<PAGE>
As filed with the Securities and Exchange Commission on October 17, 2000
Registration No. 333-43390
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO THE
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------
WEIGH-TRONIX, LLC
SWT FINANCE B.V. (Exact Name of Registrant)
(Exact Name of Registrant)
DELAWARE
THE NETHERLANDS (State or Jurisdiction of
(State or Jurisdiction of Incorporation or Organization)
Incorporation or Organization)
06-1510936
Not Applicable (I.R.S. Employer Identification
(I.R.S. Employer Identification Number)
Number)
293 South Main Street
Joan Muyskenweg 4 1096 CJ Amsterdam Providence, R.I. 02903
The Netherlands (401) 272-4402
+31-20-597-6208
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
3596
(Primary Standard Industrial Classification Code)
John J. McCann III
Weigh-Tronix, LLC
293 South Main Street
Providence, R.I. 02903
(401) 272-4402
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
copies of all communications to:
Mary Ellen O'Mara, Esq.
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
(617) 951-6600
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after the Registration Statement becomes effective. If the
securities being registered on this Form are being offered in connection with
the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of
each class
of Proposed Proposed
securities maximum maximum
to be Amount to offering price aggregate Amount of
registered be registered per note offering price registration fee
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 1/2% Senior
Subordinated
Notes of
SWT Finance
B.V. ..... (Euro)100,000,000(1) (Euro)1,000 (Euro)100,000,000 $23,810
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 457(f)(2), the (Euro)100,000,000 face amount of the notes
has been translated into dollars at the rate of $0.9019 per (Euro)1, the
August 8, 2000 noon buying rate for the euro published by the Federal
Reserve Bank of New York on August 8, 2000. The fee has been previously
paid.
The registrant hereby amends this registration statement on the date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on the date as the commission, acting pursuant to said Section 8(a),
may determine.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
Table of Additional Registrants
<TABLE>
<CAPTION>
I.R.S.
Registration Jurisdiction of SIC Employer
Name Number Incorporation Code I.D. Number
---- ------------ ----------------- ---- --------------
<S> <C> <C> <C> <C>
SWT Holdings B.V........... 333-43390-03 The Netherlands 3596 Not Applicable
Weigh-Tronix, Inc.......... 333-43390-01 Delaware 3596 52-2086569
Mecmesin, Inc.............. 333-43390-04 California 3596 68-0172326
Salter Weigh-Tronix Ltd.... 333-43390-06 England and Wales 3596 Not Applicable
Salter Housewares Holdings
Ltd....................... 333-43390-13 England and Wales 3596 Not Applicable
Weigh-Tronix Canada, ULC... 333-43390-05 Canada 3596 Not Applicable
Weigh-Tronix UK Ltd........ 333-43390-07 England and Wales 3596 Not Applicable
Salter Housewares Ltd...... 333-43390-14 England and Wales 3596 Not Applicable
Weigh-Tronix Delaware,
Inc....................... 333-43390-12 Delaware 3596 05-0511946
Berkel USA, Inc............ 333-43390-09 Delaware 3596 35-1530556
Berkel, Inc................ 333-43390-08 Indiana 3596 35-0724080
Berkel Products Co. Limit-
ed........................ 333-43390-10 Canada 3596 Not Applicable
Avery Berkel Limited....... 333-43390-16 England and Wales 3596 Not Applicable
Avery Berkel Properties
Limited................... 333-43390-15 England and Wales 3596 Not Applicable
Avery Berkel Holdings Lim-
ited...................... 333-43390-17 England and Wales 3596 Not Applicable
Berkel (Ireland) Limited... 333-43390-11 Ireland 3596 Not Applicable
</TABLE>
<PAGE>
Subject to Completion, Dated October 17, 2000
Exchange Offer for (Euro)100,000,000
12 1/2% Senior Subordinated Notes Due 2010
of SWT Finance B.V.
This Exchange Offer will expire at 5:00 p.m., London time, on , 2000,
unless extended.
Terms of the Exchange Offer:
. SWT Finance B.V. will exchange all initial notes that are validly
tendered and not withdrawn prior to the expiration of the exchange offer
for exchange notes. The initial notes are 12 1/2% senior subordinated
notes due 2010 that are not freely transferable. The exchange notes are
generally freely transferable and, otherwise, possess all of the
characteristics of the initial notes.
. You may withdraw tendered initial notes at any time prior to the
expiration of the exchange offer.
. The terms of the exchange notes, which are to be issued in the exchange
offer, are substantially identical to the terms of the initial notes,
except for transfer restrictions and registration rights relating to the
initial notes.
. The exchange notes are fully and unconditionally guaranteed by SWT
Finance B.V.'s ultimate parent entity, Weigh-Tronix, LLC, and several of
its subsidiaries. These guarantees are joint and several.
. SWT Finance B.V. will not receive any proceeds from the exchange offer.
. The exchange notes will be subordinated to all of Weigh-Tronix, LLC's
senior bank indebtedness.
. The initial notes are listed on the Luxembourg Stock Exchange. SWT
Finance will apply to list the exchange notes on the Luxembourg Stock
Exchange.
This investment involves risks. See "Risk Factors" beginning on page 19.
Neither the Securities and Exchange Commission nor any state securities and
exchange commission has approved or disapproved of these securities or passed
upon the adequacy or the accuracy of this prospectus. Any representation to the
contrary is a criminal offense.
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
securities and exchange commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights material information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes the material terms of the notes SWT Finance is offering, as
well as information regarding the business of Weigh-Tronix, LLC and detailed
financial data. We encourage you to read this prospectus in its entirety.
SWT Finance, the issuer of the notes, is an indirect subsidiary of Weigh-
Tronix, LLC. SWT Finance served as a financing vehicle to fund the acquisition
of GEC Avery International Limited and Maatschappij van Berkel's Patent BV by
Weigh-Tronix UK Limited, a subsidiary of Weigh-Tronix, LLC. SWT Finance has no
operations of its own. Weigh-Tronix, LLC is a holding company and the ultimate
parent company of the Weigh-Tronix companies. Weigh-Tronix, LLC is a guarantor
of the notes. The notes are also guaranteed by sixteen direct and indirect
wholly-owned subsidiaries of Weigh-Tronix, LLC. Those subsidiaries are: SWT
Holdings B.V., Weigh-Tronix, Inc., Mecmesin, Inc., Salter Weigh-Tronix Ltd,
Salter Housewares Holdings Ltd, Weigh-Tronix Canada, ULC, Weigh-Tronix UK
Limited, Salter Housewares Ltd, Weigh-Tronix Delaware, Inc., Berkel USA, Inc.,
Berkel, Inc., Berkel Products Co. Limited, Avery Berkel Limited, Avery Berkel
Properties Limited, Avery Berkel Holdings Limited and Berkel (Ireland) Limited.
THE COMPANY
Weigh-Tronix, LLC and its subsidiaries are a leading international
manufacturer, marketer and servicer of industrial and food retail weighing
systems. We operate an extensive service network, primarily in the U.K., for
both our own and third-party equipment which provides us with a significant
source of recurring revenues. In addition, we sell a broad range of branded
consumer scales and are a large international supplier of slicers and other
food processing equipment. Our products are sold under established brand names,
such as Avery, Berkel, Salter and Weigh-Tronix. Most of our brands have over
100 years of history and, as a result of their longevity and our emphasis on
product quality, we believe that they command significant brand recognition. We
market and sell our products in over 100 countries.
Our weighing products typically play an essential role in our customers'
businesses and fulfill a variety of different measurement needs. Examples of
common applications include: (1) for industrial: raw materials measurement,
production control, packaging and transportation; (2) for food retail: counter,
checkout and self-service weighing, food preparation, packing and inventory
control; and (3) for consumer: in-home food preparation and personal weighing.
Our customers operate in numerous industries including agriculture, chemicals,
food processing, food retail, logistics, mining, pharmaceuticals, postal
services, surface/air transportation and waste management, as well as general
manufacturing.
We are also a leading servicer of weighing products. Through our
international network, we service and provide after-sales support for our own
weighing products as well as for a wide range of third-party products. In the
U.K. and Ireland, our 45 service centers and over 650 service technicians make
us both a market leader and the only company offering full national coverage.
We also provide extensive service coverage in many other parts of the world
either directly through our 150 other service centers, or through our network
of third-party distributors. We have a large installed base of customers in the
industrial and food retail weighing industry. This installed base creates a
strong demand for our services and provides us with sales opportunities as well
as new product and application ideas.
1
<PAGE>
The Merger
Our company is the product of the merger of Weigh-Tronix, LLC and its
subsidiaries with GEC Avery International Limited and Maatschappij van Berkel's
Patent BV which was completed on June 13, 2000. Weigh-Tronix UK Limited
purchased Avery and Berkel from Marconi Corporation plc (formerly known as The
General Electric Company p.l.c.), a subsidiary of Marconi plc, in consideration
of (Pounds)105.0 million and warrants valued at approximately
(Pounds)0.8 million to subscribe for 5% of the fully diluted ownership
interests of Weigh-Tronix, LLC.
Financing
Issuance of Initial Notes
To help finance the merger, SWT Finance B.V. issued the initial notes in the
aggregate principal amount of (Euro)100.0 million. Cash totaling $96.2 million
from the proceeds of the offering was loaned to Weigh-Tronix UK Limited, which
purchased Avery and Berkel. Weigh-Tronix UK Limited used these proceeds to fund
a portion of the merger purchase price.
The Senior Credit Facility
In connection with the merger, SWT Finance B.V., Weigh-Tronix Canada, ULC
and Weigh-Tronix, LLC entered into the Senior Credit Facility, dated as of June
13, 2000, with Lehman Brothers Inc. and FleetBoston Robertson Stephens Inc., as
co-arrangers, Lehman Commercial Paper, Inc. as syndication agent, Fleet
National Bank as administrative agent, Lehman Brothers Inc., as sole advisor,
and the banks and financial institutions from time to time parties to the
senior credit facility. The senior credit facility consists of $120.0 million
(or its equivalent) of term loan and revolving credit facilities comprised of:
(1) a $30.0 million tranche A term loan facility; (2) a $40.0 million tranche B
term loan facility; and (3) a $50.0 million revolving credit facility. From the
$99.0 million in borrowings from the senior credit facility, $55.3 million was
loaned to Weigh-Tronix UK Limited to help finance the merger and $43.7 million
was used to help refinance the prior senior credit facility and to pay fees and
expenses.
The Equity Sponsor
The merger was also financed with $40.3 million in cash from the
subscription of Berkshire Partners LLC, the management of Weigh-Tronix, LLC and
other investors for ownership interests in Weigh-Tronix, LLC. Berkshire is a
Boston-based private investment firm.
Preferred Member Interest
In connection with the merger, Marconi agreed to subscribe for (Euro)10.0
million in preferred member interests of Weigh-Tronix, LLC. Holders of these
interests are entitled to receive dividends beginning at 12.0% per year and
rising over time. On or before the third anniversary of the issuance of the
preferred member interests, dividends will be payable only in additional fully
paid and nonassessable preferred member interests having an aggregate
liquidation preference equal to the amount of these dividends. After the third
anniversary of the issuance of the preferred member interests, at the option of
Weigh-Tronix, LLC, dividends will be payable in additional preferred membership
interests or in cash.
At any time after June 13, 2001, the holders of these preferred member
interests may exchange the interests for an aggregate principal amount of
exchange notes equal to the aggregate liquidation preference of those
interests. These interests are optionally redeemable by Weigh-Tronix, LLC and
the holder has a put if Weigh-Tronix, LLC meets agreed upon interest coverage
ratios. The interests will rank junior to all Senior Debt, senior subordinated
debt and all other debt liabilities of Weigh-Tronix, LLC. $9.6 million in cash
from this subscription was loaned to Weigh-Tronix UK to help finance the
merger.
2
<PAGE>
Corporate Structure
The following chart sets forth the corporate structure of our company:
At the top of the chart is a box titled "Weigh-Tronix LLC G". Below and
connnected to that box are three boxes titled, from left to right,
"Weigh,Tronix Inc. G", "SWT Holdings B.V. G", and "Weigh-tronix Delaware, Inc.
G". Below and connected to the box titled "Weigh-tronix Inc. G" are three boxes
titled, from left to right, "Berkel USA Inc. G","Mecmesin, Inc. G", and "SWT
Finance B.V." Below and connected to the box titled "Berkel USA Inc. G" is a
box titled "Berkel Inc. G". Below and connected to the box titled "Berkel Inc.
G"is a box titled "Berkel Products Co. Limited G". Below and connected to the
box titled "SWT Holding B.V. G" are five boxes titled, from left to right,
"Salter Weigh-Tronix Ltd G", "Salter Housewares Holdings Ltd G", "Weigh-Tronix
Canada ULC G", "SWT Holdings Pty Ltd", and "Weigh-tronix UK Limited G". Below
and connected to the box titled "Salter Weigh-Tronix Ltd G" are three boxes
titled, from left to right, "Hallamshire Ltd", "Deben Systems Ltd" and "GWS
Weighting Systems Ltd". Below and connected to the box titled "Salter
Housewares Holdings Ltd G" is a box titled "Salter Housewares Ltd G". Below and
connected to the box titled "SWT Holding Pty Ltd" is a box titled "Salter
Australia". Below and connected to the box titled "Weigh-Tronix UK Limited G"
are two boxes titled from left to right "Avery Berkel Holdings Limited G" and
"Maatschappij van Berkel's Patent B.V.". Below and connected to the box titled
"Avery Berkel Holdings Limited G" are eleven boxes titled, from left to right,
"Avery Berkel Limited G", "W&T Avery (Malawi) Limited", "GEC Avery Zimbabwe
(Pvt) Limited", "GEC Avery (Private) Limited", "Avery Malaysia Sdn Bhd", "Avery
Berkel S.A.", "W&T Avery (Namibia) Limited", "South African Scale Co (pty)
Limited", "W&T Avery (Kenya) Limited 49%", "Avery India Limited 51%" and
"Dormants Non-Trading". Below and connected to the box titled "Avery Berkel
Limited G" are four boxes titled, from left to right, "Berkel(Ireland) Limited
G", "Avery Berkel Properties Ltd G", "PM Services Ltd" and "Dormant Non-
Trading". Below and connected to the box titled "Maatschappij van Berkel's
Patent B.V." are eight boxes titled, from left to right, "Berkel AB", "Berkel
S.A.", "Schember Berkel Ges mbH", "Berkel Deutschland GmbH", "Brevetti van
Berkel SpA", "Berkel Services B.V. 49%", "Constructors De Basculas S.A. 49%"
and "Berkel Operations GmbH 49%". Below and connected to the box titled "Berkel
Deutschland GmbH" is a box titled "Dormant". Below and connected to the box
titled "Brevetti van Berkel SpA" is a box titled "Cantoni S.R.L."
3
<PAGE>
--------
G = Guarantors. All of the guarantor subsidiaries are directly or indirectly
wholly-owned subsidiaries of Weigh-Tronix, LLC. All of the guarantor
subsidiaries have guaranteed the senior credit facility on a senior secured
basis. All of the guarantees of the notes are joint and several, full and
unconditional, unsecured, senior subordinated obligations of each guarantor.
SWT Finance's executive offices are located at Joan Muyskenweg 4, 1096 CJ
Amsterdam. Its telephone number is +31 20 597 6208. Weigh-Tronix, LLC's
executive offices are located at 293 South Main Street, Providence, Rhode
Island 02903. Its telephone number is (401) 272-4402.
4
<PAGE>
ABOUT THIS TRANSACTION
The following summary contains basic information about this offering. It
likely does not contain all of the information that is important to you. For a
more complete understanding of this offering, we encourage you to read this
entire document and the documents to which we have referred you.
On June 13, 2000, SWT Finance issued (Euro)100,000,000 of 12 1/2% Senior
Subordinated Notes due 2010. These notes are fully and unconditionally
guaranteed by several of Weigh-Tronix, LLC's operating subsidiaries. SWT
Finance issued the initial notes primarily to help finance Weigh-Tronix UK
Limited's purchase of all of the issued capital stock of Avery and Berkel in
consideration of (Pounds)105,000,000 and warrants valued at approximately
(Pounds)800,000 to subscribe for 5% of the fully diluted ownership interests of
Weigh-Tronix, LLC.
Simultaneously with the issuance, Weigh-Tronix, LLC, SWT Finance and the
subsidiary guarantors entered into a registration rights agreement with Lehman
Brothers, the initial purchaser of the initial notes, in which they agreed to
deliver this prospectus to you and to complete this exchange offer. Under the
registration rights agreement, they agreed to use their reasonable best efforts
to cause this registration statement to become effective on or before December
13, 2000 and to complete the exchange offer on or prior to 30 days after this
registration statement becomes effective. You should read the discussions under
the headings "The Exchange Offer" and "Description of the Exchange Notes" for
further information regarding the notes to be issued in the exchange offer.
The Offering
Total Amount of Notes
Offered................... (Euro) 100 million in principal amount of 12 1/2%
Senior Subordinated Notes of SWT Finance B.V due
2010.
Maturity.................. June 1, 2010.
Interest.................. Annual rate--12.5%.
Payment frequency--every six months on June 1 and
December 1. First payment--December 1, 2000.
Subsidiary Guarantors..... Each guarantor, with the exception of Weigh-Tronix,
LLC, is a direct or indirect wholly owned
subsidiary of Weigh-Tronix, LLC. However, not all
of Weigh-Tronix, LLC's direct and indirect wholly
owned subsidiaries are guarantors of these notes.
If SWT Finance cannot make payments on the notes
when they are due, Weigh-Tronix, LLC and the
guarantor subsidiaries must make them instead.
Ranking................... These notes and the guarantees of the notes are
senior subordinated debts.
They rank behind the senior indebtedness of Weigh-
Tronix, LLC, SWT Finance and the guarantor
subsidiaries.
Assuming SWT Finance had completed this offering on
June 30, 2000 and applied the proceeds as intended,
these notes and the subsidiary guarantees would
have been subordinated to $99.1 million of senior
debt. As of June 30, 2000, these companies did not
have any other senior subordinated debt or debt
junior to the notes.
5
<PAGE>
Not all of Weigh-Tronix, LLC's direct and indirect
subsidiaries are guarantors. If SWT Finance were to
default on payment of the notes, you will not have
recourse against some of these subsidiaries of
Weigh-Tronix, LLC. See "Risk Factors."
Optional Redemption....... On or after June 1, 2005, SWT Finance may redeem
some or all of the notes at any time at the
redemption prices listed in the "Description of
Notes" section under the heading "Optional
Redemption."
On or prior to June 1, 2003, SWT Finance may redeem
up to 35% of the notes with the proceeds of any
public offering of equity by Weigh-Tronix, LLC at
the price listed in the "Description of Notes"
section under the heading "Optional Redemption."
Mandatory Offer to
Repurchase............... If Weigh-Tronix, LLC or its subsidiaries sell
certain assets or experience specific kinds of
changes of control, SWT Finance must offer to
repurchase the notes at the prices listed in the
section "Description of Notes--Repurchase at Option
of Holders."
Basic Covenants of
Indenture................ SWT Finance will issue the exchange notes under the
same indenture under which it issued the initial
notes. The indenture, among other things, restricts
the ability of Weigh-Tronix, LLC and the ability of
several of its subsidiaries to:
. borrow money;
. pay dividends on stock or purchase stock;
. make investments;
. create liens; and
. sell certain assets or merge with or into
other companies.
SWT Finance will not receive any proceeds from the
Use of Proceeds........... exchange offer.
Consequences of Not Exchanging Your Initial Notes
If you do not exchange your initial notes in the exchange offer, they will
continue to be subject to the restrictions on transfer that are described in
the legend on the notes. In general, you may offer or sell your initial notes
only if they are registered under, or offered or sold under an exemption from,
the Securities Act and applicable state securities laws. We do not currently
intend to register the initial notes under the Securities Act.
If initial notes are tendered and accepted in the exchange offer, it may
become more difficult for you to sell or transfer your unexchanged notes. In
addition, if you do not exchange your initial notes in the exchange offer, you
will no longer be entitled to have those notes registered under the Securities
Act.
6
<PAGE>
Consequences of Exchanging Your Initial Notes
Based on interpretations of the staff of the Securities and Exchange
Commission, we believe that you may offer for resale, resell or otherwise
transfer the notes that SWT Finance issues in the exchange offer without
complying with the registration and prospectus delivery requirements of the
Securities Act if:
. you acquire the notes issued in the exchange offer in the ordinary course
of your business;
. you are not participating, do not intend to participate, and have no
arrangement or undertaking with anyone to participate, in the
distribution of the notes issued to you in the exchange offer; and
. you are not an "affiliate" of SWT Finance, as defined in Rule 405 of the
Securities Act.
If any of these conditions are not satisfied and you transfer any notes issued
to you in the exchange offer without delivering a proper prospectus or without
qualifying for a registration exemption, you may incur liability under the
Securities Act. Weigh-Tronix, LLC, SWT Finance and the other subsidiaries of
Weigh-Tronix, LLC will not be responsible for or indemnify you against any
liability you may incur.
Any broker-dealer that acquires notes in the exchange offer for its own
account in exchange for initial notes, which it acquired through market-making
or other trading activities, must acknowledge that it will deliver a prospectus
when it resells or transfers any notes issued in the exchange offer.
7
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth the unaudited summary pro forma combined data
of the company for the year ended March 31, 2000 and the three months ended
June 30, 2000. The pro forma data give effect to specific acquisitions, the
merger of Avery Berkel which closed on June 13, 2000 and financing as if they
had occurred on April 1, 1999. The summary unaudited pro forma financial data
set forth below reflects pro forma adjustments that are based upon available
information and specific assumptions that the company considers are reasonable.
However, changes to adjustments included in the unaudited pro forma financial
data are expected as valuations and appraisals of assets and liabilities are
completed and additional information becomes available. The unaudited pro forma
combined statement of operations does not purport to represent what the
company's results of operations would have been if the merger and financing had
occurred on April 1, 1999, nor are they necessarily indicative of the results
for any future periods. See "Unaudited Pro Forma Combined Financial Data."
The company has specifically identified approximately $12.0 million in
savings as compared with the stand-alone operations of the two companies. To
achieve these cost savings, the company expects to incur non-recurring cash
integration costs of approximately $9.0 million in the 12 months following the
merger. Due to the non-recurring nature of these amounts, they have not been
included in the pro forma results of operations. See further discussion in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
We have included presentations of EBITDA and adjusted EBITDA, as defined
herein in notes 1 and 2. We believe the inclusion of supplemental adjustments
to the unaudited pro forma combined statement of operations applied in
presenting EBITDA and adjusted EBITDA are appropriate to reflect our ongoing
operations under the merger and financing.
The company used the following exchange rates in the preparation of the
unaudited pro forma combined financial data:
Dollars per foreign currency unit
<TABLE>
<CAPTION>
March 31, June 13, June 30,
2000 2000 2000
--------- -------- --------
<S> <C> <C> <C>
pounds sterling
spot rate...................................... 1.60 1.51 1.52
average rate................................... 1.60 n/a 1.52(/1/)
euro
spot rate...................................... n/a 0.96 0.95
average rate................................... n/a n/a 0.93
</TABLE>
--------
(1) This rate was also used to translate Avery Berkel results for the pre-
acquisition period from April 1, 2000-June 13, 2000, as it approximates
the average rate during that period.
8
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
-------------------
Three
months
Year ended ended
March 31, June 30,
2000 2000
---------- --------
(US $000, except
ratios)
<S> <C> <C>
Statement of Operations Data:
Revenues................................................. $375,797 $ 82,165
Cost of revenues......................................... 239,999 62,007
-------- --------
Gross profit............................................. 135,798 20,158
Operating expenses....................................... 123,744 24,771
-------- --------
Operating income (loss).................................. 12,054 (4,613)
Net interest expense..................................... 23,782 5,940
Other income, net........................................ (2,119) (25)
Equity in loss (income) of unconsolidated affiliates..... (344) 20
-------- --------
Loss before benefit for income taxes and minority
interest in income (loss) of subsidiary................. (9,265) (10,548)
Benefit for income taxes................................. (4,743) (765)
Minority interest in income (loss) of subsidiary......... 114 (178)
-------- --------
Loss before dividends on preferred member interest....... (4,636) (9,605)
12% dividends accrued on preferred member interest....... 1,154 289
-------- --------
Net loss available to Members............................ $ (5,790) $ (9,894)
======== ========
Other Financial Data:
EBITDA, as defined(/1/).................................. $ 34,310 $ 90
Adjusted EBITDA, as defined(/2/)......................... 36,160 1,603
Depreciation and amortization(/3/)....................... 19,154 3,374
Capital expenditures, gross.............................. 5,618 1,321
Cash interest expense(/4/)............................... 22,219 5,535
Ratio of earnings to fixed charges(/5/).................. -- --
Ratio of debt to EBITDA(/6/)............................. 5.7x --
Ratio of debt to Adjusted EBITDA(/6/).................... 5.4x --
Ratio of EBITDA to cash interest expense................. 1.5x 0.0x
Ratio of Adjusted EBITDA to cash interest expense........ 1.6x 0.3x
</TABLE>
--------
(1) EBITDA is defined as income (loss) before income taxes, interest expense,
interest income, depreciation and amortization and extraordinary items.
EBITDA should not be considered in isolation or as an alternative to, or
more meaningful than amounts determined in accordance with generally
accepted accounting principles including: (a) operating income as an
indicator of operating performance; or (b) cash flows from operations,
financing or investing activities as a measure of liquidity. EBITDA is
presented as additional information because management believes it is a
useful financial indicator of a company's ability to service and/or incur
indebtedness. As EBITDA is not calculated identically by all companies, the
presentation herein may not be comparable to similarly titled measures of
other companies.
9
<PAGE>
EBITDA excludes the write-off of deferred financing fees and prepayment
penalties resulting from the refinancing of Weigh-Tronix's indebtedness.
<TABLE>
<CAPTION>
Three
months
Year Ended ended
March 31, June 30,
2000 2000
---------- --------
(US $000)
<S> <C> <C>
Loss before benefit for income taxes.................. $(9,265) $(10,548)
Income taxes included in equity in income of
unconsolidated affiliates............................ 350 61
Minority interest in income (loss) of subsidiary...... (163) 178
Goodwill and intangible amortization relating to the
merger............................................... 5,574 1,087
Net interest expense.................................. 23,782 5,940
Weigh-Tronix, LLC depreciation and amortization....... 4,953 1,801
Avery Berkel Group depreciation and amortization...... 9,069 1,573
Avery Berkel share of associate interest expense
(income)............................................. 10 (2)
------- --------
EBITDA................................................ $34,310 $ 90
======= ========
(2) Adjusted EBITDA equals EBITDA defined above adjusted for income and expense
items which management believes are either non-recurring, non-cash or both.
EBITDA, as defined in (1) above....................... $34,310 $ 90
Weigh-Tronix, LLC non-cash compensation expense
associated with membership interests................. 169 1,714
Weigh-Tronix, LLC non-recurring terminated deal fees.. 630 --
Avery Berkel Group profit on sale of fixed assets..... (1,792) (307)
Avery Berkel Group restructuring...................... 312 106
Avery Berkel Group operating lease impact of vehicle
leases............................................... (192) --
Avery Berkel Group non-recurring Year 2000 costs...... 2,723 --
------- --------
Adjusted EBITDA....................................... $36,160 $ 1,603
======= ========
</TABLE>
(3) Depreciation and amortization excludes the amortization of deferred
financing fees which is accounted for as interest expense.
(4) For purposes of this calculation, cash interest expense consists of pro
forma interest expense before amortization of deferred financing costs.
(5) On a pro forma basis for the year ended March 31, 2000 and the three months
ended June 30, 2000, the company's pro forma ratio of earnings to fixed
charges was less than 1:1. The company must generate additional pre-tax
income of $3.6 million and $11.9 million for the year ended March 31, 2000
and for the three months ended June 30, 2000, respectively, to achieve a
coverage ratio of 1:1 in those periods.
(6) Since EBITDA and Adjusted EBITDA for the three months ended June 30, 2000
only include three months of operations, EBITDA and Adjusted EBITDA are not
comparable to those same amounts for the year ended March 31, 2000.
Therefore, these ratios are not comparable to the same ratios for the year
ended March 31, 2000 and therefore are not presented.
10
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION FOR WEIGH-TRONIX
The following is the Summary Historical Financial Information for Weigh-
Tronix at the dates and for the periods indicated. The Summary Historical
Financial Information for Weigh-Tronix Scale Products Business (the
"Predecessor") for the year ended March 31, 1998 and the one month ended April
30, 1998 has been derived from the Predecessor financial statements audited by
PricewaterhouseCoopers, independent accountants, included elsewhere in this
prospectus. Weigh-Tronix, LLC acquired the Predecessor on May 1, 1998 in a
purchase transaction. Accordingly, historical financial information for the
Predecessor for the year ended March 31, 1998 and the one month ended April 30,
1998 may not be comparable to the data for subsequent periods. The Summary
Historical Financial Information for Weigh-Tronix for the 11 months ended March
31, 1999 and the year ended March 31, 2000 has been derived from the financial
statements audited by PricewaterhouseCoopers LLP, independent accountants,
included elsewhere in this prospectus. The interim financial data as of June
30, 1999 and June 30, 2000 are unaudited. However, in the opinion of
management, the interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
for the interim periods.
We have included presentations of EBITDA and Adjusted EBITDA, as defined
herein in notes 1 and 2, respectively, which we believe are appropriate to
reflect our ongoing operations.
11
<PAGE>
<TABLE>
<CAPTION>
Predecessor Weigh-Tronix, LLC
-------------------- ------------------------------------------
Year One month 11 months Three months ended
ended ended ended Year ended --------------------
March 31, April 30, March 31, March 31, June 30, June 30,
1998 1998 1999 2000 1999 2000
--------- --------- --------- ---------- -------- ---------
(US $'000, (US $'000,
except ratios) except ratios)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $113,851 $10,864 $110,178 $126,127 $29,451 $ 43,522
Cost of revenues........ 79,359 7,389 81,462 84,873 19,971 32,103
-------- ------- -------- -------- -------- ---------
Gross profit............ 34,492 3,475 28,716 41,254 9,480 11,419
Operating expenses...... 30,567 2,724 27,226 32,926 7,208 13,260
-------- ------- -------- -------- -------- ---------
Operating income
(loss)................. 3,925 751 1,490 8,328 2,272 (1,841)
Net interest expense
(income)............... (15) (4) 5,923 5,691 1,621 2,229
Other expense (income),
net.................... 54 (30) 178 (327) (397) (25)
Equity in loss of
unconsolidated joint
venture................ -- -- -- 38 10 --
-------- ------- -------- -------- -------- ---------
Income (loss) before
provision (benefit) for
income taxes, minority
interest in income of
subsidiary and
extraordinary loss..... 3,886 785 (4,611) 2,926 1,038 (4,045)
Provision (benefit) for
income taxes........... 2,186 375 1,555 1,316 318 (68)
Minority interest in
income of subsidiary... -- -- -- -- -- 46
-------- ------- -------- -------- -------- ---------
Income (loss) before
extraordinary loss..... 1,700 410 (6,166) 1,610 720 (4,023)
Extraordinary (loss),
net of income tax
benefit of $66......... -- -- -- -- -- (2,549)
-------- ------- -------- -------- -------- ---------
Income (loss) before
dividends on preferred
member interest........ 1,700 410 (6,166) 1,610 720 (6,572)
12% dividends accrued on
preferred member
interest............... -- -- -- -- -- 54
-------- ------- -------- -------- -------- ---------
Net income (loss)
available to Members... $ 1,700 $ 410 $ (6,166) $ 1,610 $ 720 $ (6,626)
======== ======= ======== ======== ======== =========
Other Financial Data:
EBITDA, as
defined(/1/)........... $ 9,551 $ 1,271 $ 5,172 $ 13,481 $3,793 $ (61)
Adjusted EBITDA, as
defined(/2/)........... 9,551 1,271 12,495 14,280 3,838 4,069
Depreciation and
amortization........... 5,680 490 3,860 4,864 1,134 1,801
Cash interest
expense(/3/)........... 27 -- 5,576 5,719 1,507 2,039
Net cash provided by
(used in) operating
activities ............ 3,538 911 10,671 7,764 866 (951)
Net cash used in
investing activities... 3,516 209 80,310 4,853 577 164,470
Net cash provided by
(used in) financing
activities ............ (4,837) (1,439) 73,862 (2,274) (1,628) 176,855
Capital expenditures.... 3,675 209 2,356 2,736 401 698
Ratio of earnings to
fixed charges(/4/)..... 6.19x 14.77x -- 1.45x 1.48x --
Supplemental ratio of
earnings to fixed
charges(/5/)........... 6.19x 14.77x 1.25x 1.45x 1.48x 0.47x
Balance Sheet Data (as
of the end of the
period):
Working capital......... $ 34,378 $ 17,144 $ 20,552 $ 19,754 $ 92,436
Total assets............ 99,387 94,055 95,207 92,091 363,104
Total debt.............. 130 58,611 55,989 56,888 194,975
Shareholder's net
investment/Members'
equity................. 81,721 8,921 9,485 9,130 44,505
</TABLE>
12
<PAGE>
(1) EBITDA is defined as income (loss) before income taxes, extraordinary loss,
interest expense, interest income and depreciation and amortization. EBITDA
should not be considered in isolation or as an alternative to, or more
meaningful than amounts determined in accordance with generally accepted
accounting principles including: (a) operating income as an indicator of
operating performance or (b) cash flows from operations, financing or
investing activities as a measure of liquidity. EBITDA is presented as
additional information because management believes it is a useful financial
indicator of a company's ability to service and or incur indebtedness.
Because EBITDA is not calculated identically by all companies, the
presentation herein may not be comparable to similarly titled measures of
other companies.
<TABLE>
<CAPTION>
Predecessor Weigh-Tronix, LLC
----------------- ------------------------------------------
Year One
ended month 11 months Three months ended
March ended ended Year ended --------------------
31, April 30, March 31, March 31, June 30, June 30,
1998 1998 1999 2000 1999 2000
------ --------- ---------- ---------- --------- ---------
(US $ thousands) (US $ thousands)
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before
provision (benefit) for
income taxes and
extraordinary loss..... $3,886 $ 785 $(4,611) $ 2,926 $1,038 $(4,091)
Interest income......... (42) (4) (9) (329) (14) (51)
Interest expense........ 27 -- 5,932 6,020 1,635 2,280
Depreciation and
amortization........... 5,680 490 3,860 4,864 1,134 1,801
------ ------ ------- ------- -------- ---------
EBITDA.................. $9,551 $1,271 $ 5,172 $13,481 $3,793 $ (61)
====== ====== ======= ======= ======== =========
</TABLE>
(2) Adjusted EBITDA equals EBITDA as defined in (1) above adjusted for income
and expense items which management believes are either non-recurring, non-
cash or both. Adjusted EBITDA should not be considered in isolation or as
an alternative to, or more meaningful than amounts determined in accordance
with generally accepted accounting principles including: (a) operating
income as an indicator of operating performance or (b) cash flows from
operations, financing or investing activities as a measure of liquidity.
Adjusted EBITDA is presented as additional information because management
believes it is a useful financial indicator of a company's ability to
service and or incur indebtedness. Because Adjusted EBITDA is not
calculated identically by all companies, the presentation herein may not be
comparable to similarly titled measures of other companies.
<TABLE>
<CAPTION>
Predecessor Weigh-Tronix, LLC
---------------- --------------------------------------------
Year One
ended month 11 months Three months ended
March ended ended Year ended ----------------------
31, April 30, March 31, March 31, June 30, June 30,
1998 1998 1999 2000 1999 2000
------ --------- ---------- ---------- ---------- ----------
(US $ thousands) (US $ thousands)
<S> <C> <C> <C> <C> <C> <C>
EBITDA, as defined in
(1) above.............. $9,551 $1,271 $ 5,172 $13,481 $3,793 $ (61)
Non-cash compensation
expense associated with
the company's
membership
interests(a)........... -- -- 1,110 169 45 1,714
Non-recurring inventory
fair value adjustment
resulting from the
purchase accounting of
the acquisition of the
Predecessor(b)......... -- -- 6,213 -- -- --
Non-recurring inventory
fair value adjustment
resulting from the
purchase accounting of
the acquisition of
Avery Berkel(c) ....... -- -- -- -- -- 2,416
Non-recurring terminated
deal fees(d)........... -- -- -- 630 -- --
------ ------ ------- ------- ---------- ----------
Adjusted EBITDA......... $9,551 $1,271 $12,495 $14,280 $3,838 $4,069
====== ====== ======= ======= ========== ==========
</TABLE>
(a) In connection with the formation of Weigh-Tronix, LLC on May 1, 1998
and the purchase of Avery Berkel on June 13, 2000, membership interests
were allocated to certain members of management. Depending on the
characteristics of the membership interests that were granted,
compensation expense was recorded. Due to the non-cash nature of these
charges, the charges have been added back to calculate adjusted EBITDA.
(b) In connection with the acquisition of the Predecessor in a purchase
transaction on May 1, 1998, Weigh-Tronix, LLC recorded a non-recurring
inventory fair value adjustment of $6.2 million in the 11 months ended
March 31, 1999 to reflect the purchase of inventory at fair value. Due
to the non-recurring nature of this charge, the amortization of the
inventory fair value adjustment has been added back to calculate
Adjusted EBITDA.
13
<PAGE>
(c) In connection with the acquisition of Avery Berkel on June 13, 2000,
Weigh-Tronix, LLC recorded a non-recurring inventory fair value
adjustment of $16.3 million as of June 13, 2000 to reflect the purchase
of inventory at fair value. During the three months ended June 30,
2000, the Company amortized $2.4 million of this fair value adjustment.
Due to the non-recurring nature of this charge, the amortization of the
inventory fair value adjustment has been added back to calculate
Adjusted EBITDA.
(d) During the year ended March 31, 2000, the company incurred various non-
recurring fees for legal, consulting, accounting and tax services in
connection with potential acquisitions. Since these acquisitions did
not materialize, these costs were added back to calculate Adjusted
EBITDA.
(3) Cash interest expense consists of interest expense before amortization of
deferred financing costs.
(4) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent pre-tax income (loss) before adjustments for equity in
loss of unconsolidated joint venture and minority interests in consolidated
subsidiaries, plus fixed charges. Fixed charges consist of interest on all
indebtedness plus a proportion of rental expense deemed to be
representative of the interest factor. The ratio of earnings to fixed
charges for the Predecessor for the year ended March 31, 1998 was 6.19x.
The ratio of earnings to fixed charges for Weigh-Tronix, LLC for the year
ended March 31, 2000 was 1.45x.
(a) Due to the company's loss before provision (benefit) for income taxes
in the 11 months ended March 31, 1999 and the three months ended June
30, 2000, the ratio coverage for those periods was less than 1:1. The
company must generate additional pre-tax income of $4.6 million and
$4.0 million for the 11 months ended March 31, 1999 and the three
months ended June 30, 2000, respectively, to achieve a coverage ratio
of 1:1 in those periods. See Note (5) below for discussion of the
"Supplemental ratio of earnings to fixed charges" calculation.
(5) For the 11 months ended March 31, 1999 and the three months ended June 30,
2000, the company incurred a pre-tax loss. Included in the two loss periods
was the impact of a non-recurring charge relating to the amortization of
the inventory fair value adjustment that was recorded in the purchase
accounting of the Predecessor and Avery Berkel. The company's ratio of
earnings to fixed charges, excluding the amortization of the inventory fair
value adjustments for the 11 months ended March 31, 1999 and the three
months ended June 30, 2000, was 1.25x and 0.47x, respectively.
14
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
FOR THE AVERY BERKEL GROUP
The following is the Summary Historical Financial Information for the Avery
Berkel Group at the dates and for the periods indicated. The Summary Historical
Financial Information for the Avery Berkel Group for the years ended March 31,
1998, March 31, 1999 and March 31, 2000 has been derived from the financial
statements audited by Deloitte & Touche, independent accountants, included
elsewhere in this prospectus.
The financial statements of the Avery Berkel Group have been prepared in
accordance with generally accepted accounting principles in the United Kingdom
("U.K. GAAP"), which differs in certain material respects from generally
accepted accounting principles in the United States ("U.S. GAAP"). The
principal differences between U.K. GAAP and U.S. GAAP are summarized in Note 28
to the audited combined financial statements of the Avery Berkel Group included
elsewhere in this prospectus.
We have included presentations of EBITDA and Adjusted EBITDA, as defined
herein in notes 2, 3, 5 and 6, which we believe are appropriate to reflect our
ongoing operations.
<TABLE>
<CAPTION>
Avery Berkel Group
-------------------------------------------------
Year ended
-------------------------------------------------
March 31, 1998 March 31, 1999 March 31, 2000
--------------- --------------- ---------------
((Pounds) thousands)
<S> <C> <C> <C>
Profit and Loss Account
Data:
Amounts in accordance with
U.K. GAAP
Turnover.................... (Pounds)149,031 (Pounds)146,346 (Pounds)155,484
Cost of sales............... (91,036) (90,003) (96,696)
--------------- --------------- ---------------
Gross profit................ 57,995 56,343 58,788
Net operating expenses...... (49,695) (50,965) (53,329)
--------------- --------------- ---------------
Operating profit............ 8,300 5,378 5,459
Share of operating profit of
associates................. 990 564 471
--------------- --------------- ---------------
Total operating profit...... 9,290 5,942 5,930
Net interest and other
income and expenses........ 2,747 2,238 2,977
--------------- --------------- ---------------
Profit on ordinary
activities before
taxation................... 12,037 8,180 8,907
Taxation on profit on
ordinary activities........ (3,465) (3,030) (2,230)
--------------- --------------- ---------------
Profit on ordinary
activities after taxation.. 8,572 5,150 6,677
Equity minority interests... -- (115) (71)
--------------- --------------- ---------------
Profit on ordinary
activities attributable to
shareholders............... (Pounds) 8,572 (Pounds) 5,035 (Pounds) 6,606
=============== =============== ===============
Amounts in accordance with
U.S. GAAP
Turnover.................... (Pounds)149,031 (Pounds)146,346 (Pounds)155,484
Operating profit............ 8,065 5,729 6,100
Profit on ordinary
activities before taxation
in accordance with U.S.
GAAP(/1/).................. 11,483 8,336 9,322
Combined net income under
U.S. GAAP.................. 7,758 5,142 7,017
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Avery Berkel Group
----------------------------------------------
Year ended
----------------------------------------------
March 31, 1998 March 31, 1999 March 31, 2000
-------------- -------------- --------------
((Pounds) thousands)
<S> <C> <C> <C>
Other Financial Data:
Amounts in accordance with
U.K. GAAP
EBITDA, as defined(2)......... (Pounds)17,553 (Pounds)14,226 (Pounds)12,617
Adjusted EBITDA, as defined
(3).......................... 17,108 14,115 13,274
Depreciation and
amortization................. 6,016 6,485 5,668
Capital expenditures.......... 2,712 3,341 1,801
Research and development...... 2,725 4,313 4,667
Ratio of earnings to fixed
charges(4)................... 20.06x 10.98x 9.04x
Amounts in accordance with
U.S. GAAP
EBITDA, as defined(5)......... (Pounds)17,273 (Pounds)14,645 (Pounds)13,295
Adjusted EBITDA, as
defined(6)................... 16,828 14,534 13,952
Depreciation and
amortization................. 6,016 6,529 5,712
Net cash provided by operating
activities................... 8,261 6,476 9,350
Net cash flows used in
investing activities......... 2,380 2,980 1,658
Net cash provided by (used in)
financing activities......... 248 (3,095) (13,694)
Capital expenditures.......... 2,712 3,341 1,801
Ratio of earnings to fixed
charges(7)................... 19.65x 11.44x 9.65x
Balance Sheet Data (at the end
of the period):
Amounts in accordance with
U.K. GAAP
Current assets................ (Pounds)73,647 (Pounds)84,536 (Pounds)81,339
Total assets.................. 96,859 105,539 99,439
Equity shareholder funds
(deficit).................... 17,519 19,511 (2,979)
Amounts in accordance with
U.S. GAAP(/8/)
Current assets................ (Pounds)67,532 (Pounds)77,537 (Pounds)81,339
Total assets.................. 101,483 110,644 106,852
Equity shareholder funds...... 27,015 29,090 6,714
(1) The following table reconciles profit on ordinary activities before
taxation in accordance with U.K. GAAP to U.S. GAAP:
<CAPTION>
Avery Berkel Group
----------------------------------------------
Year ended
----------------------------------------------
March 31, 1998 March 31, 1999 March 31, 2000
-------------- -------------- --------------
((Pounds) thousands)
<S> <C> <C> <C>
Profit on ordinary activities
before taxation in accordance
with U.K. GAAP............... (Pounds)12,037 (Pounds)8,180 (Pounds)8,907
U.S. GAAP adjustments:
Pensions and other employee
benefits..................... 57 517 501
Restructuring................. (363) -- --
Vacation accrual.............. 91 (102) 204
Push down expenses............ (20) (20) (20)
Goodwill...................... -- (44) (44)
Associated undertakings....... (45) 24 (7)
Income taxes related to share
of operating profit of
associates(a)................ (274) (219) (219)
-------------- -------------- --------------
Profit on ordinary activities
before taxation in accordance
with U.S. GAAP............... (Pounds)11,483 (Pounds)8,336 (Pounds)9,322
============== ============== ==============
</TABLE>
(a) Share of operating profit of associates is presented net of the related
income taxes in pre-tax income under U.S. GAAP.
16
<PAGE>
(2) EBITDA is defined as income (loss) before income taxes, interest expense,
interest income and depreciation and amortization. EBITDA should not be
considered in isolation or as an alternative to, or more meaningful than
amounts determined in accordance with generally accepted accounting
principles including: (a) operating income as an indicator of operating
performance or (b) cash flows from operations, financing or investing
activities as a measure of liquidity. EBITDA is presented as additional
information because management believes it is a useful financial indicator
of a company's ability to service and or incur indebtedness. Because
EBITDA is not calculated identically by all companies, the presentation
herein may not be comparable to similarly titled measures of other
companies. The following table presents EBITDA under U.K. GAAP.
<TABLE>
<CAPTION>
Avery Berkel Group
----------------------------------------------
Year ended
----------------------------------------------
March 31, 1998 March 31, 1999 March 31, 2000
-------------- -------------- --------------
((Pounds) thousands)
<S> <C> <C> <C>
Profit on ordinary
activities before
taxation................. (Pounds)12,037 (Pounds) 8,180 (Pounds) 8,907
Interest income........... (663) (422) (2,030)
Interest expense.......... 212 171 167
Share of associate
interest................. (49) (22) 6
Depreciation and
amortization............. 6,016 6,485 5,668
Equity minority interest,
excluding taxes(a)....... -- (166) (101)
-------------- -------------- --------------
EBITDA.................... (Pounds)17,553 (Pounds)14,226 (Pounds)12,617
============== ============== ==============
</TABLE>
(a) Represents the inclusion of the equity minority interest of
(Pounds)115 and (Pounds)71 for the years ended March 31, 1999 and
March 31, 2000, respectively, grossed up for the related tax effects.
The related tax impact was determined using the United Kingdom
corporation tax rates in effect in the years ended March 31, 1999 and
March 31, 2000 of 31.0% and 30.0%, respectively.
(3) Adjusted EBITDA equals EBITDA as defined in (2) above adjusted for income
and expense items which management believes are either non-recurring, non-
cash or both. Adjusted EBITDA should not be considered in isolation or as
an alternative to, or more meaningful than amounts determined in
accordance with generally accepted accounting principles including: (a)
operating income as an indicator of operating performance or (b) cash
flows from operations, financing or investing activities as a measure of
liquidity. Adjusted EBITDA is presented as additional information because
management believes it is a useful financial indicator of a company's
ability to service and or incur indebtedness. Because Adjusted EBITDA is
not calculated identically by all companies, the presentation herein may
not be comparable to similarly titled measures of other companies. The
following table presents Adjusted EBITDA under U.K. GAAP.
<TABLE>
<CAPTION>
Avery Berkel Group
----------------------------------------------
Year ended
----------------------------------------------
March 31, 1998 March 31, 1999 March 31, 2000
-------------- -------------- --------------
((Pounds) thousands)
<S> <C> <C> <C>
EBITDA, as defined in (2)
above..................... (Pounds)17,553 (Pounds)14,226 (Pounds)12,617
Profit on sale of fixed
assets, including
vehicles(a)............... (2,247) (1,965) (1,120)
Non-recurring Year 2000
costs of Avery Berkel(b).. 933 2,937 1,702
Restructuring.............. 1,689 7 195
Operating expense impact of
vehicle leases(c)......... (1,570) (1,090) (120)
Management fee(d).......... 750 -- --
-------------- -------------- --------------
Adjusted EBITDA............ (Pounds)17,108 (Pounds)14,115 (Pounds)13,274
============== ============== ==============
</TABLE>
(a) Represents profit on sale of fixed assets, including land, buildings
and motor vehicles. Due to the non-recurring nature of these gains,
these amounts are excluded from Adjusted EBITDA.
(b) Amounts represent non-recurring costs to become Year 2000 compliant,
including implementation costs for a new Baan computer system.
Management believes these costs will not be incurred subsequent to
completion of the Baan system implementation.
(c) Avery Berkel changed its fleet vehicle policy from owned vehicles to
operating leases in June 1998. The adjustment reflects the pro forma
impact of applying operating lease expense to the vehicles leased by
Avery Berkel as of March 31, 2000.
(d) Amount represents management charge allocations from Avery Berkel's
former parent, Marconi. Due to the non-recurring nature of those
charges, this amount is added back to calculate Adjusted EBITDA.
(4) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent profit on ordinary activities before taxation before
adjustment for Avery Berkel's share of operating profit of associates and
associate interest plus fixed charges and is calculated in accordance with
U.K. GAAP. Fixed charges consist of interest on all indebtedness plus a
proportion of rental expense deemed to be representative of the interest
factor. The ratio of earnings to fixed charges for Avery Berkel Group for
the years ended March 31, 1998, March 31, 1999 and March 31, 2000 was
20.06x, 10.98x and 9.04x, respectively.
17
<PAGE>
(5) The following table reconciles EBITDA presented under U.K. GAAP to EBITDA
presented under U.S. GAAP:
<TABLE>
<CAPTION>
Avery Berkel Group
----------------------------------------------
Year ended
----------------------------------------------
March 31, 1998 March 31, 1999 March 31, 2000
-------------- -------------- --------------
((Pounds) thousands)
<S> <C> <C> <C>
EBITDA presented under U.K.
GAAP...................... (Pounds)17,553 (Pounds)14,226 (Pounds)12,617
U.S. GAAP adjustments:
Pensions and other employee
benefits.................. 57 517 501
Restructuring.............. (363) -- --
Vacation................... 91 (102) 204
Push down expenses......... (20) (20) (20)
Associated undertakings.... (45) 24 (7)
-------------- -------------- --------------
EBITDA presented under U.S.
GAAP...................... (Pounds)17,273 (Pounds)14,645 (Pounds)13,295
============== ============== ==============
</TABLE>
(6) The following table reconciles Adjusted EBITDA presented under U.K. GAAP to
Adjusted EBITDA presented under U.S. GAAP:
<TABLE>
<CAPTION>
Avery Berkel Group
----------------------------------------------
Year ended
----------------------------------------------
March 31, 1998 March 31, 1999 March 31, 2000
-------------- -------------- --------------
((Pounds) thousands)
<S> <C> <C> <C>
Adjusted EBITDA presented
under U.K. GAAP.......... (Pounds)17,108 (Pounds)14,115 (Pounds)13,274
U.S. GAAP adjustments:
Pensions and other
employee benefits........ 57 517 501
Restructuring............. (363) -- --
Vacation.................. 91 (102) 204
Push down expenses........ (20) (20) (20)
Associated undertakings... (45) 24 (7)
-------------- -------------- --------------
Adjusted EBITDA presented
under U.S. GAAP.......... (Pounds)16,828 (Pounds)14,534 (Pounds)13,952
============== ============== ==============
</TABLE>
(7) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent profit on ordinary activities before taxation before
adjustment for Avery Berkel's share of operating profit of associates and
associate interest plus fixed charges and is calculated in accordance with
U.S. GAAP. Fixed charges consist of interest on all indebtedness plus a
proportion of rental expense deemed to be representative of the interest
factor. The ratio of earnings to fixed charges for Avery Berkel Group for
the years ended March 31, 1998, March 31, 1999 and March 31, 2000 was
19.65x, 11.44x and 9.65x, respectively.
(8) Balance sheet information is presented herein on a U.S. GAAP basis.
However, classification of individual balances within the balance sheet is
in accordance with U.K. GAAP.
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RISK FACTORS
You should carefully consider the following factors, together with the other
information contained in this prospectus, before determining whether to
exchange the initial notes for the exchange notes.
Risks Relating to the Notes
Our substantial indebtedness could have an adverse impact on our financial
condition and prevent us from fulfilling our obligations under these notes.
As a result of the merger, we have a significant amount of indebtedness.
This indebtedness could prevent us from fulfilling our obligations under the
notes. As of June 30, 2000, Weigh-Tronix, LLC's total indebtedness was $195.0
million. Of our total indebtedness, the senior credit facility totaled $99.0
million and other indebtedness totaled $84,000; both of which are senior to the
notes. As of June 30, 2000, $116.6 million is the maximum borrowings under the
senior credit facility that could be outstanding. This amount represents the
total senior credit facility of $120.0 million less letters of credit
outstanding as of June 30, 2000. Our annual debt service for the senior credit
facility and other senior debt is as follows: $1.4 million for fiscal 2001,
$3.0 million for fiscal 2002, $4.5 million for fiscal 2003, $6.0 million for
fiscal 2004, $13.2 million for fiscal 2005, $46.4 million for fiscal 2006,
$19.5 million for fiscal 2007 and $5.0 million for fiscal 2008.
In addition, the (Euro)10.0 million preferred member interest is
exchangeable for exchange notes issued under the indenture, at the option of
Weigh-Tronix, LLC or the holders of the preferred member interests, subject to
specific conditions and no earlier than June 13, 2001. If Weigh-Tronix, LLC or
the holders of the preferred member interests opt to exchange their interests
on June 13, 2001, (Euro)11.2 million of exchange notes will be issued. The
exchange notes will be substantially identical to and will rank equally with
the initial notes. If an exchange takes place immediately prior to the maturity
of the initial notes, the exchange notes could have an aggregate principal
amount of as much as (Euro)38.5 million upon issuance in year 2010.
Our substantial indebtedness could have important consequences for you. For
example, it could:
. make it more difficult for us to satisfy our obligations under these
notes;
. increase our vulnerability to general adverse economic and industry
conditions;
. limit our ability to fund future working capital requirements, capital
expenditures, investments and acquisitions;
. require us to dedicate a substantial portion of cash flow from
operations to payments on our indebtedness;
. limit our flexibility in planning for, or reacting to, changes in our
business and the industries in which we operate;
. place us at a competitive disadvantage compared to competitors that have
less indebtedness; and
. limit our ability to borrow additional funds and subject us to financial
and other restrictive covenants which, if we fail to comply with them,
could result in an event of default which, if not cured or waived, would
have an adverse effect on us.
The terms of our indebtedness, including the senior credit facility and the
notes, may restrict our ability to plan for and adjust to changes in our
industry.
The senior credit facility and, to a lesser extent, the indenture limit our
flexibility in operating our businesses. As a result, we may have less capacity
to withstand competitive pressures in our industry. This could have an adverse
impact on our financial condition. Additionally, the senior credit facility and
the
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indenture may prevent us from borrowing money to repay the notes. In
particular, these agreements limit our ability in specific circumstances to:
. borrow more money;
. pay dividends and make distributions;
. make capital expenditures or buy assets;
. make specific acquisitions;
. use our assets as security for borrowing or for other purposes;
. enter into transactions with our affiliates;
. enter into joint ventures;
. sell our assets;
. merge or consolidate with other companies;
. sell or issue shares of some of our subsidiaries;
. enter into sale and leaseback transactions;
. prepay junior debts; and
. make specific investments.
A failure to satisfy the restrictive and financial covenants of the senior
credit facility could have an adverse impact on our financial condition and
prevent us from fulfilling our obligations under the notes.
The senior credit facility requires us to meet certain financial ratios and
tests. We may not be able to meet these tests. If we were unable to meet these
tests, an event of default would be triggered under that facility even if we
could still meet our debt service obligations. This would permit the lending
banks to declare all amounts that we have borrowed under the senior credit
facility to be due and payable, together with accrued and unpaid interest. In
that situation, it is likely that we would be unable to continue to make
payments to you on the notes. Our ability to continue to comply with the
covenants and restrictions contained in the senior credit facility and the
notes may be affected by events beyond our control. These include prevailing
economic, financial and industry conditions.
SWT Finance's ability to repay the notes will depend upon payments made to it
by Weigh-Tronix, LLC's subsidiaries.
If SWT Finance does not receive payments from Weigh-Tronix, LLC's
subsidiaries, it may not be able to pay you on the notes. The ability of SWT
Finance to repay the notes will depend upon its receipt of funds, either as an
investment or as repayment of debt, from Weigh-Tronix, LLC's subsidiaries. SWT
Finance has no operations or subsidiaries of its own. SWT Finance's assets
consist of a limited amount of plant and machinery and the intercompany debts
owed to it by direct and indirect subsidiaries of Weigh-Tronix, LLC, including
Weigh-Tronix UK Limited. Most of these debts arose from SWT Finance's loan to
Weigh-Tronix UK Limited of (a) $96.2 million of the proceeds of the offering;
(b) $55.3 million in borrowings under the senior credit facility; and (c) $9.6
million in proceeds from the preferred member interest. Additionally, SWT
loaned $42.0 million to other Weigh-Tronix, LLC subsidiaries to refinance the
former senior credit facility and to pay fees and expenses.
If SWT Finance were to default on payment of the notes, you will not have
recourse against some of the subsidiaries of Weigh-Tronix, LLC.
If SWT Finance were to default on the payment of the notes, you will not
have recourse against some of Weigh-Tronix, LLC's subsidiaries because they
did not guarantee the notes. Weigh-Tronix, LLC is a holding company,
conducting its operations through operating subsidiaries. Only some of Weigh-
Tronix, LLC's subsidiaries have guaranteed the notes. Except for those
subsidiaries of Weigh-Tronix, LLC that have guaranteed the notes, Weigh-Tronix
LLC's subsidiaries have no obligation, contingent or otherwise, to pay any
amounts due under the notes. These subsidiaries are not required to make funds
available to Weigh-Tronix UK
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Limited to repay the intercompany loan from SWT Finance. Additionally, in the
event of bankruptcy, liquidation or reorganization of any of the non-guarantor
subsidiaries, their creditors would generally be entitled to payment of their
claims from the assets of those subsidiaries before any assets are made
available for distribution to their shareholders. Accordingly, their assets
may not be available to Weigh-Tronix, LLC or SWT Finance. As of June 30, 2000,
the non-guarantor subsidiaries had $84,000 of senior debt outstanding.
The ability of some of the guarantors to make payments on the notes may be
restricted by local laws.
Local laws may restrict the ability of some of the guarantor subsidiaries
to make payments on the notes. Some of these subsidiaries are organized under
local laws which restrict their ability to pay interest, dividends,
distributions, loans or advances to their holding company in some
circumstances. For example, these laws may prohibit dividend payments if the
subsidiary lacks sufficient profits or if the subsidiary fails to meet
specific capital and reserve requirements. Weigh-Tronix UK Limited and other
guarantors of the notes, besides Weigh-Tronix, LLC, could be subject to
restrictions on dividends or repatriations of earnings under applicable local
law, monetary transfer restrictions and foreign currency exchange regulations
in the jurisdictions in which the subsidiaries operate. In addition, the terms
of any other future indebtedness incurred by Weigh-Tronix, LLC or its
subsidiaries may prevent the subsidiaries from distributing enough money to
Weigh-Tronix UK Limited to allow it to make any payments on the intercompany
loan from SWT Finance. This could prevent SWT Finance from making any payments
on the notes, even if this caused an event of default under the notes. We do
not believe that any of the guarantors are currently restricted from making
payments.
On a default or bankruptcy or similar proceeding your right to receive
payments on these notes is junior to the lenders' rights under the senior
credit facility and to the rights of other creditors under any other
indebtedness of SWT Finance or a guarantor that ranks equally with the senior
credit facility.
There may not be sufficient assets to pay amounts due in respect of the
notes or the guarantees because the notes and the guarantees are subordinate
to the senior credit facility debt. SWT Finance is both the issuer of the
notes and a borrower under the senior credit facility. SWT Finance's
obligations under the senior credit facility are secured by the shares and
assets of SWT Finance. The assets of SWT Finance are limited, consisting only
of a small amount of plant and leased assets and the intercompany debts owed
to it by Weigh-Tronix UK Limited. The obligations are also secured by assets
of Weigh-Tronix, LLC and some of its other subsidiaries and undertakings. In
addition, Weigh-Tronix, LLC and some of its subsidiaries have guaranteed SWT
Finance's obligations under the senior credit facility. By contrast, the notes
are unsecured obligations although they are guaranteed on a senior
subordinated basis by Weigh-Tronix, LLC and by the same subsidiaries
guaranteeing the senior credit facility. Therefore, if SWT Finance defaults on
the notes or enters into bankruptcy, liquidation, receivership, administration
or reorganization, in each case triggering a default under the senior credit
facility, the assets that secure SWT Finance's indebtedness will be used to
satisfy obligations under the senior credit facility, and any other
indebtedness that ranks equally with the senior credit facility. As a result,
upon a distribution to SWT Finance's creditors or the creditors of the
guarantors in a bankruptcy or similar proceeding relating to SWT Finance or
the guarantors, the lenders under the senior credit facility, and any other
indebtedness that ranks equally with the senior credit facility, will be
entitled to be paid in full in cash before any payment may be made with
respect to the notes or the guarantees.
Your claims under the guarantees of the notes are subordinate to claims made
under the guarantees of the senior credit facility.
Although the guarantees of the notes provide you with a direct claim
against the assets of the guarantors, the claim is contractually subordinated
to any claims relating to the guarantees of the senior credit facility. As a
result, the payment blockage provisions with respect to the senior credit
facility, described in the following risk factor, apply equally to payments by
the guarantors under the notes in the event of a default under certain
designated senior indebtedness of SWT Finance or the guarantors. Enforcement
of the guarantees may be subject to legal challenge in a bankruptcy or a
reorganization case or a lawsuit by or on behalf of creditors of
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the guarantor, and would be subject to specific defenses available to
guarantors generally. If the guarantees are not enforceable, holders of the
notes would be entirely dependent upon SWT Finance's receipt of funds, either
as an investment or otherwise, from its parent companies, Weigh-Tronix, Inc.
and Weigh-Tronix, LLC, or from payment of the intercompany debts owed to SWT
Finance by Weigh-Tronix UK Limited and other subsidiaries of Weigh-Tronix, LLC.
Holders of the notes would have no direct claim upon the assets of any
companies other than SWT Finance.
While the senior credit facility remains outstanding you will only receive
payments on the notes after the lenders under the senior credit facility have
received payments due to them.
In addition to ranking ahead of holders of notes because they are secured
creditors, the lenders under the senior credit facility also have the right to
receive payments under the senior credit facility and any other senior debt
before you receive payments on the notes. On any given payment date you will
only receive payments on the notes so long as there are sufficient funds to pay
the lenders under the senior credit facility and any other senior debt and so
long as no event or potential event of default under the notes has occurred.
Weigh-Tronix, LLC's annual debt service for the senior credit facility and
other senior debt is as follows: $1.4 million for fiscal 2001, $3.0 million for
fiscal 2002, $4.5 million for fiscal 2003, $6.0 million for fiscal 2004, $13.2
million for fiscal 2005, $46.4 million for fiscal 2006, $19.5 million for
fiscal 2007 and $5.0 million for fiscal 2008. As of June 30, 2000, Weigh-
Tronix, LLC had $99.0 million of debt outstanding that was senior to the notes.
Also you may not receive payments under the notes if SWT Finance defaults
under certain designated senior indebtedness, including the senior credit
facility. If the default is a failure to pay amounts due under the designated
senior indebtedness, the holders of the senior indebtedness under which the
default has occurred have the right to block payments under the notes until the
default is cured or waived. If the default is a non-payment default which
permits holders of the senior indebtedness under which the default has occurred
to accelerate the maturity of that senior indebtedness, the holders of the
senior indebtedness have the right to block payment under the notes until the
default is cured or waived or until 179 days after SWT Finance receives notice
of the blockage, whichever occurs first. If the maturity of the designated
senior debt is accelerated, however, payments under the notes may not be
resumed.
SWT Finance may not have sufficient cash to pay its obligations under the
notes because the generation of cash is partly dependent upon factors beyond
our control.
Weigh-Tronix, LLC's subsidiaries will need to generate cash to repay the
notes. Their ability to generate cash is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
partly beyond our control.
The ability of Weigh-Tronix, LLC's subsidiaries to transfer monies to Weigh-
Tronix UK Limited or SWT Finance as well as to pay operating expenses and to
fund planned capital expenditures, any future acquisitions and research and
development efforts will depend on their businesses' ability to generate cash
in the future. If the subsidiaries are unable to generate sufficient cash flow
to meet their payment obligations, they may be forced to reduce or delay
planned expansions or capital expenditures, sell significant assets,
discontinue specified operations, obtain additional equity capital or attempt
to restructure or refinance all or a portion of their indebtedness on or before
maturity. Weigh-Tronic, LLC cannot assure you that they will be successful in
any of these efforts or that, as a result, SWT Finance will have sufficient
cash to pay its obligations under these notes.
Despite current debt levels, we may still be able to incur substantially more
debt. This could further exacerbate the risks described above.
We may be able to incur substantial additional debt in the future. The terms
of the indenture governing the notes permit us to do so, subject to
limitations. All of the borrowings under the senior credit facility, including
additional borrowings under our revolving credit facility, are contractually
senior to these notes and the guarantees. As of June 30, 2000, the company's
total indebtedness under the senior credit facility was $99.0 million. The
maximum borrowings as of June 30, 2000 that could be outstanding under the
senior credit facility were $116.6 million. If new debt is added to our current
debt levels, the risks that we now face could intensify.
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In addition, both we and the holders of the preferred member interests have
the right, subject to specific conditions but in any event no earlier than
June 13, 2001, to exchange some or all of the preferred member interests for
exchange notes issued under the indenture. These notes will be substantially
identical to and will rank equally with the notes. Furthermore, to the extent
that preferred member interests are not exchanged, holders of these preferred
member interests will continue to have the right to receive dividends, which
increase over time, on the preferred member interests.
Interest on indebtedness under the senior credit facility is calculated on a
floating rate basis.
At the date of this prospectus we have not hedged any of our floating rate
interest obligations under the senior credit facility. At our current debt
levels, each 1% increase in interest rates would result in an increase of
approximately $1.0 million in annual interest expense which may have an
adverse effect on us and on our ability to make payment on the senior debt and
notes. Additionally, further advances under the senior credit facility would
result in greater exposure to increases in interest rates. As of June 30,
2000, the company's total indebtedness under the senior credit facility was
$99.0 million. The maximum borrowings as of June 30, 2000 that could be
outstanding under the senior credit facility were $116.6 million.
Dutch insolvency laws may adversely affect a recovery by the holders of the
notes.
In the event there is an insolvency proceeding regarding SWT Finance or SWT
Holdings B.V., each organized in The Netherlands, Dutch insolvency laws may
limit your recovery. A recovery under Dutch insolvency law could involve a
sale of the assets of the debtor in a manner that does not reflect the going
concern value of the debtor. Dutch insolvency laws could preclude or inhibit
the ability of the holders of the notes to effect a restructuring of SWT
Finance or SWT Holdings B.V.
The notes may be subject to review under the fraudulent conveyance law of The
Netherlands and your claims under the notes could be further subordinated.
If a court of competent jurisdiction in a suit by an unpaid creditor of SWT
Finance or a representative of the creditor were to find that the issuance of
the notes was a fraudulent conveyance, the court could avoid the notes. A
likely consequence of the avoidance would be the further subordination of
claims of holders of the notes to existing and possibly future indebtedness of
SWT Finance. Fraudulent conveyance law in The Netherlands provides generally
that specific transactions with a creditor entered into voluntarily by the
debtor are subject to avoidance if both parties to the transaction know or
should have known that the transaction would prejudice other creditors or that
the debtor has previously made an application for bankruptcy. Knowledge that
the transaction would prejudice other creditors is presumed by law for all
transactions performed within one year of the adjudication before bankruptcy
or within one year before the date the claim of fraudulent conveyance is made,
if it is also established that one of the conditions mentioned in Article 43
of the Dutch Bankruptcy Act or, respectively, Article 46 of Book 3 of the
Dutch Civil Code is fulfilled. These conditions include, but are not limited
to, situations in which (1) the value of the obligation of the debtor
materially exceeds the value of the obligation of the creditor, (2) the debtor
pays or grants security for debts which are not yet due, (3) an agreement is
made between legal entities or an obligation arises from one legal entity
towards another if a director of one of these legal entities is also a
director of the other or (4) an agreement is made or an obligation would arise
with a group company. We cannot assure you as to what standards a court would
apply to determine whether SWT Finance was solvent at the relevant time or
whether, whatever standard was applied, the notes would not be avoided on
another ground.
Insolvency and fraudulent conveyance and other laws may also adversely affect
a recovery by holders of the notes under the guarantees.
The making of the guarantees and any payments made under the guarantees by
the guarantors may be subject to review under relevant fraudulent conveyance
laws in an insolvency, bankruptcy, reorganization,
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rehabilitation or similar proceeding. If the making of the guarantees or
payments under the guarantees were found to be fraudulent conveyances, a likely
result would be the further subordination of claims of holders of the notes to
existing and possibly future indebtedness of the guarantor.
We can provide no assurance that the obligations of any of the guarantors
would not be voided under applicable fraudulent conveyance and similar
statutes. Relevant insolvency laws may also limit the ability of the guarantors
to make any payment with respect to interest accruing under the notes after
insolvency proceedings begin against SWT Finance or the guarantors.
Insolvency laws may also adversely affect a recovery by SWT Finance relating
to its loans to Weigh-Tronix UK Limited, which could adversely affect SWT
Finance's ability to repay the notes.
SWT Finance's ability to repay the notes may be adversely affected by
insolvency law. SWT Finance is partly dependent upon payments from Weigh-Tronix
UK Limited on loans made to Weigh-Tronix UK Limited by SWT Finance in order to
meet its obligations under the notes.
Under English insolvency law, a court could void payment obligations under
these loans if Weigh-Tronix UK Limited, at the time it entered into these
loans, was insolvent or made insolvent by entering into these loans. An English
court would generally consider the borrower insolvent if:
. the sum of its debts, including contingent liabilities, were greater than
the fair value for which it could sell all of its assets; or
. if the present fair value for which it could sell its assets were less
than the amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they become
absolute and mature; or
. it could not pay its debts as they become due.
If Weigh-Tronix UK Limited became subject to insolvency proceedings,
payments on principal and interest may be subject to non-payment or reduction
because SWT Finance might be treated as a general unsecured creditor.
Additionally, SWT Finance could be required to return payments made under these
loans to Weigh-Tronix UK Limited if any of these insolvency proceedings were to
begin shortly after Weigh-Tronix UK Limited had made payment to SWT Finance. We
do not believe that Weigh-Tronix UK Limited or SWT Finance would be considered
insolvent under English law at the time the loans were made, or as a result of
the making of the loans.
SWT Finance may not be able to redeem the notes upon a change of control.
The indenture contains provisions relating to specific events constituting a
change of control of Weigh-Tronix, LLC and its subsidiaries. If a change of
control occurs, SWT Finance will be required to make an offer to purchase all
outstanding notes at a price equal to 101% of their aggregate principal amount,
in addition to accrued and unpaid interest and any liquidated damages up to the
purchase date. SWT Finance may also be required to repay all of its obligations
under the senior credit facility. SWT Finance may not have sufficient funds to
finance the purchase and to repay the senior credit facility. In addition, the
terms of the senior credit facility do not permit prepayment of the notes and
SWT Finance cannot assure you that it would be able to secure the approval of
its senior creditors before it can purchase any notes. Any failure by SWT
Finance to purchase all notes validly tendered under the offer would result in
an event of default under the indenture which, in turn, would constitute an
event of default under the senior credit facility.
Certain transactions may not trigger the change of control payment to you.
You may not receive a change of control payment despite the fact that the
ownership structure of Weigh-Tronix, LLC and its subsidiaries may have changed.
The change of control provisions in the indenture may not protect holders of
notes in the event of highly leveraged transactions, including reorganizations,
restructurings
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or mergers, because these transactions may not involve a change in voting power
or beneficial interest of the magnitude required to trigger the change of
control provisions. Consequently, it is possible that Weigh-Tronix, LLC's
ownership structure could be altered in a manner that you disfavor without any
payment to you.
You may face foreign exchange risks.
The exchange notes are denominated and payable in euros. If you are an
investor who has elected to receive payments in a currency other than euros, an
investment in the notes entails foreign exchange-related risks due to, among
other factors, possible significant changes in the value of the euro relative
to other currencies because of economic, political and other factors over which
we have no control. Depreciation of the euro against other currencies could
cause a decrease in the effective yield of the notes below their stated coupon
rates and could result in a loss to you on a non-euro basis.
There is a risk that a non-U.S. court will not enforce a U.S. judgment based
on these notes.
It may not be possible for holders of notes to enforce against SWT Finance,
which is incorporated in The Netherlands, or any guarantors incorporated in The
Netherlands, judgments of courts of the U.S. based upon civil liabilities under
the U.S. federal securities laws. In the absence of a treaty between the U.S.
and The Netherlands providing for the reciprocal recognition and enforcement of
judgments, U.S. judgments are not automatically enforceable in The Netherlands.
However, if the party in whose favor a final judgment is rendered in the U.S.
brings a new suit in a court of competent jurisdiction in The Netherlands, the
party may submit to the Netherlands court the final judgment which has been
rendered in the U.S. If the Netherlands court finds that the jurisdiction of
the federal or state court in the U.S. has been based on grounds which are
internationally acceptable and that proper legal procedures have been observed,
the Netherlands court would give binding effect to the U.S. final judgment
unless the judgment contravenes Netherlands' principles of public policy. We
cannot assure you that U.S. holders of notes will be able to enforce against
SWT Finance or any guarantors incorporated in The Netherlands, any judgments in
civil and commercial matters, including judgments under the U.S. federal
securities laws. In addition, there is doubt as to whether a Netherlands court
would impose civil liability on SWT Finance or any guarantors incorporated in
The Netherlands in an original action predicated solely upon the U.S. federal
securities laws brought in a court of competent jurisdiction in The
Netherlands.
Additionally a number of our subsidiaries are incorporated under the laws of
England and Wales and other non-U.S. jurisdictions. Some of our directors and
executive officers and subsidiaries are resident outside of the U.S. and we
have substantial assets and a large number of these people located outside the
U.S. It may not be possible for holders of notes (a) to effect service of
process in the U.S. and the U.K. upon us and some of our directors or officers
or subsidiaries or (b) to enforce judgments of U.S. courts predicated upon the
civil liability of these persons under U.S. securities laws against any of
these persons in the courts of a foreign jurisdiction. There is also doubt as
to the direct enforceability in England against any of these persons, in an
original action or in an action for the enforcement of judgments of U.S.
courts, of civil liabilities based solely upon the U.S. federal securities
laws.
You may have difficulty selling the notes which you do not exchange.
If you do not exchange your initial notes for the notes offered in this
exchange offer, you will continue to be subject to the restrictions on the
transfer of your notes. Those transfer restrictions are described in the
indenture and in the legend contained on the initial notes. They arose because
we originally issued the initial notes under exemptions from the registration
requirements of the Securities Act of 1933.
In general, you may offer or sell your initial notes only if they are
registered under the Securities Act and applicable securities laws, or if they
are offered or sold under an exemption from those requirements. We do not
intend to register the initial notes.
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You cannot be sure that an active trading market will develop for the notes
issued in this exchange offer.
While the initial notes are listed on the Luxembourg Stock Exchange and we
will apply to list the exchange notes on the Luxembourg Stock Exchange, we do
not know if an active public market will develop for the exchange notes, or if
developed, will continue. If an active market is not developed or maintained,
the market price and the liquidity of the notes may be adversely affected.
In addition, the liquidity and the market price of the notes to be offered
in the exchange offer may be adversely affected by changes in the overall
market for high yield securities and by changes in our financial performance or
prospects.
Risks Relating to Our Business
The U.K. Competition Commission could recommend divestment of some of our
businesses.
We do not expect that, under U.K. merger control regulations, the Secretary
of State for Trade and Industry in the U.K. would refer the merger to the
Competition Commission. However, in the event that a reference were to be made,
and if the Competition Commission were to reach an adverse finding under the
provisions of the Fair Trading Act 1973, the Competition Commission could
recommend a number of remedies, including the divestment of the whole or part
of the overlapping businesses. The recommendation can be made despite the
completion of the merger.
We may not be able to integrate successfully the operations of Avery Berkel
and Weigh-Tronix.
The merger has resulted in a considerable increase in the size and
complexity of our operations. The merger requires us to undertake new
activities in new and existing markets, including maintaining a larger and more
diverse customer base and expanding our product offerings. The process of
integration will require significant management, operational, financial and
other resources. To integrate successfully Avery Berkel with Weigh-Tronix and
to realize the expected benefits of the merger, we must, among other things:
(1) develop sufficient operations, support and other back office systems; (2)
manage our employees effectively, particularly in connection with any resulting
redundancies and the harmonization of benefits; and (3) realize the annual cost
savings which our analyses have indicated can be achieved. In addition, we may
need to spend more resources than expected to replace the credit and
operational support that Avery Berkel previously enjoyed as part of a larger
industrial group. In connection with the merger we anticipate closing two of
our plants to reduce redundancies. It is possible that the closure of these
plants could prove to be problematic for us, particularly where local political
conditions may impede our integration efforts. If we fail to integrate Avery
Berkel successfully with Weigh-Tronix or to realize the expected benefits of
the merger, our business would be adversely affected in a material way.
In connection with the integration of Avery Berkel and the restructuring of
our existing business, we expect to incur approximately $9.0 million in total
non-recurring costs and approximately $1.0 million in incremental annual
corporate expenses. The non-recurring costs are expected to generate annual
savings of approximately $12.0 million and are expected to be partially funded
by non-recurring proceeds from the sale of a facility and inventory reduction
programs totaling approximately $8.0 million.
Difficulties with the implementation of our enterprise resource planning
information system may affect our financial performance.
In February 1999, Avery Berkel commenced implementation of an enterprise
resource planning system in the U.K., developed by a leading software company,
which integrated a number of its operating and financial information systems.
The system replaced 13 aging, non-year 2000 compliant systems and provided an
integration capability well suited to Avery Berkel's needs. We believe that the
year 2000 functionality and compliance has been successfully achieved and we
have not experienced any difficulties to date. Since the
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middle of 1999, however, a number of difficulties arose in connection with the
implementation of the enterprise resource planning system, primarily in the
areas of procurement, materials control, working capital management and some
aspects of production. Avery Berkel has devoted considerable human and
financial resources, including retaining outside consultants, to address these
difficulties. We believe that the remedial action that
Avery Berkel has taken has been successful to date. However, if these
difficulties were to recur, it is possible that we will need to devote
additional resources to fully rectify them. These difficulties, if not
successfully resolved, or the allocation of extra resources to address them,
could have an adverse effect on our business.
Through March 31, 2000, Avery Berkel incurred approximately $6.0 million to
implement the enterprise resource planning information system. We do not expect
to incur any additional costs with the implementation of the enterprise
resource planning information system.
The competitive pressures in our markets could adversely impact our financial
condition.
We face considerable competition in each of our business areas. The weighing
instruments markets are fragmented both geographically and by application. As a
result, we face competition from international, national, regional and local
companies, many of which are well-established in their particular markets and
have strong reputations and brand recognition. Some of our competitors have
greater financial and other resources than we do. As the markets for our
products expand, we expect that additional competition will emerge and that
existing competitors may commit more resources to the markets in which we
participate. We cannot assure you that we will be able to compete effectively
in these various areas in the future. Taken together, the competitive pressures
in our markets could adversely impact our financial performance.
A downturn in national GDP's would likely result in a decline in our revenues.
In the countries in which we operate, the historic performance of the
weighing industry has broadly tracked changes in those countries' respective
gross domestic product. Any future downturn in GDP in these markets or related
economies would be likely to result in a decline in our revenues in those
markets which could have an adverse effect on our business.
Global demand for electronic components could have an adverse effect on our
cost of production.
All of our electronic products use electronic components. Global demand for
electronic components, including both commodity products and specialist semi-
conductors, is currently outstripping supply causing allocation problems and
resulting in potential market shortages and/or price increases. If these
problems continue, they could have an adverse effect on users of electronic
components, including ourselves, and result in increased costs.
Our operating profits and reported revenues may be negatively affected by
currency exchange rate fluctuations.
Because we conduct operations in many countries, our operating income can be
significantly affected by fluctuations in currency exchange rates. The vast
majority of our operating expenses, including manufacturing costs, research and
development and general and administrative expenses are incurred in the U.S.
and the U.K. Accordingly, if the U.S. dollar and/or sterling were to strengthen
relative to our other major trading currencies (for example the euro or the
Canadian dollar), our operating profits would be reduced. In addition, to
finance the merger, we incurred indebtedness in U.S. dollars, sterlings, euros
and Canadian dollars under the senior credit facility and in euros under the
offering. Our debt levels will fluctuate due to changes in exchange rates,
particularly between the U.S. dollar, euro and sterling, potentially resulting
in higher debt charges and a reduction in net profits.
Additionally, since we report our financial results in United States
dollars, we are subject to the risk of translation losses upon fluctuations in
currencies.
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Our international operations expose us to a variety of risks over which we
have no control.
We do business in many countries and regions, including emerging markets in
Africa, Asia, India and the Middle East. We have subsidiaries in India,
Malaysia, Pakistan, South Africa and Zimbabwe. Our operations in these emerging
markets represented approximately 10% of our aggregate revenues in the year
ended March 31, 2000.
Operating in these markets exposes us to the potential risks inherent in
international operations. These risks include: uncertain economic and political
conditions, changing legal and regulatory environments (which can affect tax,
remittance of dividends and import duties among other things), difficulties in
protecting intellectual property, the nationalization of private enterprises
and general difficulties in managing and staffing remote operations including
managing labor relations. It is possible that any of the above risks, if they
materialize, could have an adverse effect on our business.
The U.S. and the U.K. are our most profitable markets. An economic downturn
in either country could have an adverse effect on our business and prospects.
We must periodically update our products and must continue to successfully
introduce these new products into our target markets.
We believe that we need to continuously upgrade our products in order to
maintain and improve our operating margins. We are currently introducing a new
range of products in our food retail business. We also frequently add new
products to our industrial and consumer ranges. We cannot assure you that we
will be successful in developing new products or that these products will be
accepted by our customers.
The interests of our controlling shareholder may differ from yours.
Berkshire Partners LLC and its affiliates own approximately 72.8% of the
fully diluted ownership interests of Weigh-Tronix, LLC, the parent company
which ultimately owns SWT Finance. Additionally, Berkshire Partners has the
right to designate two members to the Board of Managers and may designate
additional members to the Board so that a majority of the members of the Board
would be designated by Berkshire Partners. As a result, Berkshire Partners has,
and will continue to have, directly or indirectly, the power to change our
legal and capital structure and influence our day-to-day operations. Berkshire
Partners will be able to elect the directors of our subsidiaries, to change
their management and to approve any other changes to their operations.
Berkshire Partners is also party to a members agreement with Weigh-Tronix, LLC
and other stockholders pursuant to which it has (a) a right of first refusal on
any shares of Weigh-Tronix LLC to be transferred by a party to the agreement;
(b) a right of co-sale; and (c) a preemptive right to purchase its pro rata
share of any new equity issuance of Weigh-Tronix, LLC. The interests of
Berkshire Partners may, in some circumstances, differ from your interests.
We may encounter difficulty in making future acquisitions.
We may pursue additional acquisitions of complementary product lines,
technologies or businesses although our ability to do so is restricted by the
senior credit facility. Acquisitions involve numerous risks, including:
. difficulties in the assimilation of the acquired operations, technologies
and products;
. diversion of management's attention from other business concerns; and
. potential departures of key employees of the acquired company.
If we successfully identify acquisitions in the future, completing these
acquisitions may result in increased indebtedness and contingent liabilities
and additional amortization expenses relating to goodwill and other intangible
assets. Any of these may have an adverse impact on our future financial results
and could materially adversely affect our profitability. We may not be able to
identify or successfully complete any suitable acquisitions. If we are able to
do so, they will not necessarily have a positive impact on our business as a
whole.
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The amortization of goodwill resulting from the purchase of Avery Berkel will
have a negative impact on net income over the next 20 years.
In connection with the acquisition of Avery Berkel Group, we recorded total
goodwill of approximately $33.3 million, based on the exchange rate as of June
30, 2000. The goodwill will be amortized over a period of 20 years with annual
amortization expense of approximately $1.7 million per year based on the
average exchange rate for the quarter ended June 30, 2000. Additionally, we
will be required to periodically review the goodwill for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
asset may not be recoverable.
A dispute relating to the lease of our Calcutta property may disrupt our
business operations at that site.
We have been in rent negotiations with the landlord of our Calcutta
property for a number of years. We have been unable to reach an agreement and
the landlord has sought to terminate the lease. We have objected on the ground
that the rent being requested is unreasonable. The matter is now before the
Indian courts and if the landlord persists with the litigation we expect it to
be a considerable time before any decision is made. If this matter is not
successfully resolved, we may need to relocate to another facility and our
manufacturing operations in India could be adversely affected in a material
way.
If we were to experience work stoppages, our financial condition could be
adversely impacted.
Our relationship with our employees, 70% of whom are unionized, is
generally good and we have not experienced a work stoppage in two years.
However, it is possible that a work stoppage could occur in the future. A work
stoppage could have an adverse effect on our financial condition. The two-week
work stoppage that occurred in India two years ago, for example, resulted in a
loss of $400,000 in revenues. We are currently negotiating a labor agreement
regarding our employees in India. If we are unable to reach a final settlement
with these employees, there could be an adverse effect on our financial
condition. None of the other labor agreements to which we are a party will
expire in the near future.
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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act,
including in particular, the statements about our plans, strategies, and
prospects under the headings "Prospectus Summary," "Management Discussion and
Analysis of Financial Condition and Results of Operation" and "Business." We
have based these forward-looking statements on Weigh-Tronix, LLC's current
expectations and projections about future events. These forward-looking
statements are subject to risks, uncertainties and assumptions that relate to,
among other things:
. our anticipated growth strategies;
. our expected internal growth;
. our intention to introduce new products;
. technological advances in our industry;
. anticipated trends and conditions in our industry, including regulatory
reform;
. our expected future capital needs; and
. our ability to compete in the future.
We undertake no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur. Although we believe that
plans, intentions and expectations reflected in or suggested by these forward-
looking statements are reasonable, we can give no assurance that they will be
achieved.
You should rely only upon the information contained in this prospectus. We
have not, and Lehman Brothers International (Europe), the initial purchaser of
the notes, has not, authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not, and Lehman Brothers is not, making an
offer to sell the notes in any jurisdiction where the offer or sale is not
permitted. We have undertaken to update this prospectus to reflect any
subsequent events that represent a fundamental change in the information
contained herein.
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THE EXCHANGE OFFER
Purpose of the Exchange Offer
The initial notes were originally issued and sold on June 13, 2000. These
sales were not registered under the Securities Act in reliance upon the
exemptions provided in Rule 144A and Regulation S of the Securities Act. In
connection with the sale of the initial notes, SWT Finance agreed to file with
the Commission a registration statement relating to an exchange offer under
which the exchange notes would be offered in exchange for initial notes
tendered at the option of the holders. If applicable interpretations of the
staff of the Commission do not permit SWT Finance to effect the exchange offer,
SWT Finance has agreed, at its cost, to file a shelf registration statement
covering resales of the initial notes and to have that resale registration
statement declared effective and kept effective for a period of three years
from the effective date. In the event that (a) the exchange offer registration
statement is not declared effective by the Commission, or (b) the exchange
offer is not consummated or the resale registration statement is not declared
effective by the Commission, in each case within specified time periods, the
interest rate borne by the notes shall increase, which interest will accrue and
be payable in cash until completion of the filing, declaration of effectiveness
or completion of the exchange. See "Description of the Exchange Notes--
Registration Rights; Liquidated Damages."
The sole purpose of the exchange offer is to fulfill obligations of SWT
Finance under the registration rights agreement. Following the consummation of
the exchange offer, SWT Finance does not currently anticipate registering any
untendered initial notes under the Securities Act and will not be obligated to
do so.
Terms of the Exchange
This prospectus and the accompanying letter of transmittal together
constitute the exchange offer. SWT Finance hereby offers to exchange, subject
to the conditions set forth in this prospectus and in the letter of
transmittal, (Euro)1,000 in principal amount of exchange notes for each
(Euro)1,000 in principal amount of the initial notes. The terms of the exchange
notes are identical in all respects to the terms of the initial notes, for
which they may be exchanged under this exchange offer, except that the exchange
notes will generally be freely transferable by holders. After the completion of
the exchange offer, the holders of the exchange notes as well as remaining
holders of any initial notes will not be entitled to registration rights under
the registration rights agreement. See "Description of the Exchange Notes--
Registration Rights; Liquidated Damages." The exchange notes will evidence the
same debt as the initial notes and will be entitled to the benefits of the
indenture. See "Description of the Exchange Notes."
The exchange offer is not conditioned upon any minimum aggregate principal
amount of initial notes being tendered for exchange.
Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties, SWT Finance believes the exchange notes
issued under the exchange offer in exchange for initial notes may be offered
for sale, resold and otherwise transferred by any holder of these exchange
notes (other than any holder which is a broker-dealer or an "affiliate" of SWT
Finance within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that these exchange notes are acquired in the ordinary
course of the holder's business and the holder has no arrangement or
understanding with any person to participate in the distribution of these
exchange notes. Any holder who tenders in the exchange offer for the purpose of
participating in a distribution of the exchange notes cannot rely on these
interpretations by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each broker-dealer that
receives exchange notes for its own account in exchange for initial notes,
where these initial notes were acquired by the broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of these exchange
notes. See "Plan of Distribution."
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Interest on the exchange notes shall accrue from June 13, 2000 or from the
last interest payment date on which interest was paid on the initial notes so
surrendered.
Tendering holders of the initial notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes with respect to the exchange of the initial notes
under the exchange offer.
Expiration Date; Extensions; Termination; Amendments
The exchange offer shall expire at 5:00 p.m. London time, on , 2000,
unless SWT Finance, in its sole discretion, extends the period during which the
exchange offer is open. If the period is extended, the expiration date shall be
the latest time and date on which the exchange offer shall expire. SWT Finance
reserves the right to extend the exchange offer at any time by giving oral or
written notice to the exchange agent, Bankers Trust Company, and by timely
public announcement communicated, unless otherwise required by applicable law
or regulation, by making a release to the Dow Jones News Service. During any
extension of the exchange offer, all initial notes previously tendered under
the exchange offer will remain subject to the exchange offer.
The exchange date will be the first business day following the expiration
date. SWT Finance expressly reserves the right to:
. terminate the exchange offer and not accept for exchange any initial
notes if either of the events set forth below under "--Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by
SWT Finance; and
. amend the terms of the exchange offer in any manner which, in its good
faith judgment, is advantageous to the holders of the initial notes,
whether before or after any tender of the initial notes.
If any termination or amendment occurs, SWT Finance will notify the exchange
agent and will either issue a press release or give oral or written notice to
the holders of the initial notes as promptly as practicable. Unless SWT Finance
terminates the exchange offer prior to 5:00 p.m., London time, on the
expiration date, SWT Finance will exchange the exchange notes for the initial
notes on the exchange date.
How to Tender
The tender to SWT Finance of initial notes by a holder under one of the
procedures set forth below will constitute an agreement between the holder and
SWT Finance in accordance with the terms and subject to the conditions set
forth in this prospectus and in the letter of transmittal.
A holder of an initial note may tender the note by:
. properly completing and signing the letter of transmittal or a facsimile
of it (all references in this prospectus to the letter of transmittal
shall be deemed to include a facsimile of it) and delivering it,
together with the certificate or certificates representing the initial
notes being tendered and any required signature guarantees, to the
exchange agent at its address set forth on the back cover of this
prospectus on or prior to the expiration date;
. complying with the procedure for book entry transfer described below; or
. complying with the guaranteed delivery procedures described below.
If tendered initial notes are registered in the name of the signer of the
letter of transmittal and the exchange notes to be issued in exchange for the
initial notes are to be issued in the name of the registered holder (which
term, for the purposes described herein, shall include any participant in The
Depository Trust Company) whose name appears on a security listing as the owner
of initial notes, the signature of the signer need not be guaranteed. In any
other case, the tendered initial notes must be endorsed or accompanied by
written instruments of transfer in form satisfactory to SWT Finance and duly
executed by the registered holder.
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The signature on the endorsement or instrument of transfer must be guaranteed
by a commercial bank or trust company located or having an office or
correspondent in the United States, or by a member firm of a national
securities exchange or of the National Association of Securities Dealers, Inc.,
any of the foregoing being an eligible institution. If the exchange notes
and/or initial notes not exchanged are to be delivered to an address other than
that of the registered holder appearing on the note register for the initial
notes, the signature in the letter of transmittal must be guaranteed by an
eligible institution.
The method of delivery of initial notes and all other documents is at the
election and risk of the holder. If sent by mail, we recommend that:
. registered mail, return receipt requested, be used;
. proper insurance be obtained; and
. the mailing be made sufficiently in advance of the expiration date to
permit delivery to the exchange agent on or before the expiration date.
Exchanging Book-Entry Notes
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's automated tender offer
program to tender initial notes.
The exchange agent will request that DTC establish an account with respect
to the initial notes for purposes of the exchange offer within two business
days after the date of this prospectus. Any participant may make book-entry
delivery of initial notes by causing DTC to transfer these initial notes into
the exchange agent's account in accordance with DTC's automatic tender offer
procedures for transfer. However, the exchange for the tendered initial notes
will only be made after timely confirmation of the book-entry transfer of
initial notes into the exchange agent's account, and timely receipt by the
exchange agent of an agent's message and any other documents required by the
letter of transmittal. The term "agent's message" means a message, transmitted
by DTC and received by the exchange agent and forming part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
a participant tendering initial notes which are the subject of the book-entry
confirmation that the participant has received and agrees to be bound by the
terms of the letter of transmittal and that SWT Finance may enforce the
agreement against the participant.
If a holder desires to accept the exchange offer and time will not permit a
letter of transmittal or initial notes to reach the exchange agent before the
expiration date or the procedure for book-entry transfer cannot be completed on
a timely basis, the holder can comply with the following procedure. A tender
may be effected if the exchange agent has received at its address set forth
below under the heading "Exchange Agent" on or prior to the expiration date a
letter, telegram or facsimile transmission from an eligible institution setting
forth:
. the name and address of the tendering holder;
. the names in which the initial notes are registered;
. if possible, the certificate numbers of the initial notes to be tendered;
and
. a statement that the tender is being made and guaranteeing that within
five New York Stock Exchange trading days after the date of execution of
the letter, telegram or facsimile transmission by the eligible
institution, (a) the initial notes, in proper form for transfer or (b) a
confirmation of book-entry transfer of these initial notes into the
exchange agent's account at the book-entry transfer facility, will be
delivered by the eligible institution together with a properly completed
and duly executed letter of transmittal and any other required
documents.
Unless initial notes and properly completed letters of transmittal and any
other required documents being tendered by the above-described method are
deposited with the exchange agent within the time period set forth above, SWT
Finance may, at its option, reject the tender. Copies of a notice of guaranteed
delivery which may be used by eligible institutions for the purposes described
in this paragraph are available from the exchange agent.
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A tender will be deemed to have been received as of the date when:
. the tendering holder's properly completed and duly signed letter of
transmittal accompanied by the initial notes is received by the exchange
agent;
. a confirmation of book-entry transfer of these initial notes into the
exchange agent's account at the book-entry transfer facility is received
by the exchange agent; or
. a notice of guaranteed delivery or letter, telegram or facsimile
transmission to similar effect from an eligible institution is received
by the exchange agent. Issuances of exchange notes in exchange for
initial notes tendered by a notice of guaranteed delivery or letter,
telegram or facsimile transmission to similar effect by an eligible
institution will be made only against deposit of the letter of
transmittal, any other required documents, and the tendered initial
notes.
SWT Finance will determine all questions as to the validity, form,
eligibility (including time of receipt) and acceptance for exchange of any
tender of initial notes. SWT Finance's determination will be final and
binding. SWT Finance reserves the absolute right to reject any or all tenders
not in proper form or the acceptances for exchange of which may, in the
opinion of the counsel of SWT Finance, be unlawful. SWT Finance also reserves
the absolute right to waive any of the conditions of the exchange offer or any
defect or irregularity in the tender of any initial notes. None of SWT
Finance, the exchange agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any
liability for failure to give any notification.
Terms and Conditions of the Letter of Transmittal
The letter of transmittal contains, among other things, the following terms
and conditions, which are part of the exchange offer.
The party tendering initial notes for exchange exchanges, assigns and
transfers the initial notes to SWT Finance and irrevocably constitutes and
appoints the exchange agent as the transferor's agent and attorney-in-fact to
cause the initial notes to be assigned, transferred and exchanged. The
transferor represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the initial notes and to acquire
exchange notes issuable upon the exchange of these tendered initial notes. The
transferor also represents that when the initial notes are accepted for
exchange, SWT Finance will acquire good and unencumbered title to the tendered
initial notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The transferor also
warrants that it will, upon request, execute and deliver any additional
documents deemed by SWT Finance to be necessary or desirable to complete the
exchange, assignment and transfer of tendered initial notes or transfer
ownership of these initial notes on the account books maintained by a book-
entry transfer facility. The transferor further agrees that acceptance of any
tendered initial notes by SWT Finance and the issuance of exchange notes in
exchange for the initial notes shall constitute performance in full by SWT
Finance of its obligations under the registration rights agreement and that
SWT Finance shall have no further obligations or liabilities. All authority
conferred by the transferor will survive the death or incapacity of the
transferor and every obligation of the transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and
administrators of the transferor.
By tendering initial notes, the transferor certifies that it is not an
"affiliate" of SWT Finance within the meaning of Rule 405 under the Securities
Act and that it is acquiring the exchange notes in the ordinary course of the
transferor's business and that the transferor has no arrangement with any
person to participate in the distribution of these exchange notes.
Withdrawal Rights
Initial notes tendered under the exchange offer may be withdrawn at any
time prior to the expiration date.
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For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the exchange agent
at its address set forth on the back cover of this prospectus. Any notice of
withdrawal must specify:
. the person named in the letter of transmittal as having tendered initial
notes to be withdrawn;
. the certificate numbers of initial notes to be withdrawn;
. the principal amount of initial notes to be withdrawn;
. a statement that the holder is withdrawing his election to have these
initial notes exchanged; and
. the name of the registered holder of these initial notes. The notice
must be signed by the holder in the same manner as the original
signature on the letter of transmittal, including any required signature
guarantees, or be accompanied by evidence satisfactory to SWT Finance
that the person withdrawing the tender has succeeded to the beneficial
ownership of the initial notes being withdrawn.
The exchange agent will return the properly withdrawn initial notes promptly
following receipt of notice of withdrawal. If initial notes have been tendered
following the procedures for book-entry transfer, any notice of withdrawal must
specify the name and number of the account at the book-entry transfer facility
to be credited with the withdrawn initial notes or otherwise comply with the
book-entry transfer facility procedure. All questions as to the validity of
notices of withdrawals, including time of receipt, will be determined by SWT
Finance, and the determination will be final and binding on all parties.
Acceptance of Notes for Exchange; Delivery of Exchange Notes
Upon the terms and subject to the conditions of the exchange offer, the
acceptance of initial notes validly tendered and not withdrawn and issuance of
the exchange notes will be made on the exchange date. For the purpose of the
exchange offer, SWT Finance shall be deemed to have accepted for exchange
validly tendered initial notes when, as and if SWT Finance has given oral or
written notice of acceptance to the exchange agent.
The exchange agent will act as agent for the tendering holders of initial
notes for the purpose of receiving exchange notes from SWT Finance and causing
the initial notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the exchange offer, delivery of exchange notes to
be issued in exchange for accepted initial notes will be made by the exchange
agent promptly after acceptance of the tendered initial notes. Initial notes
not accepted for exchange by SWT Finance will be returned without expense to
the tendering holders promptly following the expiration date or, if SWT Finance
terminates the exchange offer prior to the expiration date, promptly after the
exchange offer is so terminated.
Conditions to the Exchange Offer
Notwithstanding any other provision of the exchange offer, or any extension
of the exchange offer, SWT Finance will not be required to issue exchange notes
in respect of any properly tendered initial notes not previously accepted. SWT
Finance may terminate the exchange offer, by oral or written notice to the
exchange agent and by timely public announcement communicated, unless otherwise
required by applicable law or regulation, by making a release to the Dow Jones
News Service, or, at its option, modify or otherwise amend the exchange offer,
if there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any court
or governmental agency or other governmental regulatory or administrative
agency or commission,
(a) seeking to restrain or prohibit the making or consummation of the
exchange offer or any other transaction contemplated by the exchange
offer, or assessing or seeking any damages as a result of the exchange
offer; or
(b) resulting in a material delay in the ability of SWT Finance to accept
for exchange or exchange some or all of the initial notes under the
exchange offer; or any statute, rule, regulation, order or injunction
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shall be sought, proposed, introduced, enacted, promulgated or deemed
applicable to the exchange offer or any of the transactions contemplated
by the exchange offer by any government or governmental authority,
domestic or foreign, or any action shall have been taken, proposed or
threatened, by any government, governmental authority, agency or court,
domestic or foreign, that in the sole judgment of SWT Finance, might
directly or indirectly result in any of the consequences referred to in
clauses (a) or (b) above or, in the sole judgment of SWT Finance, might
result in the holders of exchange notes having obligations with respect
to resales and transfers of exchange notes which would otherwise make it
inadvisable to proceed with the exchange offer.
In addition, SWT Finance will not accept for exchange any initial notes
tendered and no exchange notes will be issued in exchange for any of these
initial notes, if any stop order shall be threatened or in effect with respect
to (a) the registration statement of which this prospectus constitutes a part
or (b) qualification of the indenture under the Trust Indenture Act of 1939.
SWT Finance expressly reserves the right to terminate the exchange offer
and not accept for exchange any initial notes upon the occurrence of either of
these conditions. In addition, SWT Finance may amend the exchange offer at any
time prior to the expiration date if either of the conditions set forth above
occur. In addition, regardless of whether either of these conditions has
occurred, SWT Finance may amend the exchange offer in any manner which, in its
good faith judgment, is advantageous to holders of the initial notes.
These conditions are for the sole benefit of SWT Finance and may be waived
by SWT Finance, in whole or in part, if, in its reasonable judgment, such
waiver is not disadvantageous to holders of the exchange notes. Any
determination made by SWT Finance concerning an event, development or
circumstance described or referred to above will be final and binding on all
parties.
Exchange Agent
Bankers Trust Company has been appointed as the exchange agent for the
exchange offer. Executed letters of transmittal must be addressed to the
exchange agent at its address set forth below.
Main Delivery To:
[ ]
By mail, hand, or overnight courier to: [ ]
By facsimile:
Confirm by telephone:
Delivery to an address other than as set forth above, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
above, will not constitute a valid delivery.
Solicitation of Tenders; Expenses
SWT Finance has not retained any dealer-manager or similar agent in
connection with the exchange offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the exchange offer. SWT
Finance will, however, pay the exchange agent reasonable and customary fees
for its services and will reimburse it for reasonable out-of-pocket expenses
in connection with the services. SWT Finance will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this prospectus and related
documents to the beneficial owners of the initial notes and in handling or
forwarding tenders for their customers.
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Other
Participation in the exchange offer is voluntary and holders should
carefully consider whether to accept. Holders of the initial notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take. Neither Weigh-Tronix, LLC nor its board of managers recommends
you tender or not tender initial notes in the exchange offer.
As a result of the making of, and upon acceptance for exchange of all
validly tendered initial notes under the terms of, this exchange offer, SWT
Finance will have fulfilled a covenant contained in the terms of the initial
notes, the indenture and the registration rights agreement. Holders of the
initial notes who do not tender their certificates in the exchange offer will
continue to hold the certificates and will be entitled to all the rights, and
limitations applicable to the initial notes, under the indenture, except for
any of these rights under the registration rights agreement, which by their
terms terminate or cease to have further effect as a result of the making of
this exchange offer. All untendered initial notes will continue to be subject
to the restrictions on transfer set forth in the indenture. To the extent that
initial notes are tendered and accepted in the exchange offer, the trading
market for untendered initial notes could be adversely affected.
SWT Finance may in the future seek to acquire untendered initial notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. SWT Finance has no present plan to acquire any initial
notes which are not tendered in the exchange offer or to file a registration
statement to permit resales of any initial notes which are not tendered under
the exchange offer.
Holders of the initial notes do not have any appraisal or dissenters' rights
in the exchange offer.
37
<PAGE>
USE OF PROCEEDS
SWT Finance will not receive any proceeds from the exchange offer.
Simultaneously with the completion of the purchase of Avery Berkel on June
13, 2000, we refinanced existing bank indebtedness and specific other debts of
Weigh-Tronix, LLC. The merger and the refinancings were funded from the
following sources:
. $99.0 million in cash from borrowings by SWT Finance and Weigh-Tronix
Canada, ULC, a Canadian affiliate of SWT Finance, under a $120.0 million
senior credit facility; the proceeds of which (other than those used to
refinance existing indebtedness and to pay fees and expenses) were then
loaned to Weigh-Tronix UK Limited, by means of an intercompany loan from
SWT Finance;
. $96.2 million in cash from the proceeds of the offering; the proceeds of
which (other than those used to refinance existing indebtedness and to
pay fees and expenses) were loaned to Weigh-Tronix UK Limited by SWT
Finance by means of an intercompany loan;
. $40.3 million in cash from the subscription by Berkshire, management and
other investors for ownership interests issued in a private placement by
Weigh-Tronix, LLC; which proceeds were used by Weigh-Tronix, LLC to
subscribe for shares in Weigh-Tronix UK Limited and which shares in
Weigh-Tronix UK Limited were subsequently contributed by Weigh-Tronix,
LLC to SWT Holdings B.V.; and
. $9.6 million in cash from the subscription by Marconi (or an affiliate
of Marconi) for the preferred member interest which were issued in a
private placement by Weigh-Tronix, LLC; the proceeds of which were
loaned to Weigh-Tronix UK Limited.
The sources and uses of the cash used to finance the merger are outlined
below. Amounts have been translated at a rate of $1.00 = (Euro).96. This rate
approximates the spot rate on June 13, 2000.
<TABLE>
<CAPTION>
Amount Amount
($ million) ((Euro) million)
----------- ----------------
<S> <C> <C>
Sources
Senior credit facility........................... 99.0 102.9
Senior subordinated notes due 2010............... 96.2 100.0
Equity placement................................. 40.3 41.9
Preferred member interest(/1/)................... 9.6 10.0
----- -----
TOTAL.......................................... 245.1 254.8
===== =====
<CAPTION>
Amount Amount
($ million) ((Euro) million)
----------- ----------------
<S> <C> <C>
Uses
Funding of cash and cash equivalents for working
capital......................................... 9.6 10.0
Funding of cash overdrafts....................... 8.5 8.8
Cash portion of merger consideration(/2/)........ 154.6 160.7
Estimated fees and expenses(/3/)................. 16.5 17.2
Refinancing of senior indebtedness(/4/).......... 40.9 42.5
Refinancing of subordinated indebtedness(/5/).... 15.0 15.6
----- -----
TOTAL.......................................... 245.1 254.8
===== =====
</TABLE>
--------
(1) The preferred member interest is exchangeable at the option of Weigh-
Tronix, LLC or the holders of the preferred member interest, subject to
specific conditions, for notes of SWT Finance issued under the indenture
and substantially identical in all material respects to and ranking
equally with the notes. This cannot occur any earlier than June 13, 2001.
(2) Consists of stated purchase price of approximately $158.6 million less
$4.0 million of preliminary purchase price adjustments.
38
<PAGE>
(3) Estimated fees and expenses which includes a prepayment penalty totaling
$1.0 million related to the refinancing of indebtedness of Weigh-Tronix,
LLC.
(4) The existing senior indebtedness consisted of a U.K. senior revolving note,
a U.S. senior revolving note, a U.S. senior term note A, a U.S. senior term
note B and a Canadian senior term note B. The U.K. senior revolving note
and the U.S. senior revolving note each had an annual interest rate of
10.3% as of June 13, 2000 and had an original maturity date of May 2003.
The U.S. senior term note A, U.S. senior term note B and the Canadian
senior term note B had an annual interest rate of 10.3%, 10.5% and 10.5%,
respectively, as of June 13, 2000. Final payment for the U.S. senior term
note A was due in May 2003 and final payment for the U.S. senior term notes
B were due in May 2005.
(5) The original stated maturity date of the subordinated indebtedness was May
1, 2005 and 2006. Also, the subordinated debt had an annual interest rate
of 12%.
39
<PAGE>
CAPITALIZATION
The following table sets forth our unaudited capitalization as of June 30,
2000 that has been derived from the interim unaudited financial data as of June
30, 2000. Unless otherwise noted, all amounts have been translated into euros
using the rate of $1.00 = (Euro)0.95. This rate approximates the spot rate on
June 30, 2000. The spot rate at September 29, 2000 was $1.00 = (Euro)0.88.
<TABLE>
<CAPTION>
At June 30, 2000
------------------
Actual
------------------
US$'000 (Euro)'000
<S> <C> <C>
Cash and cash equivalents.................................... 15,137 15,859
======= =======
Revolving credit facility.................................... 29,000 30,382
Tranche A and B term loan facilities......................... 70,000 73,337
Senior subordinated notes, due 2010(/1/)..................... 95,891 100,000
Other senior debt including capital leases................... 84 88
------- -------
Total debt................................................. 194,975 203,807
------- -------
Mandatorily redeemable membership interests:
Class A membership interests, subject to put option......... 1,139 1,240
Class C membership interests, subject to put option......... 1,959 2,052
Preferred member interest(/2/).............................. 9,314 9,758
------- -------
Total mandatorily redeemable membership interests.......... 12,412 13,050
------- -------
Total members' equity........................................ 44,505 46,627
------- -------
Total capitalization......................................... 251,892 263,484
======= =======
</TABLE>
--------
(1) The senior subordinated notes were translated into U.S. Dollars at the
exchange rate effective on June 13, 2000, the date the notes were issued.
(2) Preferred member interest is exchangeable at the option of Weigh-Tronix,
LLC or the holders of the preferred member interest, subject to specific
conditions but in any event no earlier than June 13, 2001, for exchange
notes issued under the indenture and substantially identical in all
material respects to and ranking equally with the notes.
40
<PAGE>
SWT FINANCE
SWT Finance
SWT Finance was incorporated in The Netherlands on September 12, 1995 under
the name of Palometa Investments B.V. SWT Finance changed its name to SWT
Finance B.V. on June 15, 1998. SWT Finance is a Dutch private company with
limited liability (besloten vennootschap met beperkte aansprakelijkheid). The
registered office of SWT Finance is Joan Muyskenweg 4, 1096 CJ Amsterdam, The
Netherlands.
The principal activity of SWT Finance is to act as a special purpose finance
vehicle. SWT Finance has no other significant commercial activities with third
parties. In accordance with the rules and regulations of the Securities and
Exchange Commission, SWT Finance is not required to prepare individual annual
audited unconsolidated financial statements. Financial information regarding
SWT Finance is consolidated in the annual audited consolidated financial
statements of Weigh-Tronix, LLC.
Capitalization
The following table sets forth SWT Finance's unaudited capitalization as of
June 30, 2000 that has been derived from the interim unaudited financial data
as of June 30, 2000. Unless otherwise noted, all amounts have been translated
into euros using the rate of $1.00 = (Euro)0.95. This rate approximates the
spot rate on June 30, 2000. The spot rate at September 29, 2000 was
$1.00 = (Euro)0.88.
<TABLE>
<CAPTION>
At June 30, 2000
-------------------
Actual
-------------------
US$'000 (Euro)'000
<S> <C> <C>
Cash and cash equivalents................................... 2,397 2,511
======= =======
Revolving credit facility................................... 29,000 30,382
Tranche A and B term loan facilities (a).................... 68,260 71,514
Senior subordinated notes, due 2010 (b)..................... 95,891 100,000
------- -------
Total debt................................................ 193,151 201,896
------- -------
Total members' equity....................................... 2,741 2,872
------- -------
Total capitalization........................................ 195,892 204,768
======= =======
</TABLE>
--------
(a) Actual borrowings exclude $1.7 million of debt obligations from the
company's wholly-owned subsidiary, Weigh-Tronix Canada, ULC, under the
tranche A and B term loan facilities. See "Capitalization."
(b) The senior subordinated notes were translated into U.S. Dollars at the
exchange rate effective on June 13, 2000, the date the notes were issued.
Directors
The current directors of SWT Finance are:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
John J. McCann III.............................................. 55 Director
DL Trust B.V. .................................................. -- Director
</TABLE>
The business address of the above directors for all purposes in connection
with SWT Finance is at the registered address of SWT Finance. For further
information on the directors, see "Management."
Accountants
The independent accountants of record of SWT Finance are
PricewaterhouseCoopers LLP, independent accountants of PrinsBernhardplein 200,
1097 JB Amsterdam, The Netherlands.
41
<PAGE>
THE GUARANTORS
Weigh-Tronix, LLC
Weigh-Tronix, LLC is the holding company of Weigh-Tronix, Inc. and SWT
Holdings B.V. There is no amount to be paid up on its interests. The members'
equity of Weigh-Tronix, LLC, on a stand-alone basis, as of March 31, 2000 was
$13.1 million. For the year ended March 31, 2000, Weigh-Tronix, LLC had an
accumulated deficit of $1.6 million and its net loss was $321,000. For the year
ended March 31, 2000, Weigh-Tronix, LLC made no distributions to its members.
Weigh-Tronix, LLC was formed in the U.S. as a Delaware limited liability
company on March 20, 1998 and its registered office is at Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware.
SWT Holdings B.V.
SWT Holdings B.V. is an intermediate holding company for certain
subsidiaries of Weigh-Tronix, LLC. SWT Holdings B.V.'s issued share capital is
40 shares of NLG 1,000 each, its authorized share capital is 200 shares of NLG
1,000 each and it is 100% owned by Weigh-Tronix, LLC. There is no amount to be
paid up on its shares. The members' equity of SWT Holdings B.V. as of March 31,
2000 was $10.1 million. For the year ended March 31, 2000, SWT Holdings B.V.
had an accumulated deficit and net loss of $61,000. For the year ended March
31, 2000, SWT Holdings B.V. made no dividend payments to its immediate holding
company. SWT Holdings B.V. was incorporated in The Netherlands as a private
company with limited liability on September 12, 1995 and its registered office
is at Joan Muyskenweg 4, 1096 CJ, Amsterdam.
Weigh-Tronix, Inc.
Weigh-Tronix, Inc. manufactures, distributes and sells industrial weighing
equipment in North America and is an intermediate holding company of Berkel
USA, Inc., Mecmesin, Inc. and SWT Finance B.V. Its issued share capital is 200
common shares with a par value of $0.1 per share, its authorized share capital
is $1,000 and it is owned 100% by Weigh-Tronix, LLC. There is no amount to be
paid up on its interests. The members' equity of Weigh-Tronix, Inc. as of March
31, 2000 was $2.7 million. For the year ended March 31, 2000, Weigh-Tronix,
Inc. had an accumulated deficit of $1.7 million and its net income was $2.6
million. For the year ended March 31, 2000, Weigh-Tronix, Inc. made no
distributions to its immediate holding company, Weigh-Tronix, LLC. Weigh-
Tronix, Inc. was formed in the U.S. as a Delaware Corporation on February 18,
1998 and its registered office is at Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware. By a special resolution of its members, it
changed its name to Weigh-Tronix, Inc. on July 14, 1998.
Mecmesin, Inc.
Mecmesin, Inc. designs and manufactures force and torque testing systems.
Its issued share capital is 1,000 common shares of no par value, its authorized
share capital is 1,000 common shares of no par value and it is owned 100% by
Weigh-Tronix, Inc. There is no amount to be paid up on its interests. Mecmesin,
Inc. was acquired by Weigh-Tronix, Inc. on November 10, 1998 and its accounts
from that date forward are incorporated in the accounts of Weigh-Tronix, Inc.
Any net income of Mecmesin, Inc. is not reported separately and would appear in
the accounts of Weigh-Tronix, Inc. For the year ended March 31, 2000, Mecmesin,
Inc. made no distributions to its immediate holding company, Weigh-Tronix, Inc.
Mecmesin, Inc. was formed in the U.S. as a California corporation on October
12, 1988 and its registered office is at Suite 201, 789 Lombard Court, Santa
Rosa, California.
Salter Weigh-Tronix Ltd
Salter Weigh-Tronix Ltd's principal activity is the manufacture, service,
hire and repair of weighing machines. Its issued share capital is 12.6 million,
its authorized share capital is (Pounds)2.6 million and it is owned
42
<PAGE>
100% by SWT Holdings B.V. There is no amount to be paid up on its shares. The
members' equity of Salter
Weigh-Tronix Ltd as of March 31, 2000 was $5.8 million. For the year ended
March 31, 2000, Salter Weigh-Tronix Ltd had accumulated retained earnings of
$1.7 million and its net income was $305,000. For the year ended March 31,
2000, Salter Weigh-Tronix Ltd made no dividend payments to its immediate
holding company. Salter Weigh-Tronix Ltd was incorporated in England and Wales
as a private limited company under the name "Law 935 Limited" on January 14,
1998 and its registered office is at George Street, West Bromwich, West
Midlands B70 6AD. By special resolutions of its members, it changed its name to
SWT Limited on April 8, 1998 and to Salter Weigh-Tronix Ltd on May 5, 1998.
Salter Housewares Holdings Ltd
Salter Housewares Holdings Ltd is an intermediate holding company of Salter
Housewares Ltd. Its issued share capital is (Pounds)2.8 million, its authorized
share capital is (Pounds)2.8 million and it is owned 100% by SWT Holdings B.V.
There is no amount to be paid up on its shares. The members' equity of Salter
Housewares Holdings Ltd as of March 31, 2000 was $3.8 million. For the year
ended March 31, 2000, Salter Housewares Holdings Ltd had an accumulated
retained deficit of $694,000 and its net loss was $278,000. For the year ended
March 31, 2000, Salter Housewares Holdings Ltd made no dividend payments to its
immediate holding company. Salter Housewares Holdings Ltd was incorporated in
England and Wales as a private limited company under the name "Law 936 Limited"
on January 14, 1998 and its registered office is at 211 Vale Road, Tonbridge,
Kent TN9 1SU. By a special resolution of its members, it changed its name to
Salter Housewares Holdings Ltd on April 15, 1998.
Weigh-Tronix Canada, ULC
Weigh-Tronix Canada, ULC's principal activity is the sale, distribution and
service of weighing equipment. Its issued share capital is 100 common shares of
no par value, its authorized share capital is 100,000 common shares of no par
value and it is owned 100% by SWT Holdings B.V. There is no amount to be paid
up on its shares. The members' equity of Weigh-Tronix Canada, ULC as of March
31, 2000 was $1.3 million. For the year ended March 31, 2000, Weigh-Tronix
Canada, ULC had accumulated earnings of $452,000 and its net income was
$758,000. For the year ended March 31, 2000, Weigh-Tronix Canada, ULC made no
dividend payments to its immediate holding company, SWT Holdings B.V. Weigh-
Tronix Canada, ULC was incorporated under the laws of the Province of Nova
Scotia as an unlimited liability company on March 26, 1998 and its registered
office is at 1741 Brunswick Street, Suite 430, Halifax, Nova Scotia.
Weigh-Tronix UK Limited
Weigh-Tronix UK Limited is a newly incorporated holding company for certain
subsidiaries of Weigh- Tronix, LLC. Its issued share capital is 11,000, its
authorized share capital is (Pounds)2 and it is owned 100% by SWT Holdings B.V.
There is no amount to be paid up on its shares. Weigh-Tronix UK Limited was
incorporated in England and Wales as a private limited company on March 6, 2000
and its registered office is at Broadwalk House, 5 Appold Street, London EC2A
2HA. Due to the date of incorporation, no accounts have been prepared, no
distributions have been made and no net income or loss has been published.
Salter Housewares Ltd
Salter Housewares Ltd's principal activity is the manufacture and marketing
of domestic scales and other housewares products. Its issued share capital is
(Pounds)5,000, its authorized share capital is (Pounds)5,000 and it is owned
100% by Salter Housewares Holdings Ltd. There is no amount to be paid up on its
shares. The members' equity of Salter Housewares Ltd as of March 31, 2000 was
$1.7 million. For the year ended March 31, 2000, Salter Housewares Ltd had
accumulated retained earnings of $1.7 million and its net income was $1.5
million.
43
<PAGE>
For the year ended March 31, 2000, Salter Housewares Ltd made no dividend
payments to its immediate holding company. Salter Housewares Ltd was
incorporated in England and Wales as a private limited company on September 26,
1975 and its registered office is at 211 Vale Road, Tonbridge, Kent TN9 1SU.
Weigh-Tronix Delaware, Inc.
Weigh-Tronix Delaware, Inc. is a wholly-owned subsidiary of Weigh-Tronix,
LLC. Weigh-Tronix Delaware was formed in the U.S., as a Delaware corporation on
June 8, 2000 and its registered office is at 1209 Orange Street, Wilmington,
Delaware 19801.
Berkel USA, Inc.
Berkel USA, Inc. is an intermediate holding company of Berkel, Inc. Its
issued share capital is $1,000, its authorized share capital is $1,000 and it
is owned 100% by Weigh-Tronix, Inc. There is no amount to be paid up on its
interests. The net liabilities of Berkel USA, Inc. as at March 31, 2000 were
$24.7 million. For the year ended March 31, 2000, Berkel USA, Inc. had negative
reserves of $24.7 million and its loss after tax was $1.3 million. For the year
ended March 31, 2000, Berkel USA, Inc. made no distributions. Berkel USA, Inc.
was formed in the U.S. as a Delaware corporation on January 20, 1981 and its
registered office is at 100 West Tenth Street, Wilmington, Delaware.
Berkel, Inc.
Berkel, Inc. manufactures and distributes slicer and other food equipment
for the food retail and food service markets and is an intermediate holding
company of Berkel Products Co. Limited. Its issued share capital is $2.5
million, its authorized share capital is $3.0 million and it is owned 100% by
Berkel USA, Inc. There is no amount to be paid up on its interests. The net
assets of Berkel, Inc. as at March 31, 2000 were $4.0 million. For the year
ended March 31, 2000, Berkel, Inc. had reserves of $1.5 million and its profit
after tax was $519,000. For the year ended March 31, 2000, Berkel, Inc. made no
distributions. Berkel, Inc. was formed in the U.S. as an Indiana corporation
under the name "U.S. Slicing Machine Company, Inc." on December 7, 1916 and its
registered office is at One Berkel Drive, Laporte, Indiana. By a special
resolution of its members, it changed its name to Berkel, Inc. on July 6, 1970.
Berkel Products Co. Limited
Berkel Products Co. Limited distributes slicer and other food equipment for
the food retail and food services markets. Its issued share capital is
CAN$600,000, its authorized share capital is CAN$1.0 million and it is owned
100% by Berkel, Inc. There is no amount to be paid up on its shares. The net
assets of Berkel Products Co. Limited as at March 31, 2000 were CAN$958,000.
For the year ended March 31, 2000, Berkel Products Co. Limited had reserves of
CAN$358,000 and its loss after tax was CAN$42,000. For the year ended March 31,
2000, Berkel Products Co. Limited made no dividend payments. Berkel Products
Co. Limited was incorporated in Canada as a limited liability company on July
16, 1929 and its registered office is at Suite 201, 845 Wilson Avenue, Ontario.
Avery Berkel Limited
Avery Berkel Limited's principal activities are the design, manufacturer,
sale and service of weighing machines, slicers and other food processing
equipment and systems. Its issued share capital is (Pounds)2.0 million, its
authorized share capital is (Pounds)2.0 million and it is owned 100% by Avery
Berkel Holdings Ltd. There is no amount to be paid up on its shares. The net
assets of Avery Berkel Limited as at March 31, 2000, were (Pounds)12.5 million.
For the year ended March 31, 2000, Avery Berkel Limited had reserves of
(Pounds)10.5 million and its profit after tax was (Pounds)6.1 million. For the
year ended March 31, 2000, Avery Berkel Limited made dividend payments of
(Pounds)22.4 million.
44
<PAGE>
to its immediate holding company. Avery Berkel Limited was incorporated in
England and Wales as a private limited company under the name "W & T Avery
Limited" on December 10, 1957 and its registered office is at Foundry Lane,
Smethwick, Warley, West Midlands B66 2LP. By a special resolution of its
members, it changed its name to GEC Avery Limited on April 1, 1989. The
corporate name was changed to Avery Limited on June 26, 2000.
Avery Berkel Properties Ltd
Avery Berkel Properties Ltd's principal activity is to hold property as
investments. Its issued share capital is (Pounds)5,000, its authorized share
capital is (Pounds)5,000 and it is owned 100% by Avery Berkel Limited. There is
no amount to be paid up on its shares. The net assets of Avery Berkel
Properties Ltd as at March 31, 2000, were (Pounds)5.4 million. For the year
ended March 31, 2000, Avery Berkel Properties Ltd had reserves of (Pounds)5.4
million and its profit after tax was (Pounds)74,000. For the year ended March
31, 2000, Avery Berkel Properties Ltd made no dividend payments to its
immediate holding company. Avery Berkel Properties Ltd was incorporated in
England and Wales as a private limited company under the name "Avery Properties
Limited" on June 26, 1954 and its registered office is at Foundry Lane,
Smethwick, Warley, West Midlands B66 2LP, by a special resolution of its
members, it changed its name to GEC Avery Properties Limited on April 25, 1989.
The corporate name was changed to Avery Berkel Properties Limited on June 27,
2000.
Avery Berkel Holdings Limited
Avery Berkel Holdings Limited is an intermediate holding company for certain
subsidiaries of SWT Finance. Its issued share capital is (Pounds)9.2 million,
its authorized share capital is (Pounds)10.0 million and it is owned 100% by
Weigh-Tronix UK Limited. There is no amount to be paid up on its shares. The
net assets of Avery Berkel Holdings Limited as at March 31, 2000 were
(Pounds)17.0 million. For the year ended March 31, 2000, Avery Berkel Holdings
Limited had reserves of (Pounds)7.8 million and its profit after tax was
(Pounds)27.5 million. For the year ended March 31, 2000, Avery Berkel Holdings
Limited made dividend payments of (Pounds)39.9 million to Marconi. Avery Berkel
Holdings Limited was incorporated in England and Wales as a private limited
company under the name "Averys Limited" on December 10, 1894 and its registered
office is at Foundry Lane, Smethwick, Warley, West Midlands B66 2LR By a
special resolution of its members, it changed its name to GEC Avery
International Limited on April 1, 1989. The corporate name was changed to Avery
Berkel Holdings Limited on June 26, 2000.
Berkel (Ireland) Limited
Berkel (Ireland) Limited distributes and services weighing and food
equipment. Its issued share capital is IR(Pounds)770,000, its authorized share
capital is IR(Pounds)2.0 million and it is owned 100% by Avery Berkel Limited.
There is no amount to be paid up on its shares. The net assets of Berkel
(Ireland) Limited as at March 31, 2000 were IR(Pounds)1.2 million. For the year
ended March 31, 2000, Berkel (Ireland) Limited had reserves of
IR(Pounds)463,000 and its profit after tax was IR(Pounds)425,000. For the year
ended March 31, 2000, Berkel (Ireland) Limited made no dividend payments.
Berkel (Ireland) Limited was incorporated in Ireland as a limited company under
the name "Berkel Scales Limited" on November 20, 1964 and its registered office
is at Unit 2, Western Industrial Estate, Naas Road, Dublin. By a special
resolution of its members, it changed its name to Berkel (Ireland) Limited on
November 24, 1977.
45
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
Senior Credit Facility
In connection with the merger, SWT Finance B.V., Weigh-Tronix Canada, ULC
and Weigh-Tronix, LLC entered into the Senior Credit Facility, dated as of June
13, 2000, with Lehman Brothers Inc. and FleetBoston Robertson Stephens Inc., as
co-arrangers, Lehman Commercial Paper, Inc. as syndication agent, Fleet
National Bank, as administrative agent, Lehman Brothers Inc., as sole advisor,
and the banks and financial institutions from time to time parties to the
senior credit facility. The following is a summary of the material provisions
of the senior credit facility. It does not restate the agreement in its
entirety. We urge you to read the senior credit facility, which is filed as an
exhibit to the registration statement which includes this prospectus.
General
The facilities comprising the senior credit facility consist of $120.0
million (or its equivalent) of term loan and revolving credit facilities,
comprised of a $30.0 million (or its equivalent) tranche A term loan facility,
a $40.0 million (or its equivalent) tranche B term loan facility and a $50.0
million (or its equivalent) revolving credit facility. SWT Finance B.V. is
required to repay the tranche A term loan facility over five years, with the
final repayment on June 30, 2005. The tranche B term loan facility is repayable
over seven years with the final repayment on June 30, 2007. The commitments
under the revolving credit facility terminate on June 30, 2005 and amounts
drawn down under the revolving credit facility must be fully repaid by that
date. The revolving credit facility is subject to a borrowing base as defined
in the senior credit facility based on 50% of the net book value of eligible
inventory and 80% of eligible accounts receivable. The tranche A term loan
facility and the tranche B term loan facility are available in U.S. dollars and
sterling. The revolving credit facility is available in U.S. dollars, sterling
and euro. A portion of the revolving credit facility is available for the
issuance of letters of credit denominated in U.S. dollars, sterling or euro and
a portion will be available for the borrowing of swingline loans denominated in
U.S. dollars. Up to $5.0 million of the senior credit facility may be borrowed
directly by Weigh-Tronix Canada, ULC. As of June 30, 2000, the company's
outstanding debt under the senior credit facility was $99.0 million. As of June
30, 2000, the company could incur an additional $17.6 million of debt under the
senior credit facility which represents the total senior credit facility of
$120.0 million less outstanding letters of credit of $3.4 million less
outstanding debt of $99.0 million.
The proceeds of the tranche A term loan facility and the tranche B term loan
facility and the portion of the revolving credit facility drawn on the closing
of the senior credit facility were used to pay back specific existing financial
indebtedness of the company. The proceeds were also used to finance a portion
of the merger and to pay related fees and expenses. Undrawn credit under the
revolving credit facility is available for the working capital needs or general
corporate purposes (including permitted acquisitions) of the company and its
subsidiaries. The senior credit facility provides that specific subsidiaries of
the company may, subject to specific conditions, become additional guarantors
under the senior credit facility. The guarantors of the notes are also
guarantors under the senior credit facility and have granted security in
respect of the obligations of SWT Finance B.V. and Weigh-Tronix Canada, ULC.
Interest Rate; Fees
Advances under the tranche A term loan facility and advances under the
revolving credit facility initially bear interest at a rate equal to, in the
case of loans denominated in U.S. dollars, sterling, and euro, LIBOR plus 3.25%
or, in the case of loans denominated in U.S. dollars, a base rate plus 2.25%.
Advances under the tranche B term loan facility initially bear interest at a
rate equal to, in the case of loans denominated in U.S. dollars and sterling,
LIBOR plus 3.75% or, in the case of loans denominated in U.S. dollars, a base
rate plus 2.75%. The margins over LIBOR and the base rate will be subject to
adjustment six months after the closing of the senior credit facility based on
the achievement of specified ratios of total indebtedness to EBITDA, as defined
in the senior credit facility.
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A commitment fee calculated at a rate equal to 0.50% of the daily average
undrawn amount of the revolving credit facility is payable quarterly in
arrears. The commitment fee is subject to adjustment six months after June 13,
2000 based on the achievement of specified ratios of total indebtedness to
EBITDA. Agency fees are payable to the administrative agent.
Fees in respect of letters of credit issued under the revolving credit
facility are calculated at a rate per annum equal to the interest rate margin
over LIBOR then applicable to advances under the revolving credit facility on
the face amount of any letter of credit, payable quarterly in arrears and (if
other than the last day of a quarterly period) on the date on which the letter
of credit terminates. In addition a fronting fee, calculated at a rate equal to
0.25% of the face amount of the letter of credit, is payable for the account of
the issuing bank. The fronting fee is payable quarterly in arrears and (if
other than the last day of a quarterly period) on the date on which letter of
credit terminates. A fronting fee of 0.125% will also be payable under the
revolving credit facility with respect to any loans denominated in sterling or
euro which are fronted by Fleet National Bank on behalf of any other lender.
Repayment; Prepayments
The final scheduled maturity of the tranche A term loan facility will be
June 30, 2005 and amounts outstanding under the tranche A term loan facility
will be subject to interim scheduled repayments as follows: (1) in the first
year following the closing of the senior credit facility, 5% of the principal
amount, (2) in the second year following the closing, 10% of the principal
amount, (3) in the third year following the closing, 15% of the principal
amount, (4) in the fourth year following the closing, 20% of the principal
amount and (5) in the fifth year following the closing, 50% of the principal
amount.
The final scheduled maturity of the tranche B term loan facility will be
June 30, 2007 and approximately 1% of the principal amount will be repayable in
each of the first five years following the closing of the senior credit
facility. In the sixth year following the closing, 45% of the principal amount
will be repayable and in the seventh year following the closing, 50% of the
principal amount will be repayable.
Specific mandatory prepayments are required to be made under the senior
credit facility, including (1) 100% of the net proceeds of specific asset sales
and insurance claims with respect to damaged or destroyed property, unless the
proceeds are reinvested in the business within one year of the sale or casualty
event, (2) 100% of the net proceeds of any sale or issuance of equity, other
than equity provided by existing shareholders of the company or incurrence of
specific indebtedness by the company or any of its subsidiaries and (3) an
amount equal to 75%, subject to reduction based on the achievement of
performance targets, of available "excess cash flow" (as defined in the senior
credit facility) in any financial year. The mandatory prepayments will (if in
part) be applied to the tranche A term loan facility and the tranche B term
loan facility ratably and to the installments thereunder ratably. Optional
prepayments are permitted without premium or penalty but subject to customary
breakage and capital costs.
Guarantee; Security
The obligations of SWT Finance B.V. and Weigh-Tronix Canada, ULC under the
senior credit facility are guaranteed on a senior secured basis by the
guarantors.
The indebtedness under the senior credit facility and the guarantees of the
guarantors are secured by first priority fixed and floating charges over
substantially all of the tangible and intangible assets of SWT Finance B.V. and
Weigh-Tronix Canada, ULC and the guarantors.
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Certain Covenants
The senior credit facility contains a number of operating and financial
covenants, including that Weigh-Tronix, LLC and each of its subsidiaries will:
1. Provide quarterly and annual financial statements to the lenders;
2. Pay, discharge and satisfy at or before maturity or delinquency all
of its material obligations of any nature;
3. Preserve, renew and keep in full force and effect its corporate or
other existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of
its business;
4. Provide prompt written notice to the lenders of any default or event
of default whether under the senior credit facility or other contract and
any development or event that could reasonably be expected to have a
material adverse effect;
5. Comply in all material respects with all applicable environmental
laws;
6. Grant a security interest in any additional property acquired;
7. Maintain insurance on all of its property; and
8. Keep proper books and records and permit the lenders to visit and
inspect any of its properties and its books.
The senior credit facility also places limitations on the ability of
Weigh-Tronix, LLC and its subsidiaries to:
1. Create, incur, assume or suffer to exist indebtedness with some
exceptions such as debt outstanding as of the date of the senior credit
facility;
2. Create, incur, assume or suffer to exist any liens upon any of its
property, with some exceptions such as liens for taxes not yet due;
3. Enter into any merger, consolidation or amalgamation, or liquidate,
wind up or dissolve itself;
4. Dispose of its property;
5. Declare or pay any dividends on, or make any payment on account of
the purchase, redemption, defeasance, retirement or other acquisition of
any capital stock;
6. Make or commit to make any capital expenditure, except capital
expenditures in the ordinary course of business not exceeding $12,500,000
in any fiscal year;
7. Make any advance, loan, extension of credit or capital contribution
to, or purchase any capital stock or debt securities of any other person;
8. Make or offer to make any optional or voluntary payment, prepayment,
repurchase or redemption, or voluntarily defease, the notes;
9. Amend, modify, or otherwise change, or consent to or agree to, amend
any of the terms of the notes, other than amendments that would not involve
a consent fee and that would extend the maturity or reduce the amount of
any payment of principal under the notes, reduce the rate or extend the
date for payment of interest on the notes or relax any covenant or other
restriction applicable to Weigh-Tronix, LLC or its subsidiaries;
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10. Enter into any transaction with affiliates, unless such transaction
is in the ordinary course of business and upon fair and reasonable terms no
less favorable to Weigh-Tronix, LLC or its subsidiaries, as the case may
be, than it would obtain in a comparable arm's length transaction with a
person that is not an affiliate;
11. Enter into any sale and leaseback transaction;
12. Change Weigh-Tronix, LLC's fiscal year end or its method of
determining fiscal quarters;
13. Enter into or suffer to exist or become effective any agreement that
prohibits or limits the ability of Weigh-Tronix, LLC or its subsidiaries to
create, incur, assume or suffer to exist any lien upon any of its
properties or revenues;
14. Enter into or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any subsidiary to: (a) make
restricted payments of any capital stock of that subsidiary held by, or pay
any indebtedness owed to, Weigh-Tronix, LLC; (b) make investments in Weigh-
Tronix, LLC or any other subsidiary; and (c) transfer any of its assets to
Weigh-Tronix, LLC or any other subsidiary;
15. Enter into any business, except those businesses in which Weigh-
Tronix, LLC and its subsidiaries are engaged on the date of this agreement;
16. Amend, supplement or modify the terms and conditions of the
indemnities and licenses furnished to Weigh-Tronix, LLC and its
subsidiaries under the Acquisition Agreement, dated as of March 8, 2000,
between Weigh-Tronix UK Limited and Marconi Corporation plc and related
documents, so that those indemnities and licenses shall be materially less
favorable to the lenders;
17. In the case of Weigh-Tronix, LLC only, conduct, transact or engage
in, or commit to conduct, transact or engage in, any business or operations
other than those incidental to its ownership of Weigh-Tronix, Inc. and SWT
Holdings B.V.; and
18. Enter into any hedge agreement other than hedge agreements entered
into in the ordinary course of conducting its business and not for
speculative purposes.
Financial Condition Covenants
The senior credit facility also contains financial covenants, including,
without limitation, requirements to maintain minimum ratios of EBITDA to
interest expense and EBITDA to fixed charges; maximum ratios of total
indebtedness to EBITDA; minimum tangible net worth; and limitations on capital
expenditures. EBITDA is defined in the senior credit facility which is an
exhibit to the registration statement.
Events of Default
The senior credit facility contains events of default including failure to
make payments under the senior credit facility, breach of covenants, breach of
representations and warranties, specific events of liquidation, moratorium,
insolvency, bankruptcy or similar events, specific events concerning the U.S.
Employee Retirement Income Security Act of 1974, as amended, invalidity of
security and guarantees, cross default in relation to specific other
indebtedness (including the notes), specific litigation or other proceedings,
failure of the notes to be subordinated to the senior credit facility and a
change of control (as defined in the senior credit facility and including the
circumstances which would lead to a change of control offer under the notes).
Upon the occurrence of one of these defaults, the administrative agent may,
and must if directed by the financial institutions holding a majority of the
outstanding indebtedness or commitments under the senior credit facility, do
any or all of the following: terminate the commitments under the senior credit
facility, declare all amounts under the senior credit facility to be
immediately due and payable and take other actions, including enforcement of
rights in respect of collateral.
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DESCRIPTION OF THE EXCHANGE NOTES
General
The initial notes were and the exchange notes will be issued under the
Indenture dated June 13, 2000, as further supplemented, by and among SWT
Finance, the Guarantors and Bankers Trust Company, as trustee. The terms of the
notes include those stated in the indenture and those made part of the
indenture by reference to the Trust Indenture Act of 1939. The following
description is a summary of the material provisions of the indenture. It does
not restate the agreement in its entirety. We urge you to read the indenture
because it, and not this description, defines your rights as a holder of these
notes. A copy of the indenture is filed as an exhibit to the registration
statement which includes this prospectus and is available to you upon request.
The definitions of specific terms used in the following summary are set forth
below under "--Certain Definitions."
When we refer to the term "note" or "notes" in this "Description of the
Exchange Notes" section, we are referring to both the initial notes and the
exchange notes.
Brief Description of the Notes and the Subsidiary Guarantees
The Notes
The notes:
. are general unsecured obligations of SWT Finance;
. are subordinated in right of payment to all existing and future Senior
Debt;
. rank pari passu in right of payment with all other senior subordinated
debt of SWT Finance; and
. are fully and unconditionally guaranteed by the guarantors identified
immediately below.
The Guarantors
The notes are fully and unconditionally guaranteed by the following parent
and affiliated companies of SWT Finance:
. Weigh-Tronix, LLC
. SWT Holdings B.V.
. Weigh-Tronix, Inc.
. Mecmesin, Inc.
. Salter Weigh-Tronix Ltd
. Salter Housewares Holdings Ltd
. Weigh-Tronix Canada, ULC
. Weigh-Tronix UK Ltd
. Salter Housewares Ltd
. Weigh-Tronix Delaware, Inc.
. Berkel USA, Inc.
. Berkel, Inc.
. Berkel Products Co. Limited
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. Avery Berkel Limited
. Avery Berkel Properties Limited
. Avery Berkel Holdings Limited
. Berkel (Ireland) Limited
The subsidiary guarantees:
. are general unsecured obligations of each guarantor;
. are subordinated in right of payment to all existing and future Senior
Debt of each guarantor; and
. rank equally with all other Senior Subordinated Debt of each guarantor.
Under the Guarantees, the guarantors are jointly and severally liable with
respect to SWT Finance's obligations under the notes. See "--Guarantees."
Certain financial information relating to the guarantors and the remaining
subsidiaries of Weigh-Tronix, LLC which are not guarantors is presented in the
notes to the consolidated financial statements of Weigh-Tronix and Avery
Berkel. Separate financial statements of the guarantors are not presented in
this prospectus because management does not consider the additional information
which would be set forth therein to be material.
On the date when the initial notes were issued, all of Weigh-Tronix, LLC's
subsidiaries became Restricted Subsidiaries, including SWT Finance. All
references to Weigh-Tronix, LLC's "Restricted Subsidiaries" include SWT Finance
and all guarantors other than Weigh-Tronix, LLC. Not all of Weigh-Tronix, LLC's
Restricted Subsidiaries are guarantors. Under specific circumstances, Weigh-
Tronix, LLC will be able to designate current or future subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to any
of the restrictive covenants in the indenture.
SWT Finance has listed the initial notes on the Luxembourg Stock Exchange in
accordance with its rules. So long as the notes are listed on the Luxembourg
Stock Exchange, SWT Finance will maintain a special agent or, as the case may
be, a paying and transfer agent in Luxembourg.
SWT Finance has appointed Deutsche Bank Luxembourg S.A., as an additional
payment and listing agent for the notes so long as the notes remain listed on
the Luxembourg Stock Exchange.
Principal, Maturity and Interest
We have issued outstanding notes in the aggregate principal amount of
(Euro)100.0 million. Additional notes of up to (Euro)65.0 million may be issued
under the indenture. The notes issued in the exchange offer will be treated as
a continuation of the outstanding notes. The notes mature on June 1, 2010.
The notes bear interest at a rate equal to 12.5% per annum, payable semi-
annually in arrears on each June 1 and December 1 to holders of record on the
immediately preceding May 15 and November 15. Interest on the notes is computed
on the basis of a 360 day year comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
Principal and interest payments on the notes will be made at the office of
the trustee and at the office of the paying agent in Luxembourg for as long as
the notes are listed on the Luxembourg Stock Exchange, unless we elect to make
interest payments by check mailed to the holders of the notes at their
registered addresses. All payments of principal and interest on notes of
holders who have given wire transfer instructions to SWT Finance will be made
by wire transfer of immediately available funds to the accounts specified by
the holder.
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Transfer and Exchange
A holder of notes may transfer or exchange notes in accordance with the
indenture. For so long as the notes are listed on the Luxembourg Stock Exchange
and the rules of the stock exchange require, a holder of notes may transfer or
exchange notes at the offices of the paying agent in Luxembourg. The registrar
and the trustee may require a holder of notes, among other things, to furnish
appropriate endorsements and transfer documents. SWT Finance may require a
holder of notes to pay any taxes and fees required by law or permitted by the
indenture. SWT Finance is not required to transfer or exchange any note
selected for redemption. Also, SWT Finance is not required to transfer or
exchange any note for a period of 15 days before a selection of notes to be
redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes.
Subordination
The payment of principal, premium, interest, and any other payment
obligations on the notes are subordinated in right of payment to the prior
payment in full of all existing and future Senior Debt.
Holders of our Senior Debt will be entitled to receive payment in full of
all obligations due in respect of the Senior Debt before the holders of the
notes will be entitled to receive any payment on the notes in the event of any
distribution to our creditors:
. in any liquidation or dissolution of SWT Finance; or
. in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding affecting SWT Finance or its property.
Until all obligations with respect to Senior Debt are paid in full, any
distribution to which the holders of notes would be entitled but for the
subordination provisions of the indenture shall be made to the holders
of Senior Debt, except that holders of notes may receive and retain (a)
permitted junior securities and (b) payments made from the trust described
under " --Legal Defeasance and Covenant Defeasance." If a payment or
distribution is made to holders of notes that, due to the subordination
provisions, should not have been made to them, the holders are required to hold
it in trust for the holders of Senior Debt and pay it over to them as their
interests may appear.
SWT Finance also may not make any payment upon or in respect of the notes
(except in permitted junior securities or from the trust described under "--
Legal Defeasance and Covenant Defeasance") if:
. a default in the payment on Designated Senior Debt occurs and is
continuing beyond any applicable period of grace; or
. any other default occurs and is continuing with respect to Designated
Senior Debt that permits holders of the Designated Senior Debt to
accelerate its maturity and the trustee receives a payment blockage
notice from the agent or representative of any Designated Senior Debt.
Payments on the notes may and shall be resumed (a) in the case of a payment
default, upon the date on which the default is cured or waived and (b) in case
of a nonpayment default, upon the earlier of the date on which the nonpayment
default is cured or waived or 179 days after the date on which the applicable
payment blockage notice is received, unless the maturity of any Designated
Senior Debt has been accelerated. No new period of payment blockage may be
commenced unless and until (i) 360 days have elapsed since the effectiveness of
the immediately prior payment blockage notice and (ii) all scheduled payments
of principal, premium, interest, any additional amounts, and any liquidated
damages on the notes that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of delivery of
any payment blockage notice to the trustee shall be, or be made, the basis for
a subsequent payment blockage notice unless the default shall have been waived
for a period of not less than 180 days.
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We must promptly notify the holders of Senior Debt if payment on the notes
is accelerated because of an event of default. SWT Finance may not pay the
notes until five business days after the agent or representative of the
Designated Senior Debt receives notice of the acceleration and, thereafter, may
pay the notes only if the subordination provisions of the indenture otherwise
permit payment at that time.
As a result of the subordination provisions described in this section, in
the event of a liquidation or insolvency, holders of notes may recover less
ratably than creditors of SWT Finance who are holders of Senior Debt. Although
the indenture limits the amount of additional indebtedness, including Senior
Debt, that Weigh-Tronix, LLC and its Restricted Subsidiaries, including SWT
Finance, can incur, the indebtedness may nonetheless be substantial and all of
it may be Senior Debt. See "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock."
Guarantees
SWT Finance's payment obligations under the notes are jointly and severally
guaranteed by the guarantors. The Guarantee of each guarantor is subordinated
to the Senior Debt of the guarantor on the same basis and to the same extent as
the notes are subordinated to the Senior Debt of SWT Finance. The terms of the
subordinated provisions described above with respect to SWT Finance's
obligations under the notes apply equally to the guarantors and the obligations
of each guarantor under its Guarantee. Each Guarantee ranks equally with all
other senior subordinated debt of that guarantor. The obligations of each
guarantor under its Guarantee are limited in an effort to avoid payments
thereunder being deemed a fraudulent conveyance under applicable law. See,
however, "Risk Factors--Insolvency and fraudulent conveyance and other laws may
also adversely affect a recovery by holders of the notes under the Guarantees."
Under applicable provisions of the laws of England and Wales and Irish
corporate law, the giving of Guarantees may constitute financial assistance
insofar as the guarantees are given in significant part in connection with the
financing of the merger or the refinancing of prior indebtedness. Accordingly,
absent an exemption from the operative provisions of the U.K. Companies Act
1985 and comparable legislation in Ireland, the Guarantees could therefore be
avoided by the guarantor or a liquidator of the guarantor.
In addition, in connection with the issue of the Guarantees, it is necessary
that the guarantor's net assets not be reduced as a result of giving the
financial assistance, or, to the extent they are reduced, that the assistance
is given out of distributable reserves. To the extent that it was established
that the giving of the Guarantees had reduced the net assets of the relevant
guarantor and the reduction is not covered by distributable reserves, the
Guarantees could be held to be invalid. Management believes that the issuances
of the Guarantees have not resulted in a reduction in the net assets of the
relevant guarantor, but there can be no assurance that a court or a liquidator
would concur in this view. For Canadian law reasons, Berkel Products Co.
Limited, a guarantor organized under the laws of Canada, guaranteed the
Guarantee of its parent company, Berkel, Inc., an Indiana corporation and a
guarantor, instead of guaranteeing SWT Finance's obligations under the notes
directly.
The Guarantees provide that, in the event of default in payment of any
obligations on the notes (including any obligation to repurchase the notes),
the holders of the notes may institute legal proceedings directly against the
relevant guarantor without first proceeding against SWT Finance.
The indenture provides that the Guarantee of any guarantor (and of any other
guarantor which is a subsidiary of the guarantor) other than, with respect to
items 1, 2, 3 and 5 below, Weigh-Tronix, LLC, will be released:
(1) in the event that all the shares of the guarantor are sold to a person
or persons that are not affiliates of SWT Finance pursuant to an
enforcement of the security over the capital stock of the guarantor
under the applicable security agreements securing obligations under the
credit facilities, immediately upon the sale of the capital stock of
the guarantor so long as the guarantor is simultaneously
unconditionally released from its guarantee obligations in respect of
the credit facilities (other than as a result of payment under the
guarantee);
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(2) if no default or event of default exists or would exist under the
indenture, concurrently with any other sale or disposition of the
guarantor (other than a transaction subject to the provisions of, in
the case of Weigh-Tronix, LLC, "--Certain Covenants--Merger,
Consolidation or Sale of Assets" or, in the case of any other
guarantor, a transaction subject to the provisions described below) in
compliance with the terms of the indenture, by Weigh-Tronix, LLC or any
Restricted Subsidiary of Weigh-Tronix, LLC to any person that is not an
affiliate of Weigh-Tronix, LLC or any Restricted Subsidiary of Weigh-
Tronix, LLC, so long as (a) the guarantor is simultaneously
unconditionally released from its guarantee obligations in respect of
the credit facilities (other than as a result of payment under the
guarantee) and (b) the proceeds from the sale or disposition are used
for the purposes permitted by the second paragraph under the caption
"--Repurchase at the Option of Holders--Asset Sales;"
(3) in the event that the lenders under the credit facilities release the
guarantor from its guarantee obligations under the credit facilities
(other than as a result of payment under the guarantee);
(4)upon legal defeasance or covenant defeasance; or
(5)when Weigh-Tronix, LLC designates the guarantor as an Unrestricted
Subsidiary.
The indenture provides that no Restricted Subsidiary which is a guarantor
may consolidate with or merge with or into (whether or not the Restricted
Subsidiary is the surviving person), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or a series of related transactions to, another person whether or not
affiliated with the Restricted Subsidiary unless (a) subject to the provisions
of clause (2) above, the person formed by or surviving any consolidation or
merger (if other than the Restricted Subsidiary) or the person to which the
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the obligations of the Restricted Subsidiary under a
supplemental indenture in form and substance reasonably satisfactory to the
trustee under the notes and the indenture; and (b) immediately after giving
effect to the transaction, no default or event of default exists. The person
formed by or surviving the consolidation or merger (if other than the
Restricted Subsidiary) or the person to which the sale, assignment, transfer,
lease, conveyance or other disposition shall have been made will, subject to
applicable law, succeed to, and be substituted for, and may exercise every
right and power of, the Restricted Subsidiary under the indenture. However, in
the case of a lease of all or substantially all of its assets, the Restricted
Subsidiary will not be released from its obligation under its guarantee to pay
the principal, premium, interest, additional amounts, and liquidated damages,
if any, on the notes in the event of a default as described above.
Holding Company Structure
SWT Finance is a special purpose finance vehicle and has no operations or
subsidiaries of its own and only limited assets. Those assets include the right
to receive payments under some intercompany loans and intragroup lease
receivables. Weigh-Tronix, LLC is a holding company for its subsidiaries,
including SWT Finance, with no material operations of its own and only limited
assets other than the shares of its subsidiaries held by it. Accordingly, SWT
Finance is dependent upon the distribution of the earnings of Weigh-Tronix,
LLC's other Restricted Subsidiaries to service its debt obligations. In
addition to the contractual subordination provisions discussed above, the right
of Weigh-Tronix, LLC and its creditors, including holders of notes, to
participate in the assets of any of Weigh-Tronix, LLC's subsidiaries which are
not guarantors will be subject to the prior claims of all creditors of the
subsidiaries. Accordingly, the claims of creditors of Weigh-Tronix, LLC,
including holders of notes who are creditors by virtue of Weigh-Tronix, LLC's
Guarantee, will be effectively subordinated to all existing and future third-
party indebtedness and liabilities, including trade payables, of Weigh-Tronix,
LLC's subsidiaries which are not guarantors. In addition, the claims of holders
of notes are contractually subordinated to the claims of all Senior Debt of SWT
Finance and each of the guarantors as described under "--Subordination" above.
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Optional Redemption
At any time on or prior to June 1, 2003, SWT Finance may on one or more
occasions redeem up to 35% in principal amount of notes issued under the
indenture at a redemption price of 112.5% of their principal amount, plus
accrued and unpaid interest to the redemption date, with the net cash proceeds
of any capital contribution made to SWT Finance from the proceeds of any equity
offering of Weigh-Tronix, LLC; provided that at least 65% of the aggregate
principal amount of notes issued on the issue date remain outstanding after
each redemption and that each redemption will occur within 90 days of the date
of the closing of the equity offering.
The notes are, otherwise, not redeemable at SWT Finance's option prior to
June 1, 2005. After that date, we may redeem all or a part of the notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and liquidated damages to the applicable redemption date, if
redeemed during the twelve-month period beginning on June 1 of the respective
year indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2005.......................................................... 106.2500%
2006.......................................................... 104.1667%
2007.......................................................... 102.0833%
2008 and thereafter........................................... 100.0000%
</TABLE>
Selection and Notice
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the notes are listed; or
(2) if the notes are not listed on any national securities exchange, on
a pro rata basis, by lot or by such method as the trustee shall deem fair
and appropriate.
No notes of (Euro)1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each holder of notes to be redeemed at its
registered address. Notices of redemption may not be conditional. In addition,
SWT Finance will, at least 30 and not more than 60 days before the redemption
date, cause notice of the redemption to be published in a leading newspaper
having a general circulation in New York City, which is expected to be The Wall
Street Journal, a leading newspaper having a general circulation in London,
which is expected to be the Financial Times, and, so long as the notes are
listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock
Exchange so require, a newspaper having a general circulation in Luxembourg,
which is expected to be the Luxemburger Wort, with a copy to the trustee. If
any note is to be redeemed in part only, the notice of redemption that relates
to the note shall state the portion of the principal amount to be redeemed. A
new note in principal amount equal to the unredeemed portion will be issued in
the name of the holder upon cancellation of the original note. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on notes or portions of them called
for redemption.
Redemption for Taxation Reasons
SWT Finance may redeem the notes, in whole but not in part, at any time upon
giving not less than 30 nor more than 60 days' irrevocable notice to the
holders of notes. The redemption price will equal the principal amount of the
notes then outstanding, together with accrued and unpaid interest, premium, any
additional
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amounts, and any liquidated damages to the date fixed by SWT Finance for
redemption if SWT Finance determines that, as a result of:
(1) any change in, or amendment to, the laws, treaties, regulations or
rulings of the Netherlands, any of its political subdivisions or taxing
authorities, or any other relevant taxing jurisdiction (as defined in "--
Withholding Taxes") affecting taxation that becomes effective after the
issue date of the notes, or
(2) any change in or new or different position regarding the
application, administration or interpretation of those laws, treaties,
regulations or rulings, which change, amendment, application or
interpretation becomes effective after the issue date of the notes,
SWT Finance is, or on the next interest payment date would be, required to pay
additional amounts, and SWT Finance cannot avoid that payment obligation by
taking reasonable measures. This provision does not apply if a guarantor is
required to pay additional amounts under its Guarantee but SWT Finance is not
required to pay additional amounts.
Notwithstanding the above, no notice of tax redemption shall be given
earlier than 90 days prior to the earliest date on which SWT Finance would be
obligated to pay those additional amounts or withholding if a payment in
respect of the notes were then due. Prior to the publication or mailing of any
notice of tax redemption, SWT Finance will deliver to the trustee an opinion of
an independent tax counsel of recognized international standing to the effect
that the circumstances referred to in either clause (1) or (2) above exist. The
trustee shall accept the opinion as sufficient evidence of the satisfaction of
the conditions precedent described above, in which event that opinion shall be
conclusive and binding on the holders of notes.
Mandatory Redemption
Except as set forth below under "--Repurchase at the Option of Holders," SWT
Finance is not required to make mandatory redemption or sinking fund payments
with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each holder of notes will have the right to
require SWT Finance to repurchase all or any part of the holder's notes at an
offer price in cash equal to 101% of the aggregate principal amount plus
accrued and unpaid interest, any additional amounts and any liquidated damages
to the date of purchase. Within 30 days following any Change of Control, SWT
Finance will mail a notice to each holder of notes describing the transaction
or transactions that constitute the Change of Control. The notice will offer to
repurchase notes on a date specified in that notice that shall be no earlier
than 30 days and no later than 60 days from the date the notice is mailed. In
addition, within 30 days following any Change of Control, SWT Finance will:
(1) publish the notice in a leading newspaper having a general
circulation in New York City, which is expected to be The Wall Street
Journal, a leading newspaper having a general circulation in London, which
is expected to be the Financial Times, and, so long as the notes are listed
on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock
Exchange so require, a newspaper having a general circulation in
Luxembourg, which is expected to be the Luxemburger Wort, with a copy to
the trustee; and
(2) so long as the notes are listed on the Luxembourg Stock Exchange and
its rules so require, notify the Luxembourg Stock Exchange of the Change of
Control.
SWT Finance will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent these
laws and regulations are applicable in connection with the repurchase of the
notes as a result of a Change of Control. The provisions relating to SWT
Finance's obligation
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to make an offer to repurchase the notes as a result of a Change of Control may
be waived or modified with the written consent of the holders of a majority in
principal amount of the notes.
On the payment date, SWT Finance will, to the extent lawful;
(1) accept for payment all notes or portions of notes properly tendered
under the offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all tendered notes or portions of notes; and
(3) deliver or cause to be delivered to the trustee the accepted notes
together with an officers' certificate stating the aggregate principal
amount of notes being purchased by SWT Finance.
The paying agent will promptly mail to each holder of tendered notes the
Change of Control Payment for those notes, and the trustee will promptly
authenticate and mail, or cause to be transferred by book entry, to each holder
a new note equal in principal amount to any unpurchased portion of the
surrendered notes. Each new note will be in a principal amount of (Euro)1,000
or an integral multiple of (Euro)1,000. If the Change of Control Payment date
is on or after an interest record date and on or before the related interest
payment date, any accrued and unpaid interest will be paid to the person in
whose name a note is registered at the close of business on the record date. No
additional interest will be payable to holders who tender under the offer. The
indenture provides that, prior to complying with the provisions of this
covenant, but in any event within 60 days following a Change of Control, SWT
Finance will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of notes required by this covenant. SWT Finance will
publicly announce the results of the offer on or as soon as practicable after
the Change of Control Payment date and, so long as the notes are listed on the
Luxembourg Stock Exchange and its rules so require, notify the Luxembourg Stock
Exchange of the results.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the indenture are applicable. Except as
described above with respect to a Change of Control, the indenture does not
contain provisions that permit the holders of notes to require that SWT Finance
repurchase or redeem the notes in the event of a takeover, recapitalization or
similar transaction.
The senior credit facility prohibits SWT Finance from purchasing any notes
and also provides that specific Change of Control events with respect to SWT
Finance would constitute a default. Any future credit agreements or other
agreements relating to Senior Debt to which SWT Finance becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when SWT Finance is prohibited from purchasing notes, SWT
Finance could either (a) seek the consent of its lenders to the purchase of
notes or (b) attempt to repay or refinance the borrowings that contain the
prohibition. If SWT Finance does not obtain the consent or repay or refinance
these borrowings, SWT Finance will remain prohibited from purchasing notes. In
this case, SWT Finance's failure to purchase tendered notes would constitute an
event of default under the indenture which would, in turn, cause an event of
default under the senior credit facility. In these circumstances, the
subordination provisions in the indenture would likely restrict payments to the
holders of notes. In addition, SWT Finance's ability to pay cash to the holders
of notes upon a repurchase may be limited by SWT Finance's then-existing
financial resources. We cannot assure you that sufficient funds will be
available when necessary to make any required repurchases.
SWT Finance will not be required to make a Change of Control offer upon a
Change of Control if a third party makes the Change of Control offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the indenture applicable to a Change of Control offer made by SWT
Finance and purchases all notes validly tendered and not withdrawn under the
Change of Control offer.
The Change of Control provisions described above may deter specific mergers,
tender offers and other takeover attempts involving Weigh-Tronix, LLC or SWT
Finance by increasing the capital required for these transactions. The
definition of Change of Control includes a disposition of all or substantially
all of the
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property and assets of Weigh-Tronix, LLC and its Restricted Subsidiaries taken
as a whole to any person other than Berkshire and the current members of
management of Weigh-Tronix, LLC and their related parties. Although there is a
limited body of case law interpreting the phrase "substantially all," there is
no precise established definition of the phrase under applicable law.
Accordingly, in specific circumstances there may be a degree of uncertainty as
to whether a particular transaction would involve a disposition of "all or
substantially all" of the property or assets of a person. As a result, it may
be unclear as to whether a Change of Control has occurred and whether a holder
of notes may require SWT Finance to make an offer to repurchase the notes as
described above.
Asset Sales
Weigh-Tronix, LLC will not, and will not permit any of its Restricted
Subsidiaries to, complete an asset sale unless (1) Weigh-Tronix, LLC or the
Restricted Subsidiary receives consideration at the time of the asset sale at
least equal to the fair market value of the assets or equity interests issued
or sold or otherwise disposed of and (2) at least 75% of the consideration
received by Weigh-Tronix, LLC or the Restricted Subsidiary is in the form of
cash or cash equivalents. The amount of (x) any liabilities, as shown on Weigh-
Tronix, LLC's or the Restricted Subsidiary's most recent balance sheet, of
Weigh-Tronix, LLC or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the notes
or any guarantee of the notes) that are assumed by the transferee of any of
these assets under a written agreement that releases Weigh-Tronix, LLC or the
Restricted Subsidiary from further liability (in which case Weigh-Tronix, LLC
will, without further action, be deemed to have applied the deemed cash to
indebtedness in accordance with the next succeeding paragraph) and (y) any
securities, notes or other obligations received by Weigh-Tronix, LLC or any
Restricted Subsidiary from the transferee that are promptly, but in no event
more than 30 days after the receipt of the securities, notes or other
obligations converted by Weigh-Tronix, LLC or the Restricted Subsidiary into
cash, to the extent of the cash received, shall be deemed to be cash for
purposes of this provision.
Within 420 days after the receipt of any net proceeds from an asset sale,
Weigh-Tronix, LLC may apply the net proceeds, at its option,
(a) to repay Senior Debt of SWT Finance or any guarantor or any
indebtedness of any Restricted Subsidiary except to the extent the
indebtedness is owed to Weigh-Tronix, LLC or any affiliate of Weigh-
Tronix, LLC and to correspondingly permanently reduce any commitments
on the Senior Debt in the case of revolving borrowings,
(b) to the acquisition by Weigh-Tronix, LLC or any Restricted Subsidiary of
a controlling interest in a business similar to or reasonably related
to the business of Weigh-Tronix, LLC,
(c) to the making by Weigh-Tronix, LLC or any Restricted Subsidiary of a
capital expenditure in or the acquisition by Weigh-Tronix, LLC or any
Restricted Subsidiary of Weigh-Tronix, LLC of other long-term assets of
a business similar to or reasonably related to the business of Weigh-
Tronix, LLC, or
(d) a combination of the above.
Pending the final application of any net proceeds, Weigh-Tronix, LLC may
temporarily reduce indebtedness under any credit facilities or otherwise invest
net proceeds in any manner that is not prohibited by the indenture. Any net
proceeds from asset sales that are not applied or invested as provided in the
first sentence of this paragraph shall be deemed to constitute "excess
proceeds." When the aggregate amount of excess proceeds exceeds $5.0 million,
Weigh-Tronix, LLC shall be required to make an offer to all holders of notes.
If required, the offer will also be made to all holders of pari passu notes
(other senior subordinated debt outstanding with similar provisions requiring
SWT Finance to make an offer to purchase this senior subordinated debt with the
proceeds from any asset sale) to purchase the maximum principal amount of notes
and pari passu notes that may be purchased out of the excess proceeds, at an
offer price in cash in an amount equal to 100% of the principal amount plus
accrued and unpaid interest, any additional amounts and any liquidated damages
to the date of purchase. Within 30 days following the earlier of the first day
of the twelfth calendar month following an asset sale and the date Weigh-
Tronix, LLC's Board of Managers determines by
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board resolution to use the proceeds from an asset sale to make an asset sale
offer, SWT Finance will (1) mail a notice to the trustee and each holder of
notes or pari passu notes of the asset sale offer; (2) publish this notice in a
leading newspaper having a general circulation in New York City, which is
expected to be The Wall Street Journal, a leading newspaper having a general
circulation in London, which is expected to be the Financial Times, and, so
long as the notes or the pari passu notes are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange so require, a newspaper
having a general circulation in Luxembourg, which is expected to be the
Luxemburger Wort, with a copy to the trustee; and (3) if the notes or the pari
passu notes are listed on the Luxembourg Stock Exchange and its rules so
require, notify the Luxembourg Stock Exchange of the asset sale offer.
To the extent that the aggregate amount of notes and pari passu notes
tendered under an asset sale offer is less than the excess proceeds, Weigh-
Tronix, LLC may use any remaining excess proceeds for general corporate
purposes. If the aggregate principal amount of notes and pari passu notes
surrendered by holders exceeds the amount of excess proceeds, the trustee shall
select the notes and the pari passu notes to be purchased on a pro rata basis.
Upon completion of the offer to purchase, the amount of excess proceeds shall
be reset at zero.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Managers of Weigh-Tronix, LLC may designate any Restricted
Subsidiary of Weigh-Tronix, LLC, other than SWT Finance, to be an Unrestricted
Subsidiary if that designation would not cause a default. If a Restricted
Subsidiary of Weigh-Tronix, LLC is designated as an Unrestricted Subsidiary,
the aggregate fair market value of all outstanding Investments owned by Weigh-
Tronix, LLC and its Restricted Subsidiaries in the newly designated
Unrestricted Subsidiary will be deemed to be an Investment made as of the time
of that designation. This designation will either reduce the amount available
for Restricted Payments under the first paragraph of the covenant described
below in the section entitled "--Certain Covenants--Restricted Payments" or
reduce the amount available for future Investments under one or more clauses of
the definition of Permitted Investments, as Weigh-Tronix, LLC shall determine.
That designation will only be permitted if that Investment would be permitted
at that time and if that Restricted Subsidiary otherwise meets the definition
of an Unrestricted Subsidiary. The Board of Managers of Weigh-Tronix, LLC may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary of Weigh-
Tronix, LLC if the redesignation would not cause a default.
Certain Covenants
Restricted Payments
Weigh-Tronix, LLC will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of Weigh- Tronix, LLC's or any of its Restricted
Subsidiaries' equity interests (including, without limitation, any payment
in connection with any merger or consolidation involving Weigh-Tronix, LLC
or SWT Finance) or to the direct or indirect holders of Weigh-Tronix, LLC's
or any of its Restricted Subsidiaries' equity interests in their capacity
(other than dividends or distributions payable in equity interests (other
than Disqualified Stock which is not preferred member interest) of Weigh-
Tronix, LLC or any of its Restricted Subsidiaries);
(2) purchase, redeem or otherwise acquire or retire for value (including
without limitation, in connection with any merger or consolidation
involving Weigh-Tronix, LLC or SWT Finance) any equity interests of Weigh-
Tronix, LLC or of any Restricted Subsidiary of Weigh-Tronix, LLC (other
than any equity interests owned by Weigh-Tronix, LLC or any Restricted
Subsidiary of Weigh-Tronix, LLC);
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any indebtedness that is
subordinated to the notes, except a payment of interest or principal at the
stated maturity of the notes; or
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(4) make any Restricted Investment (all payments and other actions set
forth in clauses (1) through (4) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to
the Restricted Payment:
(a) no default or event of default shall have occurred and be continuing
or would occur as a consequence; and
(b) Weigh-Tronix, LLC would, at the time of the Restricted Payment and
after giving pro forma effect as if the Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional indebtedness pursuant to the fixed
charge coverage ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock;" and
(c) the Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Weigh-Tronix, LLC or any of its
Restricted Subsidiaries after the issue date (excluding Restricted Payments
permitted by clauses (2), (3), (4) or (6) of the next paragraph), is less
than the sum of (i) 50% of the consolidated net income of Weigh-Tronix, LLC
for the period (taken as one accounting period) from the beginning of the
first fiscal quarter immediately following the issue date to the end of
Weigh-Tronix, LLC's most recently ended fiscal quarter for which internal
financial statements are available at the time of the Restricted Payment
(or, if the consolidated net income for the period is a deficit, less 100%
of the deficit), plus (ii) 100% of the aggregate net cash proceeds received
by Weigh-Tronix, LLC as a contribution to its common equity capital or from
the issue or sale since the issue date of equity interests of Weigh-Tronix,
LLC (other than Disqualified Stock), or of Disqualified Stock or debt
securities of Weigh-Tronix, LLC that have been converted into the equity
interests (other than equity interests (or Disqualified Stock or
convertible debt securities) sold to a Restricted Subsidiary of Weigh-
Tronix, LLC and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii) to
the extent not already included in consolidated net income of Weigh-Tronix,
LLC for the period without duplication, in the case of any Restricted
Investment that was made by Weigh-Tronix, LLC or any of its Restricted
Subsidiaries after the issue date which is sold for cash or otherwise
liquidated or repaid for cash, or any Unrestricted Subsidiary of Weigh-
Tronix, LLC which is designated as an Unrestricted Subsidiary subsequent to
the issue date which is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to the
Restricted Investment or Unrestricted Subsidiary (less any cost of
disposition) and (B) the initial amount of the Restricted Investment or
designated amount of the Unrestricted Subsidiary, plus (iv) to the extent
not already included in consolidated net income of Weigh-Tronix, LLC for
the period without duplication, if any Unrestricted Subsidiary of Weigh-
Tronix, LLC formed subsequent to the issue date is redesignated by Weigh-
Tronix, LLC as a Restricted Subsidiary, the lesser of (a) the net book
value of Weigh-Tronix, LLC's investment in the subsidiary at the time of
its redesignation and (b) the fair market value of Weigh-Tronix, LLC's
investment in the subsidiary at the time of its redesignation.
The foregoing provisions shall not prohibit (1) the payment of any dividend
within 60 days after the date of declaration of the dividend, if at that date
of declaration the payment would have complied with the provisions of the
indenture; (2) the redemption, repurchase, retirement, defeasance or other
acquisition of any indebtedness which is subordinated to the notes or the
equity interests of Weigh-Tronix, LLC in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of Weigh-Tronix, LLC) of, other equity interests of Weigh-Tronix,
LLC (other than any Disqualified Stock); provided that the amount of any net
cash proceeds that are utilized for the redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (3) the defeasance, redemption, repurchase or other
acquisition of indebtedness which is subordinated to the notes with the net
cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4) the
payment of any dividend or distribution by a Restricted Subsidiary of Weigh-
Tronix, LLC to the holders of its common equity interests so long as Weigh-
Tronix, LLC or the Restricted Subsidiary receives at least its pro rata share
of the dividend or distribution in accordance with its equity interests; (5)
the repurchase, redemption or other
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acquisition or retirement for value of any equity interests of Weigh-Tronix,
LLC that are held by any of Weigh-Tronix, LLC's (or any of its Restricted
Subsidiaries') employees or non-employee directors under any management equity
subscription agreement or stock option agreement; provided that the aggregate
price paid for all the repurchased, redeemed, acquired or retired equity
interests shall not exceed $1.0 million in any twelve-month period; (6) the
exchange (whether initiated at the option of Weigh-Tronix, LLC or the holder of
the preferred member interest) or the redemption (by Weigh-Tronix, LLC subject
to the terms of the indenture) at any time after the first anniversary of the
issue date of preferred member interests in exchange for an aggregate principal
amount of exchange notes equal to the aggregate liquidation preference of the
preferred member interests being exchanged; provided that Weigh-Tronix, LLC's
fixed charge coverage ratio (calculated, for purposes of this clause (6) only,
by (x) adding back to consolidated cash flow any non-recurring expenses
(whether or not classified as extraordinary) and (y) deducting from
consolidated cash flow any non-recurring income (whether or not classified as
extraordinary)) for Weigh-Tronix, LLC's most recently ended four fiscal
quarters for which internal financial statements are available immediately
preceding the date on which these exchange notes are issued would have been at
least 2.50 to 1.00 determined on a pro forma basis, as if the exchange notes
had been incurred at the beginning of the four-quarter period; or (7) other
Restricted Payments in an aggregate amount since the issue date not to exceed
$15.0 million, provided further that, with respect to clauses (2), (3), (5),
(6) and (7) above, no default or event of default shall have occurred and be
continuing immediately after the transaction.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by Weigh-Tronix, LLC or the
Restricted Subsidiary of Weigh-Tronix, LLC, under the Restricted Payment. The
fair market value of any non-cash Restricted Payment shall be determined by the
Board of Managers of Weigh-Tronix, LLC whose resolution with respect to the
non-cash Restricted Payment shall be delivered to the trustee. The
determination will be based upon an opinion or appraisal issued by an
appraisal, accounting or investment banking firm of national standing if the
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, Weigh-Tronix, LLC shall deliver to the trustee an officers'
certificate stating that the Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "--Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
Weigh-Tronix, LLC will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to any indebtedness, including acquired debt. Weigh-
Tronix, LLC shall not issue any Disqualified Stock and shall not permit any of
its Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that Weigh-Tronix, LLC may incur indebtedness, including acquired
debt, or issue shares of Disqualified Stock and any of Weigh-Tronix, LLC's
Restricted Subsidiaries which are guarantors and SWT Finance may incur
indebtedness if Weigh-Tronix, LLC's fixed charge coverage ratio for Weigh-
Tronix, LLC's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which the
additional indebtedness is incurred or the Disqualified Stock is issued would
have been at least 2.00 to 1.00, determined on a pro forma basis (including a
pro forma application of the net proceeds), as if the additional indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of the four-quarter period.
The first paragraph of this covenant shall not apply to the incurrence of
any of the following items of indebtedness so long as no default has occurred
and is continuing or would be caused by the incurrence:
(1) the incurrence by SWT Finance, Weigh-Tronix Canada, ULC, Weigh-
Tronix, LLC and the other guarantors of additional indebtedness under one
or more credit facilities (including, without limitation, the senior credit
facility); provided that the aggregate principal amount of all indebtedness
and letters of credit of SWT Finance, Weigh-Tronix Canada, ULC, Weigh-
Tronix, LLC and the other guarantors (with letters
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of credit being deemed to have a principal amount equal to the maximum
potential liability of SWT Finance, Weigh-Tronix Canada, ULC, Weigh-Tronix,
LLC and the other guarantors) incurred under this clause (i) does not
exceed the sum of (1) $70.0 million (or the foreign currency equivalent)
and (2) the greater of (a) an amount equal to $50.0 million (or the foreign
currency equivalent) and (b) the amount equal to the sum of 80% of specific
unpaid accounts receivable and 50% of the net book value of specific
inventory of Weigh-Tronix, LLC and its subsidiaries on a consolidated basis
(as determined in accordance with the terms of the senior credit facility),
less the aggregate amount of all repayments, optional or mandatory, of the
principal of any indebtedness permanently reducing the commitments
thereunder, under the credit facilities that have been made by SWT Finance,
Weigh-Tronix Canada, ULC, Weigh-Tronix, LLC and the other guarantors since
the issue date under the second paragraph of the covenant described under
the caption "--Repurchase at the Option of Holders--Asset Sales"; provided,
further, that the above sum shall be increased by up to $10.0 million in
connection with an increase in the principal amount available under any
credit facility or a fluctuation in currency exchange rates;
(2) the incurrence by Weigh-Tronix, LLC and its Restricted Subsidiaries
of existing indebtedness;
(3) the incurrence by SWT Finance of indebtedness represented by the
notes issued on the issue date and the incurrence by the guarantors of the
Guarantees in an aggregate principal amount of (Euro)100.0 million;
(4) the incurrence by Weigh-Tronix, LLC or any of its Restricted
Subsidiaries of indebtedness represented by capital lease obligations,
attributable debt incurred in connection with sale and leaseback
transactions, mortgage financings or purchase money obligations, in each
case incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of Weigh-Tronix, LLC or the Restricted
Subsidiary, in an aggregate principal amount, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace
indebtedness incurred under this clause (4), not to exceed $10.0 million at
any time outstanding;
(5) the incurrence by Weigh-Tronix, LLC or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace indebtedness
(other than intercompany indebtedness) that was incurred under the first
paragraph of this covenant or clauses (2) (other than with respect to debt
incurred or refinanced under clause (1)), (3) and (5) of this paragraph;
(6) the incurrence by Weigh-Tronix, LLC or any of its Restricted
Subsidiaries of intercompany indebtedness between or among Weigh-Tronix,
LLC and any of its Restricted Subsidiaries; provided, however, that (A) if
SWT Finance is the obligor on the indebtedness, the indebtedness is
expressly subordinated to the prior payment in full in cash of all SWT
Finance's obligations with respect to the notes and the indenture, (B) if
Weigh-Tronix, LLC or any other guarantor is the obligor on the
indebtedness, the indebtedness is expressly subordinated to the prior
payment in full in cash of the guarantor's Guarantee and (C)(1) any
subsequent event or issuance or transfer of equity interests that results
in any indebtedness being held by a person other than Weigh-Tronix, LLC or
a Restricted Subsidiary of Weigh-Tronix, LLC and (2) any sale or other
transfer of any indebtedness to a person that is not either Weigh-Tronix,
LLC or a Restricted Subsidiary of Weigh-Tronix, LLC that is a guarantor
shall be deemed, in each case, to constitute an incurrence of indebtedness
by Weigh-Tronix, LLC or the Restricted Subsidiary, as the case may be, that
was not permitted by this clause (6);
(7) the incurrence by Weigh-Tronix, LLC or any of its Restricted
Subsidiaries of hedging obligations that are incurred in the normal course
of business and consistent with the practices of other commercial
enterprises engaged in the same or a similar business for the purpose of
fixing or hedging currency, commodity or interest rate risk, including with
respect to any floating rate indebtedness that is permitted by the terms of
the indenture to be outstanding in connection with the conduct of their
respective businesses and not for speculative purposes;
(8) guarantees by Weigh-Tronix, LLC and its Restricted Subsidiaries of
each other's indebtedness provided, however, that the indebtedness is
permitted to be incurred under the indenture;
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(9) the incurrence of indebtedness incurred on workers' compensation
claims, self-insurance obligations, performance, surety and similar bonds
and completion guarantees provided by Weigh-Tronix, LLC or any of its
Restricted Subsidiaries in the ordinary course of business;
(10) the incurrence of indebtedness arising from agreements of Weigh-
Tronix, LLC or any of its Restricted Subsidiaries providing for
indemnification, adjustment of purchase price or similar obligations, in
each case, incurred or assumed in connection with the disposition of any
business, assets or capital stock of a Restricted Subsidiary of Weigh-
Tronix, LLC, provided that the maximum aggregate liability in respect of
all of the indebtedness shall at no time exceed the gross proceeds actually
received by Weigh-Tronix, LLC and its Restricted Subsidiaries in connection
with the disposition;
(11) the incurrence of indebtedness arising from the honoring by a bank
or other financial institution of a check, draft or similar instrument
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business, provided, however, that the
indebtedness is extinguished within five business days of incurrence;
(12) (A) the incurrence by SWT Finance of the preferred member interest
and (B) the incurrence by SWT Finance of the exchange notes and the
incurrence by the guarantors of the exchange Guarantees, provided that, in
the case of this clause (B), (x) no default or event of default has
occurred and is continuing or would be caused by the incurrence and (y)
Weigh-Tronix, LLC's fixed charge coverage ratio (calculated, for purposes
of this clause (12) only, by (x) adding back to consolidated cash flow any
non-recurring expenses (whether or not classified as extraordinary) and (y)
deducting from consolidated cash flow any non-recurring income (whether or
not classified as extraordinary)) for Weigh-Tronix, LLC's most recently
ended four fiscal quarters for which internal financial statements are
available immediately preceding the date on which these exchange notes are
issued would have been at least 2.50 to 1.00 determined on a pro forma
basis, as if the exchange notes had been incurred at the beginning of the
four-quarter period; provided further that, in the case of each of clauses
(A) and (B) above, the aggregate liquidation preference of all preferred
member interests and the aggregate principal amount of all exchange notes
outstanding at any time shall not exceed the Maximum Amount; and
(13) the incurrence by Weigh-Tronix, LLC or any of its Restricted
Subsidiaries of additional indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any other indebtedness incurred under this clause (13), not to exceed $30.0
million.
For purposes of determining compliance with this covenant, in the event that
an item of proposed indebtedness, including acquired debt, meets the criteria
of more than one of the categories of permitted debt described in clauses (1)
through (13) above as of the date of incurrence or is entitled to be incurred
under the first paragraph of this covenant as of the date of incurrence, Weigh-
Tronix, LLC shall, in its sole discretion, classify on the date of incurrence
(or later reclassify in whole or in part, in its sole discretion) the item of
indebtedness in any manner that complies with this covenant. Accrual of
interest, the accretion of accreted value and the payment of interest in the
form of additional indebtedness will not be deemed to be an incurrence of
indebtedness for purposes of this covenant. The amount of any indebtedness
outstanding as of any date shall be (i) the accreted value of the indebtedness
in the case of any indebtedness issued with original issue discount and (ii)
the principal amount or liquidation preference of the indebtedness, in the case
of any other indebtedness.
For purposes of determining compliance with any U.S. dollar-denominated
restriction on the incurrence of indebtedness, the U.S. dollar-equivalent
principal amount of indebtedness denominated in a non-U.S. dollar currency
shall be calculated based on the relevant currency exchange rate in effect on
the date the indebtedness was incurred, in the case of term indebtedness, or
first committed, in the case of revolving credit indebtedness. If the
indebtedness is incurred to refinance other indebtedness denominated in a non-
U.S. dollar currency, and the refinancing would cause the applicable U.S.
dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of the refinancing, the U.S.
dollar-denominated restriction shall be deemed not to have been exceeded so
long as the principal amount of the refinancing
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indebtedness does not exceed the principal amount of the indebtedness being
refinanced. The principal amount of any indebtedness incurred to refinance
other indebtedness, if incurred in a different currency from the indebtedness
being refinanced, shall be calculated based on the currency exchange rate
applicable to the currencies in which the refinancing indebtedness is
denominated that is in effect on the date of the refinancing.
Issuance and Sale of Capital Stock of Restricted Subsidiaries
Weigh-Tronix, LLC will not transfer, convey, sell or otherwise dispose of,
and will not permit any Restricted Subsidiary, directly or indirectly, to
issue, transfer, convey, sell, or otherwise dispose of any equity interests of
any Restricted Subsidiary except, in the case of any Restricted Subsidiary
other than SWT Finance:
(1) to Weigh-Tronix, LLC or any of its Restricted Subsidiaries;
(2) issuance of directors' qualifying shares or an immaterial amount of
shares required to be owned by other persons to the extent required by
applicable law; or
(3) if in the case of a transfer, conveyance, sale, or other disposal,
the Restricted Subsidiary remains a Restricted Subsidiary notwithstanding
the transfer, conveyance, sale or other disposal, and an amount equal to
the net proceeds received from the transfer, conveyance, sale or other
disposal is applied within 30 days after receipt thereof in accordance with
clauses (a), (b) or (c) of the second paragraph of "--Repurchase at the
Option of Holders--Asset Sales" above.
Notwithstanding the preceding paragraph, Weigh-Tronix, LLC may sell all of
the capital stock of a Restricted Subsidiary (other than SWT Finance) as long
as Weigh-Tronix, LLC complies with the terms of clauses (a), (b) or (c) of the
second paragraph of "--Repurchase at the Option of Holders--Assets Sales"
above.
Liens
Weigh-Tronix, LLC will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist or become effective
any lien of any kind securing indebtedness, attributable debt, or trade
payables upon any of their property or assets, whether now owned or hereafter
acquired, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
Weigh-Tronix, LLC will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of Weigh-Tronix, LLC or Weigh-Tronix, LLC to:
(1) (x) pay dividends or make any other distributions to Weigh-Tronix,
LLC or any of its Restricted Subsidiaries on its capital stock or with
respect to any other interest or participation in, or measured by, its
profits, or (y) pay any indebtedness owed to Weigh-Tronix, LLC or any of
its Restricted Subsidiaries;
(2) make loans or advances to Weigh-Tronix, LLC or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to Weigh-Tronix, LLC or any
of its Restricted Subsidiaries. However, the preceding restrictions will
not apply to encumbrances or restrictions existing under or by reason of:
(1) existing indebtedness as in effect on the issue date, and any
amendments, supplements, extensions, refinancings, renewals or replacements
of the existing indebtedness; provided that the encumbrances and
restrictions in any of these amendments, supplements, extensions,
refinancings, renewals or replacements are no more restrictive than those
encumbrances or restrictions that are then in effect and that are being
amended, supplemented, extended, refinanced, renewed or replaced;
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(2) the senior credit facility as in effect as of the issue date, and
any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof and any other
credit facilities, provided that these amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings and the other credit facilities are no more restrictive with
respect to the dividend and other payment restrictions than those contained
in the senior credit facility as in effect on the issue date;
(3) the indenture and the notes;
(4) applicable law;
(5) any instrument governing indebtedness or capital stock of a person
acquired by Weigh-Tronix, LLC or any of its Restricted Subsidiaries as in
effect at the time of the acquisition (except to the extent the
indebtedness was incurred in connection with or in contemplation of the
acquisition), which encumbrance or restriction is not applicable to any
person, or the properties or assets of any person, other than the person,
or the property or assets of the person, so acquired, provided that, in the
case of indebtedness, the indebtedness was permitted by the terms of the
indenture to be incurred;
(6) by reason of customary non-assignment provisions in leases entered
into in the ordinary course of business and consistent with past or then-
current practices;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose encumbrances or restrictions of the nature
described in clause (5) above on the property so acquired;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing the Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the indebtedness being refinanced;
(9) any restriction with respect to a Restricted Subsidiary of Weigh-
Tronix, LLC imposed under an agreement entered into for the direct or
indirect sale or disposition of all or substantially all the capital stock
or assets of the Restricted Subsidiary pending the closing of the sale or
disposition;
(10) mortgages, pledges or other security agreements permitted under the
indenture securing indebtedness of Weigh-Tronix, LLC or any of its
Restricted Subsidiaries to the extent the encumbrances or restrictions
restrict the transfer of the property subject to the mortgages, pledges or
other security agreements; or
(11) customary provisions restricting dispositions of real property
interests set forth in any reciprocal easement agreements of Weigh-Tronix,
LLC or any of its Restricted Subsidiaries.
Merger, Consolidation or Sale of Assets
Neither Weigh-Tronix, LLC nor SWT Finance will, directly or indirectly,
consolidate or merge with or into, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets on a
consolidated basis in one or more related transactions, to another person
unless:
(1) Weigh-Tronix, LLC or SWT Finance, as the case may be, is the
surviving corporation or the person formed by or surviving any
consolidation or merger (if other than Weigh-Tronix, LLC or SWT Finance, as
the case may be,) or to which the sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United Kingdom, any member of
the European Union which has adopted the euro as its national currency, or
the United States, any state thereof or the District of Columbia;
(2) the successor corporation assumes all the obligations of Weigh-
Tronix, LLC or SWT Finance, as the case may be, under the notes and the
indenture under a supplemental indenture in a form reasonably satisfactory
to the trustee;
(3) immediately before and after the transaction no default or event of
default shall have occurred;
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(4) except in the case of a merger of Weigh-Tronix, LLC with or into a
Restricted Subsidiary of Weigh-Tronix, LLC, Weigh-Tronix, LLC, SWT Finance
or the successor corporation (A) will, immediately after the transaction
after giving pro forma effect to that transaction and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
indebtedness under the fixed charge coverage ratio test set forth in the
first paragraph of the covenant described above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock" or (B) will
have a fixed charge coverage ratio, as determined for its most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date of the transaction, greater than
the fixed charge coverage ratio for the entity immediately prior to the
transaction;
(5) each guarantor (unless it is the other party to the transactions
above, in which case clause (2) shall apply) shall have by supplemental
indenture confirmed that its Guarantee shall apply to the obligations of
the successor corporation under the notes and the indenture and its
obligations under the registration rights agreement shall continue to be in
effect; and
(6) Weigh-Tronix, LLC shall have delivered to the trustee an opinion of
tax counsel reasonably acceptable to the trustee stating that (A) holders
of notes will not recognize income, gain or loss for U.S. federal, U.K. or
Dutch income tax purposes as a result of the transaction, (B) any payment
of principal, redemption price or purchase price of, premium, if any,
interest, additional amounts, if any, and liquidated damages, if any, on
the notes by SWT Finance or the surviving entity, as applicable, to a
holder after the consolidation, merger, conveyance, transfer or lease of
assets will be exempt from the taxes described under "--Withholding Taxes,"
and (C) no other taxes on income, including taxable capital gains, will be
payable under the tax laws of the relevant taxing jurisdiction (as defined
in "--Withholding Taxes") by a holder who is or who is deemed to be a non-
resident of the relevant taxing jurisdiction in respect of the acquisition,
ownership or disposition of the notes, including the receipt of principal,
premium, interest, any additional amounts, or any liquidated damages paid
under the notes.
The successor corporation will succeed to, and be substituted for, and may
exercise every right and power of Weigh-Tronix, LLC or SWT Finance, as the case
may be, under the indenture. However, in the case of a lease of all or
substantially all of its assets, Weigh-Tronix, LLC, under its Guarantee or SWT
Finance, as the case may be, will not be released from its obligation to pay
the principal, premium, interest, any additional amounts, and any liquidated
damages on the notes. The above notwithstanding, either Weigh-Tronix, LLC or
SWT Finance may merge with an affiliate incorporated solely for the purpose of
reincorporating Weigh-Tronix, LLC or SWT Finance, as the case may be, in
another jurisdiction to realize tax or other benefits.
For purposes of this covenant, the sale, lease, conveyance, assignment,
transfer, or other disposition of all or substantially all of the properties
and assets of one or more subsidiaries of Weigh-Tronix, LLC, which properties
and assets, if held by Weigh-Tronix, LLC instead of these subsidiaries, would
constitute all or substantially all of the properties and assets of Weigh-
Tronix, LLC on a consolidated basis, shall be deemed to be the transfer of all
or substantially all of the properties and assets of Weigh-Tronix, LLC.
Transactions with Affiliates
Weigh-Tronix, LLC will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any properties or assets to, or purchase any property or assets
from, or enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
affiliate of any such person unless (1) the transaction is on terms that are no
less favorable to Weigh-Tronix, LLC or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by Weigh-
Tronix, LLC or the Restricted Subsidiary with an unrelated person and (2)
Weigh-Tronix, LLC delivers to the trustee (a) with respect to any transaction
or series of related transactions involving aggregate consideration in excess
of $2.5 million, a resolution of its Board of
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Managers set forth in an officers' certificate certifying that the transaction
complies with clause (1) above and that the transaction has been approved by a
majority of the disinterested members of its Board of Managers and (b) with
respect to any transaction or series of related transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the holders of notes of the transaction from a financial point of
view issued by an appraisal, accounting or investment banking firm of national
standing. The following items will not be deemed transactions for purposes of
the prior paragraph:
(1) any employment agreement entered into by Weigh-Tronix, LLC or any
of its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of Weigh-Tronix, LLC or the Restricted
Subsidiary, as the case may be,
(2) transactions between or among Weigh-Tronix, LLC and/or its
Restricted Subsidiaries,
(3) any sale or other issuance of equity interests (other than
Disqualified Stock) of Weigh-Tronix, LLC,
(4) Restricted Payments that are permitted by the covenant described
above under the caption "--Restricted Payments,"
(5) fees and compensation paid to, and indemnity provided on behalf
of, members of the Board of Managers, officers or employees of Weigh-
Tronix, LLC and of its Restricted Subsidiaries in their capacity as such,
to the extent the fees and compensation are reasonable, customary and
consistent with past practices,
(6) advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course
of business and consistent with past practices;
(7) payment of annual management, consulting and advisory fees and
related expenses to Berkshire, which payments are approved by the board of
Managers of Weigh-Tronix, LLC in good faith;
(8) transactions between Weigh-Tronix, LLC or a Restricted Subsidiary
of Weigh-Tronix, LLC and an Unrestricted Subsidiary of Weigh-Tronix, LLC in
good faith as long as (a) the transactions are on terms that are otherwise
in compliance with the terms of the indenture and (b) the transactions are
on terms that are no less favorable to Weigh-Tronix, LLC or the relevant
Restricted Subsidiary than those that would have been obtained in a
comparable transaction by Weigh-Tronix, LLC or the Restricted Subsidiary
with an unrelated person;
(9) the exchange (whether initiated at the option of Weigh-Tronix,
LLC or the holder of the preferred member interest) or the redemption by
Weigh-Tronix, LLC, subject to the terms of the indenture, of the
outstanding preferred member interests for exchange notes and exchangeable
guarantees pursuant to clause (6) of the second full paragraph under "--
Restricted Payments;" and
(10) transactions pursuant to Transaction Documents.
Sale and Leaseback Transactions
Weigh-Tronix, LLC will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
Weigh-Tronix, LLC may enter into a sale and leaseback transaction if:
(1) Weigh-Tronix, LLC could have incurred indebtedness in an amount
equal to the attributable debt relating to the sale and leaseback
transaction pursuant to the fixed charge coverage ratio test set forth in
the first paragraph of the covenant described above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock;"
(2) the gross cash proceeds of the sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by the
Board of Managers of Weigh-Tronix, LLC and set forth in an Officers'
Certificate delivered to the trustee, of the property that is the subject
of the sale and leaseback transaction;
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(3) Weigh-Tronix, LLC would be permitted to create a lien on the
property subject to the sale and leaseback transaction without securing the
notes by the covenant described under "--Liens;" and
(4) the transfer of assets in the sale and leaseback transaction is
permitted by, and Weigh-Tronix, LLC applies the proceeds of the transaction
in compliance with, the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales."
Additional Guarantees
The indenture provides that Weigh-Tronix, LLC will not permit any Restricted
Subsidiary of Weigh-Tronix, LLC which is not a guarantor, regardless whether
the Restricted Subsidiary is designated a Restricted Subsidiary on or
subsequent to the date of the indenture, to guarantee the payment of any
indebtedness of SWT Finance, Weigh-Tronix, LLC or any other guarantor unless:
(1) the Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture providing for a Guarantee of the Restricted
Subsidiary except that with respect to a Guarantee of indebtedness of SWT
Finance, Weigh-Tronix, LLC or any other guarantor (A) if the notes are
subordinated in right of payment to the indebtedness, the Guarantee under
the supplemental indenture shall be subordinated to the Restricted
Subsidiary's Guarantee with respect to the indebtedness substantially to
the same extent as the notes are subordinated to the indebtedness under the
indenture and (B) if the indebtedness is by its express terms subordinated
in right of payment to the notes, any Guarantee of the Restricted
Subsidiary with respect to the indebtedness shall be subordinated in right
of payment to the Restricted Subsidiary's Guarantee with respect to the
notes substantially to the same extent as the indebtedness is subordinated
to the notes;
(2) the Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights or
reimbursement, indemnity or subrogation or any other rights against Weigh-
Tronix, LLC or any other Restricted Subsidiary of Weigh-Tronix, LLC as a
result of any payment by the Restricted Subsidiary under its Guarantee of
the notes; and
(3) the Restricted Subsidiary shall deliver to the trustee an opinion or
opinions of counsel to the effect that (A) the Guarantee has been duly
executed and authorized and (B) the Guarantee constitutes a valid, binding
and enforceable obligation of the Restricted Subsidiary, except insofar as
enforcement thereof may be limited by bankruptcy, insolvency or similar
laws, such as fraudulent transfer laws, and except insofar as enforcement
thereof is subject to general principles of equity; provided that this
paragraph shall not be applicable to any guarantee of any Restricted
Subsidiary (x) that (A) existed at the time the person became a Restricted
Subsidiary of Weigh-Tronix, LLC and (B) was not incurred in connection
with, or in contemplation of, that person becoming a Restricted Subsidiary
of Weigh-Tronix, LLC or (y) that guarantees the payment of Obligations of
SWT Finance, Weigh-Tronix, LLC or any other guarantor under the senior
credit facility or any other Senior Debt of SWT Finance, Weigh-Tronix, LLC
or any other guarantor and any refunding, refinancing or replacement, in
whole or in part, provided that the refunding, refinancing or replacement
thereof constitutes Senior Debt of SWT Finance, Weigh-Tronix, LLC or any
other guarantor.
Limitations on Layering
The indenture provides that, notwithstanding any other provision of the
indenture, (1) SWT Finance will not incur, create, issue, assume, guarantee or
otherwise become liable directly or indirectly for any indebtedness, including
acquired debt, that is subordinate or junior in right of payment to any Senior
Debt unless the indebtedness is senior subordinated debt or is contractually
subordinated in right of payment to senior subordinated debt, and (2) neither
Weigh-Tronix, LLC nor any other guarantor will incur, create, issue, assume,
guarantee or otherwise become liable for any indebtedness, including acquired
debt, that is subordinate or junior in right of payment to any Senior Debt of a
guarantor unless the indebtedness is senior subordinated debt or is
contractually subordinated in right of payment to senior subordinated debt.
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Business Activities
Weigh-Tronix, LLC will not, and Weigh-Tronix, LLC will not permit any of its
Restricted Subsidiaries to, directly or indirectly, engage in any line of
business other than a business that is similar to or reasonably related to the
business of Weigh-Tronix, LLC and its Restricted Subsidiaries as of June 13,
2000, except to the extent as would not be material to Weigh-Tronix, LLC and
its Restricted Subsidiaries taken as a whole.
Payments for Consent
Weigh-Tronix, LLC will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder of
any notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the indenture or the notes unless the consideration
is offered to be paid or is paid to all holders of the notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to the consent, waiver or agreement.
Reports
Whether or not Weigh-Tronix, LLC is required by the rules and regulations of
the SEC, so long as any notes are outstanding, Weigh-Tronix, LLC will furnish
to each of the holders of notes (1) all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if Weigh-Tronix, LLC were required to file the financial
information that describes the financial condition and results of operations of
Weigh-Tronix, LLC and any consolidated Restricted Subsidiaries and, with
respect to the annual information only, financial reports by Weigh-Tronix,
LLC's independent public accountants (which shall be firm(s) of established
national reputation), provided that this clause (2) shall not apply to reports
for the period ending March 31, 2000, and (2) all information that would be
required to be filed with the SEC on Form 8-K if Weigh-Tronix, LLC were
required to file these reports. All information and reports shall be filed with
the SEC on or prior to the dates on which these filings would have been
required to be made had Weigh-Tronix, LLC been subject to the rules and
regulations of the SEC. In addition, whether or not required by the rules and
regulations of the SEC, Weigh-Tronix, LLC shall file a copy of all information
and reports with the SEC for public availability within the time periods
specified in the SEC's rules and regulations (unless the SEC will not accept
the filing) and make the information available to securities analysts and
prospective investors upon request. For so long as any notes remain
outstanding, SWT Finance, Weigh-Tronix, LLC and the other guarantors shall
furnish to the holders of notes and to securities analysts and prospective
investors, upon their request, the information required to be delivered under
Rule 144A(d)(4) under the Securities Act. If and so long as the notes are
listed on the Luxembourg Stock Exchange and its rules so require, the
information and reports referred to in clauses (1) and (2) above will also be
made available through the offices of SWT Finance's listing agent in
Luxembourg.
Events of Default and Remedies
Each of the following constitutes an event of default:
(1) default for 30 days in the payment when due of interest on, or
liquidated damages with respect to, the notes, whether or not
prohibited by the subordination provisions of the indenture;
(2) default in payment when due of the principal of or premium, if any, on
the notes upon optional redemption, upon required repurchase, upon
declaration or otherwise, whether or not prohibited by the
subordination provisions of the indenture;
(3) failure by Weigh-Tronix, LLC or any of its Restricted Subsidiaries to
comply with the provisions described under the captions "--Certain
Covenants--Merger, Consolidation or Sale of Assets"'' or "--Repurchase
at the Option of Holders--Change of Control;"
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(4) failure by Weigh-Tronix, LLC or any of its Restricted Subsidiaries for
30 days after notice to comply with the provisions described under the
captions "--Repurchase at the Option of Holders--Asset Sales," "--
Certain Covenants--Restricted Payments" and "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock;"
(5) failure by Weigh-Tronix, LLC or any of its Restricted Subsidiaries for
60 days after notice to comply with any of its other agreements in the
indenture or the notes;
(6) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by Weigh-Tronix, LLC or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by
Weigh-Tronix, LLC or any of its Restricted Subsidiaries) whether the
indebtedness or guarantee now exists, or is created after the issue
date, which default (a) is caused by a failure to pay principal,
premium, or interest on the indebtedness prior to the expiration of the
grace period provided in the indebtedness on the date of the default or
(b) results in the acceleration of the indebtedness prior to its
express maturity and, in each case, the principal amount of any
indebtedness, together with the principal amount of any other
indebtedness under which there has been a payment default or the
maturity of which has been so accelerated, aggregates without
duplication $7.5 million or more;
(7) failure by Weigh-Tronix, LLC or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $5.0 million (excluding
amounts covered by insurance), which judgments are not paid, discharged
or stayed for a period of 60 days;
(8) specific events of bankruptcy, insolvency or reorganization with
respect to SWT Finance, Weigh-Tronix, LLC or a significant subsidiary
(as the term is defined under Rule 1-02 of Regulation S-X promulgated
by the SEC) or group of Restricted Subsidiaries of Weigh-Tronix, LLC
that, taken together (as of the latest audited consolidated financial
statements for Weigh-Tronix, LLC and its subsidiaries) would constitute
a significant subsidiary; and
(9) except as permitted by the indenture, any Guarantee shall fail for any
reason to come into full force and effect on the issue date or shall be
held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or Weigh-Tronix,
LLC or any other guarantor, or any person acting on behalf of any
guarantor, shall deny or disaffirm its obligations under its Guarantee.
If any event of default occurs and is continuing, the trustee or the holders
of at least 25% in principal amount of the then outstanding notes may declare
all the notes to be due and payable immediately by notice in writing to SWT
Finance and the trustee. The above notwithstanding, in the case of an event of
default arising from specific events of bankruptcy or insolvency, with respect
to Weigh-Tronix, LLC or any significant subsidiary or group of Restricted
Subsidiaries which together would constitute a significant subsidiary, as
provided above, all outstanding notes will become due and payable without
further action or notice. Holders of notes may not enforce the indenture or the
notes except as provided in the indenture. Subject to specific limitations,
holders of a majority in principal amount of the then outstanding notes may
direct the trustee in its exercise of any trust or power. The trustee may
withhold from holders of notes notice of any continuing default or event of
default (except a default or event of default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any event of default occurring by reason of any willful
action or inaction, taken or not taken, by or on behalf of SWT Finance with the
intention of avoiding payment of the premium that SWT Finance would have had to
pay if SWT Finance then had elected to redeem the notes under the optional
redemption provisions of the indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the notes. If an event of default occurs prior to June 1, 2005
by reason of any willful action or inaction, taken or not taken, by or on
behalf of SWT Finance with the intention of avoiding the prohibition on
redemption of the notes prior to June 1, 2005, then the premium specified in
the indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the notes.
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The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing default or event of default and its consequences under
the indenture except a continuing default or event of default in the payment of
interest on, or the principal of, the notes.
SWT Finance is required to deliver to the trustee annually a statement
regarding compliance with the indenture. SWT Finance is required upon becoming
aware of any default or event of default to deliver to the trustee a statement
specifying the default or event of default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, manager, officer, employee, incorporator or individual
stockholder of Weigh-Tronix, LLC, SWT Finance or any guarantor, as such, shall
have any liability for any obligations of Weigh-Tronix, LLC or SWT Finance
under the notes, the guarantees or the indenture or for any claim based on, in
respect of, or by reason of, the obligations or their creation, provided that
for purposes of this covenant, "individual stockholder" means a stockholder who
is a natural person. Each holder of notes by accepting a note waives and
releases all liability. The waiver and release are part of the consideration
for issuance of the notes. The waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the SEC that the waiver
is against public policy.
Legal Defeasance and Covenant Defeasance
SWT Finance may, at its option and at any time, elect to exercise legal
defeasance, which means to have all of its obligations and all obligations of
Weigh-Tronix, LLC and the other guarantors discharged with respect to the
outstanding notes and Guarantees. SWT Finance may not discharge obligations
with respect to:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal, premium, interest, any additional amounts, and
any liquidated damages on these notes when these payments are due from the
trust referred to below;
(2) SWT Finance's obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and SWT Finance's obligations in connection with the rights, powers,
trusts, duties and immunities of the trustee; and
(4) the legal defeasance provisions of the indenture. In addition, SWT
Finance may, at its option and at any time, elect to exercise covenant
defeasance, which means to have the obligations of SWT Finance and Weigh-
Tronix, LLC released with respect to specific covenants that are described
in the indenture. Upon the exercise of covenant defeasance, any omission to
comply with these covenants shall not constitute a default or event of
default with respect to the notes. In the event covenant defeasance occurs,
specific events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "events of default"
will no longer constitute an event of default with respect to the notes.
In order to exercise either legal defeasance or covenant defeasance:
. SWT Finance must irrevocably deposit with the trustee, in trust, for the
benefit of the holders of notes, cash in euros, government securities or
european government obligations, or a combination in amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal, premium, interest, any
additional amounts and any liquidated damages on the outstanding notes on
the stated maturity or on the applicable redemption date, as the case may
be, and SWT Finance must specify whether the notes are being defeased to
maturity or to a particular redemption date;
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. in the case of legal defeasance, SWT Finance shall have delivered to the
trustee an opinion of U.S., Dutch or U.K. counsel, as appropriate,
reasonably acceptable to the trustee confirming that (A) SWT Finance has
received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the issue date, there has been a change in
the applicable U.S. federal income tax law, in either case to the effect
that, and based on that change the opinion of counsel shall confirm
that, the holders of the outstanding notes will not recognize income,
gain or loss for U.S. federal income tax purposes as a result of the
legal defeasance and will be subject to U.S. federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if the legal defeasance had not occurred;
. in the case of covenant defeasance, SWT Finance shall have delivered to
the trustee (A) an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that the holders of the outstanding
notes will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of the covenant defeasance and will be subject
to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if the covenant defeasance
had not occurred; and (B) an opinion of counsel in The Netherlands
reasonably acceptable to the trustee confirming that the holders of the
outstanding notes will not recognize income, gain or loss for Dutch
income tax purposes as a result of the covenant defeasance and will be
subject to Dutch income tax on the same amounts, in the same manner and
at the same times as would have been the case if the covenant defeasance
had not occurred;
. no default or event of default shall have occurred and be continuing on
the date of the deposit (other than a default or event of default
resulting from the borrowing of funds to be applied to the deposit) or
insofar as events of default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the
date of deposit;
. the legal defeasance or covenant defeasance will not result in a breach
or violation of, or constitute a default under any material agreement or
instrument, other than the indenture, to which Weigh-Tronix, LLC or any
of its Restricted Subsidiaries is a party or by which Weigh-Tronix, LLC
or any of its Restricted Subsidiaries is bound;
. SWT Finance must have delivered to the trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
. SWT Finance must deliver to the trustee an officers' certificate stating
that the deposit was not made by SWT Finance with the intent of
preferring the holders of notes over the other creditors of SWT Finance,
Weigh- Tronix, LLC or the other guarantors or with the intent of
defeating, hindering, delaying or defrauding creditors of SWT Finance,
Weigh-Tronix, LLC or the other guarantors or others; and
. SWT Finance must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided
for relating to the legal defeasance or the covenant defeasance have
been complied with.
Transfer and Exchange
A holder of notes may transfer or exchange notes in accordance with the
indenture. For so long as the notes are listed on the Luxembourg Stock Exchange
and the rules of the stock exchange require, a holder of notes may transfer or
exchange notes at the offices of the paying agent in Luxembourg. The registrar
and the trustee may require a holder of notes, among other things, to furnish
appropriate endorsements and transfer documents and SWT Finance may require a
holder of notes to pay any taxes and fees required by law or permitted by the
indenture. SWT Finance is not required to transfer or exchange any note
selected for redemption. Also, SWT Finance is not required to transfer or
exchange any note for a period of 15 days before a selection of notes to be
redeemed.
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The registered holder of a note will be treated as the owner of it for all
purposes.
Withholding Taxes
All payments made by SWT Finance on the notes and all payments made by the
guarantors under the guarantees, if any, will be made without withholding or
deduction for, or on account of, any present or future taxes, duties,
assessments or governmental charges of whatever nature imposed or levied by or
on behalf of the U.S., the U.K. or The Netherlands, or any other jurisdiction
in which Weigh-Tronix, LLC, SWT Finance, any other guarantors, or any successor
corporation following a transaction permitted under "--Certain Covenants--
Merger, Consolidation or Sale of Assets," are organized or are otherwise
resident for tax purposes or any political subdivision, or any authority having
power to tax or any jurisdiction from or through which payment is made, unless
the withholding or deduction of the taxes is then required by law or its
interpretation or administration. If any deduction or withholding for, or on
account of, any taxes of any relevant taxing jurisdiction, shall at any time be
required on any payments made by SWT Finance with respect to the notes,
including payments of principal, premium, interest, or any liquidated damages,
SWT Finance will pay these additional amounts as may be necessary to ensure
that the net amounts received by holders of notes after withholding or
deduction shall equal the respective amounts of principal, premium, interest
and liquidated damages that would have been receivable in respect of the notes
or the Guarantees (as the case may be) in the absence of withholding or
deduction, except that no additional amounts will be payable with respect to:
(1) any payments on notes held by or on behalf of a holder of notes or
beneficial owner who is liable for taxes in respect of the note by reason
of the holder of notes or beneficial owner having a connection with the
relevant taxing jurisdiction, including being a citizen or resident or
national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, the relevant taxing
jurisdiction, other than by the mere holding of the note or enforcement of
rights under the note or the receipt of payments in respect of the note;
(2) any taxes that are imposed or withheld where the withholding or
imposition is by reason of the failure of the holder of notes or beneficial
owner of the notes to comply with any request by Weigh-Tronix, LLC or SWT
Finance to provide information concerning the nationality, residence or
identity of the holder or beneficial owner or to make any declaration or
similar claim or satisfy any information or reporting requirement, which is
required or imposed by a statute, treaty, regulation or administrative
practice of the relevant taxing jurisdiction as a precondition to exemption
from all or part of the taxes;
(3) except in the case of the winding up of our business, any note
presented for payment, where presentation is required, in the relevant
taxing jurisdiction, unless the note could not have been presented for
payment elsewhere;
(4) any note presented for payment, where presentation is required, more
than 30 days after the relevant payment is first made available for payment
to the holder, except to the extent that the holder would have been
entitled to these additional amounts on presenting the note for payment on
the thirtieth day after the relevant payment is first made available; or
(5) any taxes which would not have been imposed, payable or due but for
the application of any estate, inheritance, gift, sales or excise tax or
any other taxes or governmental charges which are payable otherwise than by
deduction or withholding from payments on or in respect of the notes.
These additional amounts will also not be payable where, had the beneficial
owner of the note been the holder of the note, he would not have been entitled
to payment of additional amounts by reason of clauses (1) to (5) above.
Upon request, SWT Finance will provide the trustee with documentation
satisfactory to the trustee evidencing the payment of additional amounts.
Copies of the documentation will be made available to the holders of notes upon
request.
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SWT Finance will pay any present or future stamp, court or documentary
taxes, or any other excise or property taxes, charges or similar levies which
arise in any jurisdiction from the execution, delivery or registration of the
notes or any other document or instrument referred to therein, or the receipt
of any payments with respect to the notes, excluding any taxes, charges or
similar levies imposed by any jurisdiction outside of the U.K., The
Netherlands, the U.S. or any jurisdiction in which a paying agent is located,
other than those resulting from, or required to be paid in connection with, the
enforcement of the notes or any other document or instrument following the
occurrence of any event of default with respect to the notes.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect,
except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the indenture, as to all outstanding notes
when:
(1) either:
(a) all the notes previously authenticated and delivered, except
lost, stolen or destroyed notes that have been replaced or paid and
notes for whose payment money has previously been deposited in trust or
segregated and held in trust by SWT Finance and thereafter repaid to
SWT Finance or discharged from the trust, have been delivered to the
paying agent for cancellation, or
(b) all notes not previously delivered to the paying agent for
cancellation have become due and payable and SWT Finance has
irrevocably deposited or caused to be deposited with the paying agent
funds in an amount sufficient to pay and discharge the entire
indebtedness on the notes not previously delivered to the paying agent
for cancellation, for principal, premium, interest, any additional
amounts, and any liquidated damages on the notes to the date of deposit
together with irrevocable instructions from SWT Finance directing the
paying agent to apply those funds to the payment of those amounts at
maturity or redemption, as applicable;
(2) SWT Finance has paid all other sums payable under the indenture; and
(3) SWT Finance has delivered to the trustee an officer's certificate
and a written opinion of counsel stating that all conditions precedent
under the indenture relating to the satisfaction and discharge of the
indenture have been satisfied.
Amendment, Supplement and Waiver
Except as provided in the next two paragraphs, the indenture or the notes
may be amended or supplemented with the consent of the holders of at least a
majority in principal amount of the notes then outstanding, and any existing
default or compliance with any provision of the indenture or the notes may be
waived with the consent of the holders of a majority in principal amount of the
then outstanding notes.
Without the consent of each holder of notes affected, an amendment or waiver
may not (with respect to any notes held by a non-consenting holder):
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes (other
than provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
note;
(4) waive a default or event of default in the payment of principal,
premium, interest, any additional amounts, or any liquidated damages on the
notes (except a rescission of acceleration of the notes by the
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holders of at least a majority in aggregate principal amount of the notes
and a waiver of the payment default that resulted from the acceleration;
(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to
waivers of past defaults or the rights of holders of notes to receive
payments of principal, premium, interest, any additional amounts, or any
liquidated damages on the notes;
(7) waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders"); or
(8) make any change in the above amendment and waiver provisions. In
addition, any amendment to the provisions of the indenture relating to
subordination will require the consent of the holders of at least 75% in
aggregate principal amount of the notes then outstanding if the amendment
would adversely affect the rights of holders of notes. No amendment may be
made to the subordination provisions of the indenture that adversely
affects the rights of any holder of senior indebtedness then outstanding
unless the holders of the senior indebtedness (or any group or
representative thereof authorized to give a consent) consent to the change.
Notwithstanding the preceding, without the consent of any holder of notes,
SWT Finance, Weigh-Tronix, LLC, the other guarantors and the trustee may amend
or supplement the indenture or the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes:
(3) to provide for the assumption of SWT Finance's, Weigh-Tronix, LLC's
or any other guarantor's obligations to holders of notes in the case of a
merger or consolidation;
(4) to add guarantors with respect to the notes or the Guarantees;
(6) to secure the notes or the Guarantees;
(7) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the
legal rights under the indenture of any holder;
(8) to add covenants for the benefit of the holders or to surrender any
right or power conferred upon SWT Finance, Weigh-Tronix, LLC or the other
guarantors, or
(9) to comply with requirements of the SEC in order to effect or
maintain the qualification of the indenture under the Trust Indenture Act.
However, no amendment may be made to the subordination provisions of the
indenture that adversely affects the rights of any holder of Senior Debt then
outstanding unless the holders of the Senior Debt (or any group or
representative thereof authorized to give a consent) consent to the change.
The consent of the holders of notes is not necessary under the indenture to
approve the particular form of any proposed amendment. It is sufficient if the
consent approves the substance of the proposed amendment. After an amendment
under the indenture becomes effective, SWT Finance is required to mail to the
holders of notes a notice briefly describing the amendment. However, the
failure to give the notice to all the holders of notes, or any defect in the
notice, will not impair or affect the validity of the amendment.
Notices
All notices to the holders of notes will be valid if sent by first-class
mail to the registered holders of notes and published in a leading English
language daily newspaper published in New York, which is expected to be The
Wall Street Journal, a leading newspaper having a general circulation in
London, which is expected to be the Financial Times, or other English language
daily newspaper with general circulation in Europe or the
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United States, as the case may be, as approved by the trustee, and so long as
the notes are listed on the Luxembourg Stock Exchange and the rules of the
Luxembourg Stock Exchange so require, a newspaper having a general circulation
in Luxembourg, which is expected to be the Luxemburger Wort. Any notice given
by first-class mail will be deemed to have been given five calendar days after
mailing and notices given by publication will be deemed to have been given on
the first date on which publication is made.
Concerning the Trustee
Should the trustee become a creditor of SWT Finance, Weigh-Tronix, LLC or
any other guarantor, the indenture limits its right to obtain payment of claims
in specific cases, or to realize on specific property received in respect of
any claim as security or otherwise. The trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate the conflict within 90 days, and if it does not do so, it must apply
to the SEC for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
specific exceptions. The indenture provides that in case an event of default
shall occur and be continuing , the trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to the provisions, the trustee will be under no obligation
to exercise any of its rights or powers under the indenture at the request of
any holder of notes, unless the holder shall have offered to the trustee
security and indemnity satisfactory to it against any loss, liability or
expense. Except to enforce the right to receive payment of principal, premium,
interest when due, any additional amounts, or liquidated damages, no holder may
pursue any remedy with respect to the indenture or the notes unless:
(1) the holder has previously given the trustee notice that an event of
default is continuing;
(2) holders of at least 25% in principal amount of the outstanding notes
have requested the trustee to pursue the remedy;
(3) the holders have offered the trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the trustee has not complied with the request within 60 days after
the receipt of the request and the offer of security or indemnity; and
(5) the holders of a majority in principal amount of the outstanding
notes have not given the trustee a direction that, in the opinion of the
trustee, is inconsistent with the request within the 60-day period.
Additional Information
Anyone who receives this prospectus may obtain a copy of the indenture, the
form of guarantee and the registration rights agreement without charge by
writing to Weigh-Tronix, LLC, 293 South Main Street, Providence, RI 02903,
Attention: Chief Financial Officer.
Book-Entry; Delivery and Form
General
Notes sold to qualified institutional buyers are represented by two global
notes in registered form without interest coupons attached (the "Rule 144A
Global Notes"). One Rule 144A Global Note is registered in the name of Cede &
Co., as nominee of DTC, and one Rule 144A Note is deposited with [ ] and
registered in the name of the [ ] for the accounts of Euroclear and
Clearstream. Notes sold to non-U.S. persons outside the United States in
reliance on Regulation S under the Securities Act are represented by one or
more registered notes in temporary global form without interest coupons
attached (the "Regulation S Temporary Global Note"). Beneficial interests in
the Regulation S Temporary Global Note will be exchanged
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for beneficial interests in a corresponding note or notes in permanent global
form (the "Regulation S Permanent Global Note" and, together with the
Regulation S Temporary Global Note, the "Regulation S Global Notes") within a
reasonable period after the expiration of a 40-day period commencing on the
later of the commencement of the offering and the date the notes were
originally issued upon certification that the beneficial interests in the
Regulation S Temporary Global Note are owned by either non-U.S. Persons or U.S.
persons who purchased these interests under an exemption from, or in
transactions not subject to, the registration requirements under the Securities
Act. The Regulation S Temporary Global Note will be deposited upon issuance
with a common depositary and registered in the name of the nominee of the
common depositary for the accounts of Euroclear and Clearstream. Prior to the
40th day after the later of the commencement of the offering and the date the
notes were originally issued, interests in the Regulation S Temporary Global
Note may only be held through Euroclear or Clearstream (as indirect
participants in DTC) unless exchanged for interests in the Rule 144A Global
Note in accordance with the transfer and certification requirements described
below.
Ownership of interests in the Rule 144A Global Notes, otherwise known as
restricted book-entry interests, will be limited to persons that have accounts
with DTC, Euroclear and/or Clearstream, or persons that hold interests through
these participants. Ownership of interests in the applicable Regulation S
Global Note, known as unrestricted book-entry interests, will be limited to
persons that have accounts with Euroclear and/or Clearstream or persons that
hold interests through these participants. After the expiration of the 40-day
period commencing on the later of the commencement of the offering and the date
the notes were originally issued, investors may also hold unrestricted book-
entry interests which represent interests in the Regulation S Permanent Global
Note through organizations other than Euroclear and Clearstream that are
participants in the DTC System.
Clearstream and Euroclear will hold interests in the applicable Regulation S
Global Note and in their Rule 144A Global Note on behalf of their participants
through customers' securities accounts in their respective names on the books
of their respective depositaries. Except under the limited circumstances
described below, book-entry interests will not be held in definitive form.
Book-entry interests will be shown on, and transfers of those interests will
be effected only through, records maintained in book-entry form by DTC,
Euroclear and Clearstream and their participants. The laws of some
jurisdictions, including specific states of the United States, may require that
some purchasers of securities take physical delivery of these securities in
definitive form. The foregoing limitations may impair your ability to own,
transfer or pledge book-entry interests. In addition, while the notes are in
global form, holders of book-entry interests will not be considered the owners
or "holders" of notes for any purpose.
So long as the notes are held in global form, DTC, Euroclear and/or
Clearstream, as applicable (or their respective nominees), will be considered
the sole holders of Global Notes for all purposes under the indenture. In
addition, participants must rely on the procedures of DTC, Euroclear and
Clearstream and indirect participants must rely on the procedures of DTC,
Euroclear, Clearstream and the participants through which they own book-entry
interests to transfer their interests or to exercise any rights of holders
under the indenture.
Neither SWT Finance nor the trustee will have any responsibility or be
liable for any aspect of the records relating to the book-entry interests.
Redemption of the Global Notes
In the event any Global Note (or any portion of the Global Note) is
redeemed, DTC, Euroclear and/or Clearstream, as applicable, will redeem an
equal amount of the book-entry interests in the Global Note from the amount
received by it in respect of the redemption of the Global Note. The redemption
price payable in connection with the redemption of these book-entry interests
will be equal to the amount received by DTC, Euroclear and Clearstream, as
applicable, in connection with the redemption of the Global Note (or any
portion of the Note). SWT Finance understands that, under existing practices of
DTC, Euroclear and Clearstream, if fewer than all the notes are to be redeemed
at any time, DTC, Euroclear and Clearstream will credit their
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respective participants' accounts on a proportionate basis (with adjustments to
prevent fractions) or by lot or on another basis as they deem fair and
appropriate; provided however, that no book-entry interest of (Euro)1,000
principal amount or less may be redeemed in part.
Payments on Global Notes
Payments of any amounts owing in respect of the Global Notes (including
principal, premium, if any, interest, additional amounts, if any, and
liquidated damages, if any) will be made by SWT Finance to DTC or its nominee
(in the case of one Rule 144A Global Note) and to the common depositary or its
nominee for Euroclear and Clearstream (in the case of the Regulation S Global
Notes and the other Rule 144A Global Note) which will distribute these payments
to participants in accordance with their procedures. Payments of all of these
amounts will be made without deduction or withholding for or on account of any
present or future taxes, duties, assessments or governmental charges of
whatever nature except as may be required by law, and if any deduction or
withholding is required to be made by any law or regulation of a relevant
taxing jurisdiction, then, to the extent described under "--Withholding Taxes"
above, additional amounts will be paid as may be necessary in order that the
net amounts received by any holder of the Global Notes or owner of book-entry
interests after the deduction or withholding will equal the net amounts that
the holder or owner would have otherwise received in respect of the Global Note
or book-entry interest, as the case may be, absent the withholding or
deduction. SWT Finance expects that payments by participants to owners of book-
entry interests held through these participants will be governed by standing
customer instructions and customary practices.
Under the terms of the indenture, SWT Finance and the trustee will treat the
registered holder of the Global Notes (e.g., DTC, Euroclear or Clearstream (or
their respective nominees)) as the owner of the Notes for the purpose of
receiving payments and for all other purposes. Consequently, none of SWT
Finance, the trustee or any agent of SWT Finance or the trustee has or will
have any responsibility or liability for:
(1) any aspect of the records of DTC, Euroclear, Clearstream or any
participant or indirect participant relating to or payments made on account
of a book-entry interest or for maintaining, supervising or reviewing the
records of DTC, Euroclear, Clearstream or any participant or indirect
participant relating to or payments made on account of a book-entry
interest; or
(2) DTC, Euroclear, Clearstream or any participant or indirect
participant.
Currency of Payment for the Global Notes
The principal, premium, interest and all other amounts payable on the Rule
144A Global Notes will be paid (a) in euros to holders of interests in the note
who hold these interests through Euroclear and/or Clearstream (the "Rule 144A
Euroclear/Clearstream Holders") and (b) in dollars to holders of interests in
the note who hold these interests through DTC (the "DTC Holders"). The
principal, premium, interest and all other amounts payable on the Regulation S
Global Notes will be paid in euros to holders of interests in these notes
(along with the Rule 144A Euroclear/Clearstream Holders, the
"Euroclear/Clearstream Holders").
At present, DTC can only accept payment in dollars. As a result, DTC holders
will receive payments in dollars as described above, unless they elect to
receive payments in euros as described below.
Notwithstanding the payment provisions described above,
Euroclear/Clearstream holders may elect to receive payments in respect of (a)
the Rule 144A Global Notes and (b) the Regulation S Global Notes in dollars,
and DTC holders may elect to receive payments in respect of the Rule 144A
Global Note in euros.
A Euroclear/Clearstream holder may receive payments of amounts payable in
respect of its interest in the Rule 144A Global Notes or the Regulation S
Global Notes in dollars in accordance with Euroclear's and Clearstream's
customary procedures, which include, among other things, giving to Euroclear or
Clearstream, as appropriate, a notice of the holder's election to receive these
payments in dollars. All costs of conversion resulting from any election will
be borne by the holder.
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A DTC holder may receive payments of amounts payable in respect of its
interest in the Rule 144A Global Note in euros in accordance with DTC's
customary procedures, which include, among other things, giving to DTC a notice
of the holder's election to receive the payments in euros.
Action by Owners of Book-Entry Interests
DTC, Euroclear and Clearstream have advised SWT Finance that they will take
any action permitted to be taken by a holder of notes (including the
presentation of notes for exchange as described above) only at the direction of
one or more participants to whose account the book-entry interests in the
Global Notes are credited and only in respect of the portion of the aggregate
principal amount of notes as to which the participant or participants has or
have given direction. DTC, Euroclear and Clearstream will not exercise any
discretion in the granting of consents, waivers or the taking of any other
action in respect of the Global Notes. However, if there is an event of default
under the notes, each of DTC, Euroclear and Clearstream reserve the right to
exchange the Global Notes for definitive registered notes in certificated form,
and to distribute these definitive notes to its participants.
Transfers
Transfers between participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of definitive registered notes for any reason,
including to sell notes to persons in states which require physical delivery of
these securities or to pledge these securities, the holder must transfer its
interest in the Global Notes in accordance with the normal procedures of DTC
and in accordance with the procedures set forth in the indenture.
During the 40-day period commencing with the later of the commencement of
the offering and the date the notes were originally issued, any sale or
transfer of ownership of a book-entry interest in the Regulation S Temporary
Global Note to U.S. persons shall not be permitted unless the resale or
transfer is made under Rule 144A. Accordingly, book-entry interests in the
Regulation S Temporary Global Note may be transferred to a person who takes
delivery in the form of a book-entry interest in a Rule 144A Global Note only
upon delivery by the transferor of a written certification (in the form
provided in the indenture) to the effect that the transfer is being made to a
person who the transferor reasonably believes is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the
requirements of Rule 144A or otherwise in accordance with the transfer
restrictions, and in accordance with any applicable securities laws of any
state of the United States or any other jurisdiction. After this 40-day period,
the certification requirements will no longer apply to these transfers of book-
entry interests in the Regulation S Permanent Global Note, but these transfers
will continue to be subject to the transfer restrictions contained in the
legend appearing on the face of the Rule 144A Global Note.
Transfer of restricted book-entry interests to persons wishing to take
delivery of restricted book-entry interests will at all times be subject to
these transfer restrictions.
Restricted book-entry interests may be transferred to a person who takes
delivery in the form of any unrestricted book-entry interest only upon delivery
by the transferor of a written certification (in the form provided in the
indenture) to the effect that the transfer is being made in accordance with
Regulation S or Rule 144A (if available under the Securities Act).
Transfers involving an exchange of an unrestricted book-entry interest for a
restricted book-entry interest will be effected in DTC by means of an
instruction originated by the trustee through the DTC Deposit/Withdrawal at
Custodian system. Accordingly, in connection with any transfer, appropriate
adjustments will be made to reflect a decrease in the principal amount of the
applicable Regulation S Global Note and a corresponding increase in the
principal amount of the Rule 144A Global Note. The policies and practices of
DTC may prohibit transfers of unrestricted book-entry interests in the
Regulation S Temporary Global Notes prior to the expiration of the 40-day
period. Any book-entry interest in one of the Global Notes that is transferred
to a person who takes delivery in the form of a book-entry interest in the
other Global Note will,
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upon transfer, cease to be a book-entry interest in the first-mentioned Global
Note, and accordingly will thereafter be subject to all transfer restrictions,
if any, and other procedures applicable to book-entry interests in such other
Global Note for as long as it remains a book-entry interest.
Definitive Registered Notes
Under the terms of the indenture, owners of the book-entry interests will
receive definitive registered notes:
(1) if DTC, Euroclear or Clearstream notifies SWT Finance that it is
unwilling or unable to continue to act as depositary and a successor
depositary is not appointed by SWT Finance within 120 days;
(2) if DTC, Euroclear or Clearstream so requests following an event of
default under the indenture; or
(3) if the owner of a book-entry interest requests an exchange in
writing delivered through either DTC, Euroclear or Clearstream following an
event of default under the indenture.
In the case of the issuance of definitive registered notes, the holder of a
definitive registered note may transfer the note by surrendering it to the
paying agent including the transfer agent in Luxembourg. In the event of a
partial transfer or a partial redemption of a holding of definitive registered
notes represented by one definitive registered note, a definitive registered
note shall be issued to the transferee in respect of the part transferred and
a new definitive registered note in respect of the balance of the holding not
transferred or redeemed shall be issued to the transferor or the holder, as
applicable; provided, that no definitive registered note in a denomination
less than (Euro)1,000 shall be issued. The cost of preparing, printing,
packaging and delivering the definitive registered notes shall be borne by SWT
Finance.
SWT Finance shall not be required to register the transfer or exchange of
definitive registered notes for a period of 15 calendar days preceding (a) the
record date for any payment of interest on the notes, (b) any date fixed for
redemption of the notes or (c) the date fixed for selection of the notes to be
redeemed in part. Also, SWT Finance is not required to register the transfer
or exchange of any notes selected for redemption. In the event of the transfer
of any definitive registered note, the trustee may require a holder, among
other things, to furnish appropriate endorsements and transfer documents as
described in the indenture. SWT Finance may require a holder to pay any taxes
and fees required by law and permitted by the indenture and the notes.
If definitive registered notes are issued and a holder claims that these
definitive registered notes have been lost, destroyed or wrongfully taken or
if the definitive registered note is mutilated and is surrendered to the
Registrar or at the office of the paying agent, SWT Finance shall issue and
the trustee shall authenticate a replacement definitive registered note if the
trustee's and SWT Finance's requirements are met. The trustee or SWT Finance
may require a holder requesting replacement of a definitive registered note to
furnish an indemnity bond sufficient in the judgment of both to protect SWT
Finance, the trustee or the paying agent appointed under the indenture from
any loss which any of them may suffer if a definitive registered note is
replaced. SWT Finance may charge for its expenses in replacing a definitive
registered note.
In case any mutilated, destroyed, lost or stolen definitive registered note
has become or is about to become due and payable, or is about to be redeemed
or purchased by SWT Finance pursuant to the provisions of the indenture, SWT
Finance in its discretion may, instead of issuing a new definitive registered
note, pay, redeem or purchase such definitive registered note, as the case may
be.
Definitive registered notes may be transferred and exchanged for book-entry
interests in a Global Note only in accordance with the indenture and, if
required, only after the transferor first delivers to the trustee a written
certification (in the form provided in the indenture) to the effect that such
transfer will comply with the transfer restrictions applicable to such notes.
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Information Concerning DTC, Euroclear and Clearstream
SWT Finance understands as follows with respect to DTC, Euroclear and
Clearstream:
DTC.
DTC is:
(A) a limited purpose trust company organized under the New York
Banking Law;
(B) a "banking organization" under New York Banking Law;
(C) a member of the Federal Reserve System;
(D) a "clearing corporation" within the meaning of the New York
Uniform Commercial Code; and
(E) a "clearing agency" registered under Section 17A of the
Securities Exchange Act of 1934, as amended.
DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of transactions among its participants. It does
this through electronic book-entry changes in the accounts of securities
participants, eliminating the need for physical movement of securities
certificates. DTC participants include securities brokers and dealers, banks,
trust companies, clearing corporations and some other organizations. DTC is
owned by a number of its direct participants and the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a direct
participant also have access to the DTC system and are known as indirect
participants.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and some banks, the ability of an owner of a
beneficial interest to pledge the interest to persons or entities that do not
participate in the DTC system or otherwise take actions in respect of the
interest, may be limited by the lack of a definitive certificate for that
interest. The laws of some states require that specific persons take physical
delivery of securities in definitive form. Consequently, the ability to
transfer beneficial interests to these persons may be limited. In addition,
owners of beneficial interests through the DTC system will receive
distributions attributable to the Rule 144A Global Note only through DTC
participants.
Euroclear and Clearstream. Like DTC, Euroclear and Clearstream hold
securities for participating organizations. They also facilitate the clearance
and settlement of securities transactions between their respective participants
through electronic book-entry changes in accounts of these participants.
Euroclear and Clearstream provide various services to their participants,
including the safekeeping, administration, clearance, settlement, lending and
borrowing of internationally traded securities. Euroclear and Clearstream
interface with domestic securities markets. Euroclear and Clearstream
participants are financial institutions such as underwriters, securities
brokers and dealers, banks, trust companies and specific other organizations.
Indirect access to Euroclear and Clearstream is also available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodian relationship with a Euroclear or Clearstream participant, either
directly or indirectly.
Global Clearance and Settlement Under the Book-Entry System
The notes represented by the Global Notes are expected to be eligible to
trade in the PORTAL market and listed on the Luxembourg Stock Exchange and to
trade in DTC's same-day funds settlement system, and any permitted secondary
market trading activity in these notes will, therefore, be required by DTC to
be settled in immediately available funds. SWT Finance expects that secondary
trading in any certificated notes will also be settled in immediately available
funds. Subject to compliance with the transfer restrictions applicable to the
Global Notes, cross-market transfers between the participants in DTC, on the
one hand, and Euroclear or Clearstream participants, on the other hand will be
effected through DTC in accordance with DTC's rules on
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behalf of each of Euroclear or Clearstream by its common depositary; however,
these cross-market transactions will require delivery of instructions to
Euroclear or Clearstream by the counterparty in the system in accordance with
the rules and procedures and within the established deadlines (Brussels time)
of the system. Euroclear or Clearstream will, if the transaction meets its
settlements, deliver instructions of the common depositary to take action to
effect final settlement on its behalf by delivering or receiving interests in
the Global Notes in DTC, and making or receiving payment in accordance with
normal procedures of same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver instructions directly
to the common depositary.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a Global Note from a
participant in DTC will be credited, and any crediting will be reported to the
relevant Euroclear or Clearstream participant, during the securities settlement
processing day (which must be a business day for Euroclear or Clearstream)
immediately following the settlement date of DTC. Cash received in Euroclear
and Clearstream as a result of sales of interests in a Global Note by or
through a Euroclear or Clearstream participant to a participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Clearstream cash account only as of the business day for
Euroclear or Clearstream following DTC's settlement date.
Although DTC, Euroclear and Clearstream are expected to follow the foregoing
procedures in order to facilitate transfers of interests in the Global Notes
among participants of DTC, Euroclear or Clearstream, as the case maybe, they
are under no obligation to perform these procedures, and these procedures may
be discontinued at any time. None of SWT Finance, the trustee or the paying
agent will have any responsibility for the performance by DTC, Euroclear or
Clearstream or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Registration Rights; Liquidated Damages
SWT Finance, Weigh-Tronix, LLC, the other guarantors and Lehman Brothers
entered into the Registration Rights Agreement dated June 13, 2000. Under the
registration rights agreement, SWT Finance and the guarantors agreed to file
with the SEC this exchange offer registration statement with respect to the
exchange notes, guaranteed by Weigh-Tronix, LLC and the other guarantors. Upon
the effectiveness of this exchange offer registration statement, SWT Finance
and the guarantors will offer to the holders of Transfer Restricted Securities
(as defined below) under the exchange offer who are able to make specific
representations the opportunity to exchange their Transfer Restricted
Securities (and the related Guarantees) for exchange notes (and the related
Guarantees). If (a) SWT Finance and the guarantors are not required to file
this exchange offer registration statement or permitted to consummate the
exchange offer because the exchange offer is not permitted by applicable law or
SEC policy or (b) any holder of Transfer Restricted Securities notifies SWT
Finance and the guarantors prior to the 20th day following consummation of the
exchange offer that (A) it is prohibited by law or SEC policy from
participating in the exchange offer or (B) that it may not resell the exchange
notes acquired by it in the exchange offer to the public without delivering a
prospectus and the prospectus contained in the exchange offer registration
statement is not appropriate or available for these resales or (C) that it is a
broker-dealer and owns notes acquired directly from SWT Finance or an affiliate
of SWT Finance, SWT Finance and Weigh-Tronix, LLC will file with the SEC a
shelf registration statement to cover resales of the notes by those holders who
satisfy specific conditions relating to the provision of information in
connection with the shelf registration statement. SWT Finance and the
guarantors will use their best efforts to cause the applicable registration
statement to be declared effective as promptly as possible by the SEC. For
purposes of the foregoing, "Transfer Restricted Securities" means each note
(and the related Guarantees) until (a) the date on which the note has been
exchanged by a person other than a broker-dealer for an exchange note (and the
related Guarantees) in the exchange offer, (b) following the exchange by a
broker-dealer in the exchange offer of a note for an exchange note, the date on
which the exchange note is sold to a purchaser who receives from the broker-
dealer on or prior to the date of the sale a copy of the prospectus contained
in the exchange offer registration statement, (c) the date on which the note
has been effectively
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registered under the Securities Act and disposed of in accordance with the
shelf registration statement or (iv) the date on which the note is distributed
to the public under Rule 144 under the Act.
The registration rights agreement provides that (i) SWT Finance and the
guarantors will file an exchange offer registration statement with the SEC on
or prior to 90 days after the closing of the offering of the initial notes,
(ii) SWT Finance and the guarantors will use their best efforts to have the
exchange offer registration statement declared effective by the SEC on or prior
to 180 days after that date, (iii) unless the exchange offer would not be
permitted by applicable law or SEC policy, SWT Finance and the guarantors will
commence the exchange offer and use their best efforts to issue on or prior to
30 business days after the date on which the exchange offer registration
statement was declared effective by the SEC, exchange notes (and the related
Guarantees) in exchange for all Notes tendered prior thereto in the exchange
offer and (iv) if obligated to file the shelf registration statement, SWT
Finance and the guarantors will use their best efforts to file the shelf
registration statement with the SEC on or prior to 90 days after the filing
obligation arises under clause (i) or (ii) of the preceding paragraph and to
cause the shelf registration to be declared effective by the SEC on or prior to
180 days after the obligation arises. If (a) SWT Finance and the guarantors
fail to file any of the registration statements required by the registration
rights agreement on or before the date specified for the filing, (b) any of the
registration statements is not declared effective by the SEC on or prior to the
date specified for the effectiveness, or (c) SWT Finance and the guarantors
fail to consummate the exchange offer within 30 business days of the
effectiveness target date with respect to the exchange offer registration
statement, or (d) the shelf registration statement or the exchange offer
registration statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the registration rights agreement,
each a registration default, then SWT Finance and the guarantors will pay
liquidated damages to each holder of notes, with respect to the first 90-day
period immediately following the occurrence of the first registration default
in an amount equal to (Euro).05 per week per (Euro)1,000 principal amount of
notes held by the holder. The amount of the liquidated damages will increase by
an additional (Euro).05 per week per (Euro)1,000 principal amount of notes with
respect to each subsequent 90-day period until all registration defaults have
been cured, up to a maximum amount of liquidated damages of (Euro).20 per week
per (Euro)1,000 principal amount of notes. All accrued liquidated damages will
be paid by SWT Finance and the guarantors on specified damages payment dates to
the holder of the Global Notes by wire transfer of immediately available funds
or by federal funds check and to holders of Certificated Securities by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no accounts have been specified. Following the cure of
all registration defaults, the accrual of liquidated damages will cease.
Holders of notes are required to make specific representations to SWT
Finance and the guarantors (as described in the Registration Rights Agreement)
in order to participate in the exchange offer and are required to deliver
information to be used in connection with the shelf registration statement and
to provide comments on the shelf registration statement within the time periods
set forth in the registration rights agreement in order to have their notes
included in the shelf registration statement and benefit from the provisions
regarding liquidated damages set forth above. Holders of notes will also be
required to suspend their use of the prospectus included in the shelf
registration statement under circumstances upon receipt of written notice to
that effect from SWT Finance.
In the event of an exchange offer, application will be made to list the
exchange notes on the Luxembourg Stock Exchange. The Luxembourg Stock Exchange
will be informed and a notice will be published in a Luxembourg newspaper,
expected to be the Luxemburger Wort, in the event of any change in interest
rates. In the event of an exchange offer, (a) notice will be given to the
Luxembourg Stock Exchange and published in a newspaper with general circulation
in Luxembourg, expected to be the Luxemburger Wort, announcing the beginning of
the exchange offer and, following completion of the offer, the results of the
offer, (b) a Luxembourg exchange agent, through which all relevant documents
with respect to the exchange offer will be made available to holders of notes,
will be appointed and (c) the Luxembourg exchange agent shall be able to
perform all agency functions to be performed by any exchange agent, including
providing a letter of transmittal and other documents to holders of notes, and
accepting these documents on behalf of SWT Finance. The
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exchange notes will be accepted for clearance through DTC, Euroclear and
Clearstream, as the case may be, and notice will be given to the Luxembourg
Stock Exchange and published in a Luxembourg newspaper, expected to be the
Luxemburger Wort, announcing the relevant Common Codes and International
Securities Identification Numbers.
Governing Law
The indenture provides that it and the notes will be governed by, and
construed in accordance with the laws of the State of New York.
Certain Definitions
Set forth below are defined terms used in the indenture. Reference is made
to the indenture for a full disclosure of all terms, as well as any other
capitalized terms used in this prospectus for which no definition is provided.
"Acquired Debt" means, with respect to any specified person, (i)
indebtedness of any other person existing at the time such other person is
merged with or into or became a Restricted Subsidiary of the specified person,
including, without limitation, indebtedness incurred in connection with, or in
contemplation of, such other person merging with or into or becoming a
Restricted Subsidiary of such specified person, and (ii) indebtedness secured
by a lien encumbering any asset acquired by such person.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of the person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business consistent with past
practices (provided that the sale, lease, conveyance or other disposition of
all or substantially all of the assets of Weigh-Tronix, LLC and its Restricted
Subsidiaries taken as a whole will be governed by the covenants described above
under the captions "--Repurchase at the Option of Holders--Change of Control"
and "--Certain Covenants--Merger, Consolidation or Sale of Assets" and not by
the provisions of the covenant described above under the caption "--Repurchase
at the Option of Holders--Asset Sales"), and (ii) the issue or sale by Weigh-
Tronix, LLC or any of its Restricted Subsidiaries of equity interests of any of
Weigh-Tronix, LLC's Restricted Subsidiaries, in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions
(a) that have a fair market value in excess of $1.0 million or (b) for net
proceeds in excess of $1.0 million. Notwithstanding the foregoing: (1) a
transfer of assets by Weigh-Tronix, LLC to the issuer or another Restricted
Subsidiary of Weigh-Tronix, LLC that is a guarantor or by a Restricted
Subsidiary of Weigh-Tronix, LLC to Weigh-Tronix, LLC, the issuer or another
Restricted Subsidiary of Weigh-Tronix, LLC that is a guarantor; (2) an issuance
or sale of equity interests by a Restricted Subsidiary of Weigh-Tronix, LLC to
Weigh-Tronix, LLC, the issuer or another Restricted Subsidiary of Weigh-Tronix,
LLC that is a guarantor; (3) a Restricted Payment that is permitted by the
covenant described above under the caption "--Certain Covenants--Restricted
Payments"; (4) an Asset Swap; (5) transactions permitted under "--Certain
Covenants--Merger, Consolidation or Sale of Assets"; (6) dispositions of assets
with an aggregate fair market value since the issue date of less than $ 1.0
million; and (7) dispositions in connection with Permitted Liens will not be
deemed to be Asset Sales.
"Asset Swap" means a concurrent purchase and sale or exchange of Permitted
Business Assets between Weigh-Tronix, LLC or any of its Restricted Subsidiaries
and another person; provided that (i) at the time of
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entering into such Asset Swap and immediately after giving effect to such Asset
Swap, no default or event of default shall have occurred and be continuing or
would occur as a consequence thereof; (ii) in the event such Asset Swap
involves the transfer by Weigh-Tronix, LLC or any Restricted Subsidiary of
assets having an aggregate fair market value, as determined by the Board of
Directors of Weigh-Tronix, LLC in good faith, in excess of $2.0 million, the
terms of such Asset Swap have been approved by a majority of the members of the
Board of Directors of Weigh-Tronix, LLC; (iii) in the event such Asset Swap
involves the transfer by Weigh-Tronix, LLC or any Restricted Subsidiary of
Weigh-Tronix, LLC of assets having an aggregate fair market value, as
determined by the Board of Directors of Weigh-Tronix, LLC in good faith, in
excess of $10.0 million, Weigh-Tronix, LLC has received a written opinion from
an independent investment banking firm of nationally recognized standing that
such Asset Swap is fair to Weigh-Tronix, LLC or such Restricted Subsidiary, as
the case may be, from a financial point of view; and (iv) any cash received is
applied in accordance with the provisions described under the caption "--
Repurchase at the Option of Holders--Asset Sales."
"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Berkshire" means Berkshire Fund IV and Berkshire Fund V
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing person, including preferred stock or preferred interests but
excluding debt securities convertible into such capital stock.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States or U.K. government or any agency or
instrumentality thereof, as applicable, having maturities of not more than one
year from the date of acquisition; (ii) certificates of deposit and eurodollar
time deposits with maturities of not more than one year from the date of
acquisition, bankers' acceptances with maturities of not more than one year
from the date of acquisition and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of $500.0 million
and a Thompson Bank Watch Rating of "B" or better, or the long-term debt of
which is rated at the time such cash equivalents are acquired of at least "W"
or the equivalent thereof by Standard & Poor's Ratings Services, or "A" or the
equivalent thereof by Moody's Investment Service, Inc.; (iii) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clauses (i) and (h) above entered into with any
financial institution meeting the qualifications specified in clause (ii)
above; (iv) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or one of the two highest ratings from Standard &
Poor's Ratings Services with maturities of not more than six months from the
date of acquisition; and (v) interests in any investment company or money
market fund which invests solely in instruments of the type specified in
clauses (i) through (iv) above.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation) of any shares of capital stock of the issuer to any
person other than Weigh-Tronix, LLC; (ii) the sale, lease, transfer, conveyance
or other disposition (other than by way of merger or consolidation), in one or
a series of related transactions, of all or substantially all of the assets of
Weigh-Tronix, LLC and its Restricted Subsidiaries, taken as a whole to any
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"person" (as such term is used in Section 13(d)(3) of the Exchange Act) other
than the Principals and their Related Parties, provided that this provision
shall not be deemed to include transactions which result in a transfer of
assets of Weigh-Tronix, LLC and its Restricted Subsidiaries, taken as a whole,
to a different entity as long as the Principals and their Related Parties hold
the same or a greater percentage interest in such assets after such
transactions as they held immediately prior to such transactions; (iii) the
adoption of a plan relating to the liquidation or dissolution of Weigh-Tronix,
LLC or the issuer; (iv) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only
upon the occurrence of a subsequent condition), directly or indirectly, of more
than the lesser of either (A) 50% of the total Voting Stock of Weigh-Tronix,
LLC (measured by voting power rather than number of shares) or (B) the amount
of such total Voting Stock held by the Principals and their Related Parties
(measured by voting power rather than number of shares); (v) the first day on
which a majority of the members of the Board of Directors of Weigh-Tronix, LLC
or the issuer are not Continuing Directors; or (vi) Weigh-Tronix, LLC or the
issuer consolidates with, or merges with or into, any person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any person, or any person consolidates with, or merges with or
into, Weigh-Tronix, LLC or SWT Finance, in any such event pursuant to a
transaction in which any of the outstanding Voting Stock of Weigh-Tronix, LLC
or SWT Finance is converted into or exchanged for cash, securities or other
property, other than any such transaction where the Voting Stock of Weigh-
Tronix, LLC or SWT Finance outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee person (immediately
after giving effect to such issuance).
"Consolidated Cash Flow" means, with respect to any person for any period,
the Consolidated Net Income of such person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an asset sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such
Consolidated Net Income, plus (iii) consolidated interest expense of such
person and its Restricted Subsidiaries for such period, whether paid or accrued
and whether or not capitalized (including, without limitation, amortization of
debt issuance costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, amortization
and other non-cash charges (including amortization of goodwill and other
intangibles but excluding any such non-cash charges to the extent that they
represent an accrual of, or reserve for, cash expenses in any future period or
amortization of a previous cash expense that was paid in a prior period) of
such person and its Restricted Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income, plus (v) without duplication, one-time
non-cash legal, accounting and debt issuance charges resulting from the
Transactions minus (vi) non-cash items increasing such Consolidated Net Income
for such period (other than items that were accrued in the ordinary course of
business), in each case, on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Restricted Subsidiary of Weigh-Tronix, LLC shall be added to Consolidated
Net Income to compute Consolidated Cash Flow of Weigh-Tronix, LLC only to the
extent (and in the same proportion) that the Net Income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
person and only if a corresponding amount would be permitted at the date of
determination to be dividended to Weigh-Tronix, LLC by such Restricted
Subsidiary without prior governmental approval (that has not been obtained),
and without direct or indirect restriction
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pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any person for any period,
the aggregate of the Net Income of such person and its Restricted Subsidiaries
(for such period, on a consolidated basis, determined in accordance with GAAP);
provided that (i) the Net Income (but not loss) of any person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified person or a Restricted Subsidiary
that is a guarantor, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of Weigh-Tronix, LLC or the issuer, as the case may be,
who (i) was a member of such Board of Directors on the date of the indenture;
(ii) was nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election; or (iii) was nominated for
election by Berkshire, provided that, at the time of such nomination, Berkshire
was an affiliate of Weigh-Tronix, LLC or the issuer, as the case may be.
"Credit Facilities" means one or more debt facilities of the issuer or any
guarantor (including, without limitation, the senior credit facility) or
commercial paper facilities with banks or other institutional lenders providing
for term loans, revolving credit loans, receivables financing (including
through the sale of receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables) or letters of
credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Default" means any event that is or with the passage of time or the giving
of notice (or both) would be an event of default.
"Designated Senior Debt" means (i) any indebtedness outstanding under the
senior credit facility and (ii) any other Senior Debt permitted hereunder the
principal amount of which is $25.0 million or more and that has been designated
by Weigh-Tronix, LLC as "Designated Senior Debt," for purposes of the indenture
in the instrument evidencing or governing such Senior Debt.
"Disqualified Stock" means any capital stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the date that is 91 days after the date on
which the notes mature, except to the extent that such capital stock is solely
redeemable with, or solely exchangeable for, any capital stock of such person
that is not Disqualified Stock; provided that any capital stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the repurchase of such capital stock upon the occurrence of a Change
of Control or asset sale (each defined in a substantially identical manner to
the corresponding definitions in the indenture) shall not constitute
Disqualified Stock if the terms of such capital stock (and all such securities
into which it is convertible or for which it is exchangeable) provide that such
capital stock (and all such securities into which it is convertible or for
which it is exchangeable) may not be repurchased or redeemed pursuant to such
provision prior to compliance with the provisions of the indenture described
under the captions "--Repurchase at the Option of Holders--Change of Control"
and "--Repurchase at the Option of Holders--Asset Sales."
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"Equity Interests" means capital stock and all warrants, options or other
rights to acquire capital stock (but excluding any debt security that is
convertible into, or exchangeable for, capital stock).
"Equity Offering" means a primary offering of equity interests of Weigh-
Tronix, LLC.
"European Government Obligations" means direct non-callable obligations of,
or non-callable obligations permitted by, any member nation of the European
Union, the payment or guarantee of which is secured by the full faith and
credit of the respective nation; provided, however, that such nation has a
credit rating at least equal to that of the highest rated member nation of the
European Union.
"European Union" means the member nations to the third stage of economic and
monetary union pursuant to the Treaty of Rome establishing the European
Community, as amended by the Treaty on European Union, signed at Maastricht on
February 7, 1992.
"Exchange Guarantees" mean the unsecured senior subordinated guarantees of
the exchange notes issued by the guarantors having terms substantially
identical to those of the guarantees which may be issued to the holders of
exchange notes upon their exchange of pay-in-kind preferred member interest in
accordance with the terms of and subject to the conditions set forth in the
pay-in-kind preferred member interest and in the indenture.
"Exchange notes" mean 12.5% unsecured senior subordinated notes due June 1,
2010 having terms substantially identical to those of the notes which may be
issued to the holders of pay-in-kind preferred member interest upon the
exchange thereof in accordance with the terms of and subject to the conditions
set forth in the pay-in-kind preferred member interest and in the indenture.
"Existing Indebtedness" means indebtedness outstanding as of the issue date
and reflected on the February 29, 2000 consolidated balance sheets of Weigh-
Tronix, LLC and the February 28, 2000 combined balance sheets for the Avery
Berkel Group.
"Fixed Charges" means, with respect to any person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such person
and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations); (ii) the consolidated interest expense of such person
and its Restricted Subsidiaries that was capitalized during such period; (iii)
any interest expense on indebtedness of another person that is guaranteed by
such person or one of its Restricted Subsidiaries or secured by a Lien on
assets of such person or one of its Restricted Subsidiaries (whether or not
such guarantee or Lien is called upon); (iv) without duplication, the interest
expense attributable to the interest portion of rent expense associated with
Attributable Debt in respect of the relevant lease giving rise thereto,
determined as if such lease were a capitalized lease in accordance with GAAP;
and (v) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such person or any of its Restricted
Subsidiaries, other than dividend payments on equity interests payable solely
in equity interests of Weigh-Tronix, LLC or any of its Restricted Subsidiaries
(other than Disqualified Stock which is not pay-in-kind preferred member
interest), times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any person for any
period, the ratio of the Consolidated Cash Flow of such person for such period
to the Fixed Charges of such person for such period. In the event that Weigh-
Tronix, LLC or any of its Restricted Subsidiaries incurs, assumes, guarantees
or redeems any indebtedness (other than revolving credit borrowings under any
credit facilities) or issues or redeems preferred stock subsequent to the
commencement of the period for which the fixed charge coverage ratio is being
calculated but on or prior to the date on which the event for which the
calculation of the fixed charge coverage ratio is made (the "Calculation
Date"), then the fixed charge coverage ratio shall be calculated giving
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pro forma effect to such incurrence, assumption, guarantee or redemption of
indebtedness, or such issuance or redemption of preferred stock, as if the same
had occurred at the beginning of the applicable four-quarter reference period.
In addition, for purposes of making the computation referred to above, (i)
acquisitions that have been made by Weigh-Tronix, LLC or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income; (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall
be excluded; and (iii) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only to the
extent that the obligations giving rise to such Fixed Charges will not be
obligations of the specified person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles in the U.S. set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, the statements and
pronouncements of the Financial Accounting Standards Board and such other
statements by such other entities as have been approved by a significant
segment of the accounting profession, which are applicable at the issue date.
All ratios and computations based on GAAP contained in the indenture will be
computed in conformity with GAAP.
"Government Securities" means direct obligations of, or obligations fully
and unconditionally guaranteed or insured by, the United States of America or
any agency or instrumentality thereof for the payment of which obligations or
guarantee the full faith and credit of the United States is pledged and which
are not callable or redeemable at the issuer's option.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
indebtedness.
"Guarantee" means the guarantee of the notes by each of the guarantors
pursuant to Article 12 of the indenture and in the form of guarantee endorsed
on the form of note attached as Exhibit A to the indenture and any additional
guarantee of the notes to be executed by any Restricted Subsidiary of Weigh-
Tronix, LLC pursuant to the covenant described above under the caption
"Additional Guarantees."
"Guarantors" means each of Weigh-Tronix, LLC, SWT Holdings B.V, Weigh-
Tronix, Inc., Mecmesin, Inc., Salter Weigh-Tronix Ltd, Salter Housewares
Holdings Ltd, Weigh-Tronix Canada, ULC, Weigh-Tronix UK Ltd, Salter Housewares
Ltd, Weigh-Tronix Delaware, Inc., Berkel USA, Inc., Berkel, Inc., Berkel
Products Co. Limited, Avery Berkel Limited, Avery Berkel Properties Limited,
Avery Berkel Holdings Limited, Berkel (Ireland) Limited and any other
Restricted Subsidiaries of Weigh-Tronix, LLC which become guarantors under the
terms of the indenture.
"Hedging Obligations" means, with respect to any person, the net payment
Obligations of such person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements in the ordinary course of business and consistent
with the practices of other commercial enterprises engaged in the same or a
similar business as such person designed to protect such person against
fluctuations in commodity prices, interest rates or currency exchange rates.
"Indebtedness" means with respect to any specified person, any indebtedness
of such person, whether or not contingent, in respect of:
(1) borrowed money;
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(2) bonds, notes, debentures or similar instruments or letters of credit
(or reimbursement agreements in respect thereof), other than standby and
documentary letters of credit and performance and surety bonds issued by
such person in the ordinary course of business, to the extent not drawn;
(3) banker's acceptances;
(4) Capital Lease Obligations;
(5) all Attributable Debt of such person in respect of Sale and
Leaseback Transactions not involving a Capital Lease Obligation;
(6) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable incurred in the ordinary course of business which purchase
price is due more than six months after the date of placing such property
in service or taking delivery and title thereto;
(7) Disqualified Stock; or
(8) any Hedging Obligations.
In addition, the term "indebtedness" includes all indebtedness of others
secured by a Lien on any asset of the specified person (whether or not such
indebtedness is assumed by the specified person) and, to the extent not
otherwise included, the guarantee by such person of any indebtedness of any
other person, provided that a guarantee otherwise permitted by the indenture to
be incurred by Weigh-Tronix, LLC or a Restricted Subsidiary of Weigh-Tronix,
LLC of indebtedness incurred by Weigh-Tronix, LLC or a Restricted Subsidiary of
Weigh-Tronix, LLC in compliance with the terms of the indenture shall not
constitute a separate incurrence of indebtedness.
"Investment" means, with respect to any person, all investments by such
person in other persons (including affiliates) in the form of any direct or
indirect advance, loan (other than advances to customers in the ordinary course
of business) or other extension of credit (including by way of guarantee or
similar arrangement, but excluding any debt or extension of credit (including
by way of guarantee or similar arrangement, but excluding any debt or extension
of credit represented by a bank deposit other than a time deposit) or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use of others), or
any purchase or acquisition of capital stock, indebtedness or other similar
instruments issued by, such person and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that:
(1) Hedging Obligations entered into in the ordinary course of business
and in compliance with the indenture;
(2) endorsements of negotiable instruments and documents in the ordinary
course of business; and
(3) an acquisition of assets, capital stock or other securities by
Weigh-Tronix, LLC or a Restricted Subsidiary of Weigh-Tronix, LLC for
consideration consisting exclusively of common equity securities of Weigh-
Tronix, LLC, shall in each case not be deemed to be an Investment.
For purposes of "Certain Covenants-Restricted Payments,"
(1) "Investment" will include the portion (proportionate to Weigh-
Tronix, LLC's equity interest in a Restricted Subsidiary to be designated
as an Unrestricted Subsidiary) of the fair market value of the net assets
of such Restricted Subsidiary of Weigh-Tronix, LLC at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, Weigh-Tronix, LLC will be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (a) Weigh-Tronix, LLC's "Investment" in such Subsidiary
immediately prior to such redesignation less (b) the portion (proportionate
to Weigh-Tronix, LLC's equity interest in such Subsidiary) of the fair
market value of the
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net assets (as conclusively determined by the Board of Directors of Weigh-
Tronix, LLC in good faith) of such Subsidiary immediately after such
Subsidiary is so redesignated a Restricted Subsidiary; and
(2) any property transferred to or from an Unrestricted Subsidiary will
be valued at its fair market value at the time of such transfer, in each
case as determined in good faith by the Board of Directors of Weigh-Tronix,
LLC. If Weigh-Tronix, LLC or any Restricted Subsidiary of Weigh-Tronix, LLC
sells or otherwise disposes of any Voting Stock of any Restricted
Subsidiary of Weigh-Tronix, LLC such that, after giving effect to any such
sale or disposition, such entity is no longer a Subsidiary of Weigh-Tronix,
LLC, Weigh-Tronix, LLC shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value (as
conclusively determined by the Board of Directors of Weigh-Tronix, LLC in
good faith) of the capital stock of such Subsidiary not sold or disposed
of.
"Issue Date" means the date the issuer first issues the notes under the
indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in any asset and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Maximum Amount," as of any date (the "determination date"), means (i)
(Euro)10.0 million plus paid-in-kind dividends thereon compounded annually in
arrears from the issue date through and including the determination date at a
rate per annum (the "Applicable Rate") equal to 12% through and including June
1, 2005, at 15% from June 2, 2005 through and including December 1, 2005, and
thereafter increasing by fifty (50) basis points at the beginning of each
subsequent six month period up to a maximum rate of 18%; less (ii) with respect
to any pay-in-kind preferred member interest that have been exchanged for
exchange notes prior to such determination date, interest on the aggregate
liquidation preference thereof calculated from the respective date of exchange
thereof through and including the determination date at a rate per annum equal
to the Applicable Rate.
"Net Cash Proceeds," with respect to any issuance or sale of capital stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, listing fees,
discounts or commissions and brokerage, consultant and other fees and charges
actually incurred in connection with such issuance or sale and net of taxes
paid or payable as a result of such issuance or sale (after taking into account
any available tax credit deductions and any tax sharing arrangements).
"Net Income" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any asset sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the disposition of any securities by such person or any of its Restricted
Subsidiaries or the extinguishment of any indebtedness of such person or any of
its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss).
"Net Proceeds" means the aggregate cash proceeds or cash equivalents
received by Weigh-Tronix, LLC or any of its Restricted Subsidiaries in respect
of any asset sale (including, without limitation, any cash received upon the
sale or other disposition of any non-cash consideration received in any Asset
Sale), net of all costs relating to such asset sale (including, without
limitation, legal, accounting, investment banking and brokers fees, sales and
underwriting commissions and any amounts required to be paid to any person
(other than Weigh-Tronix, LLC or any Restricted Subsidiary) owning a beneficial
interest in the assets subject to the Asset Sale) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements) and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
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"Non-Recourse Debt" means indebtedness:
(1) as to which neither Weigh-Tronix, LLC nor any Restricted Subsidiary
of Weigh-Tronix, LLC (a) provides any guarantee or credit support of any
kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise);
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary of Weigh-Tronix, LLC) would permit (upon notice, lapse of time
or both) any holder of any other indebtedness of Weigh-Tronix, LLC or any
Restricted Subsidiary to declare a default under such other indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and
(3) the explicit terms of which provide there is no recourse against any
of the assets of Weigh-Tronix, LLC or its Restricted Subsidiaries.
"Obligations" means any principal, premium, if any, interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to Weigh-Tronix, LLC or its Restricted Subsidiaries
whether or not a claim for post-filing interest is allowed in such proceeding),
penalties, fees, charges, expenses, indemnifications, reimbursement
obligations, damages (including liquidated damages), guarantees and other
liabilities or amounts payable under the documentation governing any
indebtedness or in respect thereof.
"Permitted Business" means the lines of business conducted by Weigh-Tronix,
LLC and its Restricted Subsidiaries on the date hereof and businesses
reasonably related thereto.
"Permitted Business Assets" means assets used or useful in a Permitted
Business.
"Permitted Investments" means (a) any Investment in Weigh-Tronix, LLC or in
a Restricted Subsidiary of Weigh-Tronix, LLC; (b) any Investment in cash and
cash equivalents; (c) any Investment by Weigh-Tronix, LLC or any Restricted
Subsidiary of Weigh-Tronix, LLC in a person engaged in a Permitted Business, if
as a result of such Investment (i) such person becomes a Restricted Subsidiary
of Weigh-Tronix, LLC or (ii) such person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, Weigh-Tronix, LLC or a Restricted Subsidiary of Weigh-Tronix,
LLC; (d) any Restricted Investment made as a result of the receipt of non-cash
consideration from an asset sale or Asset Swap that was made pursuant to and in
compliance with the covenant described above under the caption "--Repurchase at
the Option of Holders-Asset Sales"; (e) any acquisition of assets solely in
exchange for the issuance of equity interests (other than Disqualified Stock)
of Weigh-Tronix, LLC; (f) other Investments by Weigh-Tronix, LLC or any of its
Restricted Subsidiaries in any person having an aggregate fair market value
(measured as of the date made and without giving effect to subsequent changes
in value), when taken together with all other Investments made pursuant to this
clause (f) that are at the time outstanding, not to exceed $15.0 million; (g)
Investments arising in connection with Hedging Obligations that are incurred in
the ordinary course of business consistent with the practices of other
commercial enterprises engaged in the same or a similar business, for the
purpose of fixing or hedging currency, commodity or interest rate risk
(including with respect to any floating rate indebtedness that is permitted by
the terms of the indenture to be outstanding) in connection with the conduct of
the business of Weigh-Tronix, LLC and its Restricted Subsidiaries; (h) any
Investment existing on the issue date and any amendment, modification,
restatement, supplement, extension, renewal, refunding, replacement,
refinancing, in whole or in part, thereof; (i) any stock, obligations or
securities received in settlement of debts created in the ordinary course of
business and owing to Weigh-Tronix, LLC or any of its Restricted Subsidiaries
or in satisfaction of judgments or pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy of insolvency or a debtor; (j) loans or
advances to employees or non-employee directors of Weigh-Tronix, LLC or its
Restricted Subsidiaries made in the ordinary course of business; provided that
the aggregate principal amount of all such loans or advances does not exceed an
amount equal to $2.0 million at any time outstanding; (k) guarantees issued in
accordance with "--Certain Covenants-
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Additional Guarantees" and "--Certain Covenants-Incurrence of Indebtedness and
Issuance of Preferred Stock;" (1) receivables owing to Weigh-Tronix, LLC or any
of its Restricted Subsidiaries created or acquired in the ordinary course of
business and payable or dischargable in accordance with customary trade terms;
provided, however, that such trade terms may include such concessionary trade
terms as Weigh-Tronix, LLC or any such Restricted Subsidiary deems reasonable
under the circumstances; or (m) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the ordinary course of
business.
"Permitted Junior Securities" means equity interests in Weigh-Tronix, LLC or
debt securities that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) to substantially the same extent
as, or to a greater extent than, the notes are subordinated to senior debt
pursuant to the indenture.
"Permitted Liens" means (i) liens on assets of the issuer, Weigh-Tronix, LLC
or any of the other guarantors to secure Senior Debt permitted by the indenture
to be incurred; (ii) liens on the assets of SWT Finance, Weigh-Tronix, LLC or
any of the other guarantors which secure the indebtedness under any credit
facilities or which secure Hedging Obligations which are permitted by the
indenture to be incurred; (iii) liens on property of a person existing at the
time such person is merged into or consolidated with Weigh-Tronix, LLC or any
Restricted Subsidiary of Weigh-Tronix, LLC; provided that such liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the person merged into or consolidated
with Weigh-Tronix, LLC or such Restricted Subsidiary; (iv) liens on property
existing at the time of acquisition thereof by Weigh-Tronix, LLC or any
Restricted Subsidiary of Weigh-Tronix, LLC, provided that such liens were in
existence prior to the contemplation of such acquisition and only extend to the
property so acquired; (v) liens existing on the issue date; (vi) liens to
secure any Permitted Refinancing indebtedness incurred to refinance any
indebtedness secured by any Lien referred to in the foregoing clauses (i)
through (v), as the case may be, at the time the original Lien became a
Permitted Lien; (vii) liens in favor of the issuer, Weigh-Tronix, LLC or any
Restricted Subsidiary that is a guarantor; (viii) liens incurred in the
ordinary course of business of Weigh-Tronix, LLC or any Restricted Subsidiary
of Weigh-Tronix, LLC with respect to obligations that do not exceed $3.0
million in the aggregate at any one time outstanding; (ix) liens to secure the
performance of statutory obligations, surety or appeal bonds, performance
bonds, deposits to secure the performance of bids, trade contracts, government
contracts, leases or licenses or other obligations of a like nature incurred in
the ordinary course of business (including, without limitation, landlord liens
on leased properties); (x) liens for taxes, assessments or governmental charges
or claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently prosecuted,
provided that any reserve or other appropriate provision as shall be required
to conform with GAAP shall have been made therefor; (xi) liens to secure
indebtedness (including Capital Lease Obligations) permitted by clause (iv) of
the second paragraph of the covenant described above under the caption "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"
covering only the assets acquired with such indebtedness; (xii) carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or other
like liens arising in the ordinary course of business in respect of obligations
not overdue for a period in excess of 60 days or which are being contested in
good faith by appropriate proceedings promptly instituted and diligently
prosecuted; provided that any reserve or other appropriate provision as shall
be required to conform with GAAP shall have been made therefor; (xiii)
easements, rights-of-way, zoning and similar restrictions and other similar
encumbrances or title defects incurred, or leases or subleases granted to
others, in the ordinary course of business, which do not in any case materially
detract from the value of the property subject thereto or do not interfere with
or adversely affect in any material respect the ordinary conduct of the
business of Weigh-Tronix, LLC and its Restricted Subsidiaries taken as a whole;
(xiv) liens in favor of customs and revenue authorities to secure payment of
customs duties in connection with the importation of goods in the ordinary
course of business and other similar liens arising in the ordinary course of
business; (xv) leases or subleases granted to third persons not interfering
with the ordinary course of business of Weigh-Tronix, LLC or any of its
Restricted Subsidiaries; (xvi) liens (other than any Lien imposed by ERISA or
any rule or regulation promulgated thereunder) incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, and other types of social security; (xvii)
93
<PAGE>
deposits, in an aggregate amount not to exceed $250,000, made in the ordinary
course of business to secure liability to insurance carriers; (xviii) liens for
purchase money obligations (including refinancings thereof permitted under the
covenant described above under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock"), provided that (A) the
indebtedness secured by any such Lien is permitted under the covenant described
above under the caption "--Certain Covenants-Incurrence of indebtedness and
Issuance of Preferred Stock" and (B) any such Lien encumbers only the asset so
purchased; (xix) any attachment or judgment Lien not constituting an event of
default under clause (i) of the first paragraph of the section described above
under the caption "Events of Default and Remedies;" (xx) any interest or title
of a lessor or sublessor under any operating lease; (xxi) liens arising solely
by virtue of any statutory, contractual or common law provisions relating to
banker's liens, rights of set-off or similar rights and remedies as to deposit
accounts or other funds maintained with a depositary institution; provided
that: (a) such deposit account is not a dedicated cash collateral account and
is not subject to restrictions against access by Weigh-Tronix, LLC or the
issuer, as applicable, in excess of those set forth by regulations promulgated
by the Federal Reserve Board of the United States or other applicable
governmental or banking regulatory authority; and (b) such deposit account is
not intended by Weigh-Tronix, LLC or any of its Restricted Subsidiaries to
provide collateral to the depository institution; (xxii) liens under any title
retention agreement entered into in the ordinary course of business; (xxiii)
liens arising from Uniform Commercial Code financing statement filings
regarding operating leases entered into by Weigh-Tronix, LLC and its Restricted
Subsidiaries in the ordinary course of business; and (xxiv) liens securing the
notes and the guarantees.
"Permitted Refinancing Indebtedness" means any indebtedness of Weigh-Tronix,
LLC or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other indebtedness of Weigh-Tronix, LLC or any of its Restricted
Subsidiaries (other than intercompany indebtedness); provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued and unpaid interest on, any indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing indebtedness has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the notes, such Permitted
Refinancing indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the notes on
terms at least as favorable to the holders of notes as those contained in the
documentation governing the indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such indebtedness is incurred either
by Weigh-Tronix, LLC or a Restricted Subsidiary who is the obligor on the
indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"PIK preferred member interest," which is referred to in this registration
statement as "preferred member interest," means the (Euro)10.0 million
aggregate liquidation preference exchangeable pay-in-kind preferred member
interest of Weigh-Tronix, LLC being issued on the issue date and any additional
exchangeable pay-in-kind preferred member interest which are issued thereafter
in lieu of cash dividend payments thereon, the terms of which exchangeable pay-
in-kind preferred member interest are described above under "Description of PIK
Preferred Member Interest" and are set forth in the Subscription Agreement to
be entered into prior to the issue date which provides, inter alia, that all
obligations in respect thereof shall rank junior and be subordinated in right
of payment to all senior subordinated debt (including the notes) and all Senior
Debt.
"Principal" means Berkshire and the members of management of Weigh-Tronix,
LLC or any of its subsidiaries as of the issue date.
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<PAGE>
"Related Party" means, with respect to any Principal, (A) any spouse or
immediate family member (in the case of an individual) of such Principal or (B)
a trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners or persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/or such other
persons referred to in the immediately preceding clause (A).
"Representative" means the administrative agent under the senior credit
facility or its successor thereunder.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a person means any Subsidiary of the referent
person that is not an Unrestricted Subsidiary; provided that, on the issue
date, all subsidiaries of Weigh-Tronix, LLC shall be Restricted Subsidiaries of
Weigh-Tronix, LLC.
"SEC" means the U.S. Securities and Exchange Commission.
"Senior Credit Facility" means that certain Amended and Restated Credit
Agreement, dated as of June 13, 2000, by and among the issuer, Weigh-Tronix
Canada ULC, Weigh-Tronix, LLC, Lehman Commercial Paper, Inc., as syndication
agent, Fleet National Bank, as administrative agent and security agent,
FleetBoston Robertson Stephens Inc. and Lehman Brothers Inc. as co-arrangers
and co-bank managers, Lehman Brothers Inc., as sole advisor, and the banks and
other financial institutions or entities from time to time parties thereto,
providing for approximately $70.0 million (or the foreign currency equivalent)
of term loan borrowings and approximately $50.0 million (or the foreign
currency equivalent) of revolving credit borrowings (and letters of credit and
swingline loans) and in each case, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, amended
and restated, replaced or refinanced from time to time (including any increase
in the principal amounts available thereunder).
"Senior Debt" means, with respect to any person, (i) all indebtedness of
such person outstanding under the credit facilities, letters of credit and
related guarantees under such credit facilities (without duplication) permitted
under clause (i) of the second paragraph of the covenant described above under
the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock," (ii) any other indebtedness permitted to be incurred by such
person under the terms of the indenture, unless the instrument under which such
indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the notes and (iii) all Obligations with
respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include (v) any liability for federal, state, local or other taxes owed or
owing by such person; (w) any indebtedness of SWT Finance or any guarantor to
any of its respective subsidiaries or other affiliates; (x) any trade payables;
(y) any indebtedness that is incurred in violation of the indenture or (z) any
capital stock.
"Senior Subordinated Debt" means the notes and any other indebtedness of SWT
Finance, Weigh-Tronix, LLC or any other guarantor that specifically provides
that such indebtedness is to rank equally with the notes in right of payment
and is not subordinated by its terms in right of payment to any indebtedness or
other obligation of SWT Finance, Weigh-Tronix, LLC or any other guarantor which
is not Senior Debt.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the senior credit facility or
other original documentation governing such indebtedness, and shall not include
any contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the
95
<PAGE>
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by such person and (ii) any partnership (a) the sole general partner or the
managing general partner of which is such person or an entity described in
clause (i) and related to such person or (b) the only general partners of which
are such person or of one or more entities described in clause (i) and related
to such person (or any combination thereof).
"Transactions" means the financings under the senior credit facility and the
pay-in-kind preferred member interest and the offering of the notes being made
pursuant to this offering memorandum.
"Transaction Documents" means the purchase agreement relating to the sale
and purchase of the notes, the registration rights agreement and the indenture.
"Unrestricted Subsidiary" of any person means any Subsidiary of such person
(other than the issuer) that is designated by the Board of Directors of such
person as an Unrestricted Subsidiary pursuant to a Board Resolution, but only
to the extent that the Subsidiary:
(1) has no indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with Weigh-Tronix, LLC or any Restricted Subsidiary of Weigh-
Tronix, LLC (other than in connection with the pledge of the equity
interests of that Unrestricted Subsidiary) unless the terms of that
agreement, contract, arrangement or understanding are no less favorable to
Weigh-Tronix, LLC or its Restricted Subsidiary than those that might be
obtained at the time from persons who are not affiliates of Weigh-Tronix,
LLC;
(3) is a person with respect to which neither Weigh-Tronix, LLC nor any
of its Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional equity interests or (b) to maintain or preserve
that person's financial condition or to cause that person to achieve any
specified levels of operating results;
(4) has not, at the time of designation and thereafter, guaranteed or
otherwise directly or indirectly provided credit support for any
indebtedness of Weigh-Tronix, LLC or any of its Restricted Subsidiaries;
and
(5) has at least one director on its Board of Directors that is not a
director or executive officer of Weigh-Tronix, LLC or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director
of executive officer of Weigh-Tronix, LLC or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of Weigh-Tronix, LLC as an Unrestricted
Subsidiary shall be evidenced to the trustee by filing with the trustee a
certified copy of the Board Resolution of the Board of with the preceding
conditions and was permitted by the covenant described above in the section
entitled "--Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the indenture and any indebtedness of that
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of Weigh-
Tronix, LLC as of that date and, if that indebtedness is not permitted to be
incurred as of that date under the covenant described in the section entitled
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," Weigh-Tronix, LLC shall be in default under that covenant. The Board of
Directors of Weigh-Tronix, LLC may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of Weigh-Tronix, LLC; provided that
this designation shall be deemed to be an incurrence of indebtedness by a
Restricted Subsidiary of Weigh-Tronix, LLC of any outstanding indebtedness of
the Unrestricted Subsidiary and this designation shall only be permitted if (1)
that indebtedness is permitted under the covenant described in the section
entitled "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock," calculated on a pro forma basis as if this designation had
occurred at the beginning of the four-quarter reference period; and (2) no
default shall have occurred following this designation.
96
<PAGE>
"Voting Stock" of any person as of any date means the capital stock of such
person that is at the time entitled to vote in the election of the Board of
Directors of such person, provided that Voting Stock shall not under any
circumstances include the pay-in-kind preferred member interest.
"Weighted Average Life to Maturity" means, when applied to any indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such indebtedness.
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<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following presents the Unaudited Pro Forma Combined Financial Data of
the company that has been prepared to give effect to specific acquisitions as
discussed in note 1, the merger of Avery Berkel which closed on June 13, 2000
and financing. The accompanying Unaudited Pro Forma Combined Statements of
Operations of the company for the year ended March 31, 2000 and the three
months ended June 30, 2000 give effect to certain acquisitions and the merger
and financing as if they had occurred on April 1, 1999.
The pro forma adjustments are based on available information and certain
assumptions that the company believes are reasonable under the circumstances.
Pro forma adjustments are applied to the historical financial statements of
Weigh-Tronix, LLC to account for the merger under the purchase method of
accounting. Under purchase accounting, the merger consideration will be
allocated to Avery Berkel's assets and liabilities based on their relative fair
values. Allocations are subject to valuations as of the date of the merger
based on appraisals and other studies, which are currently in process.
Accordingly, the final allocations may differ from the amounts reflected herein
and, as a consequence, impact reported operating results and financial
condition.
The Unaudited Pro Forma Combined Financial Data does not: (i) purport to
represent what the company's results of operations would have been if the
acquisitions, merger and financing had occurred as of April 1, 1999, nor are
they necessarily indicative of the results for any future periods; or (ii) give
effect to certain non-recurring charges resulting from the merger of Avery
Berkel on June 13, 2000 and financing. These charges include restructuring
charges, an accelerated depreciation charge and the extraordinary charge from
the write-off of deferred financing fees and prepayment penalties resulting
from the refinancing of Weigh-Tronix LLC's former credit agreement and other
indebtedness.
The company has specifically identified approximately $12.0 million in
savings as compared with stand-alone operations of the two companies. To
achieve these cost savings, the company expects to incur non-recurring cash
integration costs of approximately $9.0 million in the 12 months following the
merger. See further discussion in "Management's Discussion and Analysis of
Fianancial Condition and Results of Operations."
We have included a presentation of EBITDA, as defined in Note 8 to the
Unaudited Pro Forma Combined Statements of Operations, which we believe is
appropriate to reflect our ongoing operations.
The financial statements of the Avery Berkel Group as of and for the year
ended March 31, 2000 are presented elsewhere in this prospectus and are
prepared in accordance with U.K. GAAP and are presented in pounds sterling.
Accordingly, the unaudited pro forma combined financial data for the Avery
Berkel Group has been presented after converting U.K. GAAP to U.S. GAAP and
converting pounds sterling to U.S. dollars.
The statement of operations for the Avery Berkel Group for the pre-
acquisition period from April 1, 2000-June 13, 2000 were originally prepared in
accordance with U.K. GAAP and presented in pounds sterling. Accordingly, the
unaudited pro forma combined financial data for the Avery Berkel Group has been
presented after converting U.K. GAAP to U.S. GAAP and converting pounds
sterling to U.S. dollars.
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<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000
US $ thousands
<TABLE>
<CAPTION>
Avery
Berkel
Weigh-Tronix, LLC Group
-------------------------- ----------
Year ended Year ended
March 31, Other March 31, Pro forma Combined
2000 Acquisitions(1) 2000(2) adjustments Pro Forma
---------- --------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Operating Data:
Revenues................ $126,127 $896 $248,774 -- $375,797
Cost of revenues........ 84,873 412 154,714 -- 239,999
-------- ---- -------- -------- --------
Gross profit............ 41,254 484 94,060 -- 135,798
Operating expenses...... 32,926 545 84,301 5,972 (/4/) 123,744
-------- ---- -------- -------- --------
Operating income
(loss)................. 8,328 (61) 9,759 (5,972) 12,054
Net interest expense
(income)............... 5,691 60 (2,981) 21,012 (/5/) 23,782
Other income, net....... (327) -- (1,792) -- (2,119)
Equity in loss (income)
of unconsolidated
affiliates............. 38 -- (382) -- (344)
-------- ---- -------- -------- --------
Income (loss) before
provision (benefit) for
income taxes and
minority interest in
income of subsidiary... 2,926 (121) 14,914 (26,984) (9,265)
Provision (benefit) for
income taxes........... 1,316 (46) 3,574 (9,587)(/6/) (4,743)
Minority interest in
income of subsidiary... -- -- 114 -- 114
-------- ---- -------- -------- --------
Income (loss) before
dividends on
preferred member
interest............... 1,610 (75) 11,226 (17,397) (4,636)
12% dividends accrued on
preferred member
interest............... -- -- -- 1,154 (/7/) 1,154
-------- ---- -------- -------- --------
Net income (loss)
available to Members... $ 1,610 $(75) $ 11,226 $(18,551) $ (5,790)
======== ==== ======== ======== ========
Other Financial Data:
EBITDA, as
defined(/8/)........... $ 34,310
========
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Statements of
Operations.
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<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000
US $ thousands
<TABLE>
<CAPTION>
Weigh-Tronix,
LLC Avery Berkel Group
------------- ------------------
Three months
ended April 1, 2000- Pro forma Combined
June 30, 2000 June 13, 2000(/2/) adjustments Pro Forma
------------- ------------------ ----------- ---------
<S> <C> <C> <C> <C>
Operating Data:
Revenues................ $43,522 38,643 -- 82,165
Cost of revenues........ 32,103 32,320 (2,416)(/3/) 62,007
------- ------- ------- --------
Gross profit............ 11,419 6,323 2,416 20,158
Operating expenses...... 13,260 10,397 1,114 (/4/) 24,771
------- ------- ------- --------
Operating income
(loss)................. (1,841) (4,074) 1,302 (4,613)
Net interest expense
(income)............... 2,229 (47) 3,758 (/5/) 5,940
Other income, net....... (25) -- -- (25)
Equity in loss of
unconsolidated
affiliates............. -- 20 -- 20
------- ------- ------- --------
Loss before provision
(benefit) for income
taxes, minority
interest in income
(loss) of
subsidiary and
extraordinary loss..... (4,045) (4,047) (2,456) (10,548)
Provision (benefit) for
income taxes........... (68) 78 (775) (/6/) (765)
Minority interest in
income (loss) of
subsidiary............. 46 (224) -- (178)
------- ------- ------- --------
Loss before
extraordinary loss..... (4,023) (3,901) (1,681) (9,605)
Extraordinary (loss),
net of income tax
benefit of $66......... (2,549) -- 2,549 --
------- ------- ------- --------
Income (loss) before
dividends on preferred
member interest........ (6,572) (3,901) 868 (9,605)
12% dividends accrued on
preferred member
interest............... 54 -- 235 (/7/) 289
------- ------- ------- --------
Net income (loss)
available to Members... $(6,626) $(3,901) $ 633 $ (9,894)
======= ======= ======= ========
Other Financial Data:
EBITDA, as
defined(/8/)........... $ 90
========
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Statements of
Operations.
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<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000 AND THE THREE MONTHS ENDED JUNE 30, 2000
(US$ thousands, unless otherwise indicated)
(1) The Unaudited Pro Forma Combined Statements of Operations give effect to
Weigh-Tronix, LLC's acquisitions of businesses during the year ended March
31, 2000 as follows:
<TABLE>
<CAPTION>
Date of
Name of Company Acquired Acquisition
------------------------ ------------------
<S> <C>
Logtech-USA, Inc.......................................... April 1, 1999
Equatech Sales, Inc....................................... May 1, 1999
Deben System Limited...................................... September 2, 1999
Australian Weighing Co. Pty. Ltd.......................... September 13, 1999
Hallamshire Scales Limited................................ October 4, 1999
</TABLE>
The purchase price of these acquisitions totaled approximately $2.3
million and was allocated primarily to goodwill, which is being amortized
over its estimated useful life of five to ten years. From the dates of
acquisition indicated above, the results of operations of the acquired
businesses have been included in the company's historical results for that
period. The combined operating data for the preacquisition period of the
acquired businesses are set forth below:
<TABLE>
<CAPTION>
Year ended
March
31, 2000
----------
<S> <C>
Total revenues................................................... $896
Cost of revenues................................................. 412
----
Gross profit..................................................... 484
Operating expenses............................................... 545 (a)
Interest expense................................................. 60 (b)
----
Loss before benefit for income taxes............................. (121)
Benefit for income taxes......................................... (46)(c)
----
Net loss......................................................... $(75)
====
</TABLE>
--------
(a) The operating expense component includes a pro forma adjustment for the
inclusion of amortization of $89. The amortization expense was
calculated on a straight line basis over 5 to 10 years based on the
amount of goodwill recorded on acquisition date.
(b) The interest expense component represents the pro forma adjustment to
record the interest expense relating to the debt incurred to purchase
the businesses. The interest rates used to determine the pro forma
interest expense were the average interest rates in effect under Weigh-
Tronix, LLC's existing credit facilities at March 31, 2000 for the
periods in which the acquisitions took place, which ranged from 7.6% to
9.1%.
(c) Taxes have been provided using an estimated effective statutory income
tax rate of 38%.
101
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000 AND THE THREE MONTHS ENDED JUNE 30, 2000
(US$ thousands, unless otherwise indicated)
(2) The Avery Berkel Group statements of operations for the year ended March
31, 2000 and the pre-acquisition period from April 1, 2000 - June 13, 2000
have been translated from pounds sterling to U.S. dollars using an exchange
rate of $1.60 to (Pounds)1.00 and $1.52 to (Pounds)1.00, respectively, as
follows:
<TABLE>
<CAPTION>
Avery Berkel Group
---------------------------------------------------------------
For the year ended March Year ended US GAAP Year ended Year ended
31, 2000: March 31, 2000 adjustments(a) March 31, 2000 March 31, 2000
------------------------ --------------- -------------- --------------- --------------
UK
UK (Pounds)'000 (Pounds)'000 UK (Pounds)'000 US $'000
<S> <C> <C> <C> <C>
Total revenues.......... (Pounds)155,484 (Pounds)-- (Pounds)155,484 $248,774
Cost of revenues........ 96,696 -- 96,696 154,714
--------------- ----------- --------------- --------
Gross profit............ 58,788 -- 58,788 94,060
Operating expenses...... 53,329 (641) 52,688 84,301
--------------- ----------- --------------- --------
Operating income........ 5,459 641 6,100 9,759
Net interest income..... (1,863) -- (1,863) (2,981)
Other income, net....... (1,120) -- (1,120) (1,792)
Equity in loss (income)
of unconsolidated
affiliates............. (246) 7 (239) (382)
--------------- ----------- --------------- --------
Income before provision
for income taxes and
minority interest in
income of subsidiary... 8,688 634 9,322 14,914
Provision for income
taxes.................. 2,011 223 2,234 3,574
Minority interest in
income of subsidiary... 71 -- 71 114
--------------- ----------- --------------- --------
Net income.............. (Pounds) 6,606 (Pounds)411 (Pounds) 7,017 $ 11,226
=============== =========== =============== ========
</TABLE>
--------
(a) See the summary of the U.K. GAAP to U.S. GAAP adjustments in Note 28 of
Avery Berkel Group's historical financial statements contained in this
prospectus beginning on page F-78.
<TABLE>
<CAPTION>
Avery Berkel Group
------------------------------------------------------------
For the pre-acquisition April 1, 2000 April 1, 2000 April 1, 2000
period from April 1, - June 13, US GAAP - June 13, - June 13,
2000 - June 13, 2000: 2000 adjustments(b) 2000 2000
----------------------- -------------- -------------- -------------- -------------
UK UK UK
(Pounds)'000 (Pounds)'000 (Pounds)'000 US $'000
<S> <C> <C> <C> <C>
Total revenues.......... (Pounds)25,423 (Pounds)-- (Pounds)25,423 $38,643
Cost of revenues........ 21,263 -- 21,263 32,320
-------------- ----------- -------------- -------
Gross profit............ 4,160 -- 4,160 6,323
Operating expenses...... 6,802 38 6,840 10,397
-------------- ----------- -------------- -------
Operating loss.......... (2,642) (38) (2,680) (4,074)
Net interest income..... (31) -- (31) (47)
Equity in loss of
unconsolidated
affiliates............. 13 -- 13 20
-------------- ----------- -------------- -------
Loss before provision
(benefit) for income
taxes and minority
interest in (loss) of
subsidiary............. (2,624) (38) (2,662) (4,047)
Provision (benefit) for
income taxes........... 62 (11) 51 78
Minority interest in
(loss) of subsidiary... (147) -- (147) (224)
-------------- ----------- -------------- -------
Net loss................ (Pounds)(2,539) (Pounds)(27) (Pounds)(2,566) $(3,901)
============== =========== ============== =======
</TABLE>
--------
(b) The U.K. GAAP to U.S. GAAP adjustments in the pre-acquisition period
were determined by management. The methodology used to calculate the
adjustments was consistent with the methodology employed at March 31,
2000 and June 30, 2000.
102
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000 AND THE THREE MONTHS ENDED JUNE 30, 2000
(US$ thousands, unless otherwise indicated)
(3) In connection with the purchase of Avery Berkel, Weigh-Tronix, LLC recorded
a fair value adjustment of approximately $16.3 million to increase
inventory. Approximately $2.4 million of the total fair value adjustment
was recognized in cost of revenues in the quarter ended June 30, 2000 as
the related inventory was sold. The remainder of the adjustment will be
recognized during fiscal 2001 as the inventory is sold. The impact of the
$2.4 million on the historical results of operations for the quarter ended
June 30, 2000 is being removed from the pro forma results of operations for
the same period as the impact of the fair value adjustment is non-
recurring. Also, management believes its historic gross margins, without
the amortization of the fair value adjustment, are representative of its
future expected gross margins.
(4) The adjustment to operating expenses reflects the following:
<TABLE>
<CAPTION>
Asset
Asset Balance Three
Balance as of Estimated Year months
as of June useful ended ended
March 31, 30, lives in March 31, June 30,
2000 2000 years 2000 2000
--------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Incremental amortization of
goodwill arising from the
merger(a)................... $35,117 $33,302 20 $1,756 $ 349
Incremental amortization of
other intangible assets
arising from the merger(a).. 71,200 67,520 11-25 3,818 738
Elimination of Avery Berkel's
historical goodwill
amortization(b)............. (77) (17)
Impact on depreciation
expense as a result of the
merger(c)................... -- --
Increase in annual
shareholder advisory
fee(d)...................... 300 --
Increase in pension
expense(e).................. 175 44
------ ------
$5,972 $1,114
====== ======
</TABLE>
--------
(a) The company recorded (Pounds)65.7 million of goodwill and other
intangible assets on June 13, 2000 as a result of the merger. The
goodwill and other intangible assets represents $106.3 million and
$100.8 million at March 31, 2000 and June 30, 2000, respectively, using
the exchange rates at those dates of $1.60 to (Pounds)1.00 and $1.52 to
(Pounds)1.00, respectively. The goodwill will be amortized over a 20
year period and other intangibles will be amortized over their useful
lives which have been estimated by management to be between 11 and
25 years. The adjustments presented for the three months ended June 30,
2000 represent the incremental amortization for the pre-acquisition
period since the company has already included 17 days (June 14, 2000-
June 30, 2000) of amortization in its historical unaudited consolidated
interim financial statements.
Depreciation and amortization excludes deferred financing fees, which
are accounted for as interest expense.
(b) Represents the elimination of amortization of Avery Berkel's historical
goodwill. This goodwill was originally recorded when Avery Berkel's
former parent purchased Avery Berkel.
(c) Additional depreciation charges may result from the write-up in value
of property, plant and equipment to fair market value in connection
with the merger and the related purchase price allocation. The company
is currently in the process of obtaining appraisals and any change from
the estimate will either increase or decrease the final amount of
goodwill resulting from the merger. Management does not believe that
this adjustment will be significant. As a result, the accompanying pro
forma information does not include any adjustments to historical
depreciation expense.
(d) Reflects the incremental impact of the increase in the annual
shareholder advisory fee paid to Berkshire Partners, LLC to $0.5
million. Since this increase was effective on April 1, 2000, there is
no adjustment for the three months ended June 30, 2000.
(e) Reflects the anticipated increase in pension expense resulting from
changes in the funded status of the pension plans, recognition of
previously unrecognized gains and losses in accordance with SFAS 87
"Employers Accounting for Pensions" and certain changes to the plans
including the conversion of the U.K. pension plan to a flat pay defined
contribution plan and freezing benefits under the U.S. pension plan as
a result of the merger. The increase in pension expense is summarized
as follows:
103
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000 AND THE THREE MONTHS ENDED JUNE 30, 2000
(US$ thousands, unless otherwise indicated)
<TABLE>
<CAPTION>
Three months
Year ended ended
March 31, 2000 June 30, 2000
-------------- -------------
<S> <C> <C>
UK Pension Plan:
Historical US GAAP.......................... $1,585 $396
Pro forma US GAAP........................... 2,080 520
------ ----
Increase.................................... 495 124
------ ----
Non-UK Pension Plans
Historical US GAAP.......................... 984 246
Pro forma US GAAP........................... 663 166
------ ----
Decrease.................................... (321) (80)
------ ----
Net increase in expense....................... $ 175 $ 44
====== ====
</TABLE>
We identified certain additional pension post retirement plans outside of
the U.K. which are currently being assessed and valued. The merger
agreement with Marconi provides for a purchase price adjustment to the
extent these valuations result in additional obligations. Management does
not believe that the resolution of this matter will have a significant
impact on its operating results or financial position.
(5) Reflects the increase in interest expense, including the amortization of
debt issuance costs, based on the actual borrowing amounts on June 13, 2000
and the contractual interest rates based on the 3-month LIBOR rates. The 3-
month LIBOR rates used were 6.81% and 6.77% at March 31, 2000 and June 30,
2000, respectively.
<TABLE>
<CAPTION>
Three months
Year ended ended
March 31, 2000 June 30, 2000
-------------- -------------
<S> <C> <C>
Net interest expense:
Elimination of historical Weigh-Tronix, LLC
interest expense.............................. $ 6,020 $ 2,280
Elimination of historical Weigh-Tronix, LLC
interest income............................... (329) (51)
Elimination of pro forma interest expense
relating to Weigh-Tronix, LLC acquisitions.... 60 --
Elimination of historical Avery Berkel interest
expense....................................... 267 12
Elimination of historical Avery Berkel interest
income........................................ (3,248) (59)
------- -------
Total elimination of net interest expense...... (2,770) (2,182)
------- -------
Interest expense on the new debt:
Interest on the revolving credit facility,
based on a rate of LIBOR plus 3.25%........... 2,917 726
Interest on the tranche A term loan facility,
based on a rate of LIBOR plus 3.25%........... 2,961 737
Interest on the tranche B term loan facility,
based on a rate of LIBOR plus 3.75%........... 4,212 1,049
Commitment fee on unused revolving credit
facility at 0.5%.............................. 105 26
Interest on the senior subordinated notes at
12.5%......................................... 12,024 2,997
------- -------
Pro forma cash interest expense(a)............. 22,219 5,535
------- -------
Amortization of estimated debt issue costs
relating to the tranche A and tranche B term
loan facilities, revolving credit facility,
and senior subordinated notes under the
interest method over the life of the various
instruments................................... 1,563 405
------- -------
Total pro forma interest expense............... 23,782 5,940
------- -------
Net increase in interest expense............... $21,012 $ 3,758
======= =======
</TABLE>
104
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000 AND THE THREE MONTHS ENDED JUNE 30, 2000
(US$ thousands, unless otherwise indicated)
--------
(a) The interest on the revolving credit facility, tranche A term loan
facility and tranche B term loan facility are variable and based on the
3-month LIBOR rate. A change of 1/8% in LIBOR would change the interest
expense on the revolving credit facility and the term loan facilities
by approximately $123 and $31 for the year ended March 31, 2000 and the
three months ended June 30, 2000, respectively.
(6) Reflects the income tax adjustment required to result in a pro forma income
tax provision based on Weigh-Tronix's historical tax provision using
historical amounts and the direct tax effects of the pro forma transactions
described herein. An estimated effective statutory income tax rate of 38%
was applied to the company's pro forma adjustments, which excludes $1.8
million and $0.4 million of goodwill amortization as of March 31, 2000 and
June 30, 2000, respectively, as it is not deductible for income tax
purposes.
<TABLE>
<CAPTION>
Three months
Year ended ended
March 31, 2000 June 30, 2000
-------------- -------------
<S> <C> <C>
Tax benefit on the pro forma adjustments at
an estimated effective income tax rate of
38%........................................ $9,587 $775
</TABLE>
(7) The pro forma adjustment for the 12% dividends accrued on the preferred
member interest for the year ended March 31, 2000 was calculated by
multiplying the $9.6 million of the interest by the annual dividend rate of
12%. The pro forma adjustment for the 12% dividends accrued on the
preferred member interest for the quarter ended June 30, 2000 was
calculated by multiplying the $9.6 million of the interest by the quarterly
dividend rate of 3% and reducing the result by the $54 that was recorded in
the historical unaudited consolidated interim financial statements for
Weigh-Tronix, LLC for the three months ended June 30, 2000.
(8) EBITDA is defined as income (loss) before income taxes, interest expense,
interest income, depreciation and amortization and extraordinary items.
EBITDA should not be considered in isolation or as an alternative to, or
more meaningful than amounts determined in accordance with generally
accepted accounting principles including: (a) operating income as an
indicator of operating performance; or (b) cash flows from operations,
financing or investing activities as a measure of liquidity. EBITDA is
presented as additional information because management believes it is a
useful financial indicator of a company's ability to service and or incur
indebtedness. Because EBITDA is not calculated identically by all
companies, the presentation herein may not be comparable to similarly
titled measures of other companies.
EBITDA is calculated as follows:
<TABLE>
<CAPTION>
Three months
Year ended ended
March 31, 2000 June 30, 2000
-------------- -------------
<S> <C> <C>
Loss before benefit for income taxes.......... $(9,265) $(10,548)
Income taxes included in equity in loss
(income) of unconsolidated affiliates(a)..... 350 61
Minority interest in income (loss) of
subsidiary(b)................................ (163) 178
Goodwill and intangible amortization relating
to merger (See Note 4)....................... 5,574 1,087
Net interest expense (See Note 5)............. 23,782 5,940
Depreciation and amortization relating to
Weigh-Tronix(c).............................. 4,953 1,801
Depreciation and amortization relating to
Avery Berkel(c).............................. 9,069 1,573
Avery Berkel share of associate interest
expense (income)............................. 10 (2)
------- --------
EBITDA........................................ $34,310 $ 90
======= ========
</TABLE>
105
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000 AND THE THREE MONTHS ENDED JUNE 30, 2000
(US$ thousands, unless otherwise indicated)
--------
(a) In accordance with U.S. GAAP, the income taxes relating to the equity
in loss (income) of unconsolidated affiliates are presented in the
statement of operations within the equity in loss (income) of
unconsolidated affiliates.
(b) Represents the elimination of the historical minority interest in the
income (loss) of subsidiary of $114 and $(178) for the year ended March
31, 2000 and the three months ended June 30, 2000, respectively. The
minority interest in the income of subsidiary for the year ended March
31, 2000 was grossed up for the related tax effects. The related tax
impact was determined using the United Kingdom corporation tax rate in
effect for the year ended March 31, 2000 of 30.0%. There were no income
taxes recorded for the minority interest in the three months ended June
30, 2000.
(c) The depreciation and amortization amounts represent the amounts per the
Summary Historical Financial Information and the Selected Historical
Financial Information, except that depreciation and amortization
relating to Weigh-Tronix, LLC for the year ended March 31, 2000 was
adjusted for the pro forma adjustment of $89 (see Note 1(a) above).
Also, depreciation and amortization for Avery Berkel for the three
months ended June 30, 2000 represents depreciation and amortization for
the pre-acquisition period only (April 1, 2000-June 13, 2000).
106
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION FOR WEIGH-TRONIX
The following is the Selected Historical Financial Information for Weigh-
Tronix at the dates and for the periods indicated. The Selected Historical
Financial Information for Weigh-Tronix Scale Products Business (the
"Predecessor") for the year ended March 31, 1998 and the one month ended April
30, 1998 have been derived from the Predecessor combined financial statements
audited by PricewaterhouseCoopers, independent accountants, included elsewhere
in this prospectus. Weigh-Tronix, LLC acquired the Predecessor on May 1, 1998
in a purchase transaction. Accordingly, historical financial information for
the Predecessor for the year ended March 31, 1998 and the one month ended April
30, 1998 may not be comparable to the data for subsequent periods. The Selected
Historical Financial Information for Weigh-Tronix for the 11 months ended March
31, 1999 and the year ended March 31, 2000 have been derived from the
consolidated financial statements audited by PricewaterhouseCoopers LLP,
independent accountants, included elsewhere in this prospectus. The interim
financial data as of June 30, 1999 and June 30, 2000 are unaudited. However, in
the opinion of management, the interim data includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of the results for the interim periods.
We have included presentations of EBITDA and Adjusted EBITDA, as defined
herein in notes 1 and 2, respectively, which we believe are appropriate to
reflect our ongoing operations.
<TABLE>
<CAPTION>
Predecessor Weigh-Tronix, LLC
-------------------- ----------------------------------------
Three months
Year One month 11 months ended
ended ended ended Year ended ------------------
March 31, April 30, March 31, March 31, June 30, June 30,
1998 1998 1999 2000 1999 2000
--------- --------- --------- ---------- -------- --------
(US $ thousands, (US $ thousands, except ratios)
except ratios)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $113,851 $10,864 $110,178 $126,127 $29,451 $ 43,522
Cost of revenues........ 79,359 7,389 81,462 84,873 19,971 32,103
-------- ------- -------- -------- ------- --------
Gross profit............ 34,492 3,475 28,716 41,254 9,480 11,419
Operating expenses...... 30,567 2,724 27,226 32,926 7,208 13,260
-------- ------- -------- -------- ------- --------
Operating income
(loss)................. 3,925 751 1,490 8,328 2,272 (1,841)
Net interest expense
(income)............... (15) (4) 5,923 5,691 1,621 2,229
Other expense (income),
net.................... 54 (30) 178 (327) (397) (25)
Equity in loss of
unconsolidated joint
venture................ -- -- -- 38 10 --
-------- ------- -------- -------- ------- --------
Income (loss) before
provision (benefit) for
income taxes, minority
interest in income of
subsidiary and
extraordinary loss..... 3,886 785 (4,611) 2,926 1,038 (4,045)
Provision (benefit) for
income taxes........... 2,186 375 1,555 1,316 318 (68)
Minority interest in
income of subsidiary... -- -- -- -- -- 46
-------- ------- -------- -------- ------- --------
Income (loss) before
extraordinary loss..... 1,700 410 (6,166) 1,610 720 4,023
Extraordinary (loss),
net of income tax
benefit of $66......... -- -- -- -- -- (2,549)
-------- ------- -------- -------- ------- --------
Income (loss) before
dividends on preferred
member interest........ 1,700 410 (6,166) 1,610 720 (6,572)
12% dividends accrued on
preferred member
interest............... -- -- -- -- -- 54
-------- ------- -------- -------- ------- --------
Net income (loss)
available to Members... $ 1,700 $ 410 $ (6,166) $ 1,610 $ 720 $ (6,626)
======== ======= ======== ======== ======= ========
Other Financial Data:
EBITDA, as
defined(/1/)........... $ 9,551 $ 1,271 $ 5,172 $ 13,481 $ 3,793 $ (61)
Adjusted EBITDA, as
defined(/2/)........... 9,551 1,271 12,495 14,280 3,838 4,069
Depreciation and
amortization........... 5,680 490 3,860 4,864 1,134 1,801
Cash interest
expense(/3/)........... 27 -- 5,576 5,719 1,507 2,039
Net cash provided by
(used in) operating
activities............. 3,538 911 10,671 7,764 866 (951)
Net cash used in
investing activities... 3,516 209 80,310 4,853 577 164,470
Net cash provided by
(used in) financing
activities............. (4,837) (1,439) 73,862 (2,274) (1,628) 176,855
Capital expenditures.... 3,675 209 2,356 2,736 401 698
Ratio of earnings to
fixed charges(/4/)..... 6.19x 14.77x -- 1.45x 1.48x --
Supplemental ratio of
earnings to fixed
charges(/5/)........... 6.19x 14.77x 1.25x 1.45x 1.48x 0.47x
Balance Sheet Data (as
of the end of the
period):
Working capital......... $ 34,378 $ 17,144 $ 20,552 $19,754 $92,436
Total assets............ 99,387 94,055 95,207 92,091 363,104
Total debt.............. 130 58,611 55,989 56,888 194,975
Other long-term
obligations............ -- 317 130 311 3,332
Mandatorily redeemable
membership interests... -- 2,205 3,098 2,205 12,412
Shareholder's net
investment/Members'
equity................. 81,721 8,921 9,485 9,130 44,505
</TABLE>
107
<PAGE>
(1) EBITDA is defined as income (loss) before income taxes, extraordinary loss,
interest expense, interest income and depreciation and amortization. EBITDA
should not be considered in isolation or as an alternative to, or more
meaningful than amounts determined in accordance with generally accepted
accounting principles including: (a) operating income as an indicator of
operating performance or (b) cash flows from operations, financing or
investing activities as a measure of liquidity. EBITDA is presented as
additional information because management believes it is a useful financial
indicator of a company's ability to service and or incur indebtedness.
Because EBITDA is not calculated identically by all companies, the
presentation herein may not be comparable to similarly titled measures of
other companies.
<TABLE>
<CAPTION>
Predecessor Weigh-Tronix, LLC
------------------- ----------------------------------------
One 11
Year month months Year Three months ended
ended ended ended ended --------------------
March 31, April 30, March 31, March 31, June 30, June 30,
1998 1998 1999 2000 1999 2000
--------- --------- --------- --------- --------- ---------
(US $ thousands) (US $ thousands)
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before
provision (benefit) for
income taxes and
extraordinary loss..... $3,886 $ 785 $(4,611) $ 2,926 $1,038 $ (4,091)
Interest income......... (42) (4) (9) (329) (14) (51)
Interest expense........ 27 -- 5,932 6,020 1,635 2,280
Depreciation and
amortization........... 5,680 490 3,860 4,864 1,134 1,801
------ ------ ------- ------- -------- ---------
EBITDA.................. $9,551 $1,271 $ 5,172 $13,481 $3,793 $ (61)
====== ====== ======= ======= ======== =========
</TABLE>
(2) Adjusted EBITDA equals EBITDA as defined in (1) above adjusted for income
and expense items which management believes are either non-recurring, non-
cash or both. Adjusted EBITDA should not be considered in isolation or as
an alternative to, or more meaningful than amounts determined in accordance
with generally accepted accounting principles including: (a) operating
income as an indicator of operating performance or (b) cash flows from
operations, financing or investing activities as a measure of liquidity.
Adjusted EBITDA is presented as additional information because management
believes it is a useful financial indicator of a company's ability to
service and or incur indebtedness. Because adjusted EBITDA is not
calculated identically by all companies, the presentation herein may not be
comparable to similarly titled measures of other companies.
<TABLE>
<CAPTION>
Predecessor Weigh-Tronix, LLC
------------------- ----------------------------------------
One 11
Year month months Year Three months ended
ended ended ended ended --------------------
March 31, April 30, March 31, March 31, June 30, June 30,
1998 1998 1999 2000 1999 2000
--------- --------- --------- --------- --------- ---------
(US $ thousands) (US $ thousands)
<S> <C> <C> <C> <C> <C> <C>
EBITDA, as defined in
(1) above.............. $9,551 $1,271 $ 5,172 $13,481 $3,793 $ (61)
Non-cash compensation
expense associated with
the company's
membership
interests(a)........... -- -- 1,110 169 45 1,714
Non-recurring inventory
fair value adjustment
resulting from the
purchase accounting of
the acquisition of the
Predecessor(b)......... -- -- 6,213 -- -- --
Non-recurring inventory
fair value adjustment
resulting from the
purchase accounting of
the acquisition of
Avery Berkel(c)........ -- -- -- -- -- 2,416
Non-recurring terminated
deal fees(d)........... -- -- -- 630 -- --
------ ------ ------- ------- --------- ---------
Adjusted EBITDA......... $9,551 $1,271 $12,495 $14,280 $3,838 $4,069
====== ====== ======= ======= ========= =========
</TABLE>
(a) In connection with the formation of Weigh-Tronix, LLC on May 1, 1998
and the purchase of Avery Berkel on June 13, 2000, membership interests
were allocated to certain members of management. Depending on the
characteristics of the membership interests that were granted,
compensation expense was recorded. Due to the non-cash nature of these
charges, the charges have been added back to calculate Adjusted EBITDA.
(b) In connection with the acquisition of the Predecessor in a purchase
transaction on May 1, 1998, Weigh-Tronix, LLC recorded a non-recurring
inventory fair value adjustment of $6.2 million in the 11 months ended
March 31, 1999 to reflect the purchase of inventory at fair value. Due
to the non-recurring nature of this charge, the amortization of the
inventory fair value adjustment has been added back to calculate
Adjusted EBITDA.
(c) In connection with the acquisition of Avery Berkel on June 13, 2000,
Weigh Tronix, LLC recorded a non-recurring inventory fair value
adjustment of $16.3 million as of June 13, 2000 to reflect the purchase
of inventory at fair value. In the quarter ended June 30, 2000, the
Company amortized $2.4 million of this fair value adjustment. Due to
the non-recurring nature of this charge, the amortization of the
inventory fair value adjustment has been added back to calculate
Adjusted EBITDA.
108
<PAGE>
(d) During the year ended March 31, 2000, the company incurred various non-
recurring fees for legal, consulting, accounting and tax services in
connection with potential acquisitions. Since these acquisitions did
not materialize, these costs were added back to calculate Adjusted
EBITDA.
(3) Cash interest expense consists of interest expense before amortization of
deferred financing costs.
(4) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent pre-tax income (loss) before adjustments for equity in
loss of unconsolidated joint venture and minority interests in consolidated
subsidiaries, plus fixed charges. Fixed charges consist of interest on all
indebtedness plus a proportion of rental expense deemed to be
representative of the interest factor.
<TABLE>
<CAPTION>
Predecessor Weigh-Tronix, LLC
-------------------- ----------------------------------------
One month 11 months Three months ended
Year ended ended ended Year ended -------------------
March 31, April 30, March 31, March 31, June 30, June 30,
1998 1998 1999 2000 1999 2000
---------- --------- --------- ---------- --------- ---------
(US $ thousands,
except ratios) (US $ thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income (loss)
before adjustments for
equity in loss of
unconsolidated joint
venture and minority
interests in
consolidated
subsidiaries........... $3,886 $ 785 $(4,611) $2,964 $1,048 $(4,045)
====== ====== ======= ====== ======== =========
Fixed charges:
Cash interest expense... $ 27 $ -- $ 5,576 $5,719 $1,507 2,039
Amortization of debt
issuance costs......... -- -- 356 301 128 241
Rental expense.......... 722 57 488 581 547 814
------ ------ ------- ------ -------- ---------
Total fixed charges..... $ 749 $ 57 $ 6,420 $6,601 $ 2,182 $ 3,094
------ ------ ------- ------ -------- ---------
Pre-tax income (loss)
before adjustments for
equity in loss of
unconsolidated joint
venture and minority
interests in
consolidated
subsidiaries, plus
fixed charges.......... $4,635 $ 842 $ 1,809 $9,565 $ 3,230 $ (951)
====== ====== ======= ====== ======== =========
Ratio of earnings to
fixed charges(a)....... 6.19x 14.77x -- 1.45x 1.48x --
====== ====== ======= ====== ======== =========
</TABLE>
(a) Due to the company's loss before provision for income taxes in the 11
months ended March 31, 1999 and the three months ended June 30, 2000,
the ratio coverage for those periods was less than 1:1. The company
must generate additional pre-tax income of $4.6 million and $4.0
million for the 11 months ended March 31, 1999 and the three months
ended June 30, 2000, respectively, to achieve a coverage ratio of 1:1
in those periods. See Note (5) below for discussion of the
"Supplemental ratio of earnings to fixed charges" calculation.
(5) For the 11 months ended March 31, 1999 and the three months ended June 30,
2000, the company incurred a pre-tax loss. Included in the two loss periods
was the impact of a non-recurring charge relating to the amortization of
the inventory fair value adjustment that was recorded in the purchase
accounting of the Predecessor and Avery Berkel. The company's ratio of
earnings to fixed charges, excluding the impact of the inventory fair value
adjustments, for the 11 months ended March 31, 1999 and the three months
ended June 30, 2000, was 1.25x and 0.47x, respectively.
109
<PAGE>
SELECTED HISTORICAL FINANCIAL
INFORMATION FOR THE AVERY BERKEL GROUP
The following is the Selected Historical Financial Information for the Avery
Berkel Group at the dates and for the periods indicated. The Selected
Historical Financial Information for the Avery Berkel Group for the years ended
March 31, 1998, March 31, 1999 and March 31, 2000 have been derived from the
combined financial statements audited by Deloitte & Touche, independent
accountants, included elsewhere in this prospectus.
The combined financial statements of the Avery Berkel Group have been
prepared in accordance with generally accepted accounting principles in the
United Kingdom ("U.K. GAAP"), which differs in certain material respects from
generally accepted accounting principles in the United States ("U.S. GAAP").
The principal differences between U.K. GAAP and U.S. GAAP are summarized in
Note 28 to the audited combined financial statements of the Avery Berkel Group
included elsewhere in this prospectus.
We have included presentations of EBITDA and Adjusted EBITDA, as defined
herein in notes 2, 3, 5 and 6, which we believe are appropriate to reflect our
ongoing operations.
<TABLE>
<CAPTION>
Avery Berkel Group
------------------------------------------------
Year ended
------------------------------------------------
March 31, March 31,
1998 1999 March 31, 2000
--------------- --------------- ---------------
((Pounds) thousands)
<S> <C> <C> <C>
Profit and Loss Account Data:
Amounts in accordance with
U.K. GAAP
Turnover..................... (Pounds)149,031 (Pounds)146,346 (Pounds)155,484
Gross profit................. 57,995 56,343 58,788
Operating profit............. 8,300 5,378 5,459
Share of operating profit of
associates.................. 990 564 471
--------------- --------------- ---------------
Total operating profit....... 9,290 5,942 5,930
Profit on ordinary activities
before taxation............. 12,037 8,180 8,907
Profit on ordinary activities
after taxation.............. 8,572 5,150 6,677
Equity minority interests.... -- (115) (71)
--------------- --------------- ---------------
Profit on ordinary
activities attributable to
shareholders.............. (Pounds) 8,572 (Pounds) 5,035 (Pounds) 6,606
=============== =============== ===============
Amounts in accordance with
U.S. GAAP
Turnover..................... (Pounds)149,031 (Pounds)146,346 (Pounds)155,484
Operating profit............. 8,065 5,729 6,100
Profit on ordinary activities
before taxation in
accordance with U.S.
GAAP(/1/)................... 11,483 8,336 9,322
Combined net income under
U.S. GAAP................... 7,758 5,142 7,017
</TABLE>
110
<PAGE>
<TABLE>
<CAPTION>
Avery Berkel Group
---------------------------------------------
Year ended
---------------------------------------------
March 31, March 31,
1998 1999 March 31, 2000
-------------- -------------- --------------
((Pounds) thousands)
<S> <C> <C> <C>
Other Financial Data:
Amounts in accordance with U.K.
GAAP
EBITDA, as defined(/2/)........ (Pounds)17,553 (Pounds)14,226 (Pounds)12,617
Adjusted EBITDA, as
defined(3).................... 17,108 14,115 13,274
Depreciation and amortization.. 6,016 6,485 5,668
Net cash inflow from operating
activities.................... 11,229 10,167 2,313
Capital expenditures........... 2,712 3,341 1,801
Research and development....... 2,725 4,313 4,667
Ratio of earnings to fixed
charges(/4/).................. 20.06x 10.98x 9.04x
Amounts in accordance with U.S.
GAAP
EBITDA, as defined(/5/)........ (Pounds)17,273 (Pounds)14,645 (Pounds)13,295
Adjusted EBITDA, as
defined(6).................... 16,828 14,534 13,952
Depreciation and amortization.. 6,016 6,529 5,712
Net cash provided by operating
activities.................... 8,261 6,476 9,350
Net cash flows used in
investing activites........... 2,380 2,980 1,658
Net cash provided by (used in)
financing activities.......... 248 (3,095) (13,694)
Capital expenditures........... 2,712 3,341 1,801
Ratio of earnings to fixed
charges(/7/).................. 19.65x 11.44x 9.65x
Balance Sheet Data (at the end
of the period):
Amounts in accordance with U.K.
GAAP
Fixed assets................... (Pounds)23,212 (Pounds)21,003 (Pounds)18,100
Current assets................. 73,647 84,536 81,339
Total assets................... 96,859 105,539 99,439
Creditors (amounts falling due
within one year).............. 71,418 75,254 92,376
Non-current liabilities........ 7,922 7,581 6,927
Minority interest.............. -- 3,193 3,115
Shareholders' funds............ 17,519 19,511 (2,979)
Amounts in accordance with U.S.
GAAP(/8/)
Fixed assets................... (Pounds)33,951 (Pounds)33,107 (Pounds)25,513
Current assets................. 67,532 77,537 81,339
Total assets................... 101,483 110,644 106,852
Creditors (amounts falling due
within one year).............. 67,706 70,935 96,870
Non-current liabilities........ 6,762 7,426 153
Minority interest.............. -- 3,193 3,115
Equity shareholders' funds..... 27,015 29,090 6,714
</TABLE>
111
<PAGE>
(1) The following table reconciles profit on ordinary activities before
taxation in accordance with U.K. GAAP to U.S. GAAP:
<TABLE>
<CAPTION>
Avery Berkel Group
--------------------------------------------
Year ended
--------------------------------------------
March 31, March 31,
March 31, 1998 1999 2000
-------------- ------------- -------------
((Pounds) thousands)
<S> <C> <C> <C>
Profit on ordinary
activities before taxation
in accordance with U.K.
GAAP....................... (Pounds)12,037 (Pounds)8,180 (Pounds)8,907
U.S. GAAP adjustments:
Pensions and other employee
benefits................... 57 517 501
Restructuring............... (363) -- --
Vacation.................... 91 (102) 204
Push down expenses.......... (20) (20) (20)
Goodwill.................... -- (44) (44)
Associated undertakings..... (45) 24 (7)
Income taxes related to
share of operating profit
of associates(a)........... (274) (219) (219)
-------------- ------------- -------------
Profit on ordinary
activities before taxation
in accordance with U.S.
GAAP....................... (Pounds)11,483 (Pounds)8,336 (Pounds)9,322
-------------- ------------- -------------
</TABLE>
--------
(a)Share of operating profit of associates is presented net of the related
income taxes in pre-tax income under U.S. GAAP.
(2) EBITDA is defined as profit on ordinary activities before taxation,
interest expense, interest income and depreciation and amortization. EBITDA
should not be considered in isolation or as an alternative to, or more
meaningful than amounts determined in accordance with generally accepted
accounting principles including: (a) operating income as an indicator of
operating performance or (b) cash flows from operations, financing or
investing activities as a measure of liquidity. EBITDA is presented as
additional information because management believes it is a useful financial
indicator of a company's ability to service and or incur indebtedness.
Because EBITDA is not calculated identically by all companies, the
presentation herein may not be comparable to similarly titled measures of
other companies. The following table presents EBITDA under U.K. GAAP.
<TABLE>
<CAPTION>
Avery Berkel Group
----------------------------------------------
Year ended
----------------------------------------------
March 31, 1998 March 31, 1999 March 31, 2000
-------------- -------------- --------------
((Pounds) thousands)
<S> <C> <C> <C>
Profit on ordinary
activities before
taxation................. (Pounds)12,037 (Pounds) 8,180 (Pounds) 8,907
Interest income........... (663) (422) (2,030)
Interest expense.......... 212 171 167
Share of associate
interest................. (49) (22) 6
Depreciation and
amortization............. 6,016 6,485 5,668
Equity minority interest,
excluding taxes(a)....... -- (166) (101)
-------------- -------------- --------------
EBITDA.................... (Pounds)17,553 (Pounds)14,226 (Pounds)12,617
-------------- -------------- --------------
</TABLE>
(a) Represents the inclusion of the equity minority interest of (Pounds)115
and (Pounds)71 for the years ended March 31, 1999 and March 31, 2000,
respectively, grossed up for the related tax effects. The related tax
impact was determined using the United Kingdom Corporation tax rates in
effect in the years ended March 31, 1999 and March 31, 2000 of 31.0%
and 30.0%, respectively.
112
<PAGE>
(3) Adjusted EBITDA equals EBITDA as defined in (2) above adjusted for income
and expense items which management believes are either non-recurring, non-
cash or both. Adjusted EBITDA should not be considered in isolation or as
an alternative to, or more meaningful than amounts determined in accordance
with generally accepted accounting principles including: (a) operating
income as an indicator of operating performance or (b) cash flows from
operations, financing or investing activities as a measure of liquidity.
Adjusted EBITDA is presented as additional information because management
believes it is a useful financial indicator of a company's ability to
service and or incur indebtedness. Because Adjusted EBITDA is not
calculated identically by all companies, the presentation herein may not be
comparable to similarly titled measures of other companies. The following
table presents Adjusted EBITDA under U.K. GAAP.
<TABLE>
<CAPTION>
Avery Berkel Group
----------------------------------------------
Year ended
----------------------------------------------
March 31, 1998 March 31, 1999 March 31, 2000
-------------- -------------- --------------
((Pounds) thousands)
<S> <C> <C> <C>
EBITDA, as defined in (2)
above..................... (Pounds)17,553 (Pounds)14,226 (Pounds)12,617
Profit on sale of fixed
assets, including
vehicles(a)............... (2,247) (1,965) (1,120)
Non-recurring Year 2000
costs of Avery Berkel(b).. 933 2,937 1,702
Restructuring.............. 1,689 7 195
Operating expense impact of
vehicle leases(c)......... (1,570) (1,090) (120)
Management fee(d).......... 750 -- --
-------------- -------------- --------------
Adjusted EBITDA............ (Pounds)17,108 (Pounds)14,115 (Pounds)13,274
-------------- -------------- --------------
</TABLE>
(a) Represents profit on sale of fixed assets, including land, buildings
and motor vehicles. Due to the non-recurring nature of these gains,
these amounts are excluded from Adjusted EBITDA.
(b) Amounts represent non-recurring costs to become Year 2000 compliant,
including implementation costs for a new BAAN computer system.
Management believes these costs will not be incurred subsequent to
completion of the BAAN system implementation.
(c) Avery Berkel changed its fleet vehicle policy from owned vehicles to
operating leases starting in June 1998. The adjustment reflects the pro
forma impact of applying operating lease expense to the vehicles leased
by Avery Berkel as of March 31, 2000.
(d) Amount represents management charge allocations from Avery Berkel's
former parent, Marconi plc. Due to the non-recurring nature of those
charges, amount is added back to calculate Adjusted EBITDA.
113
<PAGE>
(4) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent profit on ordinary activities before taxation before
adjustment for Avery Berkel's share of operating profit of associates and
associate interest plus fixed charges. Fixed charges consist of interest on
all indebtedness plus a proportion of rental expense deemed to be
representative of the interest factor. The following table calculates the
ratio of earnings to fixed charges accounted for in accordance with U.K.
GAAP.
<TABLE>
<CAPTION>
Avery Berkel Group
--------------------------------------------
Year ended
--------------------------------------------
March 31, March 31,
March 31, 1998 1999 2000
-------------- ------------- -------------
((Pounds) thousands, except ratios)
<S> <C> <C> <C>
Amounts in accordance with
U.K. GAAP
Profit on ordinary activities
before taxation before
adjustment for Avery
Berkel's share of operating
profit of associates and
associate interest.......... (Pounds)10,998 (Pounds)7,594 (Pounds)8,442
============== ============= =============
Fixed charges:
Interest expense............. (Pounds) 212 (Pounds) 171 (Pounds) 167
Rental of plant and
machinery................... 157 279 580
Rental of other assets....... 208 311 303
-------------- ------------- -------------
Total fixed charges.......... (Pounds) 577 (Pounds) 761 (Pounds)1,050
-------------- ------------- -------------
Profit on ordinary activities
before taxation before
adjustment for Avery
Berkel's share of operating
profit of associates and
associate interest, plus
fixed charges............... (Pounds)11,575 (Pounds)8,355 (Pounds)9,492
============== ============= =============
Ratio of earnings to fixed
charges..................... 20.06x 10.98x 9.04x
============== ============= =============
</TABLE>
(5)The following table reconciles EBITDA presented under U.K. GAAP to EBITDA
presented under U.S. GAAP:
<TABLE>
<CAPTION>
Avery Berkel Group
----------------------------------------------
Year ended
----------------------------------------------
March 31, 1998 March 31, 1999 March 31, 2000
-------------- -------------- --------------
((Pounds) thousands)
<S> <C> <C> <C>
EBITDA presented under U.K.
GAAP...................... (Pounds)17,553 (Pounds)14,226 (Pounds)12,617
U.S. GAAP adjustments:
Pensions and other employee
benefits.................. 57 517 501
Restructuring.............. (363) -- --
Vacation................... 91 (102) 204
Push down expenses......... (20) (20) (20)
Associated undertakings.... (45) 24 (7)
-------------- -------------- --------------
EBITDA presented under U.S.
GAAP...................... (Pounds)17,273 (Pounds)14,645 (Pounds)13,295
============== ============== ==============
</TABLE>
(6)The following table reconciles Adjusted EBITDA presented under U.K. GAAP to
Adjusted EBITDA presented under U.S. GAAP:
<TABLE>
<CAPTION>
Avery Berkel Group
----------------------------------------------
Year ended
----------------------------------------------
March 31, 1998 March 31, 1999 March 31, 2000
-------------- -------------- --------------
((Pounds) thousands)
<S> <C> <C> <C>
Adjusted EBITDA presented
under U.K. GAAP.......... (Pounds)17,108 (Pounds)14,115 (Pounds)13,274
U.S. GAAP adjustments:
Pensions and other
employee benefits........ 57 517 501
Restructuring............. (363) -- --
Vacation.................. 91 (102) 204
Push down expenses........ (20) (20) (20)
Associated undertakings... (45) 24 (7)
-------------- -------------- --------------
Adjusted EBITDA presented
under U.S. GAAP.......... (Pounds)16,828 (Pounds)14,534 (Pounds)13,952
============== ============== ==============
</TABLE>
114
<PAGE>
(7) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent profit on ordinary activities before taxation before
adjustment for Avery Berkel's share of operating profit of associates and
associate interest plus fixed charges. Fixed charges consist of interest on
all indebtedness plus a proportion of rental expense deemed to be
representative of the interest factor. The following table calculates the
ratio of earnings to fixed charges accounted for in accordance with U.S.
GAAP.
<TABLE>
<CAPTION>
Avery Berkel Group
---------------------------------------------
Year ended
---------------------------------------------
March 31,
March 31, 1998 1999 March 31, 2000
-------------- ------------- --------------
((Pounds) thousands, except ratios)
<S> <C> <C> <C>
Amounts in accordance with
U.S. GAAP
Profit on ordinary activities
before taxation before
adjustment for Avery
Berkel's share of operating
profit of associates and
associate interest.......... (Pounds)10,763 (Pounds)7,945 (Pounds) 9,083
============== ============= ==============
Fixed charges:
Interest expense............. (Pounds) 212 (Pounds) 171 (Pounds) 167
Rental of plant and
machinery................... 157 279 580
Rental under other operating
leases...................... 208 311 303
-------------- ------------- --------------
Total fixed charges.......... (Pounds) 577 (Pounds) 761 (Pounds) 1,050
-------------- ------------- --------------
Profit on ordinary activities
before taxation before
adjustment for Avery
Berkel's share of operating
profit of associates and
associate interest.......... (Pounds)11,340 (Pounds)8,706 (Pounds)10,133
============== ============= ==============
Ratio of earnings to fixed
charges..................... 19.65x 11.44x 9.65x
============== ============= ==============
</TABLE>
(8) Balance sheet information is presented herein on a U.S. GAAP basis.
However, the classification of individual balances within the balance sheet
is in accordance with U.K. GAAP.
115
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
"Selected Historical Financial Information for Weigh-Tronix" and the "Selected
Historical Financial Information for the Avery Berkel Group" as well as the
financial statements of Weigh-Tronix Scale Products Business (the
"Predecessor"), Weigh-Tronix, LLC and the Avery Berkel Group, which are
included in this prospectus beginning on page F-1. The financial statements of
the Predecessor and those of Weigh-Tronix, LLC are prepared in accordance with
U.S. GAAP. The financial statements of the Avery Berkel Group are prepared in
accordance with U.K. GAAP, which differ in important ways from U.S. GAAP. The
main differences between U.K. GAAP and U.S. GAAP as they relate to the Avery
Berkel Group are described in Note 28 to the Combined Financial Statements of
the Avery Berkel Group.
Our interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States
of America. Operating results for the three months ended June 30, 2000 are not
necessarily indicative of the results to be expected for the full year ending
March 31, 2001.
The forward-looking statements in this discussion regarding the weighing
industry, our expectations regarding future performance, liquidity and capital
resources and other non-historical statements in this discussion include
numerous risks and uncertainties, as described in the "Risk Factors" section of
this prospectus. Our actual results may differ materially from those contained
in any forward-looking statements.
Overview
The company is the product of the merger of Weigh-Tronix, LLC and Avery
Berkel. The company believes that its future operating results may not be
directly comparable to historical operating results of either Weigh-Tronix, LLC
or Avery Berkel individually due to the company's increased size, integration
of the two businesses and related expected cost savings and operational
improvements. The company's business has not generally been seasonal in nature.
Several factors which have affected the reported operating results of the
company are discussed below.
Purchase Accounting
Acquisition of the Predecessor
On May 1, 1998, pursuant to a Stock and Asset Purchase Agreement, Weigh-
Tronix, LLC acquired substantially all of the assets and assumed certain
liabilities of Weigh-Tronix, Inc., Salter Weigh-Tronix Limited and Weigh-Tronix
Canada, ULC and all of the outstanding shares of stock of Salter Housewares
Limited and Salter Weigh-Tronix Pty Ltd (collectively the "Predecessor
companies," or the "Predecessor") from Staveley Industries plc. Subsequent to
May 1, 1998, all of the aforementioned companies are collectively referred to
as the "Successor." The acquisition of the Predecessor was financed through a
combination of debt and equity financing. The purchase price was approximately
$81.8 million, including approximately $5.2 million of transaction costs. As a
result of the purchase accounting, the company also recorded a one-time
inventory fair value adjustment of $6.2 million in the 11 months ended March
31, 1999 to reflect the purchase of inventory at fair value as of the date of
the acquisition of the Predecessor.
Merger with Avery Berkel
The merger has been accounted for as a purchase of Avery Berkel by Weigh-
Tronix. As a result, the assets and liabilities of Avery Berkel are recorded at
their estimated fair market values as of the completion of the merger. The
purchase price and the fair value of assumed liabilities in excess of
historical cost of Avery
116
<PAGE>
Berkel's assets are allocated to inventory, property, plant and equipment, any
identifiable intangible assets and goodwill. Consequently, post-merger period
income statements will be affected by the amortization of such excess purchase
price. The purchase price allocation reflected in the pro forma financial
information is based on preliminary estimates. The actual purchase accounting
adjustments are to be formalized, including the valuation of tangible assets of
Avery Berkel and such adjustments may vary from the amounts reflected in the
"Unaudited Pro Forma Combined Financial Data" included elsewhere in this
prospectus.
Potential Operating Improvements
The company believes that, following a transition period for the integration
of the Weigh-Tronix and Avery Berkel operations, it will be able to achieve
substantial annual cost savings as compared with the stand alone operations of
the two companies. Management has specifically identified approximately $12.0
million in savings, including: (1) elimination of redundant corporate offices;
(2) consolidation of manufacturing facilities and outsourcing of industrial and
low end retail and mechanical scales from Asia; (3) service center and sales
force rationalizations; and (4) elimination of duplicative research and
development. Savings are net of incremental corporate expenses to accommodate
our enlarged operations after the merger. To achieve these savings, the company
will incur non-recurring cash integration costs of approximately $9.0 million
in the 12 months following the merger. These costs will primarily be used to
fund severance expenses, systems integration costs, lease and license
termination fees, integration consulting assistance and other related costs. We
expect to partially fund the activities through proceeds from the sale of
closed facilities of approximately $2.0 million and inventory reduction
programs of approximately $6.0 million. Further detail of the estimated cost
savings are as follows:
Elimination of redundant corporate office expenses--We expect to generate
approximately $1.0 million in cost savings primarily from the consolidation of
the Weigh-Tronix European Industrial headquarters function into the equivalent
Avery Berkel facility and certain other corporate administrative cost savings
prorams. These savings exclude non-recurinng expenses estimated to total $1.2
million. The specific cost savings programs include the elimination of certain
information technology, accounting, order processing, operational support and
corporate activities. Aproximately 43 positions will be eliminated in
connection with the programs. These programs began in June 2000 and will be
completed by June 2001.
U.K. and other manufacturing facilities closures--We expect to generate
approximately $7.5 million in annual cost savings from manufacturing facilities
closure. Actions include closing the Weigh-Tronix European Industrial
Manufacturing facility in West Bromwich and consolidating this production in to
other existing facilities. In addition, outside of the U.K., we plan to close a
major facility with the consolidation of this production into an existing
facility. In connection with the relocation of production, we expect to
totaling an estimated $3.2 million relating to the transfer of production, and
severance associated with production and supervisory personnel. Approximately
395 positions will be eliminated in connection with these programs. These
programs began in June 2000 and will be completed in June 2001. We believe that
we can achieve such cost savings without otherwise affecting our cost base or
impairing our sales as a result of available manufacturing capacity in Avery
Berkel's Soho Foundry, Birmingham and other existing facilities.
Service center facilities consolidation and sales force rationalization--We
expect to generate approximately $3.0 million in annual cost savings primarily
from the closure of 11 Weigh-Tronix service centers to eliminate duplicative
service area coverage as well as service centers in Europe and North America.
These savings exclude non-recurring expenses estimated to total $1.9 million
relating to the transfer of servicing capacity, severance and lease termination
costs. The specific cost savings programs include service center and sales
personnel reductions totaling 101 and reduced operating lease rentals. This
program began in June 2000 and will be completed in June 2001. We believe that
we can achieve such cost savings without otherwise affecting the Company's cost
base or impairing our sales as a result of significant overlap in service and
sales coverage areas.
Elimination of duplicative engineering and research and development costs--
We expect to generate approximately $1.5 million of cost savings by eliminating
duplicative research and development activities and
117
<PAGE>
focusing on a single technology path for new product introductions and product
enhancements. Weigh-Tronix research and development staff will be reduced by
approximately 18 positions. These savings exclude non-recurring expenses
estimated to total $0.2 million principally related to severance. This program
began in June 2000 and will be completed in June 2001. We believe that we can
achieve such cost savings without otherwise affecting our cost base or
impairing sales as a result of the efficiencies realized by focusing on a
single technology path.
Additional corporate expenses--We plan to add approximately $1.0 million in
annual expense relating to incremental treasury, tax, benefits administration
and other corporate expenses expected to be incurred at Avery Berkel's European
Industrial headquarters facility and certain other locations worldwide to
accommodate our enlarged operations after the Merger.
The cost savings and operational improvements described above are based on
our estimates and assumptions that are inherently uncertain and are subject to
significant business, economic and competitive uncertainties and contingencies,
all of which are difficult to predict and many of which are beyond our control.
See "Risk Factors--We may not be able to successfully integrate the operations
of Avery Berkel and Weigh-Tronix."
Strategic Acquisitions and Investments
Weigh-Tronix, LLC. During the 11 months ended March 31, 1999 and the year
ended March 31, 2000, Weigh-Tronix, LLC made various strategic acquisitions as
set forth below. These acquisitions were financed primarily using existing debt
facilities:
<TABLE>
<CAPTION>
Date of
Name of Company Acquired Acquisition Purchase Price Goodwill
------------------------ ------------------ -------------- --------
(US$ millions)
<S> <C> <C> <C>
Mecmesin, Inc. ................. November 10, 1998 $0.6 $0.6
GWS Weighing Systems Limited.... March 12, 1999 $0.6 $1.0
Logtech-USA, Inc. .............. April 1, 1999 $0.3 $0.2
Equatech Sales, Inc. ........... May 1, 1999 $0.3 $0.3
Deben Systems Limited........... September 2, 1999 $1.2 $1.4
Australian Weighing Co. Pty.
Ltd. .......................... September 13, 1999 $0.1 $0.1
Hallamshire Scales Limited...... October 4, 1999 $0.4 $0.5
</TABLE>
Avery Berkel. During the year ended March 31, 1999, Avery Berkel increased
its ownership in Avery Berkel India Ltd. from 39.9% to 51.0%.
External Factors Affecting the Company's Results of Operations
The company is subject to currency translation risk and, to a lesser extent,
currency transaction risk. Weigh-Tronix, LLC United Kingdom subsidiaries are
subject to translation risk from converting local functional currencies to the
U.S. dollar when it prepares its financial results.
Avery Berkel historically reported its combined financial statements in
sterling. Commencing with the closing of the merger, Avery Berkel reports its
financial statements in U.S. dollars. As a result, Weigh-Tronix is subject to
translation risk from converting local functional currencies to the U.S. dollar
versus historical translations to sterling.
The company also incurs currency transaction risk whenever one of its
subsidiaries enters into a transaction that is denominated in a currency other
than its functional currency. The majority of the company's revenue, operating
expenses and cash flows are denominated in sterling and U.S. dollars.
Consequently, the company is subject to currency transaction risk relating to
the notes. For example, if sterling or the U.S. dollar were to weaken relative
to the euro, our ability to satisfy the obligations under these notes could be
reduced.
118
<PAGE>
Fluctuations in Interest Rates
The company uses interest rate swap agreements to partially manage interest
rate risk on its variable rate debt portfolio. Interest rate swap agreements
are entered into at the time the related variable rate debt is issued to
convert the variable rate debt to fixed debt. The interest differential to be
paid or received under the related interest rate swap agreements is recognized
over the life of the related debt and is included in interest expense.
Results of Operations-Weigh-Tronix, LLC
The following discussion compares the results of operations for the three
months ended June 30, 2000 with the three months ended June 30, 1999, the
fiscal year ended March 31, 2000 with the 11 months ended March 31, 1999, and
the 11 months ended March 31, 1999 to the results of operations of the
Predecessor for the year ended March 31, 1998.
The principal underlying differences in the operating results of the
Predecessor compared with the Successor relate to: (1) the application of
purchase accounting to fair value assets and liabilities purchased and
resulting increases in depreciation and amortization; (2) increased interest
expense resulting from the financing of the acquisition of the Predecessor; (3)
lower benefit costs in the Successor financial statements due to implementation
of defined contribution plans; (4) the effect of push down entries to reflect
stand-alone costs; and (5) resulting differences in income taxes.
Operating segments
Weigh-Tronix, LLC is organized for management purposes into three reportable
business segments: the North American Industrial division, the European
Industrial division and the Consumer division.
The North American Industrial division manufactures and markets industrial,
agricultural and postal weighing systems as well as force measurement products
throughout the U.S. and Canada. The industrial products manufactured by the
division are primarily electronics based in nature and sales are made
indirectly through a series of distributors who maintain their own service
centers.
The European Industrial division manufacturers and distributes electronic
and railweight scales throughout Europe. In addition, the division also sells
mechanical scales primarily to countries in the emerging markets. In the U.K.,
sales are mainly through a dedicated sales force while sales in Continental
Europe are primarily through distributors. The division also has a large
service revenue base in the U.K.
The Consumer division distributes residential scales to the consumer sector
primarily in the U.K. and the U.S.
Included in Weigh-Tronix, LLC's consolidated results from operations for the
three months ended June 30, 2000 are the post-acquisition results of operations
of Avery Berkel, that totals 17 days. These results from operations have been
affected by the application of purchase accounting estimates described above.
119
<PAGE>
The following table presents statement of operations line items as a
percentage of revenues for the periods indicated on the basis described above.
<TABLE>
<CAPTION>
Year 11 Months Year Three Months Ended
Ended Ended Ended ----------------------
March 31, March 31, March 31, June 30, June 30,
1998 1999 2000 1999 2000
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........ 69.7 73.9 67.3 67.8 73.8
----- ----- ----- --------- ---------
Gross profit......... 30.3 26.1(/1/) 32.7 32.2 26.2(/1/)
Operating expenses:
Selling, general and
administrative....... 23.3 22.7 23.8 22.4 27.6
Depreciation and
amortization......... 3.5 2.0 2.3 2.1 2.8
----- ----- ----- --------- ---------
Operating income..... 3.5 1.4 6.6 7.7 (4.2)
===== ===== ===== ========= =========
Supplemental:(/1/)
Cost of revenues........ 69.7 68.3 67.3 67.8 68.2
Gross profit......... 30.3 31.7 32.7 32.2 31.8
Operating expenses:
Selling, general and
administrative....... 23.3 22.7 23.8 22.4 27.6
Depreciation and
amortization......... 3.5 2.0 2.3 2.1 2.8
----- ----- ----- --------- ---------
Operating income..... 3.5% 7.0% 6.6% 7.7% 1.4%
===== ===== ===== ========= =========
</TABLE>
--------
(1) Gross profit for the 11 months ended March 31, 1999 and the three months
ended June 30, 2000 reflects higher cost of sales due to the sale of the
inventory that was recorded at fair value in the acquisition of the
Predecessor on May 1, 1998 and Avery Berkel on June 13, 2000, respectively
(the "inventory fair value adjustment"). The inventory fair value
adjustment during the eleven months ended March 31, 1999 and the three
months ended June 30, 2000 was $6.2 million and $2.4 million,
respectively. The supplemental presentation of cost of revenue excludes
the impact of the inventory fair value adjustments and is presented
because management believes its gross margins without the inventory fair
value adjustment are representative of its future gross margins.
Three months ended June 30, 2000 compared with the three months ended June 30,
1999
Revenues
Revenues increased by $14.1 million, or 47.8%, from $29.5 million for the
three months ended June 30, 1999 to $43.5 million for the three months ended
June 30, 2000. The increase comprised: (1) the impact of seventeen days of
operations of Avery Berkel of $13.8 million; (2) a decrease in net sales in the
North American Industrial business of $1.2 million or 6.8% to $17.1 million
from $18.3 million for the three months ended June 30, 1999; (3) an increase in
the net sales of the European Industrial business of $1.0 million or 14.4%, to
$8.0 million from $7.0 million for the three months ended June 30, 1999; and
(4) an increase in the net sales of the Consumer business of $0.6 million or
12.3%, to $4.7 million in the three months ended June 30, 2000 from $4.1
million for the three months ended June 30, 1999.
The revenues generated by Avery Berkel in the 17 days post-acquisition were
$13.8 million which consisted of: (1) $7.0 million of sales in the U.K.; (2)
$2.5 million in sales to other European countries; (3) $1.9 million of sales to
North America; (4) $1.3 million of sales to Asia-Pacific countries; and (5)
$1.1 million of sales to African countries.
The decrease in revenues in the North American Industrial business was
largely attributable to: (1) the deferral of a lift truck scales order for $0.4
million; and (2) delays in orders of medium industrial scales of approximately
$0.7 million.
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The increase in revenues in the European Industrial business was primarily
attributable to: (1) increased light commercial sales of approximately $0.5
million; (2) increased sales recognized on installed rail weighing scales of
$0.5 million; (3) a change in the postal rates in the U.K. which increased
sales by $0.2 million; and (4) improvements in local currency sales, offset
partly by unfavorable foreign exchange rates and reduced service revenue of
$0.1 million.
The increase in revenues in the Consumer business was primarily attributable
to: (1) increased revenues from North America, with the consumer business
gaining several large customers in the U.S. and Canada; and (2) increased
demand from key accounts in continental Europe leading to increased local
currency sales, partially offset by unfavorable foreign exchange rates.
Gross profit
Gross profit increased $1.9 million, or 20.5%, from $9.5 million in the
three months ended June 30, 1999 to $11.4 million in the three months ended
June 30, 2000. The primary reason for the increase in gross profit in the three
months ended June 30, 2000 was the impact of the Avery Berkel acquisition that
contributed $1.7 million in gross profit to the Company's consolidated results
of operations. As a percentage of revenues, gross profit was 26.2% in the three
months ended June 30, 2000 compared to 32.2% in the three months ended June 30,
1999, including the impact of 17 days of operations of Avery Berkel. Without
the impact of the Avery Berkel operations, the Company's gross profit margin
was 32.6%.
Avery Berkel's gross profit for the 17 days post-acquisition was $1.7
million, or 12.6% of Avery Berkel's sales. In applying preliminary purchase
accounting to the assets and liabilities of Avery Berkel, Avery Berkel's
inventory value was increased by $16.3 million to reflect the fair value of the
inventory. This increase, or fair value adjustment, is being amortized through
cost of goods as the related inventory is sold. Gross profit has been reported
after charging the amortization of the inventory step-up for the 17 days that
amounted to $2.4 million. Excluding the amortization of the inventory fair
value adjustment, Avery Berkel's gross profit for the 17 days was $4.1 million,
or 30.1% of Avery Berkel sales.
Gross profit in the North American Industrial business decreased $0.7
million, or 10.9%, from $6.1 million in the three months ended June 30, 1999 to
$5.4 million in the three months ended June 30, 2000. As a percentage of
revenues, gross profit was 31.8% in the three months ended June 30, 2000
compared to 33.3% in the three months ended June 30, 1999. The decrease in the
gross profit percentage was primarily attributable to unfavorable overhead
absorption in the three months ended June 30, 2000 due to the Company's efforts
to reduce inventory levels during that period and a change in sales mix towards
lower-margin truck scales from higher-margin medium industrial scales.
Gross profit in the European Industrial business increased $0.7 million, or
32.3%, from $2.2 million in the three months ended June 30, 1999 to $2.9
million in the three months ended June 30, 2000. As a percentage of revenues,
gross profit was 36.1% in the three months ended June 30, 2000 compared to
31.2% in the three months ended June 30, 1999. The increase in the gross profit
percentage was attributable to: (1) a favorable sales mix, including increases
in sales of higher-margin light commercial and electronic products; (2)
favorable overhead absorption due to higher production volumes; and (3)
increased postal rates in the U.K. that improved gross profit by approximately
$0.2 million.
Gross profit in the Consumer business increased $0.2 million, or 13.5%, from
$1.2 million in the three months ended June 30, 1999 to $1.4 million in the
three months ended June 30, 2000. As a percentage of revenues, gross profit for
the Consumer business was 29.2% in the three months ended June 30, 2000
compared to 28.9% in the three months ended June 30, 1999. The increase in
gross profit was offset partially by unfavorable exchange rates.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended June
30, 2000 increased by $5.5 million, or 82.8%, from $6.6 million to $12.0
million. As a percentage of revenues, selling, general and
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administrative expenses were 27.6% for the three months ended June 30, 2000
compared to 22.4% in the three months ended June 30, 1999. The increase in
selling, general and administrative costs during the three months ended June
30, 2000 was primarily due to the impact of: (1) 17 days of operations of Avery
Berkel that resulted in additional costs of $2.3 million; (2) severance costs
of $0.3 million; (3) non-cash compensation charges of $1.3 million and $0.4
million related to the additional vesting of the Class E Membership Interests
and the granting to management of additional membership interests in the
company by Berkshire Partners, LLC, respectively; (4) an increase in management
travel expenses of $0.2 million; and (5) one-time costs relating to Baan
information systems implementation of $0.2 million in the three months ended
June 30, 2000.
Depreciation and amortization
Depreciation and amortization expense increased $0.7 million, or 59.0%, from
$0.6 million for the three months ended June 30, 1999 to $1.2 million for the
three months ended June 30, 2000. The increase was primarily attributable to
the impact of 17 days of additional depreciation and amortization of $0.3
million and an increase in amortization expense of $0.2 million related to the
goodwill and intangible assets that were recorded in connection with the
acquisition of Avery Berkel.
Operating income (loss)
As a result of the factors discussed above, operating income decreased by
$4.1 million from operating income of $2.3 million for the three months ended
June 30, 1999 to an operating loss of $1.8 million for the three months ended
June 30, 2000. Excluding the operating loss at Avery Berkel, the operating loss
for the three months ended June 30, 2000 was $0.9 million, representing a
decrease over the three months ended June 30, 1999 of $3.1 million, due to the
factors discussed above.
Interest expense
Interest expense for the three months ended June 30, 2000 increased by $0.7
million or 39.4% from interest expense of $1.6 million for the three months
ended June 30, 1999 to interest expense of $2.3 million for the three months
ended June 30, 2000. The increase was primarily attributable to the impact of
higher debt levels during the three months ended June 30, 2000 following the
re-financing of the company's debt and the acquisition of Avery Berkel.
Other income, net
Other income, net for the three months ended June 30, 2000 decreased to $0
from $0.4 million for the three months ended June 30, 1999. The reduction was
attributable to the recording of one-time revenue and a foreign currency gain
in the three months ended June 30, 1999 that did not recur in the three months
ended June 30, 2000.
Extraordinary item, net of tax
This amount represents a prepayment penalty fee related to the early
repayment of the subordinated notes due May 1, 2005 and 2006 as a result of the
acquisition of Avery Berkel and the related re-financing of indebtedness and
the write-off of deferred financing costs relating to the debt extinguished.
Provision for income taxes
Weigh-Tronix, LLC made provisions for income taxes of $0.3 million in the
three months ended June 30, 1999 as compared to a benefit of $0.1 million in
the three months ended June 30, 2000. The provision for the three months ended
June 30, 1999 reflects an effective tax rate of 30.6% based on pretax income of
$1.0 million. The difference between the U.S. federal statutory rate of 34.0%
and the effective rate of 30.6% is mostly attributable to the fact that the
taxable income for that period was primarily generated by subsidiaries in the
U.K. that have an effective tax rate of 30.0%. The benefit recorded for the
three months ended June 30, 2000 reflects an effective tax rate of 1.7% based
on the pretax loss of $4.0 million. The difference between the U.S. federal
statutory benefit rate of 34.0% and the effective benefit rate of 1.7% is
primarily attributable to:
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(1) a net benefit of $0.2 million for the Company's U.K. subsidiaries; (2) a
provision for the Company's Canadian subsidiary of $0.1 million; and (3) the
establishment of a valuation allowance against the deductible temporary
differences and net operating losses generated during the period due to the
concern of the recoverability of the tax benefits of those assets.
Year ended March 31, 2000 compared with the 11 months ended March 31, 1999
Revenues
Revenues increased by $15.9 million, or 14.5%, from $110.2 million for the
11 months ended March 31, 1999 to $126.1 million for the year ended March 31,
2000. The increase comprised: (1) an increase in net sales in the North
American Industrial business of $9.3 million or 14.8% to $72.4 million from
$63.1 million for the 11 months ended March 31, 1999; (2) an increase in the
net sales of the European Industrial business of $2.9 million or 10.3%, to
$30.9 million from $28.1 million for the 11 months ended March 31, 1999; and
(3) an increase in the net sales of the Consumer business of $3.7 million or
19.7%, to $22.7 million in the year ended March 31, 2000 from $19.0 million for
the 11 months ended March 31, 1999.
The increase in revenues in the North American Industrial business was
largely attributable to: (1) the impact of the additional month of product and
service sales of $6.5 million; (2) an increase in demand for transportation
scales in Canada; (3) the introduction of new products such as forklift truck
scales; (4) increased service revenue; and (5) the full year impact of an
acquisition made in the 11 months ended March 31, 1999.
The net increase in revenues in the European Industrial business was
attributable to: (1) the impact of the additional month of sales of $2.5
million; (2) increases in sales in Australia; (3) the full impact of
acquisitions made in the prior period; and (4) higher service sales, partially
driven by the legal requirement to convert scales from the imperial to the
metric system (metrication program) in the U.K. These increases were partially
offset by (1) lower sales of electronic scale products in the U.K.; (2) delays
by Weigh-Tronix, LLC's largest railweight customer in implementing the second
phase of a project; and (3) a weakening of the pound sterling versus the U.S.
dollar.
The increase in revenues in the Consumer business was primarily attributable
to: (1) the impact of the additional month of sales of $1.6 million; (2) strong
demand from key national accounts in the U.K. as a result of the major new
product launches of redesigned bathroom and kitchen scales; (3) the
establishment of a sales office in Canada; and (4) an increase in activity with
key distributors in the U.S. and Italy. The increase in revenues was partially
offset by the company's decision to withdraw from a key account in the U.S. due
to the deteriorating financial condition of that account.
Gross profit
Gross profit increased $12.5 million, or 43.7%, from $28.7 million in the 11
months ended March 31, 1999 to $41.3 million in the year ended March 31, 2000.
As a percentage of revenues, gross profit was 32.7% in the year ended March 31,
2000 compared to 26.1% in the 11 months ended March 31, 1999. The increase in
the gross profit percentage was primarily attributable to higher costs of sales
in the 11 months ended March 31, 1999 due to the amortization of the inventory
fair value adjustment resulting from the acquisition of the Predecessor.
Excluding the impact of the inventory fair value adjustment, the gross profit
would have been $34.9 million, or 31.7% of sales.
Gross profit in the North American Industrial business increased $9.3
million, or 61.6%, from $15.1 million in the 11 months ended March 31, 1999 to
$24.5 million in the year ended March 31, 2000. As a percentage of revenues,
gross profit was 33.8% in the year ended March 31, 2000 compared to 24.0% in
the 11 months ended March 31, 1999. The increase in the gross profit percentage
was primarily attributable to the inventory fair value adjustment recorded in
the prior period. The gross profit in the 11 months ended March 31, 1999,
excluding the impact of the inventory fair value adjustment, was $19.2 million,
or 30.4% of sales. Additionally, the increase in the gross profit percentage
for the year ended March 31, 2000 was attributable to
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unfavorable overhead absorption in the 11 months ended March 31, 1999 due to
the company's efforts to significantly reduce inventory levels during that
period.
Gross profit in the European Industrial business increased $0.5 million, or
5.8%, from $9.4 million in the 11 months ended March 31, 1999 to $9.9 million
in the year ended March 31, 2000. As a percentage of revenues, gross profit was
32.1% in the year ended March 31, 2000 compared to 33.4% in the 11 months ended
March 31, 1999. The overall decrease in the gross profit percentage was
attributable to an unfavorable sales mix as well as unfavorable overhead
absorption due to lower production volumes. These decreases were partially
offset by the impact of the inventory fair value adjustment recorded in the 11
months ended March 31, 1999. The gross profit in the 11 months ended March 31,
1999, excluding the impact of the inventory fair value adjustment, was $10.0
million, or 35.6% of sales.
Gross profit in the Consumer business increased $2.7 million, or 63.3%, from
$4.2 million in the 11 months ended March 31, 1999 to $6.9 million in the year
ended March 31, 2000. As a percentage of revenues, gross profit for the
Consumer business was 30.2% in the year ended March 31, 2000 compared to 22.1%
in the 11 months ended March 31, 1999. The increase in the gross profit
percentage was primarily attributable to the impact of the inventory fair value
adjustment in the 11 months ended March 31, 1999 combined with improved margins
in Canada in the year ended March 31, 2000 as a result of a change in
distribution methods from a distributor model to a direct sales model. The
gross profit in the 11 months ended March 31, 1999, excluding the impact of the
inventory fair value adjustment, was $5.8 million, or 30.4% of sales.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended March 31,
2000 increased by $5.0 million, or 20.1%, from $25.0 million to $30.0 million.
As a percentage of revenues, selling, general and administrative expenses were
23.8% for the year ended March 31, 2000 compared to 22.7% in the 11 months
ended March 31, 1999. The increase in selling, general and administrative costs
was primarily due to: (1) the impact of the additional month of costs of $2.5
million; (2) an increase in professional fees associated with potential
acquisitions that ultimately did not consummate; (3) higher costs in the
Consumer business for marketing initiatives associated with new product
launches; (4) the cost of establishing a new Canadian office; (5) the full year
impact of costs associated with a new corporate office; and (6) a full year of
selling, general and administrative costs from acquisitions made in the prior
period. Partially offsetting the overall increase in selling, general and
administrative costs were termination and severance costs incurred in the 11
months ended March 31, 1999 and the recognition of non-cash compensation
related to the recording of equity compensation at the time of the acquisition
of the Predecessor.
Depreciation and amortization
Depreciation and amortization expense increased $0.7 million, or 30.7%, from
$2.2 million for the 11 months ended March 31, 1999 to $2.9 million for the
year ended March 31, 2000. The increase was primarily attributable to the
impact of the additional month of depreciation and amortization of $0.3 million
and an increase in goodwill amortization expense attributable to the full year
impact of acquisitions made in the prior period.
Operating income
As a result of the factors discussed above, operating income increased by
$6.8 million from operating income of $1.5 million for the 11 months ended
March 31, 1999 to operating income of $8.3 million for the year ended March 31,
2000. Excluding the impact of the inventory fair value adjustment, operating
income for the 11 months ended March 31, 1999 was $7.7 million.
Interest expense
Interest expense for the year ended March 31, 2000 increased by $0.1 million
from interest expense of $5.9 million for the 11 months ended March 31, 1999 to
interest expense of $6.0 million for the year ended
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March 31, 2000. The increase was primarily attributable to the impact of the
additional month of interest expense of $0.5 million offset by a reduction in
interest as a result of lower debt levels during the year ended March 31, 2000.
Other expense (income), net
Other income, net for the year ended March 31, 2000 increased to $0.3
million as compared to an expense of $0.2 million for the 11 months ended March
31, 1999. The increase in other income, net was attributable to the combination
of a bad debt recovery relating to an amount that had previously been written
off by the Predecessor and unrealized gains on certain foreign exchange forward
contracts in the Consumer business.
Provision for income taxes
Weigh-Tronix, LLC made provisions for income taxes in the year ended March
31, 2000 and the 11 months ended March 31, 1999 of $1.3 million and $1.6
million, respectively. The provision for the year ended March 31, 2000 reflects
an effective tax rate of 45.0% based on pretax income of $2.9 million. The
difference between the U.S. federal statutory rate of 34.0% and the effective
rate of 45.0% is primarily attributable to the non-deductibility of
amortization expense relating to goodwill. Although the Company incurred a
pretax loss of $4.6 million for the 11 months ended March 31, 1999, the Company
recorded a provision of $1.6 million which was primarily attributable to: (1)
the establishment of a valuation allowance against deferred tax assets relating
to the tax benefits of net operating loss carryforwards and deductible
temporary differences; and (2) the non-deductibility of amortization expense
relating to goodwill.
11 months ended March 31, 1999 compared with Predecessor year ended March 31,
1998
Revenues
Revenues decreased by $3.7 million, or 3.2%, from $113.9 million for the
year ended March 31, 1998 to $110.2 million for the 11 months ended March 31,
1999. The decrease was primarily attributable to the impact of having one less
month of sales in the 11 months ended March 31, 1999 and: (1) a decrease in net
sales in the North American Industrial business of $3.0 million or 4.6%, to
$63.1 million from $66.2 million for the year ended March 31, 1998; (2) a
decrease in the net sales of the European Industrial business of $0.7 million,
or 2.3%, to $28.1 million from $28.7 million for the year ended March 31, 1998.
Sales of the Consumer business were constant at $19.0 million in each period.
The decrease in revenues in the North American Industrial business was due
to a combination of the decrease in sales to our agricultural customers due to
a slowdown in that industry as a result of the depressed crop prices and a
large non-recurring sale in the 11 months ended March 31, 1999 to a major
customer in Canada. The overall decrease was partially offset by: (1) an
increase in revenues as a result of its point of sale project resulting in
significant growth in sales to a major customer in the U.S.; (2) growth in
revenues to certain original equipment manufacturers (OEM) in connection with
supply agreements with these large resellers of postal scales; and (3)
increases in sales of force measurement devices.
The decrease in revenues in the European Industrial business was primarily
attributable to the impact of having one less month of sales in the 11 months
ended March 31, 1999. This decrease was mitigated somewhat by a growth in sales
of rail products, which was facilitated by Weigh-Tronix, LLC obtaining
Organization Internationale de Metrologie certification for its in-motion
railweight system. The certification allows Weigh-Tronix, LLC to sell these
railweight products as legal for trade. This legal for trade status is a
requirement to legally allow the end user to charge fees based on weights that
are derived from the scale.
Revenues in the Consumer business stayed constant due to the impact of
having one less month of sales in the 11 months ended March 31, 1999, which was
offset entirely by increased revenues due mainly to a combination of a new
distributor in Spain and improved market penetration and product placements at
key accounts in the U.S.
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Gross profit
Gross profit decreased $5.8 million, or 16.8%, from $34.5 million in the
year ended March 31, 1998 to $28.7 million in the 11 months ended March 31,
1999. As a percentage of revenues, gross profit was 26.1% in the 11 months
ended March 31, 1999 compared to 30.3% in the year ended March 31, 1998. The
decrease in the gross profit percentage was attributable to the impact of the
inventory fair value adjustment described above. The gross profit in the 11
months ended March 31, 1999, excluding the impact of the inventory fair value
adjustment, was $34.9 million, or 31.7% of sales.
Gross profit in the North American Industrial business decreased $4.8
million, or 24.2%, from $19.9 million in the year ended March 31, 1998 to $15.1
million in the 11 months ended March 31, 1999. As a percentage of revenues,
gross profit for the North American Industrial business was 24.0% in the 11
months ended March 31, 1999 compared to 30.0% in the year ended March 31, 1998.
The decrease in the gross profit percentage was primarily attributable to the
impact of the inventory fair value adjustment described above partially offset
by favorable material prices. The gross profit in the 11 months ended March 31,
1999, excluding the impact of the inventory fair value adjustment, was $19.2
million, or 30.4% of sales.
Gross profit in the European Industrial business increased $0.1 million, or
1.0%, from $9.3 million in the year ended March 31, 1998 to $9.4 million in the
11 months ended March 31, 1999. As a percentage of revenues, gross profit for
the European Industrial business was 33.4% in the 11 months ended March 31,
1999 compared to 32.3% in the year ended March 31, 1998. The increase in the
gross profit percentage was primarily attributable to improvements in sales mix
toward higher margin products, primarily service and railweight, which was
partially offset by the impact of the inventory fair value adjustment described
above in the 11 months ended March 31, 1999. The gross profit in the 11 months
ended March 31, 1999, excluding the impact of the inventory fair value
adjustment, was $10.0 million, or 35.6% of sales.
Gross profit in the Consumer business decreased $1.1 million, or 21.1%, from
$5.3 million in the year ended March 31, 1998 to $4.2 million in the 11 months
ended March 31, 1999. As a percentage of net revenues, gross profit for the
Consumer division business was 22.1% in the 11 months ended March 31, 1999
compared to 28.1% in the year ended March 31, 1998. The decrease in the gross
profit percentage was due to the impact of the inventory fair value adjustment
described above in the 11 months ended March 31, 1999, slightly offset by
better pricing on finished goods purchased from Far East vendors. The gross
profit in the 11 months ended March 31, 1999, excluding the impact of the
inventory fair value adjustment, was $5.8 million, or 30.4% of sales.
Selling, general and administrative
Selling, general and administrative expenses decreased $1.6 million, or
5.9%, from $26.6 million in the year ended March 31, 1998 to $25.0 million in
the 11 months ended March 31, 1999. As a percentage of revenues, selling,
general and administrative expenses were 22.7% in the 11 months ended March 31,
1999 compared to 23.4% in the year ended March 31, 1998. The decrease in
selling, general and administrative costs was primarily due to the impact of
having one less month of costs in the 11 months ended March 31, 1999 as
compared to the year ended March 31, 1998. The decrease was partially offset by
increased selling, general and administrative costs due to termination and
severance costs incurred in the 11 months ended March 31, 1999 and the
recognition of compensation expense related to the recording of equity
compensation at the time of the acquisition of the Predecessor.
Depreciation and amortization
Depreciation and amortization expense decreased $1.8 million, or 44.5%, from
$4.0 million for the year ended March 31, 1998 to $2.2 million for the 11
months ended March 31, 1999. The decrease was primarily due to the impact of
having one less month of costs in the 11 months ended March 31, 1999 as
compared to the year ended March 31, 1998. In addition, amortization expense
decreased as a result of the elimination of the Predecessor goodwill of $46.3
million and the establishment of the Successor goodwill of $19.3 million upon
the acquisition of the Predecessor on May 1, 1998.
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Operating income
As a result of the factors discussed above, operating income decreased by
$2.4 million from operating income of $3.9 million for the year ended March 31,
1998 to operating income of $1.5 million for the 11 months ended March 31,
1999. Excluding the impact of the inventory fair value adjustment, operating
income for the 11 months ended March 31, 1999 was $7.7 million.
Interest expense
Interest expense for the 11 months ended March 31, 1999 increased to $5.9
million from $0.0 million in the year ended March 31, 1998. The interest
expense for the 11 months ended March 31, 1999 relates primarily to
indebtedness incurred to fund the acquisition of the Predecessor on May 1,
1998. See "--Overview--Purchase Accounting." Prior to the formation of Weigh-
Tronix, LLC, working capital requirements were funded through income from
operations and advances from the former parent, Staveley Industries plc.
Other expense, net
Other expense, net for the 11 months ended March 31, 1999 increased to $0.2
million from $0.1 million for the year ended March 31, 1998. The increase in
expense was primarily attributable to foreign currency exchange losses in the
Company's Canadian operations.
Provision for taxes
Weigh-Tronix, LLC made provisions for income taxes in the 11 months ended
March 31, 1999 and the year ended March 31, 1998 of $1.6 million and $2.2
million, respectively. Although the Company incurred a pretax loss of $4.6
million for the 11 months ended March 31, 1999, the Company recorded a
provision of $1.6 million which was primarily attributable to: (1) the
establishment of a valuation allowance against deferred tax assets relating to
the tax benefits of net operating loss carryforwards and deductible temporary
differences; and (2) the non-deductibility of the amortization expense relating
to goodwill. The provision for the year ended March 31, 1998 reflected an
effective tax rate of 56.3% based on pretax income of $3.9 million. The
difference between the U.S. federal statutory rate of 34.0% and the effective
provision rate of 56.3% was attributable to the non-deductibility of the
amortization expense relating to goodwill.
Results of Operations--Avery Berkel Group
The following discussion compares the results of operations of the Avery
Berkel Group for the year ended March 31, 2000 with the year ended March 31,
1999 and also compares the year ended March 31, 1999 with the year ended March
31, 1998. The Avery Berkel Group is comprised of Avery Berkel Holdings Limited,
which was formerly GEC Avery International Limited, and Maatschappij van
Berkel's Patent B.V. and their subsidiary companies included in the sale to
Weigh-Tronix UK Limited. Financial information has been prepared on a carve-out
basis to exclude subsidiaries and operations that do not form part of the sale
to Weigh-Tronix UK Limited.
The group is organized for management reporting purposes into five business
segments based upon the geographic location of the operating units. The
segments are: (1) the U.K., which includes the U.K. sales, service and
manufacturing operations as well as direct exports to overseas countries not
covered by subsidiary companies; (2) the rest of Europe, which comprises
subsidiary companies in France, Italy, Ireland, Germany, Spain and Sweden; (3)
North America, which comprises subsidiary companies in the U.S. and Canada; (4)
Asia Pacific, which comprises subsidiary companies in Malaysia, Pakistan, India
and Australia; and (5) Africa, which comprises subsidiary companies in South
Africa, Zimbabwe, Malawi and Namibia.
During the periods under review, the following changes affected the Asia
Pacific segment: (1) during the year ended March 31, 1998 Avery Berkel closed
down its Australian subsidiaries; and (2) in August 1998, Avery Berkel
increased its shareholding in Avery India Ltd from 39.9% to 51.0%.
Consequently, 100% of the turnover and operating results of Avery India Ltd
have been included in the results presented from August 1998. Prior to this
date Avery India Ltd was accounted for using the equity accounting basis for
associated companies and is not included in the turnover and operating results
figures.
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The following table presents Avery Berkel Group's historical results of
operations as a percentage of total turnover for the periods indicated:
<TABLE>
<CAPTION>
Year Ended
-----------------------------
March 31, March 31, March 31,
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Income Statement Data:
Turnover.......................................... 100.0% 100.0% 100.0%
Costs of sales.................................... 62.2 61.5 61.1
Gross profit...................................... 37.8 38.5 38.9
Net operating expenses
Distribution costs.............................. 20.2 20.1 20.0
Administrative expenses......................... 14.5 15.1 13.6
Other operating (income)........................ (0.4) (0.4) (0.2)
----- ----- -----
34.3 34.8 33.4
Operating profit.................................. 3.5 3.7 5.5
Share of operating profit of associates........... 0.3 0.4 0.7
----- ----- -----
Total operating profit............................ 3.8 4.1 6.2
===== ===== =====
</TABLE>
Year Ended March 31, 2000 Compared with the Year Ended March 31, 1999
Turnover
Turnover for the year ended March 31, 2000 increased (Pounds)9.1 million, or
6.2%, to (Pounds)155.5 million from (Pounds)146.4 million for the year ended
March 31, 1999. The increase comprised: (1) an increase in the U.K. segment of
(Pounds)5.9 million or 7.7%; (2) an increase in Asia Pacific of (Pounds)4.5
million or 44.2%; (3) a decrease in Europe of (Pounds)1.0 million or 3.4% and;
(4) a decrease in Africa of (Pounds)0.7 million or 7.8%. Turnover in North
America increased by 0.5 million or 2.5%.
The increase in turnover of the U.K. business was attributable to: (1) an
increase in service revenue due to (Pounds)3.3 million of service upgrades to
convert retail scales from imperial to metric due to changes in U.K.
legislation; (2) growth in sales of U.K. industrial product of (Pounds)1.5
million as we created industry specific sales forces in April 1999; (3)
increase in turnover through our direct export channel of (Pounds)1.0 million
as the Far Eastern and other emerging markets recovered from the 1999 economic
crisis; and (4) lower turnover of slicers and food processing equipment as
Avery Berkel rationalized its product portfolio and concentrated on core
products.
The (Pounds)4.5 million increase in turnover in our Asia Pacific business
reflects the inclusion of the full 12 months trading of Avery India Ltd
compared with only seven months in the period to March 1999, following the
increase in shareholding in the company to 51.0% in August 1998.
The (Pounds)1.0 million decrease in turnover in Europe was due to a
weakening of the euro versus sterling. This translation effect reduced turnover
by (Pounds)1.7 million. Measured in euros, turnover in Europe actually
increased by (Pounds)0.7 million, or 2.3%, largely in Italy where Avery Berkel
is growing in both the food retail and industrial weighing sectors.
In Africa, Avery Berkel had sales of (Pounds)0.7 million from a large order
of third party sourced product in the year to March 31, 1999, which was not
repeated in the period to March 31, 2000. The further decline of (Pounds)0.1
million reflects the difficult trading environment in this high inflation,
increasingly competitive market place. In response to this, Avery Berkel has
reduced its cost base in this region during February 2000 by (Pounds)0.2
million annualized.
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Gross profit
Gross profit for the year ended March 31, 2000 increased (Pounds)2.5
million, or 4.3%, to (Pounds)58.8 million from (Pounds)56.3 million for the
year ended March 31, 1999. As a percentage of turnover, gross profit was 37.8%
in the year ended March 31, 2000 compared with 38.5% in the year ended March
31, 1999.
Gross profit in the U.K. segment increased by (Pounds)2.0 million or 5.6% to
(Pounds)36.8 million from (Pounds)34.8 million. This increase was due to the
additional metrication service revenues achieved. As a percentage of turnover,
gross profit for the U.K. segment was 44.1% in the year ended March 31, 2000
compared with 45.0% in the year ended March 31, 1999. This decrease in the
gross profit percentage was attributable to: (1) price pressure in the
industrial sector where capital goods budgets had been diverted to cover Year
2000 requirements, and the fact that the traditional U.K. engineering customers
have been cutting back their investment due to lower export sales as a result
of the strength of sterling versus the euro; (2) disruption within the
manufacturing business during the first quarter of the period following the
introduction of our new ERP system in February 1999; and (3) pressure on the
old range of low end retail product in the first nine months of the period. The
new low end retail product was launched during the period and margins are
recovering.
Gross profit in the European segment decreased by (Pounds)1.3 million or
13.5%. As a percentage of turnover gross profit for the Europe segment was
27.2% in the year ended March 31, 1999 compared with 30.3% in the year ended
March 31, 1999. The decrease in the gross profit percentage was attributable to
the effect of the weak euro currency against sterling as products sold are
manufactured largely in Avery Berkel's U.K. factories.
Gross profit in the Asia Pacific segment increased by (Pounds)1.7 million to
(Pounds)5.4 million due to the inclusion of the full 12 months of Avery India
Ltd.
Gross profit in the North American segment increased by 0.4 million due to a
improvement in product mix. Gross profit in the African segment decreased from
37.7% of turnover to 37.4%, which was attributable to the difficult trading
environment.
Distribution and administrative expenses
Distribution and administrative expenses for the year ended March 31, 2000
increased (Pounds)2.5 million, or 4.8%, to (Pounds)54.0 million from
(Pounds)51.5 million for the year ended March 31, 1999. As a percentage of
turnover, distribution and administrative expenses were 34.7% in the year ended
March 31, 2000 compared with 35.2% in the year ended March 31, 1999. The
decrease as a percentage of turnover was attributable to lower non-recurring
costs associated with Year 2000 preparations. In the year ended March 31, 2000,
Avery Berkel spent (Pounds)l.7 million on implementing and refining its ERP
system and other Year 2000 preparations, compared with (Pounds)2.9 million in
the year ended March 31, 1999.
Excluding the impact of these Year 2000 costs, distribution and
administrative expenses were 33.6% of turnover in the year ended March 31, 2000
compared with 33.2% in the year ended March 31, 1999. This increase was
attributable to: (1) additional overheads of (Pounds)1.8 million for the
inclusion of the full 12 months trading of Avery India Ltd; and (2) increased
expenditures on research and development of (Pounds)0.4 million due to higher
spending on developing new slicers for the North American market and the new
generation of food retail weighing products. During the year ended March 31,
2000: (1) the new low end food retail scale was launched and the high end
product was put into extensive field trials; (2) restructuring costs of
(Pounds)0.2 million were incurred in Africa; and (3) an increase in costs
occurred which was associated with the increase in sales volume and additional
activity as Avery Berkel implemented its new ERP system.
Operating profit
As a result of the reasons described above, operating profit increased by
(Pounds)0.1 million to (Pounds)5.5 million or 3.5% of turnover for the year
ended March 31, 2000 from (Pounds)5.4 million or 3.7% of turnover for the year
ended March 31, 1999.
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Profit on sale of fixed assets
Profit on sale of fixed assets decreased by (Pounds)0.8 million as Avery
Berkel completed the sale of the majority of its surplus U.K. properties in the
year ended March 31, 1999 resulting from its service branch rationalization and
closure program over the last two years.
Interest income, net
Interest income, net for the year ended March 31, 2000 increased by
(Pounds)1.6 million, to (Pounds)2.0 million from (Pounds)0.4 million for the
year ended March 31, 1999. The increase was attributable to interest received
of (Pounds)1.6 million from the U.K. Inland Revenue on a repayment of advance
corporation tax.
Provision for income taxes
The effective income tax rate for the year ended March 31, 2000 was 25.0%
compared with 37.0% for the year ended March 31, 1999. This reduction was
partly due to a credit from prior years as the U.K. computations for the years
1988 to 1997 were agreed to during the period ended March 31, 2000 by the U.K.
Inland Revenue. After adjusting for these over-provisions in prior years, Avery
Berkel's effective income tax rate for the year ended March 31, 2000 was 29.7%
compared with 32.9% for the year ended March 31, 1999. This decrease was due to
non-taxable interest income.
Year Ended March 31, 1999 Compared with Year Ended March 31, 1998
Turnover
Turnover for the year ended March 31, 1999 decreased (Pounds)2.7 million, or
1.8%, to (Pounds)146.3 million from (Pounds)149.0 million for the year ended
March 31, 1998. The decrease comprised: (1) decrease in turnover from the U.K.
segment of (Pounds)2.1 million or 2.7%; (2) a decrease in North America of
(Pounds)1.3 million or 6.7%; (3) an increase in Asia Pacific of (Pounds)2.4
million or 30.1%; (4) an increase in Europe of (Pounds)0.5 million or 1.7% and
(5) a decrease in Africa of (Pounds)2.1 million or 18.3%.
The decrease in turnover of the U.K. business was attributable to (1)
decrease in service revenues of (Pounds)1.1 million, following a successful
cost reduction program during 1997 which involved removing layers of service
management and branch closures; (2) decrease in direct export sales of
(Pounds)1.3 million, mainly to the Far East and the other emerging markets from
the economic crisis in these regions during 1998 and 1999; and (3) (Pounds)0.6
million reduction in sales of industrial products due to gaps in the product
offering for certain indicators and weighbridge systems which have now been
filled. These decreases were partially offset by higher sales of food retail
products assisted by store refurbishment programs and metrification.
The decrease in turnover in North America of (Pounds)1.3 million was due to
lower sales of spare parts of (Pounds)0.9 million as Avery Berkel changed from
owned to third party service branches as part of the 1997 cost reduction
program, and lower sales of slicers and food processing equipment of
(Pounds)0.4 million.
The increase in turnover in the Asia Pacific region of (Pounds)2.4 million
was due to the inclusion of six months trading of Avery India Ltd of
(Pounds)6.8 million following the increase in shareholding in August 1998. This
was partially offset by: (1) the closure of the business in Australia, which
contributed (Pounds)3.1 million of turnover in the year to March 31, 1998; and
(2) (Pounds)1.2 million lower turnover in the Malaysian business following the
economic downturn that affected the Far East region.
The (Pounds)0.5 million increase in turnover in Europe was attributable to
growth in France and Italy of (Pounds)1.7 million and (Pounds)0.8 million,
respectively, as new management adopted more aggressive commercial strategies.
This was partially offset by a decline in Germany of (Pounds)1.6 million. The
German business has suffered from a lack of consistent direction and we have
now installed new management.
The decrease in turnover in Africa of (Pounds)2.1 million reflects the
devaluation of some of our African trading currencies and the difficult trading
conditions in this high inflation region.
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Gross profit
Gross profit for the year ended March 31, 1999 decreased (Pounds)1.7
million, or 2.8%, to (Pounds)56.3 million from (Pounds)58.0 million for the
year ended March 31, 1998. As a percentage of turnover, gross profit was 38.5%
for the year ended March 31, 1999 compared with 38.9% for the year ended March
31, 1998.
Gross profit in the U.K. segment decreased by (Pounds)1.6 million or 4.4% to
(Pounds)34.8 million from (Pounds)36.4 million. This decrease was due to lower
product revenues achieved. As a percentage of turnover, gross profit for the
U.K. segment was 45.0% during the year ended March 31, 1999, compared with
45.8% for the year ended March 31, 1998. This decrease in the gross profit
percentage was attributable to lower overhead recovered in the U.K. factories
as output was 11.9% lower than in the year ended March 31, 1998.
Gross profit in the North American segment decreased by (Pounds)0.8 million
and, as a percentage of turnover, has decreased to 26.3% for the year ended
March 31, 1999, from 28.7% for the year ended March 31, 1998. The decrease in
the gross profit percentage was attributable to lower spare parts sales and
increased price pressure as competitors launched new slicer products during the
period with improved functionality. Avery Berkel expects that new product
launches in 2000 will result in improved margins.
Gross profit in the European segment increased by (Pounds)0.6 million and,
as a percentage of turnover, increased to 30.3% for the year ended March 31,
1999, from 29.0% for the year ended March 31, 1998. The increase in the gross
profit percentage was attributable to the positive mix effect of the growth in
turnover in France and Italy.
Gross profit in the Asia Pacific segment has increased by (Pounds)1.2
million to (Pounds)3.8 million. The acquisition of Avery India Ltd contributed
an additional (Pounds)2.3 million of gross profit but the closure of the
Australian business reduced gross profit by (Pounds)0.8 million. As a
percentage of turnover, gross margin in the Asia Pacific segment increased to
36.8% for the year ended March 31, 1999, from 33.2% for the year ended March
31, 1998.
Gross profit in the Africa segment decreased by (Pounds)0.9 million due to
the exchange rate effect on turnover and as a percentage of turnover, has
decreased to 37.7% for the year ended March 31, 1999, from 38.8% for the year
ended March 31, 1998.
Distribution and administrative expenses
Distribution and administrative expenses for the year ended March 31, 1999
increased (Pounds)1.5 million or 3.0% to (Pounds)51.5 million from (Pounds)50.0
million for the year ended March 31, 1998. As a percentage of turnover,
distribution and administrative expenses were 35.2% for the year ended March
31, 1999, compared with 33.6% for the year ended March 31, 1998. The increase
was attributable to higher one-time costs associated with Year 2000
preparations. In the year ended March 31, 1999, Avery Berkel spent (Pounds)2.9
million on implementing and refining its ERP system and other Year 2000
preparations compared with (Pounds)0.9 million for the year ended March 31,
1998. This was partially offset by lower restructuring costs. In the year ended
March 31, 1998, Avery Berkel spent (Pounds)1.7 million on restructuring costs,
primarily closing the Australian business and paid a one-time management fee of
(Pounds)0.8 million to Marconi.
Excluding the impact of these one-time costs, distribution and
administrative expenses were 33.2% of turnover for the year ended March 31,
1999, compared with 31.3% for the year ended March 31, 1998. The increase was
attributable to: (1) the inclusion of seven months of Avery India Ltd results
amounting to (Pounds)1.9 million following Avery Berkel's increase in ownership
to 51.0%; and (2) the increase in research and development expenses for the
year ended March 31, 1999 of (Pounds)1.6 million, or 58.2%, to (Pounds)4.3
million from (Pounds)2.7 million for the year ended March 31, 1998. The
increase was attributable to higher spending on developing new slicers for the
North American market and the new generation of food retail weighing products
which will be the first new food retail product range developed in eight years.
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Operating profit
As a result of the reasons described above, operating profit decreased to
(Pounds)5.4 million, or 3.7%, of turnover for the year ended March 31, 1999
from (Pounds)8.3 million, or 5.6%, of turnover for the year ended March 31,
1998.
Profit on sale of fixed assets
Profit on sale of fixed assets decreased by (Pounds)0.3 million as Avery
Berkel sold less surplus U.K. land and properties in the year ended March 31,
1999.
Interest income, net
Interest income, net for the year ended March 31, 1999 decreased (Pounds)0.2
million due to changes made by Marconi in the way in which they managed the
funds of the group.
Provision for income taxes
Effective income tax rate for the year ended March 31, 1999 was 37.0%
compared with 28.8% for the year ended March 31, 1998. This increase was
impacted by adjustments for prior years. After adjusting for these over-
provisions in prior years, the effective income tax rate for the year ended
March 31, 1999 was 32.9% compared with 29.1% for the year ended March 31, 1998.
This increase was due to higher overseas taxation as the proportion of U.K.
profits decreased from 81.8% of total profits in the year ended March 31, 1998
to 64.1% in the year ended March 31, 1999.
Liquidity and Capital Resources--Weigh-Tronix, LLC
Short-term
As a result of the merger of Avery Berkel, related financing and offering on
June 13, 2000, the company has significant amounts of debt which require
interest payments. As of June 30, 2000, the company's outstanding debt was
$195.0 million and consists of: (i) $99.0 million related to the senior credit
facility; (ii) $95.9 million related to the notes; and (iii) $84,000 related to
capital leases. As of June 30, 2000, an additional $17.6 million of debt under
the senior credit facility was available for borrowing. Based on the debt
outstanding at June 30, 2000, the company must make principal payments of
approximately $1.8 million over the next 12 months.
On June 13, 2000, the company issued (Euro)10.0 million of preferred member
interest to Marconi. Dividends on the preferred member interest accrue at an
annual rate of 12% and are payable annually. These interests are exchangeable
for exchange notes at the option of the company or the holders of the preferred
member interests. If the company or holders of the preferred member interest
opt to exchange their interests on June 13, 2001, (Euro)11.2 million of
exchange notes will be issued. If the holders do not opt to exchange their
interests on June 13, 2001, the company will be required to pay dividends of
(Euro)1.2 million on June 13, 2001.
Besides servicing the debt and paying dividends, the company's other
liquidity needs on a short-term basis will relate to working capital, capital
expenditures and one-time merger related costs of approximately $9.0 million
which are necessary to effect the annual cost reductions of approximately $12.0
million and operating improvements. We expect to partially fund the merger
related costs through proceeds from the sale of closed facilities of
approximately $2.0 million and inventory reduction programs of approximately
$6.0 million. The company's primary source of liquidity in the short-term is
expected to be cash provided by operations and additional borrowings under the
senior credit facility. Specifically, the company expects to reduce its
inventory of raw materials, component parts and finished goods. Such reductions
are not anticipated to adversely impact revenues as the company expects to
reduce manufacturing lead times.
Generally, the company believes that its manufacturing facilities are in
good condition and does not anticipate that major capital expenditures will be
needed to replace existing facilities in the near future. Accordingly, capital
expenditures will generally run at levels similar to or slightly in excess of
depreciation.
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Long-term
The company's primary long-term liquidity needs are to: (i) service the
senior credit facility, which includes making principal and interest payments;
(ii) make interest payments related to the notes; and (iii) pay annual
dividends related to the preferred member interests. Further detail is as
follows:
. The company's principal debt service requirements for the senior credit
facility based on amounts outstanding at June 30, 2000 are as follows:
$1.4 million for fiscal 2001; $3.0 million for fiscal 2002; $4.5 million
for fiscal 2003; $6.0 million for fiscal 2004; $13.2 million for fiscal
2005; $46.4 million for fiscal 2006; $19.5 million for fiscal 2007 and
$5.0 million for fiscal 2008.
. The company's annual interest expense related to the notes is (Euro)12.5
million. Interest payments are due semi-annually starting on December 1,
2000.
. Annual dividends for the preferred member interest are (Euro)1.2
million. If the company or the holders do not opt to exchange their
interests on June 13, 2001, the company will be required to make annual
dividend payments. If the company or holders do opt to exchange their
interests on June 13, 2001, the company will be required to make
interest payments instead of dividend payments.
The company's ability to make scheduled payments on its debt obligations
will depend on its future financial condition and operating performance, which
will be affected by general economic, financial, competitive, legislative,
regulatory and other factors that are partly beyond our control. There can be
no assurance that the company's operating results, cash flow and capital
resources will be sufficient for payment of its indebtedness in the future. In
the absence of operating results and resources, the company could face
substantial liquidity problems and might be required to dispose of material
assets or operations to meet its debt service and other obligations. In
addition, because a portion of the company's borrowings bear interest at
variable rates, an increase in interest rates could adversely affect, among
other things, the company's ability to meet its debt service obligations.
Cash flows from operations
Net cash used in operations totaled $1.0 million for the three months ended
June 30, 2000. Net cash provided by operations in the three months ended June
30, 1999 amounted to $0.9 million. The decrease in cash flows from operations
for the three months ended June 30, 2000 was primarily due to a reduction in
net income from $0.7 million in the three months ended June 30, 1999 to a net
loss of $6.6 million in the three months ended June 30, 2000. The decrease in
the three months ended June 30, 2000 was somewhat mitigated by significant non-
cash charges that were added back to net income as compared to the prior
period. Non-cash charges in the three months ended June 30, 2000 were $7.7
million, compared with $1.3 million in the three months ended June 30, 1999.
The non-cash charges in the three months ended June 30, 2000 comprised: (1)
$1.5 million relating to the write-off of deferred financing fees relating to
the Company's former debt that was repaid on June 13, 2000; (2) depreciation
and amortization of $1.8 million; and (3) amortization of the inventory fair
value adjustment of $2.4 million; (4) equity compensation expense of $1.7
million; and (5) amortization of deferred financing costs of $.2 million.
Net cash provided by operations totaled $7.8 million for the year ended
March 31, 2000. Net cash provided by operations in the 11 months ended March
31, 1999 amounted to $10.7 million. The decrease from the 11 months ended March
31, 1999 was due to a successful program to increase inventory turns primarily
in North America in the 11 months ended March 31, 1999 that accounted for a
large part of the higher level of operating cash flow in that period. The
decrease in the year ended March 31, 2000 was somewhat mitigated by improved
operating profit compared with the prior period.
Net cash provided by operating activities for the year ended March 31, 1998
amounted to $3.5 million. The higher level of cash flows from operating
activities for the 11 months ended March 31, 1999 resulted from the inventory
stock reduction program described above as well as increases in accrued
expenses and deferred revenue subsequent to the acquisition of the Predecessor.
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Cash flows from investing activities
Cash used in investing activities for the three months ended June 30, 2000
was $164.5 million. Cash used in investing activities during the three months
ended June 30, 1999 was $0.6 million. Cash used for the three months ended June
30, 2000 primarily resulted from the acquisition of Avery Berkel. Weigh-Tronix,
LLC incurred capital expenditures of $0.7 million for the three months ended
June 30, 2000 versus $0.4 million for the three months ended June 30, 1999. The
major capital expenditures in both three-month periods ended June 30, 1999 and
2000 were for tooling and equipment relating to manufacturing.
Cash used in investing activities for the year ended March 31, 2000 was $4.9
million. Cash used in investing activities during the 11 months ended March 31,
1999 was $80.3 million. Cash used in investing activities for the year ended
March 31, 2000 primarily resulted from capital expenditures and small
acquisitions. See "--Overview--Strategic Acquisitions and Investments" above.
Weigh-Tronix, LLC incurred capital expenditures of $2.7 million for the year
ended March 31, 2000 versus $2.4 million for the 11 months ended March 31,
1999. The major capital expenditures in the year ended March 31, 2000 were for
manufacturing equipment at the Fairmont, Minnesota manufacturing facility in
addition to the construction and outfitting cost of the new Santa Rosa,
California manufacturing site. The capital expenditures for the 11 months ended
March 31, 1999 related primarily to new machining and tooling equipment for the
production of fork lift scales in Fairmont, Minnesota in addition to product
tooling costs in the Consumer business to support the increased levels of new
product introductions. The balance of the cash used in the 11 months ended
March 31, 1999 was for the purchase of the Predecessor.
Cash used in investing activities for the year ended March 31, 1998 was $3.5
million, which was represented by routine capital expenditures by the
Predecessor.
Cash flows from financing activities
Cash generated from financing activities for the three months ended June 30,
2000 related primarily to the debt incurred in connection with the acquisition
of Avery Berkel and the re-financing of the Company's former indebtedness. Net
cash generated from the financing activities for the three months ended June
30, 2000 was $176.9 million, consisting primarily of proceeds from the issuance
of the Notes of $95.9 million; proceeds from the term loans and revolver
relating to the Senior Credit Agreement of $99.0 million; proceeds relating to
the issuance of membership interests of $39.5 million; and proceeds from the
issuance of Preferred Member Interests of $9.3 million. These proceeds were
primarily used to fund the acquisition of Avery Berkel, to repay the former
senior debt of $40.5 million, and to repay former senior subordinated notes of
$15.0 million. Cash used in financing activities for the three months ended
June 30, 1999 was $1.6 million, consisting primarily of payments made on former
senior debt of $2.3 million, net of proceeds of $1.4 million. In addition, the
Company paid $0.7 million with respect of its former senior subordinated notes.
Cash used in financing activities for the year ended March 31, 2000 was $2.3
million, consisting primarily of repayments under the existing revolving credit
and term loan agreement partially offset by draws on the senior revolving
notes. Cash provided by financing activities for the 11 months ended March 31,
1999 was $73.9 million, consisting primarily of borrowings to effect the
purchase of the Predecessor from Staveley Industries plc, offset by $8.2
million in early prepayments as a result of successful working capital
management particularly in the area of inventories along with improved
operating profits.
Cash used in financing activities for the year ended March 31, 1998 was $4.8
million and resulted primarily from the settlement of advances with the
Predecessor's former parent, Staveley Industries plc.
Liquidity and Capital Resources-Avery Berkel
Cash flows from operations
Avery Berkel's primary source of liquidity is cash provided by operating
activities.
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Cash provided by operating activities totaled (Pounds)2.3 million for the
year to March 31, 2000 compared with (Pounds)10.2 million in the year to March
31, 1999. This decrease was largely due to increased working capital, with cash
flow before working capital providing (Pounds)11.1 million for the year ended
March 31, 2000. The working capital increases were primarily driven by short
term disruptions surrounding the implementation of the new ERP system in the
U.K. This system went live during February 1999 and we were unable to perform
our normal creditor payments runs during February and March 1999. In addition,
we suffered various operational difficulties during the year ended March 31,
2000 which have resulted in higher than normal levels of stocks and debtors.
The related issues are being resolved and stocks and debtor levels are expected
to return to normal.
Cash provided by operating activities totaled (Pounds)10.2 million for the
year ended March 31, 1999 compared with (Pounds)11.2 million in the year ended
March 31, 1998. This decrease was largely due to: (1) lower operating profit
which, after adding back depreciation and amortization, decreased cash flow by
(Pounds)2.4 million; and (2) higher spending on restructuring provisions during
the year ended March 31, 1998 which was not repeated in the year ended March
31, 1999.
Cash flows from taxation and returns on investment
Cash flows from taxation and returns on investment for the year ended March
31, 2000 were (Pounds)5.3 million (inflow) and (Pounds)1.7 million (inflow),
respectively, compared with (Pounds)3.7 million (outflow) and (Pounds)0.0
million for the year ended March 31, 1999. This increase was primarily due to a
repayment of U.K. advanced corporation tax of (Pounds)7.0 million received in
respect of prior years together with interest supplement of (Pounds)1.6
million.
Cash flows from taxation and returns on investment for the year ended March
31, 1999 were (Pounds)3.7 million (outflow) and (Pounds)0.0 million,
respectively, compared with (Pounds)3.4 million (outflow) and (Pounds)0.5
million (inflow), respectively, for the year ended March 31, 1998. This
decrease in cash flows from returns on investments was primarily due to the
minority shareholders portion of the dividend from Avery India Ltd of
(Pounds)0.3 million.
Capital expenditure and financial investment
Capital expenditure and financial investment for the year ended March 31,
2000 was (Pounds)1.8 million compared with (Pounds)3.3 million in the year
ended March 31, 1999. The major capital expenditures in the year ended March
31, 2000 were for tooling and equipment for the new range of food retail
weighing equipment currently being developed and launched. This was partly
offset by receipts of (Pounds)2.4 million from selling the remaining surplus
properties in the U.K. as well as ongoing sales of motor vehicles as and when
they become due for replacement. Prior to the Merger, these vehicles were being
replaced by leased vehicles which led to decreased capital expenditures and
depreciation expense as well as increased operating expenses. Subsequent to the
Merger, Avery Berkel will re-evaluate the replenishment program for vehicles.
While the impact of Avery Berkel's financing decision with respect to vehicles
may impact reported operating results, management does not believe cash flow
will be materially impacted. The major capital expenditures for the year ended
March 31, 1999 related primarily to new IT equipment associated with the
implementation of our ERP system and other Year 2000 preparations. This
investment was in excess of (Pounds)4.0 million of capital equipment. This was
partly offset by receipts of (Pounds)3.7 million from selling surplus
properties in the U.K. as well as the ongoing sale of motor vehicles.
Cash used in investing activities for the year ended March 31, 1999 was
(Pounds)3.3 million versus (Pounds)2.7 million for the year ended March 31,
1998. The major capital expenditures for the year ended March 31, 1999 related
primarily to new IT equipment associated with the implementation of the ERP
system and other Year 2000 preparations. The capital expenditures for the year
ended March 31, 1998 also related primarily to new IT equipment as well as
expenditure on routine replacement of motor vehicles and service branch
refurbishments. This investment in IT was in excess of (Pounds)4.0 million of
capital equipment in the year ended March 31, 1999 and (Pounds)3.0 million in
the year ended March 31, 1998. Avery Berkel investment has been partly offset
by receipts of (Pounds)3.7 million and (Pounds)3.4 million from selling
remaining surplus U.K. properties in the years ended March 31, 1999 and 1998,
respectively, as well as ongoing sale of motor vehicles as and when they become
due for replacement.
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Cash flows from financing activities
Avery Berkel's main source of finance was through intercompany loans from
Marconi group companies. These loans were increased or repaid in line with
instruction from Marconi rather than through the funding or investing
requirements of Avery Berkel. Cash flows from Marconi loans were (Pounds)18.4
million inflow for the year ended March 31, 2000 compared with (Pounds)5.0
million outflow for the year ended March 31, 1999 and (Pounds)5.2 million
outflow for the year ended March 31, 1998. Avery Berkel also paid a dividend of
(Pounds)39.9 million to Marconi in the year ended 31 March 2000.
New Accounting Pronouncements
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires that all
derivative instruments be recognized as either assets or liabilities on the
balance sheet at fair value. Changes in the fair value of derivatives (gains or
losses) are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. In June 1999, the
FASB issued Statement of Financial Accounting Standards No. 137, "Accounting
for Derivative Instruments and Hedging Activities-Deferral of the Effective
Date of SFAS 133" ("SFAS 137"). SFAS 137 changed the effective date of SFAS 133
to all fiscal quarters for all fiscal years beginning after June 15, 2000. As a
result, SFAS 133 will be effective for the Weigh-Tronix business on April 1,
2001. The company is currently assessing the impact of this standard.
Revenue recognition
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 summarizes the staff's interpretations of the application
of GAAP to revenue recognition. Management has reviewed SAB 101 and has
determined that the company is in compliance with the requirements of revenue
recognition as prescribed by SAB 101.
Stock compensation
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation--an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and among other issues
clarifies the following: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
non-compensatory plan; the accounting consequence of various modifications to
the terms of previously fixed stock options or awards; and the accounting for
an exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000, but certain conclusions in FIN 44 cover specific events
that occurred after either December 15, 1998 or January 12, 2000. The Company
does not expect the application of FIN 44 to have a material impact on the
Company's consolidated financial position or results of operations.
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INDUSTRY OVERVIEW
We believe that the global industrial and food retail weighing/slicing
equipment markets are mature and fragmented. Growth in these markets results
from the increasing use of weighing applications in manufacturing and logistics
processes, the desire for more technologically advanced network-ready weighing
equipment and general industrial growth in specific end-user markets.
The weighing industry has been consolidating as customers become more global
and demand higher levels of product performance and after-market services.
Customer demands are being driven by the growing use of sophisticated networked
systems, increased focus on internationally recognized standards of quality
assurance and consistency (e.g., ISO 9002), and increased reliance on after-
market service to provide inspection, calibration and upgrade services on a
consistent, international basis. We believe that these demands are best met by
large, integrated and international companies.
Weighing instruments typically comprise a relatively small component of a
customer's aggregate capital spending but perform important functions by
improving productivity and enhancing quality and process control. As a result,
we believe that customers generally tend to value performance over price.
Weighing equipment manufacturers may also provide a significant amount of
service and support to their customers including repair, calibration,
certification and preventive maintenance. We believe that customers tend to
purchase from their existing vendors due to the additional costs of employee
training, spare parts and service and systems integration associated with
adding additional brands of weighing equipment to their operations.
Industrial
The industrial weighing market can be divided into three main geographical
areas: North America, Europe and the rest of the world. Each of these areas
represents approximately one third of the total market. The global industrial
weighing market is generally fragmented and features several large
international companies and a large number of local businesses which generally
focus on niche weighing applications or equipment at the lower end of the price
spectrum.
Globalization of customers, increasing sophistication of products and
customers' growing need for integrated automated systems are all significant
factors in the growth of the industrial weighing industry. In addition, growth
in industries such as chemicals, pharmaceuticals and food processing is leading
to increasing demand for weighing systems in those industries.
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Food Retail
The food retail weighing market is one of the world's most advanced weighing
markets. While the traditional market for basic food retail weighing equipment
remains strong, customers, and large food retail customers in particular,
increasingly require more sophisticated weighing systems which can be
integrated into their information systems. As a result, food retail weighing
manufacturers are expected to provide data management solutions to their
customers' particular requirements. We expect that food retailers will continue
to emphasize sophisticated and flexible weighing systems which are capable of
rapid upgrade. As a consequence, major investment decisions by food retailers
for the purchase of food retail weighing products will continue to be
influenced by the quality and capability of software systems as well as
traditional criteria of precision, accuracy and after-sales support.
In addition to customer preference, government regulation can have a
significant impact on the food retail weighing market as requirements such as
metrication in the U.K. and euro conversion in many parts of continental Europe
boost demand for service upgrades and new equipment.
The market for slicers and food processors encompasses: (1) food retailers;
(2) food service providers, such as take-out chains, restaurants and caterers;
and (3) food processing companies such as sandwich makers. We believe that the
trend towards home meal replacement, where supermarkets offer ready-to-eat
take-away meals, will lead to an expansion in this market.
Global consolidation in the food retail industry has presented additional
growth opportunities for manufacturers of food retail weighing products. Many
leading food retailers have been expanding internationally in the past two
years. With international expansion, customers are increasingly looking to
large global weighing systems providers who can adequately supply and service
their weighing needs in different countries.
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Service
Service plays a key role in the industrial and food retail customer's choice
of product. The installation, calibration, maintenance and support aspects of
service are particularly important in the weighing industry where the weighing
system is often a critical element of a customer's key processes. This
significance is further enhanced as customers become increasingly obliged to
conform to governmental weights and measures regulations on an ongoing basis.
In addition, customers are placing increased importance on total cost of
ownership, with the result that service is becoming a more significant part of
the value that can be offered by weighing companies.
Customers are also demanding more sophistication, flexibility and greater
responsiveness from service providers. Many industrial and food retail
customers require service providers who possess technical expertise with
increasingly complex products and who are able to provide year-round, 24 hour-
a-day coverage with extremely short response times. Consolidation of customers
in both the industrial and food retail sectors is furthering the demand for
higher levels of service and performance.
In situations where an original equipment manufacturer is unable to provide
the service quality or value that is required, customers turn to third-party
servicers. These third-party servicers range from competing original equipment
manufacturers who have service capacity to independent service-only companies.
This presents an opportunity for manufacturers who have that capability.
Consumer
The consumer weighing market is primarily focused on bathroom and kitchen
scales. While the market for bathroom scales is a defined worldwide market, the
market for kitchen scales is primarily focused in Europe, with a nascent market
in the U.S. In line with the general consumer appetite for high-tech consumer
products, customers increasingly prefer sophisticated electronic weighing
products which offer greater levels of accuracy. Accordingly, electronic scales
are replacing mechanical scales as the scales of choice in the consumer market.
In addition, consumers favor scales which incorporate health-related features
such as the ability to calculate body mass index. Fashion and color co-
ordination also play a role in the growth of the consumer weighing market.
The consumer weighing market is relatively fragmented. In each country there
are a small number of market leaders but there is no clear global player.
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BUSINESS
The Company
Weigh-Tronix, LLC is a leading international manufacturer, marketer and
servicer of industrial and food retail weighing systems. We are a global
weighing systems manufacturer operating in the U.K. industrial and food retail
weighing markets. We also operate an extensive service network, primarily in
the U.K., for both our own and third-party equipment which provides us with a
significant source of recurring revenues. In addition, we sell a broad range of
branded consumer scales and are currently one of the five largest suppliers of
slicers and other food processing equipment in the world. Our products are sold
under established brand names, such as Avery, Berkel, Salter and Weigh-Tronix.
Most of our brands have over 100 years of history and, as a result of their
longevity and our emphasis on product quality, we believe that they command
significant brand recognition. We market and sell our products in over 100
countries.
We established Weigh-Tronix, LLC on May 1, 1998 through the management
buyout (in partnership with Berkshire) of three business units of Staveley
Industries plc (Weigh-Tronix, Inc., Salter Weigh-Tronix Limited and Weigh-
Tronix Canada ULC, as well as all of the outstanding shares of Salter
Housewares Limited and Salter Weigh-Tronix Pty Ltd). These companies were
established in the 1970's to manufacture electronic scales.
SWT Finance, the issuer of the notes, is a special purpose finance vehicle
and has no operations. SWT Finance depends upon payments from other
subsidiaries of Weigh-Tronix, LLC to service its debt. Weigh-Tronix, LLC is a
holding company for its subsidiaries, with no material operations of its own.
SWT Finance is organized in The Netherlands and many of the subsidiary
guarantors are organized outside of the United States. As a result, there is a
risk that you will not be able to enforce a judgment regarding the notes. See
"Risk Factors--There is a risk that a non-U.S. court will not enforce a U.S.
judgment based on these notes."
On June 13, 2000, one of our subsidiaries, Weigh-Tronix UK Limited, acquired
all of the outstanding stock of GEC Avery International Limited and
Maatschappij van Berkl's Patent BV in consideration of (Pounds)105.0 million
and warrants valued at approximately (Pounds)0.8 million to subscribe for 5% of
the fully diluted ownership interests of Weigh-Tronix, LLC. Avery Berkel has
been doing business globally under the Avery Berkel name since 1993 when the
previous owner, Marconi Corporation plc, began to jointly market the products
of two of its subsidiaries, Avery and Berkel.
We believe that the merger will consolidate our position as a global leader
in the industrial and food retail weighing industries. Specifically, we see the
following benefits:
. Geographic Complement. Weigh-Tronix, LLC has a strong presence in the
North American Industrial weighing market and Avery and Berkel, whose
products have been jointly marketed in the past as Avery Berkel, have a
strong presence in the U.K. and Continental European industrial and food
retail weighing markets as well as a significant presence in other parts
of the world. As a result of the merger, we have a global sales and
distribution network spanning over 100 countries. With our geographic
reach, we expect to benefit from the trend towards globalization as
multinational companies demand suppliers with international presence and
integration capabilities to supply and support their operations.
. Broad Product Range. As a result of the merger, we have a significantly
expanded product range which we believe will enable us to compete more
effectively on a global scale. We expect to be able to cross-sell Avery
Berkel and Weigh-Tronix's products, enabling us to introduce existing
products into new markets. In addition, a number of the products of Avery
Berkel overlap with the products of Weigh-Tronix. We plan to streamline
our product range, which we expect to result in improved product
offerings and cost savings.
. Substantial Cost Saving Opportunities. As a result of the merger, our
operations overlap significantly, particularly our U.K. industrial
operations--including manufacturing, R&D, distribution, service,
marketing and sales. We believe that the merger will result in
significant ongoing cost savings. For example, we intend to integrate
existing marketing, sales, administrative and R&D functions into more
streamlined and centralized departments which, we expect, will lead to
lower payroll and operational
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costs. We have appointed one of our senior executives to focus full time
on the integration of the two companies. He will be supported by a team of
other employees and outside resources from a leading international
consultancy firm. We hope to realize approximately $12.0 million in annual
cost savings within the next 12-24 months, although we cannot assure you
that these cost savings will be achieved. We believe that the costs
(totaling $12.5 million) to achieve these synergies will be partially
funded through proceeds from the sale of closed facilities of
approximately $2.0 million and inventory stock reduction programs of
approximately $6.0 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
. Focused Weighing Company. Prior to the merger, Avery Berkel was a non-
core business of Marconi. By merging with Weigh-Tronix, Avery Berkel has
become part of a focused business with a defined strategy devoted
primarily to industrial and food retail weighing. This will help Avery
Berkel to develop a consistent business strategy which it has been unable
to do over the past ten years.
For the year ended March 31, 2000, we generated $375.8 million of revenues
on a pro forma basis and $36.2 million of EBITDA on an adjusted pro forma
basis. The following chart illustrates the geographic diversification of our
pro forma revenues for the year ended March 31, 2000.
Sales by Geography
[Pie chart entitled "Sales by Geography" divided into four sections. The first
section, beginning from the right and continuing clockwise, is titled "UK -
44%." The second section is titled "North America -28%." The third section is
titled "Continental Europe - 16%." The fourth section is titled "Rest of World
- 12%."]
We address three primary markets: industrial, food retail and consumer.
. Industrial: Our products range from basic mechanical scales to high-end
electronic scales which are often fully integrated into our customers'
data processing systems. Examples of typical products include counting
scales (which count items by weight), checkweighers (which verify that
products meet a pre-determined weight), road and rail scales (which can
measure weight without interrupting the movement of goods) and postal
scales.
. Food Retail: Supermarkets and other food retailers use our food retail
weighing products to carry out multiple weighing applications for the
handling of perishable goods from the back of the store to the checkout
counter. Our products range from stand-alone price-computing scales to
sophisticated networked systems that let the retailer control prices and
inventory volumes from one centrally-operated system. Our food processing
products include slicers, vacuum packers, mincers and tenderizers. We
sell our food retail product range to some of the world's largest food
retailers which includes many of the U.K.'s leading food retailers.
. Consumer: Our range of over 200 consumer products consists primarily of
bathroom and kitchen scales of which we believe that we are currently the
leading supplier in the U.K. Our customers for these products include
many leading U.K. and U.S. retailers.
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The following chart provides a breakdown of our pro forma sales for the year
ended March 31, 2000:
Sales Breakdown
[PIE CHART]
[Pie chart entitled "Sales Breakdown" divided into four sections. The first
section, beginning from the right and continuing clockwise, is titled
"Industrial-35%." The second section is titled "Food Retail-21%." The third
section is titled "Consumer-6%." The fourth section is titled "Service-38%."]
Competitive Strengths
We believe that our company has several competitive strengths, including:
. Leading Market Position and Brand Names. Avery, Berkel, Weigh-Tronix and
Salter are long-standing brand names associated with quality, precision
and accuracy. We attribute the strength of our reputation to our wide
portfolio of products, experience in providing customers with value added
systems solutions, global presence, sophisticated R&D capability and
responsive service teams.
. Large Installed Base with Recurring Service Revenue. We believe that we
have one of the largest installed bases of weighing instruments in the
world. This installed base provides us with close relationships and
frequent contact with our customers as well as sales leads and new
product and application ideas. Our 68,000 service contracts, which cover
both our own and third parties' products, provide a strong source of
recurring revenues. We also generate considerable revenues from providing
services on a non-contract basis as well as from the sale of spare parts
to our distributor networks.
. Innovative Technology. We believe that we have an innovative product
range and are at the forefront of technological development in our
industry. Over the past three years, we have committed considerable
resources to R&D. For the years ended March 31, 1998, March 31, 1999 and
March 31, 2000, Weigh-Tronix, LLC spent $2.0 million, $1.4 million and
$1.5 million on R&D, respectively. Avery Berkel spent approximately $4.4
million, $6.9 million and $7.5 million on R&D for the fiscal years ended
March 31, 1998, March 31, 1999 and March 31, 2000, respectively. We have
recently developed several new technologies which we believe will
significantly improve the efficiency of our products. Our industrial
weighing business has developed a new fork lift weighing device and a new
programmable process control weighing indicator. We have recently
introduced the triple metal vibrating beam, which has been incorporated
into postal and food retail scales, and quartzel digital technology, a
patented, digital weighing technology which has been incorporated into
counting scales, bench scales and postal scales. Both the triple metal
vibrating beam and quartzel digital technology measure weight by
detecting changes in frequency rather than changes in electrical
resistance and provide greater precision at a comparable cost to existing
technology. In addition, we are currently introducing a new portfolio of
food retail weighing products ranging from high precision, low cost
price-computing scales to high value-added PC-based weighing terminals.
Our new M Series scales, for example, incorporate a PC processor, while
we believe that our innovative MP Series is the first PC scale with a
Windows-based operating system providing true open architecture on the
market.
. Quality and Diversity of Our Customer Base. Our geographically diverse
customer base covers a wide cross-section of companies operating in over
100 countries across industries including agriculture, chemicals, food
processing, logistics, mining, pharmaceuticals, postal services, surface
transportation, waste management and general manufacturing. We have many
longstanding weighing customers, a
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number of which have been with us for more than 20 years. Our food retail
customers cover the whole spectrum of business in the food retail sector
from market stall traders to some of the largest national and
international food retail chains. No one customer accounted for more than
1.3% of our pro forma revenues for the year ended March 31, 2000.
. Focus on Providing Solutions. We work closely with our customers to
develop the weighing solutions they require. In our food retail business,
for example, our new generation scales have been developed in
consultation with major food retailers in Europe to ensure that our
products meet customers' existing and future requirements. In both our
industrial and food retail businesses, we have frequently worked in close
partnership with customers from the initial design phase, through the
engineering and manufacturing process, to the final implementation of
developed solutions.
. Strong Management Team with High Level of Ownership. Since Weigh-Tronix's
inception, management has successfully integrated three originally
disparate businesses and strengthened operations, resulting in EBITDA
growth from $9.6 million for the year ended March 31, 1998 to
$13.5 million for the year ended March 31, 2000; or 41.1% over the past
two years. Since 1996, the management of Avery Berkel has successfully
implemented a $32.0 million restructuring of the business and has
significantly improved operating profits. The management of Weigh-Tronix,
LLC owns or has the right to acquire approximately 14.0% of the ownership
interests of Weigh-Tronix, LLC.
Business Strategy
Our post-merger strategy for the combined business is as follows:
. Realize Benefits of the Merger. We are committed to realizing the
benefits of the merger including: (1) realizing annual cost savings; (2)
creating/identifying cross-selling opportunities; (3) combining our
global sales and distribution capabilities; and (4) consolidating our
position as a focused and leading international weighing company. We plan
to increase existing incentive-based bonus schemes for our employees
which we believe will improve motivation and performance and will assist
us in realizing the benefits of the merger.
. Grow the U.K. Industrial Business. We are focused on increasing both
product and service sales in our U.K. industrial business. We provide
products and services to over 12,000 manufacturing sites in the U.K.
However, we believe that there are over 130,000 manufacturing sites in
the U.K. which, we believe, will give us substantial opportunities for
growth. We expect to grow sales by leveraging our expanded sales
resources, continuing to develop new and innovative products and
targeting multi-site national and international companies in growing
industry sectors such as food processing, pharmaceuticals and chemicals.
See "--Service Overview."
. Emphasize Systems Solutions Offerings. We also plan to continue to
emphasize our food retail and industrial systems solutions offerings in
the U.S., the U.K. and Continental Europe. We believe our industrial
weighing systems solutions business has been growing at a compounded
annual growth rate of over 20% during the past three years. For the same
period, the number of food retail systems scales which we have sold to
supermarket chains and which are networked and linked to a PC has
tripled. We expect this trend to continue. Given the importance of
accurate weighing systems in our customers' processes, our approach is to
provide systems which improve the control of the process and provide the
necessary traceability for transactions to be fully auditable. To provide
these kinds of solutions, our systems are designed to be integrated into
our customers' systems; this involves working in close partnership with
our major customers. See "--Product Overview."
. Leverage New Product Innovations. We are continuously introducing new
products in each of our business areas. We recently launched a new range
of food retail products as well as several new industrial products. We
believe that these new products will attract new customers in our
existing markets and enable us to enter into new markets. We also plan to
use our new product ranges to
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maintain our strong market position with our existing customers and
increase our international sales. See "Research and Development."
. Reduce Costs. We are committed, as a general business policy, to continue
to emphasize the reduction of production and marketing costs in all our
product lines. One example of cost reductions is in the area of food
retail where we have successfully reduced the number of necessary
components by one-third for our more technologically advanced products.
Another example is the development of our QDT weighing cell which
provides digital output and which we can now produce for the same cost as
an analog cell. We expect that productivity and efficiency of both
service and sales resources will be increased by improved management
processes resulting from the introduction of our enterprise resource
planning system. We are working with our distributors to strengthen our
market position and reduce costs through the use of e-commerce and we are
also working to reduce inefficiencies in our supply chain. In addition,
we will continue to introduce initiatives into our manufacturing process
(for example, cellular manufacturing and re-locating manufacturing to
lower cost centers) which we believe will allow us to offer lower cost
products throughout our business.
Product Overview
In order to meet the demands of our broad customer base we have developed a
comprehensive product range.
Industrial Products
Our industrial weighing customers are engaged in a wide variety of
industries and require industrial weighing products with a large range of
applications. The products we manufacture or source from third party
manufacturers range from balances measuring to one-hundred-thousandth of a gram
for use in chemical laboratories to weighbridges weighing up to 300 metric tons
for use in the mining industry. Other typical applications include process
weighing of sugar juice in a sugar refinery and checkweighing of added value
ingredients in food processing. We supply counting scales to count parts in the
motor component and electronics industries and our road and rail scales are
used in the movement of bulk materials in the logistics, waste management,
mining and agricultural industries.
We also provide customers with weighing systems solutions offerings. While
many of our standard weighing products can be configured for various
applications, our systems solutions are customized by us for use by specific
customers and are designed to meet their particular requirements.
Our industrial products fall into four broad areas:
Transport Weighing. This business area deals with the provision of products
and services for the weighing of road and rail vehicles in all industries. Our
main customers are companies involved in power generation, mining, waste
disposal, agriculture, primary metals processing, freight transport and food
processing. The applications of these products include the weighing of bulk
solids and liquids and the checkweighing of goods arriving and being
dispatched. We offer basic vehicle weighing machines which range in price from
$16,000 to $40,000. We also provide systems solutions which are suitable for
capturing management data relating to weight and process control in driver-
operated and automated operations. These systems range in price from $25,000 to
$240,000.
Materials Weighing. Our main customers in this area are companies involved
in food processing, chemicals, pharmaceuticals, primary metal processing,
postal services and general manufacturing. Stand alone weighing products offer
the ability to record and control weights, checkweigh and count the number of
items being weighed. Typical applications include the checkweighing of
manufactured items such as engine pistons for accuracy and quality. Other
applications include: (1) weighing storage tanks for process and stock control;
(2) counting electronic parts for issue to the factory floor and checking
received quantities; and (3) weighing, counting and sorting mail. These
products range in price from $800 to $16,000.
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Our industrial systems solution products provide a configured and/or a made
to specification system solution for customers who require greater capabilities
from their weighing system than a basic stand-alone unit can provide. We offer
our customers integrated weighing and data collection systems with or without
process control. Typical applications include: (1) full and semi automation of
the weighing process to reduce manpower costs and improve efficiency; (2)
factory floor data acquisition and quality reporting systems to conform to
weights and measures regulations; and (3) reporting on quality and process
issues. These systems range in price from $12,000 to $24,000.
Filling. Our main customers are involved in food processing, chemicals,
paints, production of cleaning materials and production of industrial gases.
Our filling products are controlled by weight or by volume measurement and we
offer products capable of filling from 5 milliliters to 1,250 liters. Typical
applications include: (1) the filling and dispensing of sauces and semi-solid
food; and (2) filling of items such as paint, cleaning materials and liquid
propane gases. Stand alone filling products range in price from $6,000 to
$80,000.
Configured and made to specification filling systems solutions offer
integrated filling, capping, lidding and conveyor systems which can be
integrated into manufacturing processes. We offer systems which allow semi or
fully automated filling. These systems range in price from $16,000 to $240,000.
Pre-pack. Pre-pack products offer weighing, labeling and packing
capabilities. Our main users are companies involved in food processing
industries. Typical applications include: (1) the dynamic checkweighing of pre-
packed products such as meat and cheese; and (2) the vacuum packing of products
for transport and display. Our manual labeling systems provide weight and price
information and our automated labeling systems can weigh and label items while
on a conveyor belt. Our products offer customers the ability to pack, label and
checkweigh from 100 grams to 60 metric tons. Stand alone units range in price
from $3,000 to $32,000.
Integrated pre-pack systems, whether configured or a made to specification
solution, offer integrated packing, weighing, labeling and data collection.
Typical applications include full and semi automation of the weighing, packing
and labeling processes which assist customers in conforming to their own
quality standards and with relevant regulations. These systems range in price
from $16,000 to $240,000.
Food Retail Products
We sell food retail weighing and food processor products and provide after-
market service to customers ranging from small grocery/convenience stores to
large supermarkets where many applications can be found in both rear and front
of store operations. Weighing is a key element in food sales, particularly
because food is commonly sold by weight. Generally food is weighed on arrival
for stock and payment control and specific food items are then pre-packed,
weighed and price-labeled. Other goods will either be weighed at the counter,
or on self-service scales or at the check-out counter at the time of sale. Our
food retail products range in price from $500 to $6,000 per machine.
Depending on the type of store, the scales employed by our food retail
customers range from basic price computing scales, where the unit price is
entered and the "price to pay" is displayed, to more sophisticated system
scales which can interface with the food retailer's information management
system to retrieve product and price files from a centralized data base (which
may be located at the food retailer's corporate headquarters) which can send
key data back to the central system. The types of scales used include:
. Self-service Scales: Scales where customers select and weigh the goods
themselves.
. Checkout Scales: Scales which are connected to the point of sale
(scanning) system and register the price of loose fruit and vegetables.
. Counter Scales: Scales which are normally staff operated and which are
used in the fresh food counters of most supermarkets.
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Beginning in July 1999, we began introducing a new food retail product range
which provides innovative and competitive hardware and software weighing
solutions. These products are gradually replacing our existing product lines.
This new retail product range is divided into three categories:
Basic Scales. Our new FX range offers a low cost, price computing scale
which caters primarily to the independent food retailer market, namely
newsagents and convenience stores, grocers, butchers and market stall traders.
We sell these products under two brand names, Avery Berkel and Brecknell. Our
checkout range offers a choice of products which simply weigh or weigh and
compute price as well. Our scanner scale range is more versatile because the
operator can either weigh or scan goods, depending on their type, and the
compact size of the scales makes them particularly suitable for the checkout
environment.
Mid-range Scales. Our "mid-range" scales consist of price computing scales
which have numerous applications. These applications include: (1) basic pre-
pack labeling; (2) electronic cash register modes (where a cash drawer is
attached to the scale); and (3) issuing a bar code which can be scanned by EPOS
(electronic point of sale) terminals, which extract the product code and price
payable. We typically sell our mid-range scales to larger independent food
retailers and to mid-size supermarket chains.
High-end Scales. Our newly launched M Series scale is a sophisticated
system-based scale which integrates into a customer's individual store
management system. These products are capable of networking with other systems
and are easily integrated into store computers. Our new M Series range is
designed to reduce total cost of ownership by as much as 25% through a number
of innovative features, such as improved labeling capabilities.
We believe that our new MP Series is the first PC scale on the market with
true open architecture. These scales allow food retailers to develop their own
customer service and counter management software, which can be run on the MP
Scale's touch screen terminal. The MP Series encompasses features that are
designed to increase sales and improve counter management. For example, the
scale can display targeted advertising messages such as promotions on related
products.
We believe that the total cost of ownership is increasingly regarded by
customers as a better measure of economics than price as the capital costs of
food retail scales generally only accounts for approximately 10% of the total
cost of ownership over the lifetime of the product. Maintenance, management,
operational and other associated costs, as well as the cost of consumables (for
example, the cost of label rolls), account for the balance of the costs of
ownership.
Slicers and Other Food Processors. Our slicer and other food processor
customers tend to be the same as our food retail weighing customers since
whenever food is sliced or prepared, a weighing application is generally also
needed.
Our slicers are sold to food retailers and to the catering/hospitality
markets under the Berkel brand name. We sell two categories of slicers: manual
slicers, which are designed for use at a delicatessen counter and automatic
slicers, which are designed for use at rear of store operations such as pre-
pack operations.
In addition to slicers, we supply other food processors which complement our
food retail product offerings. These products fall into three broad categories:
"red meat equipment", preparation machines and cooking and processing
equipment. We have responded to the trend for home meal replacement, whereby
supermarket customers are buying increasing amounts of ready to eat food
products, by enhancing our product portfolio with products such as rotisseries.
Consumer Products
We manufacture or source a wide-range of products under the Salter brand
name. The following is a selection of our products:
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Bathroom Scales. We sell a wide range of electronic bathroom scales
featuring strain-gauge weight sensing systems. Some of our scales calculate
body mass index which is an internationally recognized measure of healthy
weight. We also manufacture mechanical bathroom scales as well as professional
scales for use in doctors' offices and medical health clinics. We market these
products in the U.K. and over 80 other countries.
Kitchen Scales. Our kitchen scales range from traditional kitchen scales to
"add & weigh" scales, which allow individual weighing by each ingredient within
the same container, high capacity scales, diet kitchen scales and antique
kitchen scales. We market kitchen scales in the U.K. and we are continuing to
expand the export side of this business.
Other Products. We also sell a range of other kitchen products including
salt and pepper mills, insulated servers to keep pre-cooked food hot, time and
temperature gauges, cafetieres and insulated jugs.
Service Overview
We believe that maintaining, developing and expanding our service business
is vital to our continued success and we regard our service business as a major
strength. We provide service in some of our key markets across the world using
our own service operations and extend our reach by partnering with distributors
who provide service coverage outside of our areas of operations. While a large
part of our service business consists of servicing our own products, we have
extensive and growing experience in servicing competitors' products and other
third party non-weighing equipment. Our extensive coverage and comprehensive
infrastructure allows us to provide a high level of performance and a wide
range of service offerings. A discussion of revenues by region for the last
three fiscal years can be found in "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Our extensive service capability is also a key advantage in helping us win
new product sales. Increasingly, our customers want to ensure that, having
purchased a product that is critical to their business, they have the support
of an efficient and reliable service provider. Our experience has shown us the
mutual benefit of product sales and service, each having successful "pull
through" on the other. This connection becomes more significant as products
become increasingly integrated into the customer's business and as the customer
considers the total cost of ownership when making a purchase.
Globally, we operate a network of service centers and dedicated service
teams with over 1,600 skilled personnel to service all of our products and a
large number of third-parties' products around the world. Whether we directly
provide servicing of our products depends, to a large extent, on the
characteristics of the particular market, such as the level of start up costs
and the geography. In Canada, for example, where our customers are largely
concentrated in a small number of locations, we offer a full service function,
but in the U.S., where our customers are much more geographically diverse, we
generally do not. In the U.S. we use our network of 76 key distributors to
offer national service coverage to major customers. We often train the
distributors' service staff ourselves to ensure a high-level of quality and
performance. In addition, we generate revenues from these distributors through
the sale of spare parts.
Our extensive coverage has become increasingly important as customers
consolidate to form larger national or international operations. The customers
expect their suppliers to be able to provide services wherever they operate. We
regard this as a growth opportunity for us, and it is an area where we believe
we have been successful. For example, we gained significant business from a
leading French supermarket chain when it expanded into Poland because we were
able to provide it with local support and service in that country.
Our service offerings cover an extensive range of options for our customers.
For large corporate customers we can offer an all-inclusive, multi-service,
multi-site package with varying response times from as little as two hours. For
smaller retailers we can offer a simple time and materials package better
suited to their needs. Our own service operation has over 68,000 maintenance
contracts covering over 290,000 installations. Our service
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offering extends to legal verification of the equipment in many of our
operations, ensuring that the customer is not reliant on the various trading
standards bodies to carry out subsequent testing.
To be able to deliver a high standard of service, an efficient service
infrastructure is essential. We believe that our ISO 9002 accredited
infrastructure in the U.K., for example, is the most comprehensive and
efficient in the industry. We have over 650 trained technicians located across
the U.K., supported by regional service centers in key locations and a central
spares warehouse able to offer quick delivery of parts not carried by our
technicians. Our National Response Centre in Walsall, U.K. handles most
incoming service calls, totaling approximately 5,000 calls per week. Using our
recently introduced IT system, we are able to deal with each call effectively,
either by clearing the problem with the customer over the telephone or by
dispatching a technician to visit the site. We are then able to manage the
service call to ensure that the contractual requirements are met and the
problem is resolved efficiently. Data from the on-site technician is fed back
using wireless data terminals which allow us to monitor the call in real-time
and use the data to provide performance statistics for our own use and for use
by our customers. This is becoming an increasingly important requirement as
many customers stipulate stringent service levels when entering into service
contracts. For example, one of our major customers, which has thousands of
sites across the U.K., now has on-line access to data on its current
outstanding service calls, giving full visibility of our performance. In
addition, we offer our customers the ability to use the Internet to request
service calls and monitor our performance. We believe that large corporate
customers are increasingly seeing these services as a significant advantage
that we offer over our competitors.
In the U.K., our experience in field service and our infrastructure has
allowed us to expand into non-weighing service activity which we believe has
significant growth potential. In the U.K., we provide full warranty support for
a growing range of IT products and systems including notebooks, laser printers,
digital projectors and scanners and PC peripheral devices for blue-chip
suppliers on an exclusive basis. This includes the provision of end-user
hotline support, as well as any necessary on-site repair. We have recently been
awarded a contract by a large new customer for the on-site support of their
Dell PCs across the U.K. Our growing reputation in this area was recognized
last year when, choosing from all of their service providers worldwide, one of
our well-known customers awarded us its "best third party service provider"
award.
While we have one common infrastructure, the delivery of services is via
specialized teams which focus on our particular market sectors. This allows us
to tailor our services to the needs of the different sectors while gaining the
operational benefits of a uniform and efficient infrastructure.
Customers
We have a large and diverse customer base. On a pro forma basis for the year
ended March 31, 2000, 44.0% of sales were derived from the U.K., 16.2% were
derived from Continental Europe, 28.0% were derived from North America and
11.8% were derived from the rest of the world.
Our customers operate in virtually every major industry. Our industrial
customers are engaged in a wide range of industries including agriculture,
airlines/airports, cement, chemicals, construction, food processing, logistics,
mining, motor components, petrochemicals, pharmaceuticals, postal services,
primary metals, power generation, processing, steel, storage, surface
transportation, textiles and waste management as well as general manufacturing.
In the food retail sector our principal customers are hypermarkets,
supermarkets, grocery stores, delicatessens and butchers. Our primary target
customers for our slicers and food processors are the same customers as for the
food retail sector although we also supply customers in industrial food
applications, for example in sandwich preparation and in the wider
catering/hospitality market. Customers of our consumer business consist
primarily of department stores, pharmacies, catalog companies and kitchenware
stores.
In the year ended March 31, 2000, our top ten customers accounted for
approximately 10% of pro forma sales and no single customer represented more
than 1.3% of pro forma sales. We believe this diverse customer base helps
reduce our exposure to industry and regional economic fluctuations. A large
number of the
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companies with which we do business are long standing customers. We perceive
this to be a significant advantage to us as it enables us to better respond to
their business needs.
Sales and Distribution
We operate a dual sales strategy consisting of our own direct sales force
and an extensive global network of distributors. Depending on the particular
product and the market, we either focus on just one of these routes to market
or we adopt both methods. For example, in the U.S. industrial weighing sector,
we predominantly sell our products through our network of 76 key independent
distributors, whereas in the U.K. industrial weighing market, we sell our
products primarily through our direct sales force as well as through a network
of distributors. For each of our industrial, food retail and consumer products,
and for each of the countries in which we operate, we determine the most
appropriate route to market for our products. We consider a number of factors,
including: (1) the level of sophistication of our established distribution
network and the ability of the distributors to fully understand, effectively
market, sell and service our products and, in particular, our high-end
products; (2) the cost effectiveness of running a direct sales force; (3) the
likelihood of distributors purchasing larger quantities of products from us
than end-users might; and (4) the expectations of our customers in a particular
region. In addition, when using distributors, we often work closely with them
in all aspects of their sales process.
In the major countries where we operate, we have national key account teams
who monitor the development of particular customers' business operations. To
keep pace with the increasing globalization of our customers, we have recently
introduced an international key account management initiative so that we can
better serve and cover our multi-national customers by having designated staff
who monitor the international aspects of our customers' business operations and
with whom our customers can communicate. The international key account managers
work closely with the national key account managers, allowing us to respond
more rapidly to our customers' global business requirements. In the U.S., U.K.,
France and Germany we also run telemarketing campaigns to create customer
awareness, generate leads and sell products and services directly.
We have recently increased our efforts for Continental European expansion
and we have gained new customers in France, Italy and Germany. We are also
beginning to establish a presence in Asia and North Africa because we expect
these markets to become increasingly important as they become more
industrialized.
Our sales and distribution operations are organized as follows:
UK and Ireland. We have a team of over 100 dedicated food retail and
industrial sales people who are responsible for direct sales and for co-
ordinating sales nationwide. In addition, we use a network of distributors,
independent dealers and other suppliers. We also have a separate sales team
working for our consumer business which is augmented by various agents and
distributors. We sell low cost auxiliary products, such as label-rolls and
sharpeners for slicers, via our telesales operation.
Continental Europe. We have operations in France, Germany and Italy, each of
which has its own direct sales force and network of distributors. In a number
of other Continental European countries, we have networks of distributors
managed from the U.K. Our consumer products are also sold in these markets by
direct sales teams and by distributors.
North and South America. Our industrial weighing products are sold almost
exclusively via distributors in the U.S. with the exception of seven company
owned stores. We have established strong relationships with these distributors
by demonstrating our commitment to this channel. As an illustration of our
commitment to our distributors and to the need to integrate them into our
business, we hold "Distributors Counsel" meetings twice a year to exchange
views on our markets. We perceive our distribution network to be a major
advantage of our company. In Canada, we sell through a direct sales operation
and also use distributors and dealers. In Mexico, we have both a direct sales
operation and a network of distributors. From Mexico, we also provide
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technical support to customers and dealers throughout the Latin American
region. In North and South America, we sell our food retail and consumer
products directly and we have limited sales via the mail order market.
Rest of World. We have a number of direct sales operations in several other
regions, the most material of which are India, South Africa and Malaysia. We
also use distributors to sell our food retail and industrial and, to a lesser
extent, our consumer products in these regions.
We expect that the Internet will become an increasingly important component
of our business. We are currently working with distributors to bring them on-
line via an Internet link-up. This will allow distributors to order products
directly as well as check the progress of their orders and levels of stock. It
will also enable distributors to access technical support directly.
Marketing
Each of our businesses has a dedicated marketing team. The role of these
teams is to formulate, propose and implement our strategy with a view to
profitably expanding market share. Marketing efforts include consolidating and
rationalizing the product portfolio based on customers' requirements; adapting
products to specific customer preferences; identifying new markets,
applications and products; understanding conditions and trends in particular
market sectors; and recommending routes to market. We work closely with our
international operations to ensure that customer requirements in various
countries are included in product specifications. For example, we conduct field
trials for products in a selection of countries in order to better understand
the specific local preferences and to obtain feedback.
We primarily advertise at trade fairs and through professional directories.
We also communicate with our customers through industry journals.
Manufacturing
We have 12 principal manufacturing sites located throughout the world. Our
industrial weighing products are manufactured at all of our sites, while food
retail weighing production is focused in the U.K. and India. In addition,
slicers and food processors are manufactured in the U.S. We believe that
approximately 95% of our consumer products are manufactured by sub-contractors
in China to our specification and design and that the remaining 5% are produced
in the U.K.
We manufacture many of our own components, including many innovative
technical components which, we believe, add significant value to our products.
However, when it is more efficient, we outsource manufacturing to reliable
third-party suppliers. We anticipate further opportunities for outsourcing and
low cost manufacturing. We have considerable manufacturing experience in
transducer technology, electronics, heavy fabrication, precision machining and
product assembly. We run a number of quality programs worldwide since many of
our products and processes require tight quality control to ensure conformity
to type approvals, legislation and regulatory requirements. Most of our
manufacturing facilities are ISO 9001 accredited. We operate internationally
approved weighing laboratory facilities (capable of testing whether new
products will comply with applicable quality standards) allowing high levels of
quality control and reduced lead times for product approvals. Many of our
weighing products are subject to an extensive calibration process involving
compensation for gravity, humidity and temperature.
In the near future, we intend to close our facility in West Bromwich, U.K.
because it duplicates facilities of our Birmingham, Walsall and Leicester
plants. We are also planning to close one of our overseas facilities which
overlaps with another, more efficient plant. See "--Property."
Working Capital
Weigh-Tronix, LLC's working capital management is focused on practices that
result in the most effective utilization of the working capital items.
Inventories are maintained at levels to support just-in-time manufacturing
practices. Weigh-Tronix, LLC provides rights to return merchandise for a
restocking fee of approximately 20% of the product value. In addition, Weigh-
Tronix, LLC does not normally provide extended payment terms to customers. In
order to strengthen our ongoing working capital position, Weigh-Tronix, LLC
will continue to improve upon practices such as matching accounts receivable
and payable turnover and optimizing inventory levels.
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Research and Development
As a result of the merger we have two R&D teams. We intend to combine these
teams to create one streamlined R&D group which will share technology and work
closely together from its centers in the U.K. and the U.S. By creating a
uniform R&D group, we expect to be able to deliver high quality R&D at a
reduced cost.
Our business has become increasingly dependent on our ability to develop
technologically superior products, particularly in light of customers' desires
for higher-performance weighing systems. In order to address this customer
demand, we have incurred considerable expenditures on R&D over the last three
years. For the years ended March 31, 1998, March 31, 1999 and March 31, 2000,
Weigh-Tronix, LLC spent $2.0 million, $1.4 million and $1.5 million on R&D,
respectively. Avery Berkel spent approximately $4.4 million, $6.9 million and
$7.5 million on R&D for the fiscal years ended March 31, 1998, 1999 and 2000,
respectively. As a consequence, both in the U.K. and the U.S., our active
research and product development effort has resulted in several innovative
product designs and technologies which, we believe, afford us competitive
advantages. We believe that the benefits of our increased R&D expenditures have
been realized in our new ranges of industrial, food retail and consumer
products.
We organize our R&D teams into our industrial, food retail and consumer
businesses so that product development occurs close to manufacturing. Our
innovations include products which require fewer components than their
predecessor models and offer enhanced features and flexibility to the user.
Examples of products which incorporate these innovations include:
. Forklift Scales--We have developed a scale that can be attached to a
forklift so that pallets can be weighed while being transported on the
forklift which is intended to save time and improve productivity.
. Indicators--We have developed a new indicator (the box that reads,
records and displays results from a load cell or weighbar) with a
relatively easy to program software package. This technology allows
companies to customize weighing applications and integrate weighing data
into information systems.
. New Retail Products--We are currently launching new basic, mid-range and
high-end food retail weighing product ranges. The basic FX range was
launched at the end of the first quarter of 1999; the mid-range GX
Series, produced exclusively for us under a joint development
arrangement, is expected to be launched this summer; and the more
technologically advanced M Series and MP Series were launched in the
first quarter of 2000. Together, these comprise our first completely new
range of retail products since 1992. We have spent considerable time and
financial resources in developing these new product ranges which we
believe meet the requirements of our key customers. We have also
introduced significant technical developments into the new range. We have
incorporated PC technology, for example, to develop flexible and
configurable system solutions, enhanced touch-screen technology and
systems integration software.
. QDT--We manufacture the only direct to digital quartz load cell in the
market which is sold under the name Quartzell@ Digital Technology. We
believe that this technology allows for greater resolution (i.e., more
precise weighing) than any other load cell available. We have applied QDT
to checkweighing/ counting systems and are working together with two
major IT companies to supply QDT to postal services globally.
. Truck Scale--We recently redesigned our truck scales to improve quality
and reduce costs. Features of these scales include enhanced durability,
ease of installation and simplified foundation requirements.
. Weighline--We are currently renegotiating a license from the patent
holder to manufacture and sell under our name the Weighline railweight
system that can weigh railcars which are travelling at speeds of up to
60kph.
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Competition
We face considerable competition in each of our business areas. The weighing
instruments markets are fragmented both geographically and by application.
These markets are undergoing substantial consolidation. As a result, we face
competition from international, national, regional and local companies, many of
which are well-established in their particular markets and have strong
reputations and brand recognition.
The global industrial weighing market features several large national and
international companies and a large number of local businesses focused on niche
weighing applications or equipment at the lower end of the price spectrum. The
global food retail weighing market features six large international companies
as well as numerous smaller specialty weighing companies competing at the local
level. In the global consumer market, there are a small number of market
leaders, but there is no clear global leader. We believe that we are one of the
largest weighing systems manufacturers in the world. In our various businesses
we compete primarily based on the design and functionality of our products,
product reliability and service quality. Many manufacturers employ sales
personnel to sell directly to retailers and distributors. Industrial and food
retail weighing businesses also compete with specialty distributors and other
entities engaged in businesses that provide avenues of distribution linking
manufacturers, retailers, and consumers. Some of our competitors may have lower
overhead costs than us, have greater financial resources or have better
knowledge of, or relationships in, local and regional markets which may give
those competitors advantages in offering services and products.
Raw Materials/Suppliers
The primary materials necessary for the manufacture of most of our products
are steel and electronic components. Both the steel and electronics component
industries are highly competitive, enabling us to negotiate aggressively on
price. Generally, the materials necessary for the manufacture of our products
are readily available.
Our top three suppliers account for less than 6.0% of the materials supplied
to us for the year ended March 31, 2000. We are not dependent on any particular
suppliers or specialist raw materials, although all of our electronic products
use electronic components. The global demand for electronic components is
outstripping supply, resulting in potential market shortages and/or price
increases. If these problems continue, they could have a material adverse
effect on us. See "Risk Factors--Our electronic products depend on specific key
electronic components."
Employees
As of March 31, 2000, on a pro-forma basis, we had approximately 5,490
employees worldwide. Included in that amount is 1,990 employees at our Indian
subsidiary. Some of our Canadian, Irish, Malaysian and South African employees
(totaling approximately 100 people) are affiliated with unions. Similarly,
roughly half of our U.K. work-force (totaling 790) is unionized. Only 36 of our
U.S. employees are affiliated with a union. Our Indian joint venture is
currently involved in mandatory negotiations regarding salaries and conditions
for workers. In recent years, we have experienced a short period of strike
action at our Indian joint venture towards the conclusion of each negotiation.
However, in each case, the matter has been resolved to our satisfaction and
without material disruption to our business. We believe our relations with our
employees to be good.
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Property
We own seven of our 12 principal properties and lease the other five. Our
aggregate annual lease payments in the year ended March 31, 2000 were
approximately $0.8 million. In connection with the senior credit facility, we
have granted liens over most of the properties that we own.
The following table sets out information about our principal properties.
<TABLE>
<CAPTION>
Lease
Owned/ Expiration Building Site
Facilities by Country Leased Date Principal Use (square ft)
--------------------- ------ -------------- -------------------------------- -------------
<S> <C> <C> <C> <C>
U.S.
Offices/Manufacturing
Fairmont, Minnesota..... Owned -- (Industrial) 250,000
Laporte, Indiana........ Owned -- Manufacturing (Industrial and
Food Processor) 130,000
Offices/Manufacturing
Santa Rosa, California.. Leased November 2009 (Industrial) 60,000
Canada
Offices/Manufacturing
Montreal, Quebec........ Leased October 2000 (Industrial) 45,000
U.K.
Birmingham.............. Owned -- Offices/Manufacturing
(Industrial and Food Retail) 300,000
Leicester............... Leased December 2002 Manufacturing (Industrial) 16,000
Tonbridge............... Leased September 2002 Offices/Manufacturing (Consumer) 33,500
Walsall................. Owned -- Manufacturing (Industrial) and
Service Center 16,000
Offices/Manufacturing
West Bromwich........... Owned -- (Industrial) 60,000
India
Calcutta................ Leased January 1989(1) Offices/Manufacturing
(Industrial and Food Retail) 144,000
Delhi................... Owned -- Offices/Manufacturing
(Industrial and Food Retail) 153,000
South Africa
Offices/Manufacturing
Johannesburg............ Owned -- (Industrial) 80,000
</TABLE>
--------
(1) See "Risk Factors--A dispute relating to the lease of our Calcutta property
may disrupt our business operations at that site."
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Under the senior credit facility, Weigh-Tronix, LLC and its subsidiaries
granted liens on the following real property:
<TABLE>
<CAPTION>
Property Leased/Owned by Entity
-------- -----------------------------------
<S> <C>
One Berkel Drive............................ Berkel Incorporated
Laporte, Indiana
Kings Road.................................. Avery Berkel Limited
St. Peter PortGuernsey
9 Glebe Street.............................. Avery Berkel Limited
Dumfries, Scotland
43 Hillgrove Street......................... Avery Berkel Limited
St Helier
Jersey
1000 Armstrong Drive........................ Weigh-Tronix, Inc.
Fairmont, Minnesota
Unit 1, Tilson Road......................... Salter Weigh-Tronix Limited
Baguley
Greater Manchester
Premises at George Street and Spon Lane..... SWT Finance BV (freehold)
West Bromwich
West Midlands
B706AD
England
George Street and Spon Lane West............ Salter Weigh-Tronix Limited (lease)
Bromwich
West Bromwich
West Midlands
B706AD
England
Soho Foundry................................ Avery Berkel Limited
Foundry Lane
Smethwick
Warley West
Midlands
Sertec Site................................. Avery Berkel Properties Limited
Woodruff Way
Tamebridge
Walsall
Intec Site.................................. Avery Berkel Properties Limited
Woodruff Way
Tamebridge
Walsall
Land adjacent to Tame Valley Canal.......... Avery Berkel Properties Limited
Tamebridge
Walsall, West Midlands
Land on the Southwest side of Foundry....... Avery Berkel Limited
Row
Camborne, Redruth
Units D1 and D2............................. Avery Berkel Limited
27 Jarman Way
Orchard Road
Royston
9 Carden Street............................. Avery Berkel Limited
Worcester
</TABLE>
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<TABLE>
<CAPTION>
Property Leased/Owned by Entity
-------- ------------------------
<S> <C>
10A and 10B Humber Bridge Industrial................... Avery Berkel Limited
Estate
Barton-upon-Humber
Leasehold Units 3 and 4 North Road..................... Avery Berkel Limited
Bridgend Industrial Estate
Bridgend
Mid Glamorgan
Leasehold premises at Kings Street..................... Avery Berkel Limited
St Nicholas Industrial Estate
Carlisle
Unit 84 Willows Court.................................. Avery Berkel Limited
Teesside Industrial Estate
Thornby on Tees
Cleveland
Leasehold premises at 72-76 Baggrave................... Avery Berkel Limited
Street
North Evington
Leicester
1 Ashley Hill Trading Estate, Bristol.................. Avery Berkel Limited
Unit 1, Fry House...................................... Berkel (Ireland) Limited
Athlone, County Westmeath
Ground Floor of Unit 4................................. Berkel (Ireland) Limited
Ballybrit Upper Industrial Estate
Galway
</TABLE>
Environmental Regulation
Our operations are subject to comprehensive environmental laws and
regulations including those relating to noise, soil contamination, air
emissions, waste water discharges, the handling and disposal of solid and
hazardous waste, and the remediation of contamination associated with the
current and historic use and disposal of hazardous substances. Permits are
required for some of our operations, and these permits are subject to
modification, renewal and revocation by the environmental issuing authorities.
Governmental authorities have the power to enforce compliance with applicable
laws and regulations, and violations may result in fines or injunctions,
including the cessation of operations, or both. In addition, where operations
have given rise to contamination of property or property we occupy has been
historically contaminated, governmental authorities may require measures to be
taken to address or remediate the contamination. We believe that environmental
laws and regulations have not had a material effect on our capital
expenditures, earnings or competitive position. However, we cannot assure you
that we will not be required under existing or future environmental laws to
spend amounts which will have a material adverse effect on our financial
condition and operations as a whole. We believe that we are in substantial
compliance with material applicable environmental laws and regulations and are
not aware of any substantial liabilities under these laws and regulations. See
"Risk Factors--As a manufacturer, we are subject to environmental regulations
and potential liability."
Intellectual Property
We hold more than 120 patents and trademarks, primarily in the U.S. and
Europe. Our products generally incorporate a wide variety of technological
innovations, a number of which are protected by patents. Products as a whole
are generally not protected by individual patents. Accordingly, no one patent
or group of related patents is material to our business. We also have numerous
trademarks and consider the Avery, Berkel, Weigh-Tronix and Salter names and
logos to be material to our business. The Brecknell, Dillon, NCI and
Weighmaster brand names and logos are also important to our business.
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Market Risk
Weigh-Tronix, LLC had $29.0 million outstanding under its $50.0 million
revolving credit facility as of June 30, 2000. Interest rates for amounts
outstanding under the revolving credit facility are currently: (1) in the case
of loans denominated in U.S. dollars, Weigh-Tronix, LLC may choose between a
rate of LIBOR plus 3.25% and a base rate plus 2.25% or (2) in the case of loans
denominated in sterling and euro, LIBOR plus 3.25%. In addition, an annual
commitment fee payable on the daily average unused portion of the revolving
credit facility is currently 0.50%. The effective interest rate on the
outstanding variable rate borrowings at June 30, 2000 was 11.75%.
To mitigate against the risks associated with increases in interest rates,
Weigh-Tronix, LLC historically has entered into and plans to continue to enter
into interest-rate protection agreements with members of Weigh-Tronix, LLC's
banking group. The cash differentials paid or received under interest rate swap
agreements are recognized as adjustments to interest expense. The fair values
of interest rate swap agreements are not recognized in the consolidated
financial statements, as these agreements modify the interest rate basis (i.e.,
fixed or floating rate) of debt instruments of similar face amounts and term.
Management is currently renegotiating the interest-rate protection agreements
that related to the former senior debt for the new senior credit facility.
Weigh-Tronix, LLC enters into foreign exchange forward contracts to manage
exposure to fluctuations in foreign currency exchange rates. Weigh-Tronix, LLC
does not hold or issue derivative financial instruments for trading purposes.
Exchange differences arising during the contract term are marked to market and
are included in other (income) expense in the consolidated statements of
operations. Weigh-Tronix, LLC regularly monitors its foreign currency exposures
and ensures that hedge contract amounts do not exceed the amounts of the
underlying exposures.
Legal Proceedings
We are party to a number of legal proceedings that have arisen in the
ordinary course of our business. We have been in rent negotiations with the
landlord of our Calcutta property for a number of years. We have been unable to
reach an agreement and the landlord has sought to terminate the lease. We have
objected on the ground that the rent being requested is unreasonable. The
matter is now before the Indian courts and if the landlord persists with the
litigation we expect it to be a considerable time before any decision is made.
If this matter is not successfully resolved, we may need to relocate to another
facility and our manufacturing operations in India could be adversely affected
in a material way.
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MANAGEMENT
The following table sets out information about the members of the board of
managers of Weigh-Tronix, LLC and its senior officers.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
John J. McCann III*.............. 55 Chairman and Chief Executive Officer
Laurence R Gunning*.............. 48 Managing Director, Salter Weigh-Tronix
Roger W. Evans*.................. 58 Managing Director, Salter Housewares
David R. Castle*................. 51 President, Weigh-Tronix, Inc.
Donald J. MacKenzie.............. 32 Chief Financial Officer, Weigh-Tronix, LLC
Richard Wilkinson................ 33 Finance Director, Avery Berkel
International Business Director, Avery
Timothy J. Cooper................ 41 Berkel
Robin M. Richardson.............. 40 Retail Business Director, Avery Berkel
Bradley M. Bloom*................ 47 Board Manager
D. Randolph Peeler*.............. 35 Board Manager
Rowland T. Moriarty*............. 53 Board Manager
</TABLE>
--------
* Denotes a member of the board of managers of Weigh-Tronix, LLC.
Directors
John J. McCann III has been Chairman and Chief Executive Officer of Weigh-
Tronix since 1998. From 1994 to 1998, he was the Chief Executive Officer of
Staveley Inc., and was retained by the board of directors of Staveley
Industries plc to restructure the Weigh-Tronix and Chronos group of companies.
Mr. McCann has held a number of other positions, including President and Chief
Executive Officer of Crane Canada Inc. He holds an MBA from Columbia University
School of Business and a Bachelors degree from St. Anslem College.
Laurence P. Gunning has been President of Avery Berkel since June 13, 2000.
Prior to that he was Managing Director of Salter Weigh-Tronix since 1995. Prior
to that he was Group Financial Controller of Staveley Industries plc and before
that he held a number of financial positions with British Petroleum. Mr.
Gunning is a qualified FCA (Ireland) and he holds a Bachelors of Commerce
degree from the University College, Dublin.
Roger W. Evans has been Managing Director of Salter Housewares since 1992.
Prior to that he was Sales Director and before that he was employed in a number
of senior positions including Sales Director at William Levene Limited
(Housewares) and Sales Manager at 3M Co. Limited. Mr. Evans has also been
elected as a member of the Marketing Society.
David R. Castle has been the President of Weigh-Tronix North America since
1995. Prior to that he was vice president and General Manager of the Santa Rosa
facility and before that he was employed by Cooper Industries and has held many
other general management positions. Mr. Castle holds a BBA degree in industrial
marketing from Western Michigan University.
Bradley M. Bloom has been a non-executive manager of Weigh-Tronix since
1998. Mr. Bloom has been a managing director of Berkshire since 1984 and was
also a founding partner at Berkshire, a Boston-based investment firm.
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Prior to that he was a partner of the Thomas H. Lee Company and was at the
First National Bank of Boston. Mr. Bloom holds an AB in economics from Harvard
College and an MBA from Harvard Business School.
D. Randolph Peeler has been a non-executive manager of Weigh-Tronix since
1999. Mr. Peeler is a managing director of Berkshire, a Boston-based investment
firm, where he has been employed since 1996. From 1994 to 1996, he was co-
founder of Health Advances, a privately owned health care services company.
Prior to 1994, he served as chief of staff for the Assistant Secretary for
Economic Policy in the U.S. Department of the Treasury and was a consultant
with Cannon Associates and Bain & Co. Mr. Peeler holds a BA in public policy
studies from Duke University and an MBA from Harvard Business School. He is
director of Miami Cruisline Services, B.V. and Holmes Group, Inc.
Rowland T. Moriarty has been a non-executive manager of Weigh-Tronix since
1999. Mr. Moriarty is also Chairman and Chief Executive Officer of Cubex
Corporation, a post which he has held since 1981 and is a Director of Trammel
Crow Company, Charles River Associates, Inc and Staples Inc. He has also been a
professor at Harvard Business School. Mr. Moriarty holds a BA in biological
sciences from Rutgers University, an MBA in marketing from The Wharton School
and a Doctoral degree in marketing from Harvard University.
Officers
Donald J. MacKenzie has been Chief Financial Officer of Weigh-Tronix, LLC
since June 1, 2000. From 1997 to June, 2000, he was a Director of
PricewaterhouseCoopers, LLP. Prior to that, he worked for Ernst & Young in its
mergers and acquisitions group. Mr. MacKenzie holds a Bachelor of Science from
the University of St. Andrews in Scotland.
Richard Wilkinson has been Finance Director of Avery Berkel since 1999. From
1988 to 1999, he was Financial Controller of Avery Berkel's international
businesses division. Prior to that he was a management accountant for Avery
Berkel. Mr. Wilkinson is a qualified ACA (Institute of Chartered Accountants in
England and Wales) and holds a BSc (Honours) degree in chemistry from the
University of Nottingham.
Timothy J. Cooper has been Managing Director of Avery Berkel since June,
2000. From 1998 until then, he was International Business Director of Avery
Berkel. From 1996 to 1998 he was General Manager of Avery Berkel, France. Prior
to that he was International Sales Manager for Avery Berkel. Mr. Cooper holds a
BA (Hons) degree in business studies from Lanchester Polytechnic.
Robin M. Richardson has been Industrial Business Director of Avery Berkel
since June, 2000. From 1999 until then he was the Retail Business Director of
Avery Berkel. Prior to that he was General Manager of Avery Berkel's retail
business division. Prior to that he was a National Sales Manager for Avery
Berkel. Mr. Richardson holds a BA (Hons) degree in American studies from Hull
University.
The aggregate amount of compensation paid on a pro forma basis in the year
ended March 31, 2000 by the combined group to these managers and officers,
including salaries, bonuses and payments to pension plans, was approximately
$2.3 million.
None of the managers or listed officers has specific terms of office.
The Boards of Managers
Weigh-Tronix, LLC's board of managers currently has seven members. Under its
Operating Agreement Weigh-Tronix, LLC is required to have a minimum of six
managers. Managers are elected by members in a general meeting or by the board.
With the exception of Rowland T. Moriarty, the current managers were appointed
by the members upon vote at general meeting. Managers may be removed without
cause by resolution of the members but otherwise cannot be removed except for
cause. Berkshire has the right to designate two members to the board of
managers and may at their option increase the size of the board and designate
these additional members so that after giving effect to this increase a
majority of the members of the board would be designated by Berkshire. Any
vacancy created by the removal of a manager designated by Berkshire will be
filled by Berkshire upon written notice to Weigh-Tronix, LLC. Mr. Moriarty is
entitled to receive $5,000 per day for his services when acting as a manager
plus out-of-pocket expenses. There are no other compensation arrangements for
managers.
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WEIGH-TRONIX LLC
EXECUTIVE COMPENSATION
For Fiscal Year Ended March 31, 2000
The following table sets forth for the fiscal year ended March 31, 2000, the
compensation paid to the Chief Executive Officer and our next four most highly
compensated executive officers during that period.
<TABLE>
<CAPTION>
Annual Compensation
----------------------------
Name and Principal Other Annual
Weigh-Tronix Position Year Salary Bonus Compensation*
--------------------- ---- ------- ------ -------------
$ $ $
<S> <C> <C> <C> <C>
John J. McCann III............................ 2000 294,000 88,200
Chairman & CEO
Vijay Tharani(1).............................. 2000 210,000 93,000
Chief Financial Officer
Laurence P. Gunning........................... 2000 167,026 47,024
Managing Director of Salter Weigh-Tronix
David R. Castle............................... 2000 203,700 61,110
President, Weigh-Tronix North America
Roger W. Evans................................ 2000 126,701 38,010
Managing Director, Salter Housewares
John Hughes(2)................................ 2000 125,000 31,250
Vice President, Industrial Sales
</TABLE>
--------
(1) Mr. Tharani's employment was terminated on July 7, 2000.
(2) Mr. Hughes was not an executive officer on March 31, 2000.
* For each of the officers, the aggregate total of all "Other compensation"
for the named officers did not exceed the lesser of $50,000 or 10% of the
total of their annual combined salary and bonus amount.
For the fiscal year ended March 31, 2000, the annual salaries of Weigh-
Tronix LLC's Chief Executive Officer and Weigh-Tronix LLC's four other most
highly compensated executive officers are as follows: John J. McCann III--
$294,000; Vijay Tharani, $210,000; David R. Castle, $203,700, Laurence P.
Gunning, $167,026; and Roger W. Evans, $126,701. John Hughes is the fifth
highest compensated individual with an annual salary of $125,000. No options
were granted to any of the listed officers.
Each of the named executive officers will be entitled to severance benefits
if he is terminated or constructively terminated through diminution in job
responsibilities or compensation following an acquisition. The severance
benefit for termination without cause or for good reason in the case of Mr.
McCann will be equal to (a) three times the annual salary in effect at the time
of termination and (b) his annual performance bonus payable equal to that
percentage of the calendar year during which Mr. McCann was employed by the
company, both payable pursuant to Weigh-Tronix LLC's normal payroll practices.
The severance benefit for Messrs. Castle, Gunning, and Evans will be equal to
(a) twice the annual salary in effect at the time of termination and (b) their
annual performance bonus payable equal to that percentage of the calendar year
during which they were employed by the company, both payable pursuant to Weigh-
Tronix LLC's normal payroll practices. The named executive officers will also
receive continued coverage under Weigh-Tronix LLC's medical benefit plans for
one year following such termination or two years following termination in the
case of Messrs. Gunning and Evans.
For termination due to change of control the severance benefit for the named
executive officers will be equal to the sum of (a) such officer's annual salary
payable pursuant to Weigh-Tronix LLC's normal payroll practices and (b)
continued coverage under Weigh-Tronix LLC's medical benefits plan for one year
following such termination.
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<PAGE>
Information with respect to fiscal years prior to the last completed fiscal
year are not provided. The registrant was not a reporting company pursuant to
Section 13(a) or 15(d) of the Exchange Act at any time during those years.
Compensation Committee
Weigh-Tronix, LLC has a three-member compensation committee. The committee
consists of John J. McCann III, Bradley M. Bloom and D. Randolph Peeler. Mr.
McCann is the chairman and chief executive officer of Weigh-Tronix, LLC.
Messrs. Bloom and Peeler are on the Board of Managers of Weigh-Tronix, LLC.
Each of Messrs. Bloom and Peeler is a managing director of Berkshire and could
be deemed to beneficially own those interests of Weigh-Tronix, LLC owned by
Berkshire. Messrs. Bloom and Peeler disclaim beneficial ownership of these
interests.
Audit Committee
Weigh-Tronix, LLC has a two-member audit committee, consisting of Bradley M.
Bloom and D. Randolph Peeler.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SWT Finance is a wholly-owned subsidiary of Weigh-Tronix, Inc., a Delaware
corporation. Weigh-Tronix, Inc. is a wholly-owned subsidiary of Weigh-Tronix,
LLC, a Delaware limited liability company.
The following table and the paragraphs that follow set forth information
with respect to the beneficial ownership of membership interests of Weigh-
Tronix, LLC as of July 31, 2000 by (a) all interest holders of Weigh-Tronix who
own more than 5% of any class of membership interests; (b) each director who is
an interest holder; (c) specific executive officers; and (d) all directors and
executive officers as a group, as determined under Rule 13(d) under the
Securities and Exchange Act of 1934.
Membership interests are composed of five classes of members designated as
Class A, Class B, Class C, Class D and Class E members. Each member is entitled
to vote on all matters with the number of votes corresponding to each member's
percentage interest. Class A members are entitled to 86.455% of all outstanding
interests. Class B members are entitled to 1.874% of all outstanding interests.
Class C members are entitled to 2.849% of all outstanding interests. Class D
members are entitled to 2.206% of all outstanding interests. Class E members
are entitled to 6.616% of all outstanding interests.
The following table presents (a) the percentage of each class owned by the
respective individuals and entities and (b) the aggregate interests owned by
each individual or entity as a percentage of the total combined membership
interests.
Unless otherwise noted, the address for each executive officer and director
of Weigh-Tronix, LLC is Weigh-Tronix, LLC, 293 South Main Street, Providence,
Rhode Island 02903.
<TABLE>
<CAPTION>
Name and Address of Class A Class B Class C Class D Class E Combined
Beneficial Owner Interests Interests Interests Interests(i) Interests(j) Interests(k)
------------------- --------- --------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John J. McCann III...... * 30.000% 29.994% 20.000% 3.138%
Laurence P. Gunning..... * 23.333%(a) 23.335%(a) 15.556%(a) 2.371%
Roger W. Evans.......... * 23.333% 23.335% 15.556%(c) 2.308%
David R. Castle......... * 23.333%(b) 23.335%(b) 15.556%(b) 2.371%
Richard D. Goddard......
Donald J. MacKenzie.....
Richard Wilkinson.......
Timothy J. Cooper.......
Robin M. Richardson.....
Gerald Boothroyd........
Bradley M. Bloom (d).... 84.199% 72.794%
D. Randolph Peeler (d).. 84.199% 72.794%
Rowland T. Moriarty..... 2.015% 1.742%
Berkshire Fund IV
Investment Corp. (e)... 51.979% 44.938%
Berkshire Fund V
Investment Corp. (e)... 24.566% 21.238%
Berkshire Investors, LLC
(e).................... 7.654% 6.618%
The Northwestern Mutual
Life Ins. (f).......... 100% 2.849%
W-T Investment, LLC
(g).................... 2.012% 33.333% 3.945%
Marconi, Inc. (h)....... 5.783% 5.000%
All directors and
officers as a group (13
persons)............... 3.978% 100% 100% 66.667% 11.930%
</TABLE>
--------
* Represents less than one percent.
(a) Includes interests beneficially owned by R&H Trust Co. [Jersey] Limited.
Mr. Gunning disclaims beneficial ownership of these interests.
(b) Held by David R. Castle and Susan M. Castle.
(c) Includes interests beneficially owned by Nicholas' Trust dated May 8, 1998,
Dominic's Trust dated May 7, 1998 and Discretionary Settlement dated May 6,
1998. Mr. Evans disclaims beneficial ownership of these interests.
(d) Includes the interests beneficially owned by Berkshire Fund IV Investment
Corp., Berkshire Fund V Investment Corp. and Berkshire Investors, LLC.
Messrs. Bloom and Peeler disclaim beneficial ownership of these interests.
Messrs. Bloom and Peeler's address is c/o Berkshire Partners, LLC, One
Boston Place, Suite 3300, Boston, Massachusetts 02108. Berkshire Partners
is a Boston-based investment firm.
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<PAGE>
(e) This person's address is One Boston Place, Suite 3300, Boston,
Massachusetts 02108.
(f) This person's address is 720 East Wisconsin Avenue, Milwaukee, Wisconsin
53202-4797.
(g) This person's address is c/o Weigh-Tronix, LLC, 1000 Armstrong Drive,
Fairmont, Minnesota 56031-1000.
(h) Includes interests that may be obtained upon the exercise of the warrant
issued to Marconi in connection with the merger. This person's address is
c/o Marconi Data Systems, Inc., 1500 Mittel Boulevard Wood Dale, Illinois
60191-1073
(i) Under the Weigh-Tronix, LLC Second Amended and Restated Operating
Agreement, these interests are subject to becoming conformed in the event
that a Class D holder ceases to be an employee of Weigh-Tronix, LLC or one
of its subsidiaries prior to the fourth anniversary of May 1, 1998. On
each of the first through fourth anniversaries on which the holder remains
an employee of the company an additional twenty-five percent (25%) of the
Class D interests of that holder will be released from being subject to
becoming conformed. When an interest is conformed, the holder may no
longer vote those conformed interests. If a Class D holder remains
employed until immediately prior to consummation of a change of control,
then effective immediately prior to that change of control, the Class D
interests of that holder will no longer be subject to becoming a conformed
interest.
(j) Under the operating agreement, portions of these interests are subject to
becoming conformed in the event that Weigh-Tronix, LLC does not achieve
specific financial targets. Additionally, if a Class E holder's employment
by Weigh-Tronix, LLC or one of its subsidiaries terminates for any reason
prior to achievement of the targets then all of the interests that are
subject to becoming conformed will be conformed. If either (i) the company
for which a Class E holder works is sold to an unaffiliated third party,
that holder offers to become an employee of the buyer for at least one
year following the sale at a compensation level and with responsibilities
substantially equivalent to the employees immediately before the sale, and
the buyer declines the offer of employment, or (ii) there is an internal
reorganization or restructuring of Weigh-Tronix, LLC or its subsidiaries
under which the holder's position is eliminated or materially changed,
that holder offers to continue in the employ of the company at a
compensation level comparable to that employee's position immediately
prior to the reorganization or restructuring, and to assume
responsibilities appropriate for his expertise and abilities, and the
company declines that offer of employment, then the Class E interest of
that Class E holder will continue to be eligible for release from becoming
a conformed interest.
(k) Percentage of all classes of interests owned, weighted to reflect the
percentage interests attributable to each class of membership interests.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the interest beneficially
owned by a person, equity subject to options held by that person that are
currently exercisable or exercisable within 60 days of this prospectus are
deemed outstanding, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
Managers' Ownership Interests in Weigh-Tronix
With respect to certain managers of Weigh-Tronix, LLC, the following table
presents ownership of each class, individually by class and on an aggregate
basis, as a percentage of the total combined membership interests.
<TABLE>
<CAPTION>
Combined
Class A Class B Class C Class D Class E Membership
Name of Owner Interests Interests Interests Interests Interests Interests
------------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
John J. McCann III...... 0.590% 0.562% -- 0.662% 1.323% 3.138%
Laurence P. Gunning(1).. 0.390% 0.437% -- 0.515% 1.029% 2.371%
Roger W. Evans(2)....... 0.327% 0.437% -- 0.515% 1.029% 2.308%
David R. Castle(3)...... 0.390% 0.437% -- 0.515% 1.029% 2.371%
Rowland T. Moriarty..... 1.742% -- -- -- -- 1.742%
</TABLE>
--------
(1) The percentages for Mr. Gunning include ownership interests held in trust
for the benefit of Mr. Gunning.
(2) Includes interests beneficially owned by Nicholas' Trust dated May 8, 1998,
Dominic's Trust dated May 7, 1998 and Discretionary Settlement dated May 6,
1998.
(3) Includes interests held by David R. Castle and Susan M. Castle.
SWT Finance
The board of directors of SWT Finance B.V. consists of John J. McCann III
and D L Trust B.V. (a corporate trustee company). The control persons of DL
Trust B.V. are Gerald Kotterman and Frank Nagel. They have no relation to any
director, officer, affiliate or beneficial owner of Weigh-Tronix, LLC.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Certain Fees Relating to the Transactions
Weigh-Tronix, LLC paid a fee of $1.7 million to Berkshire Partners LLC and
its affiliates, a Boston-based private investment firm, for providing advisory,
management and consulting services regarding Weigh-Tronix, LLC, the
consummation of the merger and financing, its financial and business affairs,
its relationsihp with its lenders and security holders, and the operation and
expansion of its business. Berkshire also was reimbursed for $152,000 in
expenses incurred by it in connection with the merger and financing. Berkshire
is also entitled to receive $500,000 per year from Weigh-Tronix, LLC for the
advisory, management and consulting services described above. Prior to the
merger, the annual advisory and management fee was $200,000.
In connection with the merger and financing, John J. McCann III, Laurence P.
Gunning, Roger W. Evans and David R. Castle received a total of $0.4 million of
membership interests in Weigh-Tronix, LLC. Accordingly, Weigh-Tronix, LLC
recorded compensation expense in the quarter ended June 30, 2000.
Weigh-Tronix, LLC granted various loans to members of management totaling
$450,000 in exchange for membership interests in Weigh-Tronix, LLC. The notes
bear interest at an annual rate of 8%, which is payable annually. The notes
have no stated maturity date but become due and payable if the employee leaves
Weigh-Tronix, LLC. Collectively, John J. McCann, Laurence R. Gunning, Donald J.
MacKenzie, Timothy J. Cooper and Robin M. Richardson received $245,000 of these
loans. The remaining $205,000 of loans were granted to 11 members of Weigh-
Tronix, LLC and do not include executive officers, directors or board members.
Members Agreement
Weigh-Tronix, LLC and (a) each of the management members, which includes
John J. McCann III, Roger W. Evans, David R. Castle, and Laurence P. Gunning,
(b) each of the Berkshire members, which includes Berkshire Fund IV, L.P.,
Berkshire Fund V Investment Corp. and Berkshire Investors LLC and (c) each of
the investors, which includes The Northwestern Mutual Life Insurance Company,
the Craig L. Burr 1986 Children's Trust, Sunapee Securities, Inc., Squam Lake
Investors 111, L.P. and BancBoston Investments, Inc. along with the Berkshire
members are parties to an Amended and Restated Members Agreement dated June 13,
1998. The management members, Marconi and the investors are together referred
to as the "members."
Under the members agreement, the management members and investors agreed to
specific restrictions on the transfer of membership interests in Weigh-Tronix,
LLC. They include: (a) a right of first refusal on any shares of Weigh-Tronix,
LLC to be transferred by a member; (b) a right of co-sale so that the investors
may join in any transfer of membership interests by a management member to any
third party; and (c) a right of repurchase so that Weigh-Tronix, LLC has the
right to buy back a management member's membership interest in the event that
the employment of that management member is terminated by Weigh-Tronix, LLC or
any of its subsidiaries. If the employment of a management member is terminated
by Weigh-Tronix, LLC or a subsidiary without cause, the management member may
require Weigh-Tronix, LLC to purchase all of his membership interests
outstanding at the time of the termination. In addition, each member has the
right, subject to specific exceptions, to purchase its pro rata share of any
new securities proposed to be sold by Weigh-Tronix, LLC to a third party.
In the event that Weigh-Tronix, LLC has not completed a public offering of
its common stock or a sale of substantially all its assets or voting control by
December 31, 2005, investors holding Class C membership interests of Weigh-
Tronix, LLC may require that the company redeem all outstanding Class C
membership interests. The price to be paid on the redemption shall be the fair
market value of these interests as determined under the members agreement.
Appointments to the Board of Managers
Under the members agreement, the Board of Managers of Weigh-Tronix, LLC
consists of two managers designated by the Berkshire members, four managers
designated by the management members and one
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manager designated by mutual agreement of the parties. Bradley M. Bloom and D.
Randolph Peeler have been elected as the Berkshire representatives and John J.
McCann III, Laurence P. Gunning, Roger W. Evans and David R. Castle have been
elected as the management representatives. Rowland T. Moriarty has been elected
by mutual agreement of the management members and Berkshire members. The
Berkshire members may at any time increase the number of managers they are
entitled to designate on the board of managers so that after giving effect to
this increase a majority of the members of the board of managers shall have
been designated by the Berkshire members. The members agreement also calls for
the creation of a compensation committee and an audit committee.
Matters Requiring Consent
Under an operating agreement by and among the members dated May 1, 1998,
specific corporate actions of Weigh-Tronix, LLC require the prior written
consent of the holders of at least 75% in interest of the outstanding Class A
membership interests. These actions include the sale, lease or disposal of all
or substantially all of the assets of Weigh-Tronix, LLC, a material change in
the nature of its business or the issue, sale, repurchase or redemption of any
interests, options, warrants or other securities of Weigh-Tronix, LLC.
Warrants
As part of the consideration for the merger, Marconi has been granted
warrants to subscribe for up to 5% of the fully diluted ownership interests of
Weigh-Tronix, LLC (calculated as at the date of the closing of the offering).
The aggregate value of the warrants (based on the Black-Scholes model) is
approximately (Pounds)0.8 million. Marconi was also granted, as additional
consideration for its subscription of the preferred member interest, the right
to exercise warrants for 50% of the attributable cost paid by Berkshire for the
underlying equity, rather than 100% as originally agreed.
Preferred Member Interest
In connection with and as part of the financing for the merger, Marconi, the
seller of Avery Berkel, agreed to subscribe (or to procure that one of its
affiliates will subscribe) for (Euro)10.0 million of preferred member interests
of Weigh-Tronix, LLC, which are exchangeable at the option of Weigh-Tronix, LLC
or the holders of the preferred member interests, subject to specific
conditions described in "Description of Preferred Member Interest" but in any
event no earlier than June 13, 2001, for exchange notes of SWT Finance. The
exchange notes will be substantially identical to and will rank equally with
the notes. If an exchange takes place immediately prior to the maturity of the
notes, the exchange notes could have an aggregate principal amount of as much
as (Euro)38.5 million upon issuance in year 2010. See "Description of Preferred
Member Interest."
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DESCRIPTION OF PREFERRED MEMBER INTEREST
Weigh-Tronix, LLC issued (Euro)10.0 million liquidation preference
exchangeable preferred membership interests under the Subscription Agreement
among Weigh-Tronix, LLC, SWT Finance and Marconi in a private transaction not
subject to the registration requirements of the Securities Act.
The preferred member interests will be limited in aggregate liquidation
preference to (Euro)10.0 million on issuance and thereafter (Euro)10.0 million
plus an additional amount of preferred member interests payable in lieu of cash
dividends on the preferred member interests together having an aggregate
liquidation preference not in excess of (Euro)45.5 million at June 1, 2011. The
proceeds of the preferred member interests were contributed by Weigh-Tronix,
LLC to Weigh-Tronix Delaware, Inc. which loaned these proceeds to SWT Finance.
SWT Finance in turn loaned these proceeds to Weigh-Tronix UK Limited which used
the proceeds to fund a portion of the purchase price of the merger.
Dividends
Holders of the preferred member interests are entitled to receive dividends
at a rate per annum equal to 12.0% through and including June 1, 2005, 15.0%
from June 2, 2005 through and including December 1, 2005, and increasing by
fifty (50) basis points at the beginning of each subsequent six month period up
to a maximum rate of 18.0%, in each case calculated on the liquidation
preference per preferred member interest. Dividends will be cumulative and
payable annually on each June 1 of each year, commencing on June 1, 2001.
On or before the third anniversary of the issuance of the preferred member
interests, dividends will be payable only in additional fully paid and
nonassessable preferred member interests having an aggregate liquidation
preference equal to the amount of these dividends. After the third anniversary
of the issuance of the preferred member interests, at the option of Weigh-
Tronix, LLC, dividends will be payable in additional preferred membership
interests or in cash.
Exchange of Preferred Member Interest
At any time after June 13, 2001, the first anniversary of the issuance of
the preferred member interests, the holders of the preferred member interests
may exchange their interests for an aggregate principal amount of exchange
notes (as defined below under "Description of the Exchange Notes") equal to the
aggregate liquidation preference of the preferred member interests being
exchanged. If the holders exchanged their interests on June 13, 2001, the
aggregate principal of the exchange notes would be (Euro)11.2 million. The
company may redeem the preferred member interests in exchange for the amount of
the exchange notes, provided that (x) no default or event of default under the
indenture governing the notes has occurred and is continuing or would be caused
thereby and (y) Weigh-Tronix, LLC's fixed charge coverage ratio (as defined and
calculated as described below under "Description of the Exchange Notes") for
Weigh-Tronix, LLC's most recently ended four fiscal quarters for which internal
financial statements are available immediately preceding the date on which
these exchange notes are issued would have been at least 2.50 to 1.00
determined on a pro forma basis, as if the exchange notes had been incurred at
the beginning of the four-quarter period. The right to exchange the preferred
member interests is exercisable once only. The notes will be issued under the
indenture and will be substantially identical to the notes save that the date
of issue and the first interest period will be different.
Redemption
The preferred member interests will not be subject to mandatory redemption
except under the exchange provisions described above and at maturity on June 1,
2011. The preferred member interests are optionally redeemable at any time by
Weigh-Tronix, LLC at the aggregate liquidation preference plus accrued but
unpaid dividends; however, the terms of the senior credit facility and the
notes will severely limit Weigh-Tronix, LLC's ability to optionally redeem the
preferred member interests other than in exchange for the exchange notes as
described under "--Exchange of Preferred Member Interest" above. If Weigh-
Tronix, LLC or the holders of the preferred member interests opt to exchange
their interests on June 13, 2001, (Euro) 11.2 million of exchange notes will be
issued.
165
<PAGE>
Ranking of Preferred Member Interest
The preferred member interests, with respect to distributions upon the
liquidation, winding-up and dissolution of Weigh-Tronix, LLC, will rank junior
to and will be subordinated in right of payment to the prior payment in full
of all Senior Debt, senior subordinated debt and all other debt liabilities
and obligations of Weigh-Tronix, LLC. The exchange notes issuable upon
exchange of the preferred member interest, however, will rank pari passu with
the notes.
Liquidation Preference
In the event of bankruptcy, liquidation or reorganization of Weigh-Tronix,
LLC, the assets of Weigh-Tronix, LLC will be available to pay obligations on
the preferred member interests only after all holders of Senior Debt, senior
subordinated debt and all other debt liabilities and obligations have been
paid.
No Voting Rights
Holders of the preferred member interests are not entitled to any voting
rights within Weigh-Tronix, LLC.
The subscription agreement provides that if: (a) dividends on the preferred
member interests are in arrears and unpaid for any interest period; (b) Weigh-
Tronix, LLC fails to redeem the preferred member interests upon maturity or
upon the valid exercise by a holder of the interest of the holder's exchange
rights; or (c) specific other material breaches of the terms of the preferred
member interests occur, the holders of a majority of preferred member
interests will have the right to elect one manager to the Board of Managers of
Weigh-Tronix, LLC and the Board of Managers will be adjusted to permit the
additional manager.
Transfer
The preferred member interests may not be transferred (other than to
affiliates of Marconi) prior to June 13, 2001. At any time after June 13,
2001, the preferred member interests may be freely transferred, subject to the
approval of Weigh-Tronix, LLC (which approval may not be unreasonably withheld
or delayed).
166
<PAGE>
LISTING AND GENERAL INFORMATION
Clearing Systems
The initial notes have been accepted for clearance through Clearstream and
Euroclear. The ISIN is XS0112615157 for the Rule 144A Global Note which will be
deposited with a common depositary and registered in the name of the nominee of
the common depositary for the accounts of Euroclear and Clearstream and
XS0112618680 for the Regulation S Global Notes. The Common Code is 011261515
for the Rule 144A Global Note which will be deposited with a common depositary
and registered in the name of the nominee of the common depositary for the
accounts of Euroclear and Clearstream and 011261868 for the Regulation S Global
Notes. The CUSIP number is 785039 AA6 for the Rule 144A Global Note which will
be deposited with a common depositary and registered in the name of the nominee
of the common depositary for the accounts of Euroclear and Clearstream and
N8434A AA9 for the Regulation S Global Notes.
Listing
Application will be made to list the exchange notes on the Luxembourg Stock
Exchange. The initial notes are listed on the Luxembourg Stock Exchange. The
Articles of Association of SWT Finance and the legal notice relating to the
issue of the initial notes were deposited prior to the listing of the initial
notes with the Chief Registrar of the District Court in Luxembourg (Geffier en
Chef du Tribunal d'Arrondissement de et a Luxembourg), where those documents
are available for inspection and where copies can be obtained upon request. As
long as the notes are listed on the Luxembourg Stock Exchange, an agent
appointed to make payments on, and transfers of, the notes will be maintained
in Luxembourg.
Consents and Authorizations
SWT Finance obtained all necessary consents, approvals and authorizations in
The Netherlands in connection with the issue and performance of the initial
notes. The issue of the initial notes was authorized by a resolution of the
board of directors of SWT Finance passed on May 31, 2000. Weigh-Tronix, LLC,
Weigh-Tronix, Inc., SWT Holdings B.V., Salter Weigh-Tronix Ltd, Salter
Housewares Holdings Ltd and Weigh-Tronix UK Limited obtained all necessary
consents, approvals and authorizations in connection with giving their
guarantees. The giving of these guarantees was authorized by resolutions of the
boards of directors/managers of the guarantors passed on May 24, 2000 for
Weigh-Tronix, LLC, Weigh-Tronix, Inc., Weigh-Tronix UK Limited, Salter
Housewares Holdings Limited and Salter Weigh-Tronix Limited and on May 31, 2000
for SWT Holdings B.V. All other guarantors obtained all necessary consents,
approvals and authorizations in connection with the giving of the guarantees.
No Significant or Material Change
Except as disclosed in this prospectus, there has been no significant or
material change in the financial or trading position or prospects of SWT
Finance since its incorporation. Additionally, there has been no significant or
material change in the financial or trading position of the guarantors, since
the latest audited balance sheet date.
No Litigation
SWT Finance is not involved in any litigation or arbitration proceedings
which relate to claims or amounts which are material in the context of the
issue of the notes or that may have, or have had during the 12 months preceding
the date of this Prospectus, a material adverse effect on the financial
position of SWT Finance, nor, so far as the management of SWT Finance is aware,
is any such proceeding pending or threatened.
167
<PAGE>
Accounts
Copies of the most recent annual audited consolidated financial statements
of Weigh-Tronix, LLC and the most recent annual audited unconsolidated
financial statements of Salter Weigh-Tronix Limited, Salter Housewares Holdings
Limited, Salter Housewares Limited, Avery Berkel Limited, Avery Berkel
Properties Limited, Avery Berkel Holdings Limited and Berkel (Ireland) Limited,
will be available at the specified offices of the paying agent in Luxembourg
during normal business hours as long as the notes are listed on the Luxembourg
Stock Exchange and the rules of such stock exchange require it. Weigh-Tronix UK
Limited was formed to facilitate the merger on March 6, 2000. Due to the date
of incorporation no annual audited unconsolidated financial statements have
been prepared. However, Weigh-Tronix UK Limited will in the future prepare
annual audited unconsolidated financial statements which will be available at
the specified offices of the paying agent in Luxembourg during normal business
hours for so long as the notes are listed on the Luxembourg Stock Exchange and
the rules of the such stock exchange require it. SWT Finance, SWT Holdings
B.V., Weigh-Tronix, Inc., Mecmesin Inc., Weigh-Tronix Delaware, Inc., Berkel
USA Inc., Berkel Inc., Berkel Products Co. Limited and Weigh-Tronix Canada, ULC
do not prepare individual annual audited unconsolidated financial statements.
Weigh-Tronix, LLC does not prepare interim audited consolidated financial
statements. None of Weigh-Tronix, LLC, SWT Finance and the guarantors prepare
separate interim audited or unaudited unconsolidated financial statements.
Copies of the indenture governing the notes will be available for inspection at
the specified offices of the paying agent in Luxembourg during normal working
hours, as long as the notes are listed on the Luxembourg Stock Exchange and the
rules of that stock exchange require it.
Accountants
The accountants of Weigh-Tronix, LLC and SWT Finance are
PricewaterhouseCoopers LLP and the accountants of the Avery Berkel Group were
Deloitte & Touche. Effective June 13, 2000, Deloitte & Touche resigned and
PricewaterhouseCoopers LLP was appointed as accountants for all subsidiaries
that comprised the Avery Berkel Group.
Notices
All notices shall be deemed to have been given upon (1) the mailing by first
class mail, postage prepaid, of notices to holders of the notes at their
registered address and (2) so long as either series of notes is listed on the
Luxembourg Stock Exchange and it is required by the rules of the Luxembourg
Stock Exchange, publication of such notice to the holders of the notes in
English in a leading newspaper having general circulation in Luxembourg (which
is expected to be the Luxemburger Wort) or, if such publication is not
practicable, in one other leading English language daily newspaper with general
circulation in Europe, such newspaper being published on each business day in
morning editions, whether or not it shall be published in Saturday, Sunday or
holiday editions.
Paying Agent
SWT Finance has appointed Deutsche Bank Luxembourg S.A. as its Paying Agent
and Transfer Agent in Luxembourg. Its address is 2 Boulevard Konrad Adenauer,
L-1115 Luxembourg. SWT Finance reserves the right to vary such appointment. The
Paying Agent in Luxembourg will act as intermediary between the holders of the
notes and SWT Finance and so long as the notes are listed on the Luxembourg
Stock Exchange, SWT Finance will maintain a paying agent in Luxembourg.
168
<PAGE>
TAX CONSIDERATIONS
U.S. Federal Income Tax Considerations
The following is a summary of all material U.S. federal income tax
consequences applicable to U.S. holders who are not residents of The
Netherlands, who are initial purchasers of the initial notes, who exchange
their initial notes for the exchange notes pursuant to this exchange offer and
who will hold the exchange notes as capital assets. This summary is based upon
existing U.S. federal income tax law, which is subject to change, possibly
retroactively. This summary does not discuss all aspects of U.S. federal income
taxation which may be important to particular holders who may be subject to
special rules not discussed below. In addition, this summary does not discuss
any foreign, state or local tax considerations other than the discussion of
taxes in the "Netherlands Tax Considerations" section below.
Each holder should consult his or her own tax advisor regarding the
particular tax consequences to such holder of exchanging initial notes for
exchange notes and of acquiring, owning and disposing of the notes, including
the applicability of any federal estate or gift tax laws or any state, local or
foreign tax laws.
The Exchange
An exchange of initial notes for exchange notes will be treated as a "non-
event" for federal income tax purposes because the exchange notes will not be
considered to differ materially in kind or event from the initial notes. As a
result, no federal income tax consequences will result to holders exchanging
initial notes for exchange notes.
The Exchange Notes
Payment of Interest
The initial notes were not issued with original issue discount. Therefore,
interest on the notes generally will be taxable to you as ordinary interest
income at the time accrued or received, in accordance with your
method of accounting for U.S. federal income tax purposes.
Sale, Retirement or Other Taxable Disposition of the Notes
Upon the sale, exchange or redemption of the note, you generally will
recognize gain or loss equal to the difference between the amount realized on
the sale, exchange or redemption (or, if it is realized in other than U.S.
dollars, the U.S. dollar value of the amount using the spot rate in effect on
the date of the sale, exchange or redemption) and your tax basis in the note.
In the case of a note, your tax basis in an exchange note generally will be the
U.S. dollar value of the purchase price of the initial note on the date of a
purchase (determined by translating the purchase price into U.S. dollars at the
spot rate in effect on the date of purchase). Except with respect to gains or
losses attributable to changes in currency exchange rates, as described below,
the gain or loss will be capital gain or loss and will be long-term capital
gain or loss if you have held the note for more than one year.
Gain or loss recognized by you on the sale, exchange or redemption of a note
that is attributable to changes in the rate of exchange between the U.S. dollar
and the euro will be treated as ordinary income or loss and generally will not
be treated as interest income or expense except to the extent provided by
future regulations or administrative pronouncements of the Internal Revenue
Service. Foreign currency gain or loss is recognized on the sale, exchange or
redemption of a euro note only to the extent of total gain or loss recognized
on the sale, exchange or retirement.
Transactions in Euro
Euro received as interest on, or on the sale, exchange or redemption of, a
note will have a tax basis equal to their U.S. dollar value at the time the
interest is received or at the time payment is received in consideration of the
sale, exchange or redemption. The amount of gain or loss recognized on a sale
or other disposition of the euro will be equal to the difference between (1)
the amount of U.S. dollars, or the fair market value in U.S. dollars of the
other currency or property received in the sale or other disposition and (2)
the tax basis of the euro.
169
<PAGE>
Netherlands Tax Considerations
The following is a summary of the principal Netherlands tax consequences
applicable to U.S. holders, not being resident, nor deemed to be resident in
The Netherlands, which are relevant to the exchange of initial notes for
exchange notes and of the acquisition, ownership and disposition of notes. A
U.S. holder of notes will not be nor deemed to be a resident of The Netherlands
for Dutch tax purposes, or otherwise be subject to taxation in The Netherlands
by reason only of the signing, delivery and/or enforcement of the documents
relating to the issue of the notes or the performance by SWT Finance of its
obligations thereunder or under the notes.
This summary is not exhaustive of all the possible tax consequences that may
be relevant to U.S. holders in light of their particular circumstances and
potential investors are advised to consult their own tax advisors in order to
determine the final tax consequences of the exchange of initial notes for
exchange notes, and the acquisition, ownership and disposition of notes in
their own particular circumstances. In particular, this summary does not cover
tax consequences applicable to joint venture vehicles, such as partnership
structures.
This summary is based on the existing tax laws of The Netherlands, as well
as the current treaty titled the Convention between the Kingdom of The
Netherlands and the United States of America for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income
(the "Treaty"). For purposes of the Treaty, a U.S. holder is a resident of the
U.S. as defined in the Treaty. Changes made to these laws or Treaty may have
retroactive effect, and may affect the tax consequences described therein.
Withholding Tax
All payments by SWT Finance under the notes may be made free of any
withholding or deduction of any taxes imposed, levied, withheld or assessed by
The Netherlands or any political subdivision or taxing authority in The
Netherlands, provided that the interest is not dependent nor deemed to be
dependent on the profits or on the distributions of profits of SWT Finance.
Taxes on income and capital gains
Under the terms of the Treaty, a U.S. holder will not be subject to any
Netherlands taxes on income in respect of interest paid under the notes,
provided that the U.S. holder does not have or had an enterprise or an interest
in an enterprise which is or was, in whole or in part, carried on through a
permanent establishment in The Netherlands and to which enterprise the interest
paid was attributable, or provided the holder does not perform independent
personal services from a fixed base that the holder has in The Netherlands and
to which the interest paid is or was attributable. Further, the right to tax
capital gains realized upon the exchange of initial notes for exchange notes,
or upon disposition of any or all of the notes by a U.S. holder is allocated to
the U.S., unless the U.S. holder has interest in an enterprise which is carried
on through a permanent establishment in The Netherlands and to which enterprise
the notes are attributable, or unless the notes are attributable to a fixed
base available to the U.S. holder in The Netherlands for the purpose of
performing individual personal services.
Turnover tax (VAT)
No Netherlands turnover tax will arise in respect of any payment in
consideration for the issue of the notes or with respect to any payment by SWT
Finance of principal, interest or premium (if any) on the notes.
Registration tax, customs duty etc.
No Netherlands registration tax, customs duty, transfer tax, stamp duty or
any other similar documentary tax or duty, other than court fees, will be
payable in The Netherlands in respect of or in connection with the execution,
delivery and/or enforcement of the notes or the performance by SWT Finance of
the obligations under the notes.
170
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of these exchange notes. This prospectus, as it may
be amended or supplemented from time to time, may be issued by a broker-dealer
in connection with resales of exchange notes received in exchange for initial
notes where these notes were acquired as a result of market-making activities
or other trading activities. SWT Finance has agreed that for a period of 180
days after the expiration date, it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale. In addition, until 2000, all dealers effecting transactions
in the exchange notes may be required to deliver a prospectus.
SWT Finance will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of these
methods of resale, at market prices prevailing at the time of resale, at prices
related to the market prices or negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker dealer
and/or the purchasers of any exchange notes. Any broker-dealer that resells
exchange notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
these exchange notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any resale of exchange notes and any
commissions or concessions received by any persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration date SWT Finance will promptly
send additional copies of this prospectus and any amendment or supplement to
this prospectus to any broker-dealer that requests these documents in the
letter of transmittal. SWT Finance has agreed to pay all expenses incident to
the exchange offer other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the notes (including any broker
dealers) against specific liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the notes are being passed upon on
behalf of the Company, as to U.S. law, by Hutchins, Wheeler & Dittmar, A
Professional Corporation, Boston, Massachusetts.
EXPERTS
The financial statements of Weigh-Tronix, LLC as of March 31, 2000 and 1999
and for the year ended March 31, 2000 and the eleven months ended March 31,
1999 included in this prospectus have been so included in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements of Weigh-Tronix Scale Products Business as of March
31, 1998 and for the year ended March 31, 1998 and the one month ended April
30, 1998 included in this prospectus have been so included in reliance on the
report of PricewaterhouseCoopers independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements of the Avery Berkel Group as of March 31, 2000,
1999 and 1998 and for each of the three years in the period ended March 31,
2000 included in this prospectus have been so included in reliance on the
report of Deloitte & Touche, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
171
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-4 to register
this exchange offer. This prospectus, which forms part of the registration
statement, does not contain all of the information included in that
registration statement. For further information about Weigh-Tronix and the
notes offered in this prospectus, you should refer to the registration
statement and its exhibits.
We are not currently subject to the periodic reporting and other
informational requirements of the Securities and Exchange Act of 1934. Upon the
effectiveness of the registration statement, we will become subject to the
periodic reporting and other information requirements of the Exchange Act, and
in accordance therewith, will be required to file periodic reports and other
information with the SEC.
You may read and copy any document we file with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the
Public Reference Room. We file our SEC materials electronically with the SEC,
so you can also review our filings by accessing the web site maintained by the
SEC at http://www.sec.gov. This site contains reports, proxy and information
statements and other information regarding issuers that file electronically
with the SEC.
Our principal executive offices are located at 293 South Main Street,
Providence, Rhode Island 02903. Our telephone number is (401) 272-4402.
172
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Weigh-Tronix, LLC
<TABLE>
<CAPTION>
Page
----
<S> <C>
Unaudited Consolidated Interim Financial Statements:
Unaudited Consolidated Balance Sheet--June 30, 2000...................... F-2
Unaudited Consolidated Statements of Operations--For the three months
ended June 30, 2000 and June 30, 1999................................... F-3
Unaudited Consolidated Statements of Cash Flows--For the three months
ended June 30, 2000 and June 30, 1999................................... F-4
Notes to Unaudited Consolidated Financial Statements..................... F-5
</TABLE>
<TABLE>
<S> <C>
Audited Consolidated Financial Statements:
Report of Independent Accountants--March 31, 2000 and March 31, 1999 and
the year ended March 31, 2000 and the eleven months ended March 31,
1999..................................................................... F-19
Consolidated Balance Sheets--March 31, 2000 and March 31, 1999............ F-20
Consolidated Statements of Operations--For the year ended March 31, 2000
and the eleven months ended March 31, 1999............................... F-21
Consolidated Statements of Changes in Members' Equity--For the year ended
March 31, 2000 and the eleven months ended March 31, 1999................ F-22
Consolidated Statements of Cash Flows--For the year ended March 31, 2000
and the eleven months ended March 31, 1999............................... F-23
Notes to Consolidated Financial Statements................................ F-24
Weigh-Tronix Scale Products Business
Report of Independent Accountants--March 31, 1998 and the year ended March
31, 1998 and one month ended April 30, 1998.............................. F-53
Combined Balance Sheet--March 31, 1998.................................... F-54
Combined Statement of Operations--For the year ended March 31, 1998 and
the one month ended April 30, 1998....................................... F-55
Combined Statement of Shareholder's Net Investment--For the year ended
March 31, 1998 and the one month ended April 30, 1998.................... F-56
Combined Statement of Cash Flows--For the year ended March 31, 1998 and
the one month ended April 30, 1998....................................... F-57
Notes to Combined Financial Statements.................................... F-58
Avery Berkel Group
Independent Auditor's Report to the Board of Directors and Shareholders of
the Avery Berkel Group--31 March 2000, 31 March 1999 and 31 March 1998
and the years ended 31 March 2000, 31 March 1999 and 31 March 1998....... F-77
Combined Profit and Loss Accounts--For the years ended 31 March 2000, 31
March 1999 and 31 March 1998............................................. F-78
Combined Balance Sheets--31 March 2000, 31 March 1999 and 31 March 1998... F-79
Combined Cashflow Statements--For the years ended 31 March 2000, 31 March
1999 and 31 March 1998................................................... F-80
Combined Statements of Total Recognised Gains and Losses--For the years
ended 31 March 2000, 31 March 1999 and 31 March 1998..................... F-81
Notes to the Accounts..................................................... F-82
</TABLE>
F-1
<PAGE>
WEIGH-TRONIX, LLC
CONSOLIDATED BALANCE SHEET
(In Thousands)
<TABLE>
<CAPTION>
June 30,
2000
-----------
(unaudited)
<S> <C>
Assets
Current assets:
Cash and cash equivalents....................................... $ 15,137
Accounts receivable, net........................................ 73,612
Inventories, net................................................ 84,141
Prepaid expenses and other current assets....................... 8,398
Deferred income taxes........................................... --
--------
Total current assets........................................... 181,288
Property, plant and equipment, net................................ 47,403
Intangibles, net.................................................. 119,469
Deferred financing costs, net..................................... 11,189
Other assets...................................................... 3,755
--------
Total assets................................................... $363,104
========
Liabilities, Mandatorily Redeemable Membership Interests and
Members' Equity
Current liabilities:
Current portion of long-term debt............................... $ 1,391
Accounts payable................................................ 30,738
Accrued expenses................................................ 36,052
Deferred revenue................................................ 16,675
Deferred income taxes........................................... 3,996
--------
Total current liabilities...................................... 88,852
Long-term debt.................................................... 193,584
Other long-term obligations....................................... 3,332
Deferred income taxes............................................. 15,885
Minority interest................................................. 4,534
--------
Total liabilities.............................................. 306,187
--------
Mandatorily redeemable membership interests:
Class A membership interests, subject to put option............. 1,139
Class C membership interests, subject to put option............. 1,959
Preferred member interest....................................... 9,314
--------
Total mandatorily redeemable membership interests.............. 12,412
Members' equity:
Membership interests............................................ 54,410
Additional paid-in capital...................................... 3,480
Subscription note receivable.................................... (455)
Unearned compensation........................................... (340)
Accumulated deficit............................................. (11,182)
Accumulated other comprehensive loss............................ (1,408)
--------
Members' equity................................................ 44,505
--------
Total mandatorily redeemable membership interests and members'
equity........................................................ 56,917
--------
Total liabilities, mandatorily redeemable membership interests
and members' equity........................................... $363,104
========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE>
WEIGH-TRONIX, LLC
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
<TABLE>
<CAPTION>
Three Months
Ended June 30,
----------------
1999 2000
<S> <C> <C>
Revenues:
Product.................................................... $22,618 $31,261
Services................................................... 6,833 12,261
------- -------
Total revenues........................................... 29,451 43,522
Cost of revenues:
Cost of products........................................... 15,180 22,683
Cost of services........................................... 4,791 9,420
------- -------
Total cost of revenues................................... 19,971 32,103
------- -------
Gross profit............................................. 9,480 11,419
Operating expenses:
Selling, general and administrative........................ 6,581 12,032
Depreciation and amortization.............................. 627 1,228
------- -------
Operating income (loss).................................. 2,272 (1,841)
Interest expense............................................. 1,635 2,280
Interest income.............................................. (14) (51)
Other income, net............................................ (397) (25)
Equity in loss of unconsolidated joint venture............... 10 --
------- -------
Income (loss) before provision for income taxes, minority
interest in income of subsidiary and extraordinary
loss.................................................... 1,038 (4,045)
------- -------
Provision (benefit) for income taxes......................... 318 (68)
Minority interest in income of subsidiary.................... -- 46
------- -------
Income (loss) before extraordinary loss.................. 720 (4,023)
Extraordinary (loss), net of income tax benefit of $66....... -- (2,549)
------- -------
Income (loss) before dividends on preferred member
interest................................................ 720 (6,572)
12% dividends accrued on preferred member interest........... -- 54
------- -------
Net income (loss) available to Members................... $ 720 $(6,626)
======= =======
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
F-3
<PAGE>
WEIGH-TRONIX, LLC
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------
1999 2000
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ 720 $ (6,572)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Non-cash extraordinary loss, net of income tax
benefit.............................................. -- 1,505
Depreciation and amortization......................... 1,134 1,801
Amortization of the inventory step-up................. -- 2,416
Equity in loss of unconsolidated joint venture........ 10 --
Membership equity interest compensation............... 45 1,714
Interest expense, deferred financing costs............ 128 241
Deferred income taxes................................. (161) (511)
Gain on disposal of property and equipment............ (14) --
Unrealized (gain) loss on foreign currency
translation.......................................... (100) 47
Changes in operating assets and liabilities, net of
effect of acquisitions:
Accounts receivable................................. 1,126 3,169
Inventories......................................... (725) (49)
Prepaid expenses and other current assets........... (668) (207)
Accounts payable.................................... 1,129 (3,758)
Accrued expenses and deferred revenue............... (1,758) (747)
-------- ----------
Net cash provided by (used in) operating
activities....................................... 866 (951)
Cash flows from investing activities:
Expenditures for property and equipment............... (401) (698)
Proceeds from sales of property and equipment......... 390 11
Acquisition of businesses, net of cash acquired....... (524) (163,783)
Loan to joint venture................................. (42) --
-------- ----------
Net cash used in investing activities............. (577) (164,470)
Cash flows from financing activities:
Proceeds from former senior debt...................... 1,400 --
Payments made on former senior debt................... (2,344) (40,487)
Payments made on former senior subordinated notes..... (675) (15,000)
Proceeds from term loans related to the Senior Credit
Agreement............................................ -- 70,000
Proceeds from the revolving credit portion of the
Senior Credit Agreement.............................. -- 29,000
Proceeds from the Senior Subordinated Notes due June
1, 2010.............................................. -- 95,891
Proceeds from membership interests.................... -- 39,461
Proceeds from preferred member interest............... -- 9,260
Net payments made on capital lease obligations........ (9) (8)
Deferred financing costs.............................. -- (11,262)
-------- ----------
Net cash provided by (used in) financing
activities....................................... (1,628) 176,855
Effect of exchange rates on cash........................ (311) (442)
-------- ----------
Increase (decrease) in cash............................. (1,650) 10,992
Cash and cash equivalents, beginning of the period...... 3,678 4,145
-------- ----------
Cash and cash equivalents, end of the period............ $ 2,028 $ 15,137
======== ==========
Supplemental cash flow information:
Cash paid for interest................................ $ 1,758 $ 1,842
Cash paid for income taxes............................ $ 11 $ 249
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
F-4
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
1. Basis of Presentation
Weigh-Tronix, LLC (the "Parent") is organized as a holding company and
operates through various subsidiaries (collectively, the "Company" or "Weigh-
Tronix"). The Company's fiscal year-end is March 31. The accompanying unaudited
consolidated financial statements include the consolidated accounts of Weigh-
Tronix, LLC and its subsidiaries and have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements. The consolidated financial
statements have not been audited by independent accountants in accordance with
generally accepted auditing standards, but in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary to summarize fairly the Company's financial position, results of
operations and cash flows.
Results for interim periods are not indicative of the results expected for
the year primarily due to the seasonal nature of the Company's business. The
unaudited consolidated financial statements should be read in conjunction with
the following notes and the Company's most recently audited consolidated
financial statements which are contained in this prospectus.
2. Acquisition of Avery Berkel
On June 13, 2000, Weigh-Tronix UK Limited, a subsidiary of the Company, and
Marconi Corporation plc completed the acquisition of all the issued share
capital of GEC Avery International Limited and Maatschappij van Berkel's Patent
BV (collectively, "Avery Berkel"). The purchase price consideration paid was
(Pounds)105.0 million (approximately $158.5 million), subject to preliminary
post-closing adjustments of $3.9 million, payable in cash, together with
warrants valued at $1.2 million to subscribe for 5% of the fully diluted
ownership interests of Weigh-Tronix, LLC. Avery Berkel is a leading
manufacturer, distributor and servicer of industrial and food retail weighing
systems and other food processing equipment. The Avery Berkel acquisition was
financed by the issuance of (Euro)100.0 million of 12.5% Senior Subordinated
Notes due June 1, 2010, the issuance of a (Euro)10.0 million liquidation
preference exchangeable preferred membership interest (hereafter referred to as
"Preferred Member Interest"), a new Senior Credit Agreement with maximum
borrowings of $120.0 million and the issuance of additional membership
interests of $40.3 million to existing and new Members of the Company.
F-5
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
The Avery Berkel acquisition is accounted for in accordance with the
purchase method of accounting. The preliminary purchase price recorded in the
consolidated accounts as of June 30, 2000 was approximately $159.6 million and
has been allocated to the net assets acquired as of June 13, 2000 based on
their respective fair values based on valuations and other studies that are not
yet complete. The valuations of the acquired property and equipment are not yet
complete and, therefore, the property and equipment amount indicated below
represents Avery Berkel's historical cost basis in those assets. The actual
allocation of the merger consideration could differ from the estimated amounts
included herein. A preliminary allocation of the merger consideration has been
made to major categories of assets and liabilities acquired as of the date of
acquisition in accordance with the purchase method of accounting:
<TABLE>
<CAPTION>
<S> <C>
Cash.................................................................. $ --
Accounts receivable................................................... 53,697
Inventories........................................................... 65,339
Prepaid expenses and other current assets............................. 6,881
Property and equipment................................................ 23,578
Goodwill.............................................................. 30,450
Other identifiable intangible assets.................................. 67,385
Other assets.......................................................... 3,734
Accounts payable and accrued expenses................................. (59,517)
Deferred income taxes--current........................................ (4,857)
Other long-term obligations........................................... (7,741)
Deferred income taxes--noncurrent..................................... (15,166)
--------
Total purchase price.............................................. $163,783
========
The purchase price was funded by:
Debt................................................................. $115,062
Preferred member interest............................................ 9,260
Additional membership interests...................................... 39,461
--------
Total purchase price.............................................. $163,783
========
</TABLE>
In accordance with EITF 95-3, "Recognition of Liabilities in Connection with
a Purchase Business Combination", the Company has included an estimate of $3.5
million as additional purchase accounting liabilities. This amount is comprised
of the following estimated liabilities:
<TABLE>
<S> <C>
Elimination of redundant corporate office expenses...................... $ 200
Manufacturing facility closure.......................................... 2,300
Service center facility consolidation and sales force rationalization... 1,000
------
Total................................................................. $3,500
</TABLE>
The Company has not yet finalized its business integration plans for the
Avery Berkel acquisition primarily due to a three month consultation period
required in the United Kingdom, and accordingly, the purchase accounting
liabilities will be finalized in future quarters. During the quarter ended June
30, 2000, the Company did not utilize any of its purchase accounting
liabilities.
In accordance with EITF 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)", the Company is expecting to take a
restructuring charge in the quarter ended September 30, 2000 relating to
certain of the historic Weigh-Tronix business operations.
F-6
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
3. Financing Related to the Avery Berkel Acquisition
Issuance of the (Euro)100.0 million of 12.5% Senior Subordinated Notes due
June 1, 2010
On June 13, 2000, SWT Finance B.V., a subsidiary of the Company (the
"Issuer"), issued (Euro)100.0 million of 12.5% Senior Subordinated Notes due
June 1, 2010 (the "Notes") in a private transaction pursuant to a note
indenture (the "Notes Indenture"). The Company is in the process of registering
the Notes on Form S-4 with the Securities and Exchange Commission and expects
their registration to go effective during its third quarter in fiscal 2001.
Interest is calculated on the basis of a 360-day year comprised of twelve
30-day months. Interest is payable semi-annually in arrears on each June 1 and
December 1, commencing on December 1, 2000.
The Notes are subordinated in right of payment to all current and future
senior debt, which includes the Senior Credit Agreement discussed below. The
Notes will rank pari passu in right of payment with all other Senior
Subordinated Debt of the Issuer issued in the future, if any, and senior in
right of payment to all subordinated indebtedness of the Issuer issued in the
future, if any.
The holders of the Notes have the right to require the Issuer to repurchase
all or any part of the Notes upon a Change of Control, as defined in the Notes
Indenture. Also, if the Company has "excess proceeds" of more than $5.0
million, as defined in the Notes Indenture, the Company is required to make an
offer to all holders of the Notes to purchase the maximum principal amount of
Notes that may be purchased with the excess proceeds at an offer price in cash
of an amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest.
The Notes Indenture contains a number of covenants that limit, among other
things, dividend payments, certain types of investments, incurrence of
indebtedness and issuance of preferred stock, issuance and sale of capital
stock of restricted subsidiaries, liens, merger, consolidation or sale of
assets, transactions with affiliates, sale and leaseback transactions,
additional guarantees and certain business activities.
Senior Credit Agreement
In connection with the Avery Berkel acquisition, certain subsidiaries of the
Company entered into a Senior Credit Agreement with certain lenders. The Senior
Credit Agreement is comprised of $120.0 million of Term Loan and Revolving
Credit Facilities, including a $30.0 million Tranche A Term Loan Facility, a
$40.0 million Tranche B Term Loan Facility and a $50.0 million Revolving Credit
Facility. The Tranche A Term Loan Facility is payable over 5 years, with the
final repayment on June 30, 2005. The Tranche B Term Loan Facility is payable
over 7 years, with the final payment on June 30, 2007. The commitment on the
Revolving Credit Facility terminates on June 30, 2005 and amounts drawn down
under the Revolving Credit Facility must be fully repaid by that date. The
Revolving Credit Facility is subject to a borrowing base as defined in the
Senior Credit Agreement based on specified percentages of eligible inventory
and accounts receivable. The proceeds of the Senior Credit Agreement were used
to pay back certain indebtedness of the Company and to finance a portion of the
Avery Berkel acquisition, including related fees and expenses.
The Tranche A Term Loan Facility and the Revolving Credit Facility bear
interest at a rate equal to, in the case of loans denominated in U.S. dollars,
sterling and euro, LIBOR plus 3.25% or, in the case of loans denominated in
U.S. dollars, a base rate plus 2.25%. The Tranche B Term Loan Facility bears
interest at a rate equal to, in the case of loans denominated in U.S. dollars
and sterling, LIBOR plus 3.75% or, in the case of loans denominated in U.S.
dollars, a base rate plus 2.75%. The margins over LIBOR and the base rate will
be subject to adjustment on December 13, 2000 based on the achievement of
certain financial ratios.
A commitment fee is calculated at a rate equal to 0.50% of the daily average
undrawn amount of the Revolving Credit Facility and is payable quarterly in
arrears. The commitment fee is also subject to adjustment on December 13, 2000
based on the achievement of certain financial ratios.
F-7
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
The Senior Credit Agreement provides for mandatory prepayments including: 1)
100% of the net proceeds of certain asset sales and insurance claims; 2) 100%
of the net proceeds of any sale or issuance of equity (other than equity
provided by existing shareholders of the Company) or incurrence of certain
indebtedness by the Company or any of its subsidiaries; and 3) an amount equal
to 75% of available "excess cash flows", as defined in the Senior Credit
Agreement, in any fiscal year. Such prepayments will be applied to the Tranche
A Term Loan Facility and the Trance B Term Loan Facility ratably.
The Senior Credit Agreement contains a number of operating and financial
covenants that limit, among other things, amalgamations and changes in
business, assets sales and disposals, indebtedness and other liabilities,
liens, guarantees and other contingent liabilities, investments, loans and
advances, dividends and other distributions and payments with respect to
capital stock, optional payments and modifications with respect to the Notes
and other debt instruments, transactions with affiliates, sale and leasebacks,
changes in the passive holding structure of the Parent, changes in lines of
business, permitted hedging activities, changes in fiscal periods, negative
pledge causes, restrictions on subsidiary distributions and amendments to Avery
Berkel acquisition documents. Also, the Senior Credit Agreement contains a
number of operating and financial covenants, including, without limitation,
requirements to maintain minimum ratios of earnings before interest, income
taxes, depreciation and amortization ("EBITDA") to interest expense and EBITDA
to fixed charges; maximum ratios of total indebtedness to EBITDA; minimum
tangible net worth; and limitations on capital expenditures. The Company does
not have to comply with the financial covenants until July 1, 2000.
Long-term debt at June 30, 2000 is as follows:
<TABLE>
<S> <C>
12.5% Senior Subordinated Notes due June 1, 2010................... $ 95,891
Tranche A Term Loan................................................ 30,000
Tranche B Term Loan................................................ 40,000
Revolving Credit Facility.......................................... 29,000
Capital Leases..................................................... 84
--------
Total debt......................................................... 194,975
Less current portion............................................... 1,391
--------
Long-term debt..................................................... $193,584
========
</TABLE>
Redemption of the senior debt and the 12% Senior Subordinated Notes due May 1,
2005 and 2006
On June 13, 2000, a portion of the proceeds from the Senior Credit Agreement
and the Notes was used to fund the redemption of all outstanding senior debt
under the credit agreement that was in place at March 31, 2000 and the 12%
Senior Subordinated Notes. The Company recorded a pre-tax extraordinary loss of
approximately $1.0 million relating to the early redemption of the 12% Senior
Subordinated Notes. Also, the Company recorded a pre-tax extraordinary loss of
approximately $1.6 million, which represents the unamortized deferred financing
costs of the retired senior debt and the 12% Senior Subordinated Notes. Both
amounts are reflected as extraordinary items, net of the income tax benefit, in
the accompanying consolidated statement of operations.
Preferred Member Interest
In connection with the Avery Berkel Acquisition on June 13, 2000, the
Company issued the Preferred Member Interest pursuant to a subscription
agreement (the "Subscription Agreement") between the Company,
F-8
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
the Issuer of the Notes and Marconi Corporation plc. The Subscription Agreement
was a private transaction not subject to the registration requirements of the
Securities Act of 1933 or 1934. The holder of the Preferred Member Interest is
entitled to dividends at a rate per annum equal to 12.0% through and including
June 1, 2005, 15.0% from June 2, 2005 through and including December 1, 2005,
and thereafter increasing by fifty basis points at the beginning of each
subsequent six month period up to a maximum rate of 18.0%, in each case
calculated on liquidation preference per Preferred Member Interest. Dividends
are cumulative and payable annually on each June 1, commencing on June 1, 2001.
At any time subsequent to the first anniversary of the issuance of the
Preferred Member Interest, subject to the Company's achieving a certain fixed
charge coverage ratio for the most recently ended four fiscal quarters, the
holder of the Preferred Member Interest, at its option, may exchange its
Preferred Member Interest for an aggregate principal amount of exchange notes.
The right to exchange the Preferred Member Interest is exercisable only once.
The exchange notes will be issued under the Notes Indenture and will be
substantially identical to the Notes except that the date of issue and the
first interest period will be different.
The Preferred Member Interest, with respect to distributions upon the
liquidation, winding-up and dissolution of Weigh-Tronix, rank junior and are
subordinated in right of payment to the prior payment in full of the Notes, the
Senior Debt and all other debt liabilities and obligations of Weigh-Tronix. The
exchange notes issuable upon exchange of the Preferred Member Interest will
rank pari passu with the Notes.
In the event of bankruptcy, liquidation or reorganization of the Company,
the assets of Weigh-Tronix will be available to pay obligations on the
Preferred Member Interest only after all holders of the Notes, the Senior
Credit Agreement and all other debt liabilities and obligations have been paid.
4. Pro Forma Information
The results of operations of Avery Berkel and other purchased businesses
have been included in the consolidated results of the Company from their
respective acquisition dates. The following unaudited pro forma summary
presents the net sales and net income (loss) for the three months ended June
30, 1999 and June 30, 2000 as if the acquisitions had occurred as of the
beginning of the periods indicated. The pro forma summary gives effect to
actual operating results prior to the acquisition, adjusted to include the pro
forma effect of interest expense on the debt used to finance the acquisitions,
amortization of the related goodwill and other identifiable intangible assets
and income taxes. In addition, the pro forma results for both periods presented
include an amortization charge of $12.9 million related to the one time
adjustment of $16.3 million to record the acquired Avery Berkel inventory at
its estimated fair value. No effect has been given to cost reductions or
operating synergies in this presentation.
Additionally, the pro forma summary does not necessarily reflect the actual
results that would have occurred nor is it necessarily indicative of future
results of operations of the combined companies:
<TABLE>
<CAPTION>
Three Months
Ended June 30,
(unaudited)
-----------------
1999 2000
<S> <C> <C>
Net sales.................................................... $91,130 $ 82,262
======= ========
Net loss..................................................... $(9,570) $(14,557)
======= ========
</TABLE>
F-9
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
5. Inventories
<TABLE>
<CAPTION>
June
30,
2000
-------
<S> <C>
Inventories, net consist of the following:
Raw materials........................................................ $14,452
Work in process...................................................... 13,354
Finished goods....................................................... 56,335
-------
$84,141
=======
</TABLE>
In connection with the acquisition of Avery Berkel in a purchase transaction
on June 13, 2000, the Company recorded a non-recurring inventory fair value
adjustment of $16.3 million in the three months ended June 30, 2000 to reflect
the purchase of the Avery Berkel inventory at its estimated fair value. During
the three months ended June 30, 2000, the Company amortized $2.4 million of the
fair value adjustment in cost of goods sold. The unamortized fair value
adjustment of $13.9 million will be amortized into cost of goods sold during
fiscal 2001 as the inventory is sold.
6. Income Taxes
During the three months ended June 30, 2000, the Company's loss was
primarily generated by the Parent and by the Company's subsidiaries in the
United Kingdom. The Parent is a limited liability company and thus not directly
subject to U.S. federal or state income taxes. For its subsidiaries in the
United Kingdom, the Company recorded a net income tax benefit of $142 for the
three months ended June 30, 2000. In addition, for its Canadian subsidiary, the
Company recorded income tax expense of $74 for the three months ended June 30,
2000. During the three months ended June 30, 1999, the income tax expense of
$318 is related to the Company's United Kingdom subsidiaries. For both periods,
the Company has provided a valuation allowance against all net operating loss
carryforwards and deductible temporary differences as the Company's operating
results do not presently support an assertion that ultimate realization is more
likely than not.
7. Comprehensive Income (Loss)
Comprehensive income (loss) and its components are as follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------
1999 2000
--------- ----------
<S> <C> <C>
Net income (loss)......................................... $ 720 $ (6,572)
Other comprehensive loss:
Foreign currency translation adjustment................. (554) (798)
-------- ----------
Comprehensive income (loss)............................... $ 166 $(7,370)
======== ==========
</TABLE>
8. Segment Information
Prior to the acquisition of Avery Berkel on June 13, 2000, the Company was
organized for management purposes into three reportable business segments: the
North American Industrial division, the European Industrial division and the
Consumer division. The Company continued to evaluate the historical Weigh-
Tronix
F-10
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
operations within those reportable business segments during the three months
ended June 30, 2000. The operations of Avery Berkel were evaluated as five
separate reportable business segments prior to the acquisition and continued to
be evaluated using those segments under Weigh-Tronix management. The reportable
segments of Avery Berkel are based on the geographical areas in which it
operates. In connection with management's restructuring plan as discussed in
Note 2, the Company anticipates consolidating the business segments that are
currently in place.
The Company evaluates performance and allocates resources based on operating
income. The reporting segments follow the same accounting policies as Weigh-
Tronix's consolidated financial statements as described in the annual audited
consolidated financial statements. Following is a tabulation of the business
segment information for each of the periods presented.
F-11
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
8. Segment Information (Continued)
<TABLE>
<CAPTION>
Historical Weigh-Tronix Operations Historical Avery Berkel Operations
Three months ended June 30, Seventeen days ended June 30, 2000
---------------------------------------- -------------------------------------------
North Other
American European Corporate United European The Asia Inter- Consolidated
Industrial Industrial Consumer and Other Kingdom Countries Americas Pacific Africa Segment Total
---------- ---------- -------- --------- -------- --------- -------- ------- ------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999
External product
sales........... $14,780 $3,690 $4,148 $ -- $ -- $22,618
External service
sales........... 3,564 3,269 -- -- -- 6,833
------- ------ ------ -------- --------- -------
Total external
sales........... 18,344 6,959 4,148 -- -- 29,451
------- ------ ------ -------- --------- -------
Intersegment
sales........... 870 -- -- -- -- 870
Gross profit.... 6,107 2,173 1,200 -- -- 9,480
Operating income
(loss).......... 1,856 599 81 (264) -- 2,272
Net income...... 910 182 27 (399) -- 720
2000
External product
sales........... $13,433 $4,837 $4,658 $ -- $ 3,580 $ 1,754 $ 1,534 $ 830 $ 635 $ -- $31,261
External service
sales........... 3,671 3,127 -- -- 3,408 782 335 492 446 -- 12,261
------- ------ ------ -------- -------- ------- ------- ------- ------ --------- -------
Total external
sales........... 17,104 7,964 4,658 -- 6,988 2,536 1,869 1,322 1,081 -- 43,522
------- ------ ------ -------- -------- ------- ------- ------- ------ --------- -------
Intersegment
sales........... 927 20 -- -- 591 32 -- 6 -- -- 1,576
Gross profit.... 5,444 2,874 1,362 -- (460) 747 553 510 389 11,419
Operating income
(loss).......... 905 1,042 (14) (2,800) (1,704) 105 273 171 181 (1,841)
Net income
(loss).......... (737) 412 (65) (5,639) (1,230) 160 209 184 134 -- (6,572)
June 30, 2000
Long-lived
assets.......... 28,448 11,475 3,257 16,404 113,388 4,658 1,264 1,728 1,194 -- 181,816
Total assets.... 69,726 24,493 12,761 335,769 174,304 32,772 20,540 18,593 8,453 (334,307) 363,104
June 30, 1999
Capital
expenditures.... 108 236 57 -- 401
June 30, 2000
Capital
expenditures.... 429 32 56 -- 123 35 9 5 9 -- 698
</TABLE>
F-12
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
8.Segment Information (Continued)
Net sales by customer location for the three months ended June 30, 1999 and
2000 were as follows:
<TABLE>
<CAPTION>
Three months
ended June 30,
---------------
1999 2000
------- -------
<S> <C> <C>
Net sales:
United States................................................. $15,201 $16,082
United Kingdom................................................ 10,620 16,006
Other......................................................... 3,630 11,434
------- -------
$29,451 $43,522
======= =======
</TABLE>
Long-lived assets by location as of June 30, 1999 and June 30, 2000 were as
follows:
<TABLE>
<CAPTION>
June 30, June 30,
1999 2000
-------- --------
<S> <C> <C>
Long-lived assets:
United States............................................... $ 27,736 $ 30,506
United Kingdom.............................................. 17,192 145,004
Other....................................................... 1,233 6,306
-------- --------
$ 46,161 $181,816
======== ========
</TABLE>
9.Guarantors of Debt
The following summarized combined financial information presents guarantor
and non-guarantor results of operations, financial position, and ccash flows of
the Company under the Notes. The Notes are fully and unconditionally
guaranteed, jointly and severally, on an unsecured senior subordinated basis by
the guarantor subsidiaries.
Investments in subsidiaries are accounted for using the equity method;
accordingly, entries necessary to consolidate the Company, guarantor
subsidiaries and non-guarantor subsidiaries are reflected in the eliminations
column. The summarized consolidated financial information was prepared using
the same consolidation policies as presented in Note 1--Basis of Presentation.
Management asserts that separate complete financial statements of the issuer
and subsidiary guarantors of the Notes would not provide additional material
information that would be useful in assessing the financial composition of the
guarantors or the sufficiency of the guarantees.
F-13
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
9.Guarantors of Debt (Continued)
Unaudited Consolidated Statements of Operations for the Quarter Ended June
30, 1999
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Total
------ ------------ ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Revenues:
Products.............. $ -- $24,011 $359 $(1,752) $22,618
Services.............. -- 6,737 96 -- 6,833
----- ------- ---- ------- -------
Total revenues...... -- 30,748 455 (1,752) 29,451
Cost of revenues:
Cost of products...... -- 16,682 231 (1,733) 15,180
Cost of services...... -- 4,709 82 -- 4,791
----- ------- ---- ------- -------
Total cost of
revenues........... -- 21,391 313 (1,733) 19,971
----- ------- ---- ------- -------
Gross profit........ -- 9,357 142 (19) 9,480
Operating expenses:
Selling, general and
administrative....... 45 6,369 167 -- 6,581
Depreciation and
amortization......... -- 607 20 -- 627
----- ------- ---- ------- -------
Operating income
(loss)............. (45) 2,381 (45) (19) 2,272
Interest expense........ 40 1,578 17 -- 1,635
Interest income......... -- (14) -- -- (14)
Other income, net....... -- (358) (39) -- (397)
Equity in loss of
unconsolidated joint
venture................ -- 10 -- -- 10
Equity in income of
consolidated
subsidiaries........... (805) -- -- 805 --
----- ------- ---- ------- -------
Income (loss) before
provision for
income taxes....... 720 1,165 (23) (824) 1,038
Provision for income
taxes.................. -- 318 -- -- 318
----- ------- ---- ------- -------
Net income (loss)... $ 720 $ 847 $(23) $ (824) $ 720
===== ======= ==== ======= =======
</TABLE>
F-14
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
9.Guarantors of Debt (Continued)
Unaudited Consolidated Condensed Statements of Cash Flows for the Quarter Ended
June 30, 1999
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Total
------ ------------ ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Net cash provided by
(used in) operating
activities............ $-- $ 809 $ (6) $ 63 $ 866
Cash flows from
investing activities:
Expenditures for
property and
equipment........... -- (379) (22) -- (401)
Proceeds from sales
of property and
equipment........... -- 390 -- -- 390
Acquisition of
businesses, net of
cash acquired....... -- (524) -- -- (524)
Loan to joint
venture............. -- (42) -- -- (42)
==== ======= ==== ==== =======
Net cash used in
investing
activities........ -- (555) (22) -- (577)
Cash flows from
financing activities:
Proceeds from former
senior debt......... -- 1,400 -- -- 1,400
Payments made on
former senior debt.. -- (2,344) -- -- (2,344)
Payments made on
former senior
subordinated notes.. -- (675) -- -- (675)
Payments made on
capital lease
obligations......... -- -- (9) -- (9)
---- ------- ---- ---- -------
Net cash used in
financing
activities........ -- (1,619) (9) -- (1,628)
Effect of exchange
rates on cash......... -- (251) 2 (62) (311)
---- ------- ---- ---- -------
Net decrease in cash... -- (1,616) (35) 1 (1,650)
Cash and cash
equivalents, beginning
of the period......... -- 3,422 256 -- 3,678
---- ------- ---- ---- -------
Cash and cash
equivalents, end of
the period............ $-- $ 1,806 $221 $ 1 $ 2,028
==== ======= ==== ==== =======
</TABLE>
F-15
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
9. Guarantors of Debt (Continued)
Unaudited Consolidated Balance Sheets As of June 30, 2000
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.......... $ -- $ 9,576 $ 5,561 $ -- $ 15,137
Accounts receivable,
net.................. 744 66,609 25,665 (19,406) 73,612
Inventories, net...... -- 69,887 14,342 (88) 84,141
Prepaid expenses and
other current
assets............... 6 3,646 4,746 -- 8,398
------- -------- ------- --------- --------
Total current
assets............. 750 149,718 50,314 (19,494) 181,288
Property, plant and
equipment, net......... -- 43,542 3,861 -- 47,403
Intangibles, net........ 1,200 117,979 290 -- 119,469
Deferred financing
costs, net............. -- 11,189 -- -- 11,189
Other assets............ -- 648 3,107 -- 3,755
Investment in
subsidiaries........... 57,229 219,292 -- (276,521) --
Intercompany
receivables............ -- 183,075 -- (183,075) --
------- -------- ------- --------- --------
Total assets........ $59,179 $725,443 $57,572 $(479,090) $363,104
======= ======== ======= ========= ========
Liabilities, Mandatorily
Redeemable Membership
Interests and Members'
Equity
Current liabilities:
Current portion of
long-term debt....... $ -- $ 1,350 $ 41 $ -- $ 1,391
Accounts payable...... 75 37,032 12,771 (19,140) 30,738
Accrued expenses...... -- 29,319 6,733 -- 36,052
Deferred revenue...... -- 11,025 5,650 -- 16,675
Deferred income
taxes................ -- 3,996 -- 3,996
------- -------- ------- --------- --------
Total current
liabilities........ 75 82,722 25,195 (19,140) 88,852
Long-term debt.......... -- 193,541 43 -- 193,584
Other long-term
obligations............ -- 182 3,150 -- 3,332
Deferred income taxes... -- 17,918 (2,033) -- 15,885
Minority interest....... -- -- 4,534 -- 4,534
Intercompany loans...... 779 421,115 25,827 (447,721) --
------- -------- ------- --------- --------
Total liabilities... 854 715,478 56,716 (466,861) 306,187
Mandatorily redeemable
membership interests:
Class A membership
interests, subject to
put option .......... 1,139 -- -- -- 1,139
Class C membership
interests, subject to
put option........... 1,959 -- -- -- 1,959
Preferred member
interest............. 9,314 -- -- -- 9,314
------- -------- ------- --------- --------
Total mandatorily
redeemable
membership
interests.......... 12,412 -- -- -- 12,412
Members' equity:
Membership interests.. 54,410 18,354 372 (18,726) 54,410
Additional paid-in
capital.............. 3,480 -- -- -- 3,480
Subscription note
receivable........... (455) -- -- -- (455)
Unearned
compensation......... (340) -- -- -- (340)
Retained earnings
(accumulated
deficit)............. (11,182) (7,244) 505 6,739 (11,182)
Accumulated other
comprehensive loss... -- (1,145) (21) (242) (1,408)
------- -------- ------- --------- --------
Members' equity......... 45,913 9,965 856 (12,229) 44,505
------- -------- ------- --------- --------
Total mandatorily
redeemable
membership
interests and
members' equity.... 58,325 9,965 856 (12,229) 56,917
------- -------- ------- --------- --------
Total liabilities,
mandatorily redeemable
membership interests
and members' equity.... $59,179 $725,443 $57,572 $(479,090) $363,104
======= ======== ======= ========= ========
</TABLE>
F-16
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
9. Guarantors of Debt (Continued)
Unaudited Consolidated Statements of Operations for the Quarter Ended June 30,
2000
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Revenues:
Products.............. $ -- $29,955 $3,652 $(2,346) $31,261
Services.............. -- 10,229 2,206 (174) 12,261
------- ------- ------ ------- -------
Total revenues...... -- 40,184 5,858 (2,520) 43,522
Cost of revenues:
Cost of products...... -- 22,254 2,775 (2,346) 22,683
Cost of services...... -- 8,093 1,501 (174) 9,420
------- ------- ------ ------- -------
Total cost of
revenues........... -- 30,347 4,276 (2,520) 32,103
------- ------- ------ ------- -------
Gross profit........ -- 9,837 1,582 -- 11,419
Operating expenses:
Selling, general and
administrative....... 1,714 9,247 1,071 -- 12,032
Depreciation and
amortization......... -- 1,170 58 -- 1,228
------- ------- ------ ------- -------
Operating income
(loss)............. (1,714) (580) 453 -- (1,841)
Interest expense........ 992 1,285 61 (58) 2,280
Interest income......... -- (33) (76) 58 (51)
Other income, net....... -- (25) -- -- (25)
Equity in loss of
unconsolidated joint
venture................ -- -- -- -- --
Equity in loss of
consolidated
subsidiaries........... 3,866 -- -- (3,866) --
------- ------- ------ ------- -------
Income (loss) before
benefit for income
taxes, minority
interest in income
of subsidiary and
extraordinary
loss............... (6,572) (1,807) 468 3,866 (4,045)
Benefit for income
taxes.................. -- (65) (3) -- (68)
Minority interest in
income of subsidiary... -- -- 46 -- 46
------- ------- ------ ------- -------
Income (loss) before
extraordinary
loss............... (6,572) (1,742) 425 3,866 (4,023)
Extraordinary (loss),
net of income tax
benefit of $66......... -- (2,549) -- -- (2,549)
------- ------- ------ ------- -------
Income (loss) before
dividend on
preferred member
interest........... (6,572) (4,291) 425 3,866 (6,572)
12% dividends accrued on
preferred member
interest............... 54 -- -- -- 54
------- ------- ------ ------- -------
Net income (loss)
available to
Members............ $(6,626) $(4,291) $ 425 $ 3,866 $(6,626)
======= ======= ====== ======= =======
</TABLE>
F-17
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
9. Guarantors of Debt (Continued)
Unaudited Consolidated Condensed Statements of Cash Flows for the Quarter Ended
June 30, 2000
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Net cash used in
operating activities... $ -- $ (766) $ (450) $ 265 $ (951)
Cash flows from
investing activities:
Expenditures for
property and
equipment............ -- (663) (35) (698)
Proceeds from sales of
property and
equipment............ -- (2) 13 11
Acquisition of
businesses, net of
cash acquired........ -- (163,783) (163,783)
-------- --------- ------ ----- ---------
Net cash used in
investing
activities......... -- (164,448) (22) -- (164,470)
Cash flows from
financing activities:
Proceeds from former
senior debt.......... --
Payments made on
former senior debt... -- (40,487) -- -- (40,487)
Payments made on
former senior
subordinated notes... -- (15,000) -- -- (15,000)
Proceeds from term
loans related to the
Senior Credit
Agreement............ -- 70,000 -- -- 70,000
Proceeds from the
revolving credit
portion of the Senior
Credit Agreement..... -- 29,000 -- -- 29,000
Proceeds from the
Senior Subordinated
Notes due June 1,
2010................. -- 95,891 -- -- 95,891
Proceeds from
membership
interests............ 39,461 -- -- -- 39,461
Proceeds from
preferred member
interest............. 9,260 -- -- -- 9,260
Payments made on
capital lease
obligations.......... -- -- (8) -- (8)
Deferred financing
costs................ -- (11,262) -- -- (11,262)
Intercompany loans.... (48,721) 43,161 5,560 --
-------- --------- ------ ----- ---------
Net cash provided by
financing
activities......... -- 171,303 5,552 -- 176,855
Effect of exchange rates
on cash................ 103 (280) (265) (442)
-------- --------- ------ ----- ---------
Net increase in cash.... -- 6,192 4,800 -- 10,992
Cash and cash
equivalents, beginning
of the period.......... -- 3,384 761 -- 4,145
-------- --------- ------ ----- ---------
Cash and cash
equivalents, end of the
period................. $ -- $ 9,576 $5,561 $ -- $ 15,137
======== ========= ====== ===== =========
</TABLE>
F-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members and Board of Managers of
Weigh-Tronix, LLC
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in members' equity, and of
cash flows present fairly, in all material respects, the financial position of
Weigh-Tronix, LLC and its subsidiaries (the "Company") at March 31, 2000 and
March 31, 1999, and the results of their operations and their cash flows for
the year ended March 31, 2000 and the eleven months ended March 31, 1999 in
conformity with accounting principles generally accepted in the United States.
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 audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Hartford, CT
June 21, 2000
F-19
<PAGE>
WEIGH-TRONIX, LLC
CONSOLIDATED BALANCE SHEETS
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
March 31, March 31,
1999 2000
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents................................. $ 3,678 $ 4,145
Accounts receivable, net.................................. 20,825 21,677
Inventories, net.......................................... 20,165 21,008
Prepaid expenses and other current assets................. 1,625 1,319
Deferred income taxes..................................... 1,210 897
------- -------
Total current assets...................................... 47,503 49,046
Property, plant and equipment, net......................... 25,134 24,625
Intangibles, net........................................... 19,285 19,840
Deferred financing costs, net.............................. 2,074 1,675
Investment in joint venture................................ 59 21
------- -------
Total assets.............................................. $94,055 $95,207
======= =======
Liabilities, Mandatorily Redeemable Membership Interests and Members' Equity
Current liabilities:
Current portion of long-term debt......................... $ 7,207 $ 2,692
Current portion of obligations under capital leases....... 58 50
Accounts payable.......................................... 6,722 10,733
Accrued expenses.......................................... 15,355 12,998
Deferred revenue.......................................... 1,017 2,021
------- -------
Total current liabilities................................. 30,359 28,494
Long-term debt............................................. 51,301 53,203
Obligations under capital leases........................... 45 44
Other long-term obligations................................ 317 130
Deferred income taxes...................................... 907 753
------- -------
Total liabilities......................................... 82,929 82,624
------- -------
Commitments and contingencies (Note 9)
Mandatorily redeemable membership interests:
Class A membership interests, subject to put option....... 900 1,139
Class C membership interests, subject to put option....... 1,305 1,959
------- -------
Total mandatorily redeemable membership interests......... 2,205 3,098
Members' equity:
Membership interests...................................... 14,100 14,100
Additional paid-in capital................................ 1,666 1,012
Subscription note receivable.............................. (75) (75)
Unearned compensation..................................... (555) (386)
Accumulated deficit....................................... (6,166) (4,556)
Accumulated other comprehensive loss...................... (49) (610)
------- -------
Members' equity........................................... 8,921 9,485
------- -------
Total mandatorily redeemable membership interests
and members' equity...................................... 11,126 12,583
------- -------
Total liabilities, mandatorily redeemable membership
interests and members' equity............................ $94,055 $95,207
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-20
<PAGE>
WEIGH-TRONIX, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended
March 31, March 31,
1999 2000
------------- ----------
<S> <C> <C>
Revenues:
Product sales........................................ $ 86,568 $ 98,571
Services............................................. 23,610 27,556
-------- --------
Total revenues..................................... 110,178 126,127
Cost of revenues:
Cost of products sold................................ 66,634 66,544
Cost of services..................................... 14,828 18,329
-------- --------
Total cost of revenues............................. 81,462 84,873
-------- --------
Gross profit....................................... 28,716 41,254
Operating expenses:
Selling, general and administrative.................. 25,025 30,049
Depreciation and amortization........................ 2,201 2,877
-------- --------
Operating income................................... 1,490 8,328
Interest expense....................................... 5,932 6,020
Interest income........................................ (9) (329)
Other expense (income), net............................ 178 (327)
Equity in loss of unconsolidated joint venture......... -- 38
-------- --------
Income (loss) before provision for income taxes.... (4,611) 2,926
Provision for income taxes............................. 1,555 1,316
-------- --------
Net income (loss).................................. $ (6,166) $ 1,610
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-21
<PAGE>
WEIGH-TRONIX, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Accumulated
Additional Subscription Other Total
Membership Paid-in Note Unearned Accumulated Comprehensive Members' Comprehensive
Interests Capital Receivable Compensation Deficit Loss Equity Income (Loss)
---------- ---------- ------------ ------------ ----------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, May 1, 1998.... $ -- $ -- $-- $ -- $ -- $ -- $ --
Net loss.............. (6,166) (6,166) $(6,166)
Currency translation
adjustment........... (49) (49) (49)
-------
Total comprehensive
loss............... $(6,215)
=======
Issuance of Class A
member interests for
cash and note.......... 14,100 -- (75) -- -- -- 14,025
Class B, Class D and
Class E equity
interests.............. -- 1,666 -- (741) -- -- 925
Unearned compensation... -- -- -- 186 -- -- 186
------- ------ ---- ----- ------- ----- ------
Balance, March 31,
1999................... 14,100 1,666 (75) (555) (6,166) (49) 8,921
------- ------ ---- ----- ------- ----- ------
Net income............ 1,610 1,610 $ 1,610
Currency translation
adjustment........... (561) (561) (561)
-------
Total comprehensive
income............. $ 1,049
=======
Accretion of Class C
equity interests..... -- (654) -- -- -- -- (654)
Unearned
compensation......... -- -- -- 169 -- -- 169
------- ------ ---- ----- ------- ----- ------
Balance, March 31,
2000................... $14,100 $1,012 $(75) $(386) $(4,556) $(610) $9,485
======= ====== ==== ===== ======= ===== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-22
<PAGE>
WEIGH-TRONIX, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Eleven Months Year
Ended Ended
March 31, March 31,
1999 2000
------------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $ (6,166) $ 1,610
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization........................ 3,860 4,864
Amortization of the inventory step-up................ 6,213 --
Equity in loss of unconsolidated joint venture....... -- 38
Membership equity interest compensation.............. 1,110 169
Amortization of the deferred financing costs......... 356 301
Deferred income taxes................................ (184) 159
(Gain)/loss on disposal of property and equipment.... 17 (75)
Unrealized (gain) loss on foreign currency
translation......................................... 129 (46)
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable................................ (1,526) (703)
Inventories........................................ 4,412 (622)
Prepaid expenses and other current assets.......... 940 310
Accounts payable................................... (841) 3,829
Accrued expenses and deferred revenue.............. 2,287 (1,888)
Other liabilities.................................. 64 (182)
-------- -------
Net cash provided by operating activities........ 10,671 7,764
Cash flows from investing activities:
Expenditures for property and equipment.............. (2,356) (2,736)
Proceeds from sales of property and equipment........ 40 161
Acquisition of the Acquired Companies, net of cash
acquired............................................ (77,012) --
Acquisition of businesses, net of cash acquired...... (923) (2,236)
Investment in joint venture.......................... (59) --
Loan to joint venture................................ -- (42)
-------- -------
Net cash used in investing activities............ (80,310) (4,853)
Cash flows from financing activities:
Proceeds from senior revolving notes................. 23,135 7,670
Payments made on senior revolving notes.............. (8,225) (3,213)
Proceeds from senior term notes...................... 30,000 --
Payments made on senior term notes................... (950) (6,886)
Proceeds from senior subordinated term notes......... 15,000 --
Proceeds from membership interests................... 14,925 239
Payments made on capital lease obligations........... (23) (84)
-------- -------
Net cash provided by (used in) financing
activities...................................... 73,862 (2,274)
Effect of exchange rates on cash....................... (545) (170)
-------- -------
Increase in cash....................................... 3,678 467
Cash and cash equivalents, beginning of the period..... -- 3,678
-------- -------
Cash and cash equivalents, end of the period........... $ 3,678 $ 4,145
======== =======
Supplemental cash flow information:
Cash paid for interest............................... $ 4,620 $ 5,498
Cash paid for income taxes........................... $ 547 $ 1,551
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-23
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of U.S. Dollars)
1. Business Description, Acquisition of Business and Financial Statement
Presentation
Business Description
Weigh-Tronix, LLC (the "Company") was formed as a Delaware limited liability
company, effective May 1, 1998, in accordance with a Limited Liability Company
Agreement between Berkshire Fund IV Investment Corp., Berkshire Investors, LLC,
Squam Lake Investors, III, L.P., BancBoston Investments, Inc., Sunapee
Securities, Inc., R&H Trust Co. (Jersey) Limited and certain individuals,
collectively herein referred to as the "Members". The Company is a manufacturer
of scales, scale peripherals and force measurement equipment and primarily
operates throughout the United States, Canada, Australia and the United
Kingdom.
On May 1, 1998, pursuant to a Stock and Asset Purchase Agreement, the
Company acquired substantially all of the assets and assumed certain
liabilities of Weigh-Tronix, Inc., Salter Weigh-Tronix Limited and Weigh-Tronix
Canada, ULC and all of the outstanding shares of stock of Salter Housewares
Limited and Salter Weigh-Tronix Pty Ltd. (All of these aforementioned companies
are collectively referred to as the "Acquired Companies" and the transaction
itself as the "Acquisition"). The Acquisition was financed through a
combination of debt and equity financing. The purchase price was approximately
$81,800, which included approximately $5,221 of transaction costs. The purchase
price has been allocated to the net assets acquired as of the date of
acquisition as follows in accordance with the purchase method of accounting:
<TABLE>
<S> <C>
Cash................................................................... $ 4,788
Accounts receivable.................................................... 19,298
Inventories............................................................ 30,790
Prepaid expenses and other current assets.............................. 3,388
Property and equipment................................................. 26,012
Goodwill............................................................... 7,079
Other identifiable intangible assets................................... 12,100
Deferred financing costs............................................... 1,125
Accounts payable and accrued expenses.................................. (21,639)
Other liabilities...................................................... (1,141)
-------
Total purchase price.................................................. $81,800
=======
The purchase price was funded by:
Cash.................................................................. $14,500
Debt.................................................................. 67,300
-------
Total purchase price.................................................. $81,800
=======
</TABLE>
The accompanying consolidated results of operations include the operating
results of the Acquired Companies from May 1, 1998. Prior to May 1, 1998, the
Company had no other operating activities.
An inventory step-up and a fixed asset revaluation were required under the
purchase method of accounting. The inventory step-up resulted in a $6,213 one
time charge to cost of goods sold in the eleven months ended March 31, 1999.
The excess of cost over the fair value of the underlying assets acquired has
been allocated to goodwill which is being amortized on a straight-line basis
over an estimated useful life of 30 years.
F-24
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
Acquisition of Businesses
During the eleven months ended March 31, 1999 and the year ended March 31,
2000, the Company acquired two and five businesses, respectively. The
acquisitions were financed primarily using the Company's existing debt
facilities. The acquisitions were accounted for using the purchase method of
accounting and, therefore, the purchase price has been allocated to the net
assets acquired based on their fair value at the date of the respective
acquisitions. The excess of cost over the fair value of the underlying assets
acquired has been allocated to goodwill which is being amortized on a straight-
line basis over estimated useful lives of 5-10 years.
The acquisitions are summarized as follows:
<TABLE>
<CAPTION>
Date of Purchase
Name of Company Acquired Acquisition Price Goodwill
------------------------ ------------------ -------- --------
<S> <C> <C> <C>
Mecmesin, Inc.......................... November 10, 1998 $ 613 $ 563
GWS Weighing Systems Limited........... March 12, 1999 630 954
Logtech-USA, Inc....................... April 1, 1999 254 189
Equatech Sales, Inc.................... May 1, 1999 317 261
Deben System Limited................... September 2, 1999 1,153 1,370
Australian Weighing Co. Pty. Ltd....... September 13, 1999 133 109
Hallamshire Scales Limited............. October 4, 1999 444 502
</TABLE>
In connection with the acquisition of Logtech, the Company may be required
to pay up to $250 relating to the achievement of certain sales levels as
outlined in the acquisition agreement.
The results of operations of the acquired businesses have been included in
the consolidated results of the Company from their respective acquisition
dates. The following unaudited pro forma summary presents the net sales and net
income (loss) for the eleven months ended March 31, 1999 and the year ended
March 31, 2000 as if the businesses had been acquired as of the beginning of
the earliest period indicated. The pro forma summary gives effect to actual
operating results prior to the acquisition, adjusted to include the pro forma
effect of interest expense on the debt, amortization of the goodwill and income
taxes. The pro forma summary does not reflect any benefits from economies that
might be achieved from combining operations.
Additionally, the pro forma summary does not necessarily reflect the actual
results that would have occurred nor is it necessarily indicative of future
results of operations of the combined companies:
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended
March 31, March 31,
1999 2000
------------- -----------
(unaudited) (unaudited)
<S> <C> <C>
Net revenues....................................... $114,988 $127,023
Net income (loss).................................. $ (6,616) $ 1,489
</TABLE>
Joint Venture
On March 30, 1999, the Company invested $59 for a 50% interest in a joint
venture with Indian Partners. The Company's equity in the loss of the joint
venture has been included in the consolidated financial statements since the
date of the investment.
F-25
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the Company and all its
wholly-owned subsidiaries. All intercompany accounts and transactions have been
eliminated. Investments in companies in which the Company has the ability to
exercise significant influence, but not control, are accounted for by the
equity method.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates. The most
significant management estimates used in the financial statements are
associated with the valuation of assets and liabilities related to
acquisitions, the valuation of the fair value of the membership interests, the
allowance for doubtful accounts, the reserve for slow-moving and obsolete
inventory and the valuation allowance related to deferred tax assets.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market using the first-in,
first out (FIFO) method. The Company provides an allowance for slow-moving and
obsolete inventory based on market value, quantity on hand, historical sales
and other factors related to the Company's underlying business.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated
depreciation. Depreciation is provided on property, plant and equipment using
the straight-line method over the estimated useful lives of the assets, as
follows:
<TABLE>
<S> <C>
Buildings............................................... 40 years
Plant equipment......................................... 3-20 years
Furniture, fixtures and office equipment................ 2-15 years
Vehicles................................................ 4-10 years
Leasehold improvements.................................. Shorter of useful
life or lease term
</TABLE>
Maintenance and repair costs are charged to expense as incurred and renewals
and improvements that extend the useful life of the assets are capitalized.
When assets are sold, retired or otherwise disposed of, the cost of the asset
and the related accumulated depreciation are removed from the respective
accounts, and any gains or losses are included in other expense (income), net
in the consolidated statements of operations.
F-26
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
Income Taxes
Weigh-Tronix, LLC is a limited liability company and thus is not directly
subject to U.S. federal or state income taxes. The individual members are
responsible for paying U.S. federal and state income taxes on their respective
interests in the Company's U.S. taxable income.
The subsidiaries' income taxes are calculated in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"). SFAS 109 is an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future consequences of temporary differences between the financial
statement carrying amounts and the tax basis of assets and liabilities.
Intangibles
Intangibles are comprised of goodwill, which represents the excess of cost
over the fair value of tangible net assets and other identifiable intangible
assets acquired and are amortized on a straight-line basis over their estimated
useful lives as follows:
<TABLE>
<CAPTION>
Useful Lives March 31, March 31,
(Years) 1999 2000
------------ --------- ---------
<S> <C> <C> <C>
Goodwill....................................... 5-30 $ 8,122 $10,236
Know-how....................................... 25 4,900 4,900
Workforce...................................... 8 4,200 4,200
Customer relationships......................... 10 3,000 3,000
------- -------
20,222 22,336
Less: accumulated amortization................. (937) (2,496)
------- -------
$19,285 $19,840
======= =======
</TABLE>
Impairment of Long-Lived Assets
The Company periodically reviews long-lived assets, principally property,
plant and equipment, goodwill and other identifiable intangibles, for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. The carrying value of a
long-lived asset is considered impaired when the anticipated undiscounted cash
flow from such an asset, measured at the lowest level for which there are
identifiable cash flows, is less than its carrying value. In that event, a loss
is recognized based on the amount by which the carrying value exceeds the fair
market value of the long-lived asset. Fair market value is determined primarily
using the anticipated cash flows discounted at a rate commensurate with the
risk involved.
Deferred Financing Costs
Costs related to obtaining debt financing are deferred and amortized to
interest expense over the life of the related debt.
F-27
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
Foreign Currency Translation
The balance sheet accounts of foreign operations are translated from foreign
currencies into U.S. dollars at year end exchange rates; income and expenses
are translated at the weighted average exchange rates for the year; and
elements of members' equity are translated at historical rates. The Company's
subsidiaries' local currencies are also their functional currencies.
Adjustments resulting from the translation of the foreign operations'
financial statements are included as a component of other comprehensive income
in the accompanying consolidated financial statements. Gains and losses
resulting from foreign currency transactions (transactions denominated in a
currency other than the entity's functional currency) are included as a
component of operating income.
Revenue Recognition
Revenue from product sales, net of trade discounts and allowances, is
recognized at the time the product is shipped or upon installation when the
Company has a contractual commitment to install its products. Provisions are
established for estimated costs that may be incurred for product warranties.
Revenue from services is recognized as the related services are performed.
Revenue related to sales of extended term maintenance agreements is deferred
and recognized ratably over the contractual term of the arrangement. Service
revenue includes the sale of replacement parts.
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 summarizes the staff's interpretations of the application
of generally accepted accounting principles to revenue recognition. The Company
is in compliance with the requirements of revenue recognition as prescribed by
SAB 101.
Advertising
Advertising costs are expensed as incurred and amounted to $716 and $1,500
for the eleven months ended March 31, 1999 and the year ended March 31, 2000,
respectively.
Research and Development
Internal research and development costs are expensed as incurred. Research
and development expense for the eleven months ended March 31, 1999 and the year
ended March 31, 2000 was $1,248 and $1,488, respectively.
Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), requires the reporting of comprehensive
income in addition to net income. Comprehensive income is composed of both net
income and other comprehensive income, with other comprehensive income
including charges or credits to equity that are not the result of transactions
with the owners such as foreign currency translation adjustments. Deferred U.S.
income taxes have not been provided on the cumulative translation adjustment
component of other comprehensive income (loss) due to management's decision to
permanently reinvest those earnings. The Company reports accumulated other
comprehensive loss and comprehensive income (loss) in its statements of changes
in members' equity in the accompanying consolidated financial statements.
F-28
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
Impact of New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires that all
derivative instruments be recognized as either assets or liabilities on the
balance sheet at fair value. Changes in the fair value of derivatives (gains or
losses) are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction. In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of SFAS 133" ("SFAS 137"). SFAS 137
changed the effective date of SFAS 133 to all fiscal quarters for all fiscal
years beginning after June 15, 2000. As a result, SFAS 133 will be effective
for the Company on April 1, 2001. The Company is currently assessing the impact
of this standard.
Off-Balance-Sheet Foreign Exchange Risk
The Company has significant foreign operations and conducts business in
various foreign currencies. The Company uses a number of derivative financial
instruments, mainly foreign currency forward contracts and interest rate swaps,
as a means of hedging exposure to foreign currency risks and interest rate
fluctuations, respectively. It is the Company's practice to periodically buy
foreign currency forward contracts. Exchange differences arising during the
contract term are marked to market and are included in other (income) expense
in the accompanying consolidated statements of operations. The Company
regularly monitors its foreign currency exposures and ensures that hedge
contract amounts do not exceed the amounts of the underlying exposures.
At March 31, 1999 and March 31, 2000, the Company held foreign currency
forward contracts with notional amounts totaling approximately (Pounds)1,507
($2,500) and (Pounds)2,127 ($3,385), respectively. The majority of these
contracts mature within 8 months of March 31, 2000.
Off-Balance-Sheet Interest Rate Risk
The Company uses interest rate swap agreements to partially manage interest
rate risk on its variable rate debt portfolio. Interest rate swap agreements
are entered into at the time the related variable rate debt is issued to
convert the variable rate debt to fixed debt. The interest differential to be
paid or received under the related interest rate swap agreements is recognized
over the life of the related debt and is included in interest expense or income
in the accompanying consolidated statements of operations. During the eleven
months ended March 31, 1999 and the year ended March 31, 2000, interest expense
increased $58 and $191, respectively, as a result of these agreements.
Concentrations of Credit Risk
In the United States, the Company sells primarily through a distributor
network, while sales in the United Kingdom are made primarily through the use
of both a direct sales force and a distributor network. No single customer
accounted for 10% or more of revenues or accounts receivable as of and for the
eleven months ended March 31, 1999 and the year ended March 31, 2000. Credit
risk with respect to accounts receivable is generally diversified due to the
number of entities comprising the Company's customer base and their dispersion
across many different industries and geographic locations. The Company performs
ongoing credit evaluations of its customers' financial condition, and requires
collateral, such as letters of credit and bank guarantees, in certain
circumstances.
F-29
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
Fair Value of Financial Instruments
The carrying values of the Company's financial instruments, including
accounts receivable, accounts payable and other accrued expenses, approximate
their fair values due to their short maturities. The estimated fair values may
not be representative of actual values of the financial instruments that could
have been realized as of the period end or that will be realized in the future.
The fair values associated with the foreign currency forward contracts have
been estimated by valuing the net position of the contracts using the
applicable forward rates as of the reporting dates. The fair value of the
Company's foreign currency forward contracts at March 31, 1999 and March 31,
2000 is $2,432 and $3,274, respectively.
The fair values of interest rate swaps are the amounts at which they could
be settled and are estimated by obtaining quotes from brokers. At March 31,
1999 and March 31, 2000, the Company had interest rate swaps outstanding on
current notional principal denominated in British pounds sterling of
(Pounds)5,000 [$8,059] and (Pounds)5,000 [$7,957], respectively, with fair
values of (Pounds)(141) [$(227)] and (Pounds)(11) [($17)], respectively. At
March 31, 1999 and March 31, 2000, the Company had interest rate swaps
outstanding on current notional principal denominated in U.S. dollars of
$25,000 and $26,145, respectively, with fair values of $(287) and $601,
respectively. The fair values represent the estimated amount the Company would
have to pay to terminate the agreements.
F-30
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
3. Selected Balance Sheet Information
<TABLE>
<CAPTION>
March 31, March 31,
1999 2000
--------- ---------
<S> <C> <C>
Accounts Receivable
Accounts receivable consists of the following:
Trade accounts receivable................................. $22,159 $22,535
Less allowance for doubtful accounts...................... (1,334) (858)
------- -------
$20,825 $21,677
======= =======
<CAPTION>
March 31, March 31,
1999 2000
--------- ---------
<S> <C> <C>
Inventories
Inventories consists of the following:
Raw materials............................................. $ 7,622 $ 6,345
Work in process........................................... 3,285 3,708
Finished goods............................................ 9,258 10,955
------- -------
$20,165 $21,008
======= =======
<CAPTION>
March 31, March 31,
1999 2000
--------- ---------
<S> <C> <C>
Property, Plant and Equipment
Property and equipment consists of the following:
Land...................................................... $ 930 $ 754
Buildings................................................. 13,002 12,324
Plant equipment........................................... 10,262 12,022
Furniture, fixtures and office equipment.................. 2,973 4,031
Vehicles.................................................. 646 643
Leasehold improvements.................................... 2 613
Construction in progress.................................. 188 99
------- -------
28,003 30,486
Less accumulated depreciation and amortization.............. (2,869) (5,861)
------- -------
$25,134 $24,625
======= =======
</TABLE>
F-31
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
Vehicles include approximately $112 and $118 held under capital leases at
March 31, 1999 and March 31, 2000, respectively. Related accumulated
amortization on those vehicles under capital leases was $16 and $57 at March
31, 1999 and March 31, 2000, respectively. Depreciation and amortization
expense related to property, plant and equipment for the eleven months ended
March 31, 1999 and the year ended March 31, 2000 was $2,923 and $3,249,
respectively.
<TABLE>
<CAPTION>
March 31, March 31,
1999 2000
--------- ---------
<S> <C> <C>
Accrued Expenses
Accrued expenses consisted of the following:
Accrued payroll........................................... $ 860 $ 1,301
Accrued other taxes....................................... 1,227 1,216
Accrued income taxes...................................... 1,740 1,564
Accrued interest.......................................... 911 778
Accrued warranty.......................................... 1,234 1,654
Accrued commissions....................................... 1,323 1,347
Other..................................................... 8,060 5,138
------- -------
$15,355 $12,998
======= =======
</TABLE>
4. Members' Equity
Membership Interests
Membership interests are comprised of five classes of Members designated as
Class A, Class B, Class C, Class D, and Class E Members. Each Member is
entitled to vote on all matters with the number of votes corresponding to each
Member's percentage interest.
Special attributes of each class of Membership are as follows:
Class A: Class A Members made initial capital contributions of $15,000 for
which the Class in the aggregate is entitled to a 69.29% interest. Class A
Members have priority as to distribution and liquidation. In the event a
management member who is also a Class A holder is terminated from employment
without cause or leaves for good reason, as defined in the membership
agreement, the Member has the ability to put the interest to the Company at an
amount equal to the Member's initial investment. Since the redemption of the
Class A membership interests held by management members is at the option of the
holder, the fair value of these Class A membership interests are presented as a
mandatorily redeemable obligation in the accompanying consolidated balance
sheets. During the year ended March 31, 2000, a new Class A Member made an
initial contribution of $239.
Class B: Class B membership interests were allocated to management who made
no initial capital contribution for the interests; Class B Members are entitled
to a 4.25% interest in the aggregate. The $631 fair value of the Class B
membership interests at the date of inception was charged to expense as the
interests were fully vested with no future service requirements.
Class C: Class C membership interests equal to 6.46% of total initial
membership interests were issued to the lender of the senior subordinated term
notes. Class C Members made no initial capital contribution. The fair value of
the Class C membership interest at date of issuance was considered debt
discount. The holder of the
F-32
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
Class C membership interest may at any time, within 180 days after December 31,
2005, put the interest to the Company at fair market value if the Company has
not consummated a liquidity event. A liquidity event consists of a public
offering, the sale of all or substantially all of the assets of the Company or
a transaction that results in a change of control. Because the redemption of
the Class C membership interest is at the option of the holder, the fair value
of the Class C membership interest is presented as a mandatorily redeemable
obligation in the accompanying consolidated balance sheets; increases in fair
value are charged to additional paid-in-capital.
Class D: Class D membership interests comprising 5% in the aggregate of
initial membership interests have been allocated to members of management.
Class D Members made no initial capital contribution. The Class D membership
interests are subject to forfeiture if the management members cease to be
employees of the Company prior to the fourth anniversary of employment. On each
of the first through fourth such anniversaries on which a Class D Member
remains an employee, 25% of the Class D interest is released from being subject
to forfeiture. The Class D membership interests are a fixed compensation equity
plan and as such the fair value at date of issuance ($741) is being recognized
as compensation expense over the four-year vesting period of the arrangement.
Class E: Class E membership interests comprising 15% in the aggregate of
initial membership interests have been allocated to members of management.
Class E Members made no initial capital contribution. The Class E membership
interests are subject to forfeiture if the Company does not achieve defined
performance criteria for earnings before interest, income taxes, depreciation
and amortization ("EBITDA") in the initial five years of the Company's
operations. The Class E membership interests are a variable equity compensation
plan. Compensation expense is recognized equal to the fair value of the Class E
interests at the date the performance criteria are met or at the date it
becomes probable that they will be met. During the eleven months ended March
31, 1999, one-fifth of the Class E membership interests representing 3% of the
aggregate equity of the Company were vested by the Board of Directors. As a
result, $294 of compensation expense was recognized as the fair value of the
equity grant. No additional expense was recorded for the year ended March 31,
2000 as performance targets were not achieved.
Rights in Distributions and Liquidation: Class A Members are entitled to
priority as to distributions and in the event of liquidation until the Class A
Members recover their initial capital contribution.
F-33
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
5. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, March 31,
1999 2000
--------- ---------
<S> <C> <C>
U.K. senior revolving note, denominated in British Pounds
Sterling. Interest is payable quarterly at the London
Interbank Market (LIBOR) rate plus a margin rate and an
additional rate based on a reserve asset ratio. The margin
rate is based on the Company's leverage ratio and the
reserve asset ratio is calculated by the Bank of England
and ranged from .0091% to .0625% during the year ended
March 31, 2000. As of March 31, 1999 and March 31, 2000,
the interest rate was 8.06% and 8.08%, respectively.
Outstanding principal is due in May 2003.................. $13,858 $12,730
U.S. senior revolving note, with maximum borrowings of
$30,000 including amounts outstanding under the U.K.
senior revolving note. Interest is payable quarterly, for
base rate loans, or on the applicable Euro maturity date
for Eurocurrency rate loans, at the Company's option,
either at the base rate determined by the lender plus
1.25% or the Eurocurrency rate plus 2.5%. The interest
rate was 7.5% and 8.13% as of March 31, 1999 and March 31,
2000, respectively. Outstanding principal is due in May
2003...................................................... 600 6,000
U.S. senior term note A: Interest is payable quarterly or
on the applicable Euro maturity date for Eurocurrency rate
loans, at the Company's option, either at a base rate
determined by the lender plus 1.25% or the Eurocurrency
rate plus 2.5%. Principal is payable in 20 quarterly
installments of $188 for quarters ended June 1998 through
March 1999, $625 for quarters ended June 1999, $525 for
quarters ended March 2000, $631 for quarters ending June
2000 through March 2001, $841 for quarters ending June
2001 through March 2002 and $999 for quarters ending June
2002 through December 2002 and for the period ending
May 1, 2003............................................... 14,250 9,884
U.S. senior term note B: Interest is payable quarterly or
on the applicable Euro maturity date similar to the U.S.
senior term note A, except that the interest is the base
rate plus 1.5% or the Eurocurrency rate plus 2.75%.
Principal is payable in 28 quarterly installments of $43
for quarters ended June 1998 through June 1999, $36 for
quarters ending September 1999 through March 2003 and
$1,263 for quarters ending June 2003 through December 2004
and for the period ending May 1, 2005..................... 12,703 10,541
U.S. 12% senior subordinated term notes: Interest is
payable semi-annually commencing November 1, 1998 and the
principal is payable in May 2005 and May 2006, subject to
adjustment as described in the notes thereto.............. 15,000 15,000
------- -------
58,508 55,895
Less current portion...................................... (7,207) (2,692)
------- -------
$51,301 $53,203
======= =======
</TABLE>
Canadian senior term note B: Interest is payable quarterly
or on the Euro maturity date similar to U.S. senior term
note B. Principal is payable in 28 quarterly installments
of $7 for quarters ended June 1998 through June 1999, $6
for quarters ending September 1999 through March 2003 and
$207 for quarters ending June 2003 through December 2004
and for the period ending May 1, 2005..................... 2,097 1,740
F-34
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
The U.S. and U.K. senior revolving notes and the U.S. and Canadian senior
term notes (the "Senior Debt") are pursuant to credit agreements dated May 1,
1998 (the "Senior Loan Agreements") with the same lender. Under the Senior Loan
Agreements, all amounts due are collateralized by substantially all tangible
and intangible assets of the Company. The Senior Loan Agreements stipulate
mandatory repayments in the event of certain circumstances such as cash
proceeds from the sale of assets, insurance claims and certain equity
issuances. Also, the Company is subject to annual mandatory prepayments based
on the Company's Consolidated Excess Cash Flow (as defined in the Senior Loan
Agreements) for the previous fiscal year. These prepayments are applied to the
U.S. and Canadian senior term notes and are due within ninety-five days after
the Company's fiscal year-end. The Company paid approximately $4,507 in July
1999 based on the Company's fiscal 1999 Consolidated Excess Cash Flow. The
Senior Debt is also subject to an unused line fee, which is payable quarterly.
The Company does not have to make a mandatory prepayment based on its
Consolidated Excess Cash Flow for the year ended March 31, 2000 since the
Senior Debt was retired early. See Note 12--Subsequent Events.
The interest rate for the U.S. senior revolving note ranged from 7.44% to
9.5% during fiscal 1999 and from 7.25% to 8.13% during fiscal 2000. The
interest rate for the U.K. senior revolving note ranged from 8.06% to 10.17%
during fiscal 1999 and from 7.18% to 8.19% during fiscal 2000. The interest
rate for the U.S. senior term note A ranged from 7.44% to 7.94% during fiscal
1999 and from 7.31% to 8.13% during fiscal 2000. The interest rates for the
U.S. and Canadian senior term notes B ranged from 7.69% to 8.19% during fiscal
1999 and from 7.56% to 8.38% during fiscal 2000.
The Company had outstanding letters of credit and guarantees amounting to
approximately $2,347 and $2,620 as of March 31, 1999 and March 31, 2000,
respectively.
On May 1, 1998, the Company entered into a second borrowing agreement (the
"Senior Subordinated Agreement") for $15,000 of senior subordinated term notes
(the "12% Senior Subordinated Notes") due May 1, 2005 and 2006. The 12% Senior
Subordinated Notes are collateralized by certain equity interests in the
Company. Such borrowings are subordinated to borrowings under the Senior Loan
Agreements pursuant to a Subordination and Intercreditor Agreement between each
of the lenders. In connection with this agreement, the lender became the holder
of the Class C membership interests.
On May 1, 2005, the Company must pay an amount equal to the lessor of $7,500
or the principal amount of the 12% Senior Subordinated Notes then outstanding.
The remainder of the principal is due on May 1, 2006. Also, in the event of a
Change of Control (as defined in the Senior Subordinated Agreement), the 12%
Senior Subordinated Notes, with accrued interest and a premium, as calculated
and defined in the Senior Subordinated Agreement, become payable, at the option
of the lender. On June 13, 2000, a portion of the proceeds from the Senior
Credit Agreement and the Notes (both the Senior Credit Agreement and the Notes
are defined and discussed in Note 12--Subsequent Events) was used to fund the
redemption of all the 12% Senior Subordinated Notes. The Company paid a pre-
payment penalty fee of $1,044 in connection with the early redemption.
The Senior Loan Agreements and the Senior Subordinated Agreement have
various affirmative and negative covenants that limit, among other things,
subject to certain exceptions, indebtedness, liens, transactions with
affiliates, investments, mergers, consolidations and dissolutions, sale of
assets, distributions and restricted payments and certain other business
activities. The Senior Loan Agreements require the Company to meet certain
minimum net worth and maximum capital expenditure limits, as well as, certain
leverage, interest coverage and fixed charge coverage ratios. The Company was
in compliance with all covenants for the eleven months ended March 31, 1999 and
the year ended March 31, 2000.
F-35
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
6. Employee Savings and Profit Sharing Plan
Weigh-Tronix, Inc. maintains a defined contribution 401(k) plan which covers
eligible employees who have worked at least 30 days. The plan allows eligible
participants to voluntarily contribute up to 20% of their compensation subject
to certain Internal Revenue Code limitations. Weigh-Tronix, Inc. matches a
percentage of employee contributions to the plan and additional profit sharing
contributions are made at the discretion of the Board of Directors. Total
Weigh-Tronix, Inc. matching contributions to the plan were $585 for the eleven
months ended March 31, 1999 and $644 for the year ended March 31, 2000. There
were no discretionary contributions made during the eleven months ended March
31, 1999 and the year ended March 31, 2000.
On May 1, 1998, the Company established a defined contribution plan for
employees of Weigh-Tronix Canada, ULC. The Company matches 100% of employee
contributions up to 4% of their annual gross salary subject to certain
limitations. Total Weigh-Tronix Canada, ULC matching contributions to the plan
were $86 and $102 for the eleven months ended March 31, 1999 and the year ended
March 31, 2000, respectively.
During the year ended March 31, 1999, Salter Weigh-Tronix Pty Ltd.
established a defined contribution plan for its employees to which it
contributes between 7% and 8% of the participants' eligible salary.
Contributions to the plan for the eleven months ended March 31, 1999 and the
year ended March 31, 2000 were $36 and $37, respectively.
In April 1999, Salter Weigh-Tronix Limited and Salter Housewares Limited
established a defined contribution plan to which they contribute between 3% and
7.5% of eligible salary, depending on the age of the employee. Salter Weigh-
Tronix Limited and Salter Housewares Limited made contributions of $492 and
$121, respectively, for the eleven months ended March 31, 1999 and $294 and
$98, respectively, for the year ended March 31, 2000.
7. Income Taxes
Income (loss) before provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Eleven Months Year
Ended Ended
March 31, March 31,
1999 2000
------------- ---------
<S> <C> <C>
Domestic.......................................... $(5,790) $ 145
Foreign........................................... 1,179 2,781
------- ------
Total............................................. $(4,611) $2,926
======= ======
</TABLE>
F-36
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended
March 31, March 31,
1999 2000
------------- ----------
<S> <C> <C>
Current:
Federal........................................... $ -- $ --
State............................................. 124 6
Foreign........................................... 1,615 1,151
------ ------
1,739 1,157
------ ------
Deferred:
Federal........................................... -- --
State............................................. -- --
Foreign........................................... (184) 159
------ ------
(184) 159
------ ------
$1,555 $1,316
====== ======
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at March 31, 1999 and March 31, 2000 are as
follows:
<TABLE>
<CAPTION>
March 31, March 31,
1999 2000
--------- ---------
<S> <C> <C>
Deferred income tax assets and (liabilities):
Allowance for doubtful accounts....................... $ 262 $ 134
Reserve for obsolete and slow-moving inventory........ 967 949
Accrued expenses...................................... 1,711 705
Other................................................. 655 310
------- -------
Total gross current deferred income tax assets....... 3,595 2,098
Less valuation allowance............................. (2,385) (1,201)
------- -------
Net current deferred income tax assets............... $ 1,210 $ 897
======= =======
Net operating loss carryforwards....................... $ 96 $ 1,205
Depreciation on property, plant and equipment.......... (75) (59)
Amortization of deductible goodwill.................... (58) (38)
Amortization of intangible assets...................... (774) (656)
------- -------
Total gross long-term deferred income tax assets
(liabilities)....................................... (811) 452
Less valuation allowance............................. (96) (1,205)
------- -------
Net long-term deferred tax income liabilities........ $ (907) $ (753)
======= =======
</TABLE>
F-37
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
As of March 31, 1999 and March 31, 2000, the Company had U.S. federal and
state net operating loss carryforwards of approximately $91 and $2,436,
respectively. The Company also has foreign net operating loss carryforwards as
of March 31, 1999 and March 31, 2000 of $171 and $798, respectively. The U.S.
federal net operating loss carryforwards begin to expire in 2019. The foreign
net operating loss carryforwards begin to expire in 2006. As of March 31, 1999
and March 31, 2000, the Company had $5,844 and $3,160, respectively, of
deductible U.S. temporary differences that can offset future years' taxable
income. A valuation allowance has been established for the tax benefits of all
net operating loss carryforwards and net U.S. deductible temporary differences
as the Company's operating results do not presently support an assertion that
ultimate realization is more likely than not.
The accumulated deficit at March 31, 1999 and March 31, 2000 includes
undistributed earnings of $769 and $1,990, respectively, of certain foreign
subsidiaries which are not subject to additional foreign income tax nor
considered to be subject to U.S. income taxes unless remitted as dividends. The
Company intends to permanently reinvest these undistributed earnings;
accordingly, no provision has been made for U.S. taxes on such earnings.
The effective tax rate varies from the United States federal statutory rate
for the eleven months ended March 31, 1999 and the year ended March 31, 2000
principally due to the following:
<TABLE>
<CAPTION>
Eleven Months Year
Ended Ended
March 31, March 31,
1999 2000
------------- ---------
<S> <C> <C>
Taxes computed at U.S. federal statutory rate........... (34.0)% 34.0 %
State income tax, net of federal benefit................ (7.4) 0.2
Increase (decrease) in valuation allowance.............. 53.8 (2.7)
Permanent differences................................... 23.7 13.4
Foreign income taxes.................................... (2.4) 0.0
----- ----
Effective tax rate...................................... 33.7 % 44.9 %
===== ====
</TABLE>
8. Related Party Transactions
The Company has a management services agreement with Berkshire Investors,
LLC ("Berkshire"), which is a Class A Member of the Company. Under the terms of
the agreement, Berkshire provides management and advisory services to the
Company for an annual fee of $200. The fee charged was $183 and $200 for the
eleven months ended March 31, 1999 and for the year ended March 31, 2000,
respectively.
The subscription note receivable of $75 is due from a Member of the Company
and is repayable on demand. Interest accrues on the note at a rate of 7% per
annum. The note is included as a reduction in Members' Equity in the
accompanying consolidated balance sheets.
Included within prepaid expenses and other current assets as of March 31,
1999 and March 31, 2000 is an amount of $79 due from a Member of the Company.
The loan is repayable in installments and bears no interest.
F-38
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
9. Commitments and Contingencies
Lease commitments
The Company has certain operating and capital lease agreements for its
manufacturing, warehousing and office facilities, office equipment and
vehicles.
Future minimum lease payments for lease obligations at March 31, 2000 are as
follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
2001..................................................... $ 53 $2,078
2002..................................................... 40 1,597
2003..................................................... 12 1,005
2004..................................................... -- 714
2005..................................................... -- 601
Thereafter............................................... -- 2,131
---- ------
Total minimum lease payments............................. $105 $8,126
======
Less amounts representing interest....................... (11)
----
Present value of future minimum lease payments........... 94
Less current portion..................................... (50)
----
$ 44
====
</TABLE>
Total rent expense under all operating lease agreements was $1,465 and
$1,744 for the eleven months ended March 31, 1999 and for the year ended March
31, 2000, respectively.
Litigation
Certain claims, suits and complaints associated with the ordinary course of
business are pending or may arise against the Company, including all of its
direct and indirect subsidiaries. In the opinion of management, all matters are
adequately covered by insurance or, if not covered, are without merit or are of
such kind, or involve such amounts as would not have a material effect on the
consolidated financial position, results of operations and cash flows of the
Company if disposed of unfavorably.
10. Segment Information
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131") establishes
standards for the reporting of information about operating segments in annual
and interim financial statements. Operating segments are defined as components
of an enterprise for which separate financial information is available that is
evaluated regularly by the chief operating decision maker(s) in deciding how to
allocate resources and in assessing performance. SFAS 131 also requires
disclosures about products and services, geographic areas and major customers.
The Company is organized for management purposes into three reportable
business segments: the North American Industrial division, the European
Industrial division and the Consumer division. The Company's reportable
business segments are managed separately based on differences in their products
and operations.
The North American Industrial division manufactures and markets industrial,
agricultural and postal weighing systems as well as force measurement products
throughout the United States and Canada. These products, which are primarily
electronic in nature, are manufactured at three facilities located in Fairmont,
F-39
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
Minnesota, Santa Rosa, California and Montreal, Canada. The industrial products
manufactured by Fairmont and Santa Rosa are sold through a network of
distributors who maintain their own aftermarket service centers. However,
distribution and service sales in Canada are primarily operated through an
internal sales and service force.
The European Industrial division manufactures and sells industrial scales in
the United Kingdom as well as distributing specific models of electronic scales
that have been manufactured by the North American Industrial division. In
addition to the range of electronic scales, the European Industrial division
also manufactures mechanical scales at its location in West Bromwich, United
Kingdom. Most sales are made directly to the end user, with a large percentage
being after sales service, which are administered through twelve Company owned
service centers strategically located throughout the United Kingdom.
The Consumer division distributes residential scales to the retail sector
primarily in the United Kingdom and the United States. These residential scales
include consumer scale products used in kitchens and bathrooms.
Certain responsibilities are maintained at the Company's corporate
headquarters (Corporate), located in the United States, and in certain non-
operating companies located in the Netherlands (Other). These activities
include management of the Company's debt and related net interest expense,
cash, equity method investments and also general corporate oversight.
The Company evaluates performance and allocates resources based on operating
income. The reporting segments follow the same accounting policies as Weigh-
Tronix, LLC's consolidated financial statements as described in Note 2--Summary
of Significant Accounting Policies. Following is a tabulation of the business
segment information for each of the periods presented.
F-40
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
North
American European Corporate Inter-
Industrial Industrial Consumer and Other Segment Total
---------- ---------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Eleven months ended
March 31, 1999.........
External product sales.. $50,856 $16,705 $19,007 $ -- $ -- $ 86,568
External service sales.. 12,265 11,345 -- -- -- 23,610
------- ------- ------- ------- -------- --------
Total external sales.... $63,121 $28,050 $19,007 $ -- $ -- $110,178
======= ======= ======= ======= ======== ========
Intersegment sales...... $ 2,284 $ 87 $ -- $ -- $ -- $ 2,371
Gross profit............ $15,137 $ 9,371 $ 4,208 $ 28,716
Depreciation and
amortization........... $ 2,426 $ 1,087 $ 347 $ -- $ -- $ 3,860
Operating income
(loss)................. $(1,240) $ 3,342 $ 496 $(1,108) $ -- $ 1,490
Interest expense........ 281 43 25 5,583 -- 5,932
Interest income......... (9) -- -- -- -- (9)
Other expense, net...... 167 11 -- -- -- 178
Provision for income
taxes.................. 124 1,212 219 -- -- 1,555
------- ------- ------- ------- -------- --------
Net income (loss)....... $(1,803) $ 2,076 $ 252 $(6,691) $ -- $ (6,166)
======= ======= ======= ======= ======== ========
Year ended March 31,
2000...................
External product sales.. $57,653 $18,170 $22,748 $ -- $ -- $ 98,571
External service sales.. 14,794 12,762 -- -- -- 27,556
------- ------- ------- ------- -------- --------
Total external sales.... $72,447 $30,932 $22,748 $ -- $ -- $126,127
======= ======= ======= ======= ======== ========
Intersegment sales...... $ 2,366 $ 72 $ -- $ -- $ -- $ 2,438
Gross profit............ $24,468 $ 9,916 $ 6,870 $ -- $ -- $ 41,254
Depreciation and
amortization........... $ 2,829 $ 1,520 $ 418 $ 97 $ 4,864
Operating income
(loss)................. $ 7,493 $ 1,120 $ 1,963 $(2,248) $ -- $ 8,328
Interest expense........ 4,307 771 293 649 -- 6,020
Interest income......... (268) (43) (16) (2) -- (329)
Other expense (income),
net.................... (268) 39 (112) 14 -- (327)
Equity in loss of
unconsolidated
joint venture.......... -- -- -- 38 -- 38
Provision for income
taxes.................. 326 385 595 10 -- 1,316
------- ------- ------- ------- -------- --------
Net income (loss)....... $ 3,396 $ (32) $ 1,203 $(2,957) $ -- $ 1,610
======= ======= ======= ======= ======== ========
March 31, 1999..........
Long-lived assets....... $28,181 $10,894 $ 3,758 $ 3,719 $ -- $ 46,552
Total assets............ $62,855 $25,318 $13,188 $89,139 $(96,445) $ 94,055
March 31, 2000..........
Long-lived assets....... $27,093 $12,271 $ 3,411 $ 3,386 $ -- $ 46,161
Total assets............ $65,934 $26,363 $14,048 $87,117 $(98,255) $ 95,207
Eleven months ended
March 31, 1999.........
Capital expenditures.... $ 1,356 $ 858 $ 83 $ 59 $ -- $ 2,356
Year ended March 31,
2000...................
Capital expenditures.... $ 1,786 $ 696 $ 249 $ 5 $ -- $ 2,736
</TABLE>
F-41
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
Net sales by customer location for the eleven months ended March 31, 1999
and for the year ended March 31, 2000 were as follows:
<TABLE>
<CAPTION>
Eleven months Year
ended ended
March 31, March
1999 31, 2000
------------- --------
<S> <C> <C>
Net sales:
United States....................................... $ 53,149 $ 59,674
United Kingdom...................................... 33,996 37,911
Canada.............................................. 8,933 11,607
Australia........................................... 2,612 2,746
Other............................................... 11,488 14,189
-------- --------
$110,178 $126,127
======== ========
Long-lived assets by location as of March 31, 1999 and March 31, 2000 were
as follows:
<CAPTION>
March 31, March
1999 31, 2000
------------- --------
<S> <C> <C>
Long-lived assets:
United States....................................... $ 29,286 $ 27,736
United Kingdom...................................... 16,384 17,192
Canada.............................................. 162 440
Australia........................................... 396 484
Other............................................... 324 309
-------- --------
$ 46,552 $ 46,161
======== ========
</TABLE>
11. Supplemental Financial Information
<TABLE>
<CAPTION>
Additions
---------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended March 31,
2000................... $1,334 $ 34 $ 50 $ (560) $ 858
Eleven months ended
March 31, 1999......... $1,353 $ 379 $-- $ (398) $1,334
Deferred tax asset valu-
ation allowance:
Year ended March 31,
2000................... $2,481 $ -- $-- $ (75) $2,406
Eleven months ended
March 31, 1999......... $ -- $2,481 $-- $ -- $2,481
Inventory reserve for
obsolescence:
Year ended March 31,
2000................... $5,197 $ 194 $-- $(1,732) $3,659
Eleven months ended
March 31, 1999......... $6,038 $ 325 $-- $(1,166) $5,197
</TABLE>
F-42
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
12. Subsequent Events
Acquisition
On June 13, 2000, Weigh-Tronix UK Limited, a subsidiary of the Company, and
Marconi Corporation plc completed the acquisition of all the issued share
capital of GEC Avery International Limited and Maatschappij van Berkel's Patent
BV (collectively, "Avery Berkel") (the "Avery Berkel Acquisition"). The
purchase price was 105.0 million (approximately $157.5 million), subject to
post-closing adjustments, payable in cash, together with warrants valued at
approximately $1.2 million to subscribe for 5% of the fully diluted ownership
interests of Weigh-Tronix, LLC. Avery Berkel is a leading manufacturer,
distributor and servicer of industrial and food retail weighing systems and
other food processing equipment. The Avery Berkel Acquisition was financed by
the issuance of (Euro)100.0 million of 12.5% Senior Subordinated Notes due June
1, 2010, a new Senior Credit Agreement and the issuance of additional
membership interests of $40.2 million to existing and new Members of the
Company.
Issuance of the Notes
On June 13, 2000, a subsidiary of the Company (the "Issuer") issued
(Euro)100.0 million of 12.5% Senior Subordinated Notes due June 1, 2010 (the
"Notes") in a private transaction pursuant to a note indenture (the "Notes
Indenture"). The Notes Indenture provides for the registration of the Notes on
Form S-4 with the United States Securities and Exchange Commission within
ninety days of the Avery Berkel Acquisition.
Interest is calculated on the basis of a 360-day year comprised of twelve
30-day months. Interest is payable semi-annually in arrears on each June 1 and
December 1, commencing on December 1, 2000.
The Notes are subordinated in right of payment to all current and future
senior debt, which includes the Senior Credit Agreement discussed below. The
Notes will rank pari passu in right of payment with all other Senior
Subordinated Debt of the Issuer issued in the future, if any, and senior in
right of payment to all subordinated indebtedness of the Issuer issued in the
future, if any.
The holders of the Notes have the right to require the Issuer to repurchase
all or any part of the Notes upon a Change of Control, as defined in the Notes
Indenture. Also, if the Company has "excess proceeds" of more than $5.0
million, as defined in the Notes Indenture, the Company is required to make an
offer to all holders of the Notes to purchase the maximum principal amount of
Notes that may be purchased with the excess proceeds at an offer price in cash
of an amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest.
The Notes Indenture contains a number of covenants that limit, among other
things, dividend payments, certain types of investments, incurrence of
indebtedness and issuance of preferred stock, issuance and sale of capital
stock of restricted subsidiaries, liens, merger, consolidation or sale of
assets, transactions with affiliates, sale and leaseback transactions,
additional guarantees and certain business activities.
Senior Credit Agreement
In connection with the Avery Berkel Acquisition, certain subsidiaries of the
Company entered into a Senior Credit Agreement with certain lenders. The Senior
Credit Agreement is comprised of $120.0 million of Term Loan and Revolving
Credit Facilities, including a $30.0 million Tranche A Term Loan Facility, a
$40.0 million Tranche B Term Loan Facility and a $50.0 million Revolving Credit
Facility. The Tranche A Term Loan Facility is payable over 5 years, with the
final repayment on June 30, 2005. The Tranche B Term Loan Facility is repayable
over 7 years, with the final repayment on June 30, 2007. The commitment on the
Revolving Credit Facility terminates on June 30, 2005 and amounts drawn down
under the Revolving Credit
F-43
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
Facility must be fully repaid by that date. The Revolving Credit Facility is
subject to a borrowing base as defined in the Senior Credit Agreement based on
specified percentages of eligible inventory and accounts receivable. The
proceeds of the Senior Credit Agreement were used to pay back certain
indebtedness of the Company and to finance a portion of the Avery Berkel
Acquisition, including related fees and expenses.
The Tranche A Term Loan Facility and the Revolving Credit Facility bear
interest at a rate equal to, in the case of loans denominated in U.S. dollars,
sterling and euro, LIBOR plus 3.25% or, in the case of loans denominated in
U.S. dollars, a base rate plus 2.25%. The Tranche B Term Loan Facility bears
interest at a rate equal to, in the case of loans denominated in U.S. dollars
and sterling, LIBOR plus 3.75% or, in the case of loans denominated in U.S.
dollars, a base rate plus 2.75%. The margins over LIBOR and the base rate will
be subject to adjustment on December 13, 2000 based on the achievement of
certain financial ratios.
A commitment fee is calculated at a rate equal to 0.50% of the daily average
undrawn amount of the Revolving Credit Facility and is payable quarterly in
arrears. The commitment fee is also subject to adjustment on December 13, 2000
based on the achievement of certain financial ratios.
The Senior Credit Agreement provides for mandatory prepayments including: 1)
100% of the net proceeds of certain asset sales and insurance claims; 2) 100%
of the net proceeds of any sale or issuance of equity (other than equity
provided by existing shareholders of the Company) or incurrence of certain
indebtedness by the Company or any of its subsidiaries; and 3) an amount equal
to 75% of available "excess cash flows, as defined in the Senior Credit
Agreement, in any fiscal year. Such prepayments will be applied to the Tranche
A Term Loan Facility and the Trance B Term Loan Facility ratably.
The Senior Credit Agreement contains a number of operating and financial
covenants that limit, among other things, amalgamations and changes in
business, assets sales and disposals, indebtedness and other liabilities,
liens, guarantees and other contingent liabilities, investments, loans and
advances, dividends and other distributions and payments with respect to
capital stock, optional payments and modifications with respect to the Notes
and other debt instruments, transactions with affiliates, sale and leasebacks,
changes in the passive holding structure of Weigh-Tronix, LLC, changes in lines
of business, permitted hedging activities, changes in fiscal periods, negative
pledge causes, restrictions on subsidiary distributions and amendments to Avery
Berkel acquisition documents. Also, the Senior Credit Agreement contains a
number of operating and financial covenants, including, without limitation,
requirements to maintain minimum ratios of EBITDA to interest expense and
EBITDA to fixed charges; maximum ratios of total indebtedness to EBITDA;
minimum tangible net worth; and limitations on capital expenditures.
The non-current portion of the Senior Credit Agreement matures as follows:
<TABLE>
<S> <C>
2001................................................................. $ 1,350
2002................................................................. 3,000
2003................................................................. 4,525
2004................................................................. 6,025
2005................................................................. 13,225
Thereafter........................................................... 70,875
-------
$99,000
=======
</TABLE>
F-44
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
Redemption of the Senior Debt and the 12% Senior Subordinated Notes due May 1,
2005 and 2006
On June 13, 2000, a portion of the proceeds from the Senior Credit Agreement
and the Notes was used to fund the redemption of all outstanding Senior Debt
under the Senior Credit Agreement that was in place at March 31, 2000 and the
12% Senior Subordinated Notes. The Company paid a pre-payment penalty fee of
$1,044 in connection with the early redemption of the 12% Senior Subordinated
Notes. Also, the Company will record an extraordinary loss in fiscal 2001 of
approximately $1,594, which represents the unamortized deferred financing costs
of the Senior Debt and the 12% Senior Subordinated Notes on June 13, 2000.
Preferred Member Interest
In connection with the Avery Berkel Acquisition on June 13, 2000, the
Company issued a (Pounds)10.0 million liquidation preference exchangeable
preferred membership interest (hereafter referred to as "Preferred Member
Interest") pursuant to the Subscription Agreement (the "Subscription
Agreement") between the Company, the Issuer of the Notes and Marconi
Corporation plc. The Subscription Agreement was a private transaction not
subject to the registration requirements of the Securities Act of 1933 or 1934.
The holder of the Preferred Member Interest is entitled to dividends at a rate
per annum equal to 12.0% through and including June 1, 2005, 15.0% from June 2,
2005 through and including December 1, 2005, and thereafter increasing by fifty
basis points at the beginning of each subsequent six month period up to a
maximum rate of 18.0%, in each case calculated on liquidation preference per
Preferred Member Interest. Dividends are cumulative and payable annually on
each June 1, commencing on June 1, 2001.
At any time subsequent to the first anniversary of the issuance of the
Preferred Member Interest (June 13, 2000), subject to the Company's achieving a
certain fixed charge coverage ratio for the most recently ended four fiscal
quarters, the holder of the Preferred Member Interest, at its option, may
exchange its Preferred Member Interest for an aggregate principal amount of
Exchange Notes. The right to exchange the Preferred Member Interest is
exercisable only once. The Exchange Notes will be issued under the Notes
Indenture and will be substantially identical to the Notes except that the date
of issue and the first interest period will be different.
The Preferred Member Interest, with respect to distributions upon the
liquidation, winding-up and dissolution of Weigh-Tronix, LLC, will rank junior
and will be subordinated in right of payment to the prior payment in full of
the Notes, the Senior Debt and all other debt liabilities and obligations of
Weigh-Tronix, LLC. The Exchange Notes issuable upon exchange of the Preferred
Member Interest will rank pari passu with the Notes.
In the event of bankruptcy, liquidation or reorganization of the Company,
the assets of Weigh-Tronix, LLC will be available to pay obligations on the
Preferred Member Interest only after all holders of the Notes, the Senior Debt
and all other debt liabilities and obligations have been paid.
F-45
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
13. Guarantors of Debt
The following summarized combined financial information presents guarantor
and non-guarantor results of operations, financial position, and cash flows of
the Company under the Notes. The Notes are fully and unconditionally
guaranteed, jointly and severally, on an unsecured senior subordinated basis by
the guarantor subsidiaries.
Investments in subsidiaries are accounted for using the equity method;
accordingly, entries necessary to consolidate the Company, guarantor
subsidiaries and non-guarantor subsidiaries are reflected in the eliminations
column. The summarized consolidated financial information was prepared using
the same consolidation policies as presented in Note 2--Summary of Significant
Accounting Policies. Management asserts that separate complete financial
statements of the issuer and subsidiary guarantors of the Notes would not
provide additional material information that would be useful in assessing the
financial composition of the guarantors or the sufficiency of the guarantees.
F-46
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
13. Guarantors of Debt (Continued)
Consolidated Balance Sheets as of March 31, 1999
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $ -- $ 3,422 $ 256 $ -- $ 3,678
Accounts receivable,
net................... 500 29,510 444 (9,629) 20,825
Inventories, net....... -- 19,457 708 -- 20,165
Prepaid expenses and
other current assets.. -- 1,598 27 -- 1,625
Deferred income taxes.. -- 1,210 -- -- 1,210
------- -------- ------ -------- -------
Total current assets... 500 55,197 1,435 (9,629) 47,503
Property, plant and
equipment, net......... -- 24,898 236 -- 25,134
Intangibles, net........ -- 19,080 205 -- 19,285
Deferred financing
costs, net............. 1,156 904 14 -- 2,074
Investment in joint
venture................ -- 59 -- -- 59
Investment in
subsidiaries........... 9,594 14,368 -- (23,962) --
Intercompany
receivable............. -- 55,640 -- (55,640) --
------- -------- ------ -------- -------
Total assets........... $11,250 $170,146 $1,890 $(89,231) $94,055
======= ======== ====== ======== =======
Liabilities, Mandatorily
Redeemable Membership
Interests and Members'
Equity
Current liabilities:
Current portion of
long-term debt........ $ -- $ 7,207 $ -- $ -- $ 7,207
Current portion of
obligations under
capital leases........ -- -- 58 -- 58
Accounts payable....... 75 15,851 425 (9,629) 6,722
Accrued expenses....... -- 15,186 169 -- 15,355
Deferred revenue....... -- 1,017 -- -- 1,017
------- -------- ------ -------- -------
Total current
liabilities........... 75 39,261 652 (9,629) 30,359
Long-term debt.......... -- 51,301 -- -- 51,301
Obligations under
capital leases......... -- -- 45 -- 45
Other long-term
obligations............ -- 317 -- -- 317
Deferred income taxes... -- 907 -- -- 907
Intercompany loans...... -- 54,637 1,003 (55,640) --
------- -------- ------ -------- -------
Total liabilities...... 75 146,423 1,700 (65,269) 82,929
------- -------- ------ -------- -------
Commitments and
contingencies (Note 9)
Mandatorily redeemable
membership interests:
Class A membership
interests, subject to
put option............ 900 -- -- -- 900
Class C membership
interests, subject to
put option............ 1,305 -- -- -- 1,305
------- -------- ------ -------- -------
Total mandatorily
redeemable membership
interests............. 2,205 -- -- -- 2,205
Members' equity:
Membership interests... 14,100 28,496 372 (28,868) 14,100
Additional paid-in
capital............... 1,666 -- -- -- 1,666
Subscription note
receivable............ (75) -- -- -- (75)
Unearned compensation.. (555) -- -- -- (555)
Accumulated deficit.... (6,166) (4,735) (171) 4,906 (6,166)
Accumulated other
comprehensive loss.... -- (38) (11) -- (49)
------- -------- ------ -------- -------
Members' equity........ 8,970 23,723 190 (23,962) 8,921
------- -------- ------ -------- -------
Total mandatorily
redeemable membership
interests and members'
equity................ 11,175 23,723 190 (23,962) 11,126
------- -------- ------ -------- -------
Total liabilities,
mandatorily redeemable
membership interests
and members' equity... $11,250 $170,146 $1,890 $(89,231) $94,055
======= ======== ====== ======== =======
</TABLE>
F-47
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
13. Guarantors of Debt (Continued)
Consolidated Statements of Operations for the Eleven Months Ended March 31,
1999
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales......... $ -- $ 90,246 $1,483 $(5,161) $ 86,568
Services.............. -- 23,284 326 -- 23,610
------- -------- ------ ------- --------
Total revenues...... -- 113,530 1,809 (5,161) 110,178
Cost of revenues:
Cost of products
sold................. -- 70,694 1,101 (5,161) 66,634
Cost of services...... -- 14,753 75 -- 14,828
------- -------- ------ ------- --------
Total cost of
revenues........... -- 85,447 1,176 (5,161) 81,462
------- -------- ------ ------- --------
Gross profit........ -- 28,083 633 -- 28,716
Operating expenses:
Selling, general and
administrative....... 1,110 23,245 670 -- 25,025
Depreciation and
amortization......... -- 2,143 58 -- 2,201
------- -------- ------ ------- --------
Operating income
(loss)............. (1,110) 2,695 (95) -- 1,490
Interest expense........ 150 5,782 64 (64) 5,932
Interest income......... -- (73) -- 64 (9)
Other income, net....... -- 166 12 -- 178
Equity in loss of
consolidated
subsidiaries........... 4,906 -- -- (4,906) --
------- -------- ------ ------- --------
Loss before
provision for
income taxes....... (6,166) (3,180) (171) 4,906 (4,611)
Provision for income
taxes.................. -- 1,555 -- -- 1,555
------- -------- ------ ------- --------
Net loss............ $(6,166) $ (4,735) $ (171) $ 4,906 $ (6,166)
======= ======== ====== ======= ========
</TABLE>
F-48
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
13. Guarantors of Debt (Continued)
Consolidated Condensed Statements of Cash Flows for the Eleven Months Ended
March 31, 1999
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Net cash provided by
(used in) operating
activities............. $ (425) $ 11,067 $ 29 $ -- $ 10,671
Cash flows from invest-
ing activities:
Expenditures for prop-
erty and equipment... -- (2,327) (29) -- (2,356)
Proceeds from sales of
property and
equipment............ -- 19 21 -- 40
Acquisition of the
Acquired Companies,
net of cash
acquired............. (14,500) (67,300) -- 4,788 (77,012)
Acquisition of
businesses, net of
cash acquired........ -- (923) -- -- (923)
Investment in joint
venture.............. -- (59) -- -- (59)
-------- -------- ---- ------- --------
Net cash used in in-
vesting activi-
ties............... (14,500) (70,590) (8) 4,788 (80,310)
Cash flows from financ-
ing activities:
Proceeds from senior
revolving notes...... -- 23,135 -- -- 23,135
Payments made on se-
nior revolving
notes................ -- (8,225) -- -- (8,225)
Proceeds from senior
term notes........... -- 30,000 -- -- 30,000
Payments made on se-
nior term notes...... -- (950) -- -- (950)
Proceeds from senior
subordinated term
notes................ -- 15,000 -- -- 15,000
Proceeds from member-
ship interests....... 14,925 -- -- -- 14,925
Payments made on capi-
tal lease obliga-
tions................ -- -- (23) -- (23)
-------- -------- ---- ------- --------
Net cash provided by
(used in) financing
activities......... 14,925 58,960 (23) -- 73,862
Effect of exchange rates
on cash................ -- (537) (8) -- (545)
-------- -------- ---- ------- --------
Net increase (decrease)
in cash................ -- (1,100) (10) 4,788 3,678
Cash and cash
equivalents, beginning
of the period.......... -- 4,522 266 (4,788) --
-------- -------- ---- ------- --------
Cash and cash equiva-
lents, end of the peri-
od..................... $ -- $ 3,422 $256 $ -- $ 3,678
======== ======== ==== ======= ========
</TABLE>
F-49
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
13. Guarantors of Debt (Continued)
Consolidated Balance Sheets as of March 31, 2000
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $ -- $ 3,384 $ 761 $ -- $ 4,145
Accounts receivable,
net................... 750 33,644 931 (13,648) 21,677
Inventories, net....... -- 20,134 962 (88) 21,008
Prepaid expenses and
other current assets.. -- 1,292 27 -- 1,319
Deferred income taxes.. -- 897 -- -- 897
------- -------- ------ -------- -------
Total current assets... 750 59,351 2,681 (13,736) 49,046
Property, plant and
equipment, net......... -- 24,299 326 -- 24,625
Intangibles, net........ -- 19,541 299 -- 19,840
Deferred financing
costs, net............. 992 673 10 -- 1,675
Investment in joint
venture................ -- 21 -- -- 21
Investment in
subsidiaries........... 11,525 14,367 -- (25,892) --
Intercompany
receivable............. -- 55,557 -- (55,557) --
------- -------- ------ -------- -------
Total assets........... $13,267 $173,809 $3,316 $(95,185) $95,207
======= ======== ====== ======== =======
Liabilities, Mandatorily
Redeemable Membership
Interests and Members'
Equity
Current liabilities:
Current portion of long-
term debt.............. $ -- $ 2,692 $ -- $ -- $ 2,692
Current portion of
obligations under
capital leases........ -- 608 50 (608) 50
Accounts payable....... 75 22,840 1,361 (13,543) 10,733
Accrued expenses....... -- 12,909 89 -- 12,998
Deferred revenue....... -- 2,021 -- -- 2,021
------- -------- ------ -------- -------
Total current
liabilities........... 75 41,070 1,500 (14,151) 28,494
Long-term debt.......... -- 53,203 -- -- 53,203
Obligations under
capital leases......... -- 1,469 44 (1,469) 44
Other long-term
obligations............ -- 130 -- -- 130
Deferred income taxes... -- 753 -- -- 753
Intercompany loans...... -- 52,158 1,323 (53,481) --
------- -------- ------ -------- -------
Total liabilities...... 75 148,783 2,867 (69,101) 82,624
------- -------- ------ -------- -------
Commitments and
contingencies (Note 9)
Mandatorily redeemable
membership interests:
Class A membership
interests, subject to
put option............ 1,139 -- -- -- 1,139
Class C membership
interests, subject to
put option............ 1,959 -- -- -- 1,959
------- -------- ------ -------- -------
Total mandatorily
redeemable membership
interests............. 3,098 -- -- -- 3,098
Members' equity:
Membership interests... 14,100 28,513 372 (28,885) 14,100
Additional paid-in
capital............... 1,012 -- -- -- 1,012
Subscription note
receivable............ (75) -- -- -- (75)
Unearned compensation.. (386) -- -- -- (386)
Accumulated earnings
(deficit)............. (4,556) (2,953) 80 2,873 (4,556)
Accumulated other
comprehensive loss.... (1) (534) (3) (72) (610)
------- -------- ------ -------- -------
Members' equity........ 10,094 25,026 449 (26,084) 9,485
------- -------- ------ -------- -------
Total mandatorily
redeemable membership
interests and members'
equity................ 13,192 25,026 449 (26,084) 12,583
------- -------- ------ -------- -------
Total liabilities,
mandatorily redeemable
membership interests
and members' equity... $13,267 $173,809 $3,316 $(95,185) $95,207
======= ======== ====== ======== =======
</TABLE>
F-50
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
13. Guarantors of Debt (Continued)
Consolidated Statements of Operations for the Year Ended March 31, 2000
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales......... $ -- $101,787 $2,588 $(5,804) $98,571
Services.............. -- 25,393 2,163 -- 27,556
------- -------- ------ ------- -------
Total revenues...... -- 127,180 4,751 (5,804) 126,127
Cost of revenues:
Cost of products
sold................. -- 70,658 1,602 (5,716) 66,544
Cost of services...... -- 17,309 1,020 -- 18,329
------- -------- ------ ------- -------
Total cost of
revenues........... -- 87,967 2,622 (5,716) 84,873
------- -------- ------ ------- -------
Gross profit........ -- 39,213 2,129 (88) 41,254
Operating expenses:
Selling, general and
administrative....... 169 28,210 1,670 -- 30,049
Depreciation and
amortization......... -- 2,773 104 -- 2,877
------- -------- ------ ------- -------
Operating income
(loss)............. (169) 8,230 355 (88) 8,328
Interest expense........ 152 5,798 70 -- 6,020
Interest income......... -- (321) (8) -- (329)
Other (income) expense,
net.................... -- (384) 41 16 (327)
Equity in loss of
unconsolidated joint
venture................ -- 38 -- -- 38
Equity in income of
consolidated
subsidiaries........... (1,931) -- -- 1,931 --
------- -------- ------ ------- -------
Income before
provision for income
taxes................ 1,610 3,099 252 (2,035) 2,926
Provision for income
taxes.................. -- 1,316 -- -- 1,316
------- -------- ------ ------- -------
Net income.......... $ 1,610 $ 1,783 $ 252 $(2,035) $ 1,610
======= ======== ====== ======= =======
</TABLE>
F-51
<PAGE>
WEIGH-TRONIX, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
13. Guarantors of Debt (Continued)
Consolidated Condensed Statements of Cash Flows for the Year Ended March 31,
2000
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Net cash provided by
operating activities... $ 1,531 $ 7,233 $ 651 $(1,651) $ 7,764
Cash flows from
investing activities:
Expenditures for
property and
equipment............ -- (2,648) (88) -- (2,736)
Proceeds from sales of
property and
equipment............ -- 161 -- -- 161
Acquisition of
businesses, net of
cash acquired........ -- (2,125) (111) -- (2,236)
Loan to joint
venture.............. -- (42) -- -- (42)
------- ------- ----- ------- -------
Net cash used in
investing
activities......... -- (4,654) (199) -- (4,853)
Cash flows from
financing activities:
Proceeds from senior
revolving notes...... -- 7,670 -- -- 7,670
Payments made on
senior revolving
notes................ -- (3,213) -- -- (3,213)
Payments made on
senior term notes.... -- (6,886) -- -- (6,886)
Proceeds from
membership
interests............ 239 -- -- -- 239
Payments made on
capital lease
obligations.......... -- (15) (69) -- (84)
Intercompany loans.... (1,770) (135) 135 (1,770) --
------- ------- ----- ------- -------
Net cash provided by
(used in) financing
activities......... (1,531) (2,579) 66 1,770 (2,274)
Effect of exchange rates
on cash................ -- (38) (13) (119) (170)
------- ------- ----- ------- -------
Net increase (decrease)
in cash................ -- (38) 505 -- 467
Cash and cash
equivalents, beginning
of the year............ -- 3,422 256 -- 3,678
------- ------- ----- ------- -------
Cash and cash
equivalents, end of the
year................... $ -- $ 3,384 $ 761 $ -- $ 4,145
======= ======= ===== ======= =======
</TABLE>
F-52
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members and Board of Managers of Weigh-Tronix, LLC
In our opinion, the accompanying combined balance sheet and the related
combined statements of operations, of changes in shareholder's net investment
and of cash flows present fairly, in all material respects, the financial
position of the Weigh-Tronix Scale Products Business ("Weigh-Tronix Business")
as defined in footnote 1, at March 31, 1998 and the results of its operations
and its cash flows as of and for the year ended March 31, 1998 and for the one
month ended April 30, 1998, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of the management of the Weigh-Tronix Business; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers
Uxbridge, United Kingdom
March 24, 2000
F-53
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
COMBINED BALANCE SHEET
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
March 31,
1998
---------
<S> <C>
Assets
Current assets:
Cash................................................................ $ 5,079
Accounts receivable, net............................................ 18,862
Inventories, net.................................................... 24,122
Deferred income taxes............................................... 2,816
Prepaid expenses and other current assets........................... 1,062
-------
Total current assets.............................................. 51,941
Property, plant and equipment, net.................................... 20,212
Goodwill, net......................................................... 25,312
Deferred income taxes................................................. 613
Other assets.......................................................... 1,309
-------
Total assets...................................................... $99,387
=======
Liabilities and Shareholder's Net Investment
Current liabilities:
Accounts payable.................................................... $ 7,138
Accrued expenses.................................................... 9,562
Deferred revenue.................................................... 836
Current portion of obligations under capital leases................. 27
-------
Total current liabilities......................................... 17,563
Obligations under capital leases, net of current portion.............. 103
-------
Total liabilities................................................. 17,666
Commitments and contingencies (Note 12)
Shareholder's net investment.......................................... 81,721
-------
Total liabilities and shareholder's net investment................ $99,387
=======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-54
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
COMBINED STATEMENT OF OPERATIONS
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Year One Month
Ended Ended
March 31, April 30,
1998 1998
--------- ---------
<S> <C> <C>
Revenues:
Product sales............................................ $ 88,849 $ 8,529
Services................................................. 25,002 2,335
-------- -------
Total revenues......................................... 113,851 10,864
Cost of revenues:
Cost of products sold.................................... 62,571 5,874
Cost of services......................................... 16,788 1,515
-------- -------
Cost of revenues....................................... 79,359 7,389
-------- -------
Gross profit........................................... 34,492 3,475
Operating expenses:
Selling, general and administrative...................... 26,599 2,420
Depreciation and amortization............................ 3,968 304
-------- -------
Operating income....................................... 3,925 751
Interest income............................................ (42) (4)
Interest expense........................................... 27 --
Other (income) expense, net................................ 54 (30)
-------- -------
Income before provision for income taxes............... 3,886 785
Provision for income taxes................................. 2,186 375
-------- -------
Net income............................................. $ 1,700 $ 410
======== =======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-55
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
COMBINED STATEMENT OF SHAREHOLDER'S NET INVESTMENT
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Income
----------------------
Minimum Foreign
Shareholder's Pension Currency
Net Liability Translation Comprehensive
Investment Adjustment Adjustment Income
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, April 1, 1997...... $83,126 $ -- $ --
Net Income................ 1,700 -- -- $1,700
Currency Translation
Adjustment............... 45 -- 45 45
Minimum Pension
Liability................ 52 52 -- 52
Net Cash Transfers to
Staveley Industries...... (3,202) -- -- --
------- ----- ----- ------
Balance, March 31, 1998..... 81,721 52 45 $1,797
======= ===== ===== ======
Net Income................ 410 -- -- $ 410
Currency Translation
Adjustment............... -- -- -- --
Minimum Pension
Liability................ -- -- -- --
Net Cash Transfers to
Staveley Industries...... (1,433) -- -- --
------- ----- ----- ------
Balance, April 30, 1998..... $80,698 $ 52 $ 45 $ 410
======= ===== ===== ======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-56
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
COMBINED STATEMENT OF CASH FLOWS
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Year One Month
Ended Ended
March 31, April 30,
1998 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 1,700 $ 410
Adjustments to reconcile net loss to net income provided
by operating activities:
Depreciation and amortization........................... 5,680 490
Deferred income taxes................................... 103 (212)
Loss on disposal of property and equipment.............. 30 --
Changes in operating assets and liabilities:
Accounts receivable................................... (358) (123)
Inventories........................................... (2,114) (37)
Prepaid expenses and other current assets............. 28 184
Other assets.......................................... 317 9
Accounts payable...................................... (1,270) 255
Accrued expenses and deferred revenue................. (578) (65)
------- -------
Net cash provided by operating activities........... 3,538 911
Cash flows from investing activities:
Expenditures for property and equipment................... (3,675) (209)
Proceeds from sales of property and equipment............. 159 --
------- -------
Net cash used in investing activities............... (3,516) (209)
Cash flows from financing activities:
Payments made on capital lease obligations................ (68) --
Repayment of debt......................................... (490) --
Net change in amount due to Staveley Industries........... (4,279) (1,439)
------- -------
Net cash used in financing activities............... (4,837) (1,439)
Effect of exchange rates on cash.......................... 211 45
------- -------
Net decrease in cash...................................... (4,604) (692)
Cash, beginning of the period............................. 9,683 5,079
------- -------
Cash, end of the period................................... $ 5,079 $ 4,387
======= =======
Supplemental disclosures of cash flow information:
Cash paid for interest.................................. $ 27 $ --
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-57
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
(In Thousands of U.S. Dollars)
1. Overview and Basis of Presentation
On May 1, 1998, pursuant to a Stock and Asset Purchase Agreement, Weigh-
Tronix, LLC acquired substantially all of the assets and assumed certain
liabilities of Weigh-Tronix, Inc., Salter Weigh-Tronix Limited and Weigh-Tronix
Canada, ULC and all of the outstanding shares of stock of Salter Housewares
Limited and Salter Weigh-Tronix Pty Ltd. from Staveley Industries plc
("Staveley Industries"). All of the aforementioned companies, except Staveley
Industries, are collectively referred to as the Weigh-Tronix Scale Products
Business ("Weigh-Tronix Business"). Prior to May 1, 1998, Staveley Industries
owned 100% of the Weigh-Tronix Business which operated as a division of the
Staveley group.
Weigh-Tronix, LLC was formed as a Delaware limited liability company,
effective May 1, 1998, in accordance with a Limited Liability Company Agreement
between Berkshire Fund IV Investment Corp., Berkshire Investors, LLC, Squam
Lake Investors, III, L.P., BancBoston Investments, Inc., Sunapee Securities,
Inc., R&H Trust Co. (Jersey) Limited and certain individuals.
The Weigh-Tronix Business represented part of Staveley Industries'
measurement group. Weigh-Tronix Business is a manufacturer of scales, scale
peripherals and force measurement equipment and has operations throughout the
United States, United Kingdom, Canada and Australia.
All transactions between the companies within the Weigh-Tronix Business
included in the accompanying combined financial statements are herein referred
to as "intracompany" transactions, whereas transactions between the Weigh-
Tronix Business and Staveley Industries and its subsidiaries are referred to as
"intercompany" or "related party" transactions.
The accompanying combined financial statements include the assets,
liabilities, operating results, changes in shareholder's net investment, and
cash flows of the Weigh-Tronix Business and have been prepared using Staveley
Industries' historical bases. All intracompany balances, intracompany sales and
intracompany profit have been eliminated. Account balances of the Weigh-Tronix
Business, which are settled through intercompany billings to Staveley
Industries or its subsidiaries, have been reported as part of the shareholder's
net investment. The shareholder's net investment represents Staveley
Industries' transfer of its net investment in the Weigh-Tronix Business, after
giving effect to the net earnings of the Weigh-Tronix Business plus net cash
transfers to or from Staveley Industries. All non-trade receivables and
payables to Staveley Industries and its non-Weigh-Tronix subsidiaries have been
accumulated in the balance of shareholder's net investment. The Weigh-Tronix
Business began accumulating retained earnings on May 1, 1998.
The Securities and Exchange Commission in Staff Accounting Bulletin No. 55,
requires that historical financial statements of a subsidiary, division, or
lesser business component of another entity include certain expenses incurred
by the parent on its behalf. As a result, the accompanying combined financial
statements include allocations of certain Staveley Industries corporate
expenses, including legal, accounting, employee benefits, insurance services,
information technology services, goodwill amortization, treasury and other
Staveley Industries corporate and infrastructure costs. The expense allocations
have been determined on a weighted average basis of headcount and sales revenue
that Weigh-Tronix Business considered to be a reasonable reflection of the
utilization of services provided to or the benefit received by the Weigh-Tronix
Business. However, the financial information included herein may not reflect
the consolidated financial position, operating results, changes in
shareholder's net investment and cash flows of the Weigh-Tronix Business in the
future or what they would have been had the Weigh-Tronix Business been a
separate, standalone entity during the periods presented.
F-58
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The most significant management estimates used in the financial statements
include the allocation of certain Staveley Industries' corporate expenses, the
determination of warranty accruals, the allowance for doubtful accounts, the
reserve for slow-moving and obsolete inventory and the valuation allowance
related to deferred tax assets.
Inventories
Inventories are stated at lower of cost or market using the first-in, first
out (FIFO) method. Weigh-Tronix Business provides an allowance for obsolete and
slow-moving inventory based on market value, quantity on hand, historical sales
and other factors.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated
depreciation. Depreciation is provided on property, plant and equipment using
the straight-line method over the estimated useful lives of the assets, as
follows:
<TABLE>
<S> <C>
Buildings......................................................... 50 years
Plant equipment................................................... 15 years
Furniture, fixtures and office equipment.......................... 15 years
Vehicles.......................................................... 4 years
Leasehold improvements............................................ Lease Term
</TABLE>
Maintenance and repair costs are charged to expense as incurred and renewals
and improvements that extend the useful life of the assets are capitalized.
When assets are sold, retired or otherwise disposed of, the cost of the asset
and the related accumulated depreciation are removed from the respective
accounts, and any gains or losses are included in operations.
Income Taxes
The Weigh-Tronix Business' operating results historically have been included
in Staveley Industries' consolidated U.S. and state income tax returns and in
tax returns of certain Staveley Industries' foreign subsidiaries. The provision
for income taxes in the accompanying Weigh-Tronix Business combined financial
statements has been determined on a separate-return basis. The provisions of
Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting
for Income Taxes," have been retroactively applied to the accompanying combined
financial statements. SFAS 109 is an asset and liability approach that requires
the recognition of deferred tax assets and liabilities for the expected future
consequences of temporary differences between the financial statement carrying
amounts and the tax basis of assets and liabilities.
Goodwill
Staveley Industries purchased many of the entities which now comprise the
Weigh-Tronix Business through various acquisitions. The excess of the purchase
price paid by Staveley Industries over the fair value of
F-59
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
2. Summary of Significant Accounting Policies (Continued)
the acquired assets has been allocated to the respective entity within the
Weigh-Tronix Business as part of the allocations of certain Staveley Industries
corporate amounts as described in the Overview and Basis of Presentation note
disclosure. Goodwill is being amortized on a straight-line basis over its
estimated life of 20 years. Accumulated amortization as of March 31, 1998 was
$21,002. Amortization expense for the year ended March 31, 1998 and the one
month ended April 30, 1998 was $2,315 and $193, respectively.
Impairment of Long-Lived Assets
Weigh-Tronix Business periodically reviews long-lived assets, principally
property, plant and equipment and goodwill, for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may
not be recoverable. The carrying value of a long-lived asset is considered
impaired when the anticipated undiscounted cash flow from such an asset,
measured at the lowest level for which there are identifiable cash flows, is
less than its carrying value. In that event, a loss is recognized based on the
amount by which the carrying value exceeds the fair market value of the long-
lived asset. Fair market value is determined primarily using the anticipated
cash flows discounted at a rate commensurate with the risk involved.
Pensions and Other Postretirement Benefits
The provisions of Statement of Financial Accounting Standards No. 132 ("SFAS
132"), "Employers Disclosures about Pensions and Other Postretirement
Benefits," has been retroactively applied to the accompanying combined
financial statements. SFAS 132 standardizes the disclosure requirements for
pensions and other postretirement benefits.
Foreign Currency Translation
The balance sheet accounts of foreign operations are translated from foreign
currencies into U.S. dollars at year-end exchange rates while income and
expenses are translated at the weighted average exchange rates for the year.
Adjustments resulting from the translation of the foreign operations' financial
statements are included as a component of other comprehensive income in the
accompanying combined financial statements. Gains and losses resulting from
foreign currency transactions (transactions denominated in a currency other
than the entity's functional currency) are included as a component of operating
income.
Revenue Recognition
Revenue from product sales, net of trade discounts and allowances, is
recognized at the time the product is shipped or upon installation when Weigh-
Tronix Business has a contractual commitment to install its products.
Provisions are established for estimated costs that may be incurred for product
warranties. Revenue from services is recognized as the related services are
performed. Revenue related to sales of extended term maintenance agreements are
deferred and recognized ratably over the contractual term of the arrangement.
Service revenue includes the sale of replacement parts.
Advertising
Advertising costs are expensed as incurred and amounted to $1,071 for the
year ended March 31, 1998 and $117 for the one month ended April 30, 1998.
Research and Development
Internal research and development costs are expensed as incurred. Research
and development expense for the year ended March 31, 1998 and the one month
ended April 30, 1998 was $1,963 and $155, respectively.
F-60
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
2. Summary of Significant Accounting Policies (Continued)
Comprehensive Income
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting
Comprehensive Income," has been retroactively applied to these financial
statements. SFAS 130 requires the reporting of comprehensive income in addition
to net income from operations. Comprehensive income is a more inclusive
financial reporting methodology that includes disclosure of certain financial
information that historically has not been recognized in the calculation of net
income. Comprehensive income is composed of both net income and other
comprehensive income, with other comprehensive income including charges or
credits to equity that are not the result of transactions with the owners such
as foreign currency translation adjustments and minimum pension liability
adjustments. The Weigh-Tronix Business reports accumulated other comprehensive
income and comprehensive income in its statement of changes in shareholder's
net investment in the accompanying combined financial statements.
Impact of New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities." SFAS 133 requires that all
derivative instruments be recognized as either assets or liabilities on the
balance sheet at fair value. Changes in the fair value of derivatives (gains or
losses) are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction. In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 137 ("SFAS 137"), "Accounting for Derivative Instruments and
Hedging Activities--Deferral of the Effective Date of FAS 133." SFAS 137
changed the effective date of SFAS 133 to all fiscal quarters for all fiscal
years beginning after June 15, 2000. As a result, SFAS 133 will be effective
for the Weigh-Tronix Business on April 1, 2001. The Weigh-Tronix Business is
currently assessing the impact of this standard.
Off-Balance-Sheet Foreign Exchange Risk
Weigh-Tronix Business has significant foreign operations and conducts
business in various foreign currencies. The Weigh-Tronix Business uses a number
of derivative financial instruments, mainly foreign currency forward contracts,
as a means of hedging exposure to foreign currency risks. It is the Weigh-
Tronix Business practice to periodically buy foreign currency forward
contracts. Exchange differences arising during the contract term are marked to
market and are included in operating profit. Weigh-Tronix Business regularly
monitors its foreign currency exposures and ensures that hedge contract amounts
do not exceed the amounts of the underlying exposures.
At March 31, 1998, Weigh-Tronix Business held foreign currency forward
contracts with notional amounts totaling approximately (Pounds)3,092 ($5,050).
The majority of these contracts mature within eight months of the year-end.
Concentrations of Credit Risk
In the United States, the Weigh-Tronix Business sells primarily through a
distributor network while sales in the United Kingdom are made primarily
through the use of both a direct sales force and a distributor network. No
single customer accounted for 10% or more of revenues or of accounts receivable
as of and for the year ended March 31, 1998 and the one month ended April 30,
1998. Credit risk with respect to accounts receivable is generally diversified
due to the number of entities comprising the WeighTronix Business' customer
base and their dispersion across many different industries and geographies.
Weigh-Tronix Business performs ongoing credit evaluations of its customers'
financial condition, and requires collateral, such as letters of credit and
bank guarantees, in certain circumstances.
F-61
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
2. Summary of Significant Accounting Policies (Continued)
Fair Value of Financial Instruments
The carrying values of the Weigh-Tronix Business financial instruments,
including accounts receivable, accounts payable and other accrued liabilities,
approximate their fair values due to their short maturities. The estimated fair
values may not be representative of actual values of the financial instruments
that could have been realized as of the period end or that will be realized in
the future.
The fair values associated with the foreign currency forward contracts have
been estimated by valuing the net position of the contracts using the
applicable forward rates as of the reporting date. The fair value of the Weigh-
Tronix Business foreign currency forward contracts at March 31, 1998 is $5,143.
3. Accounts Receivable
Accounts receivable consisted of the following at March 31, 1998:
<TABLE>
<S> <C>
Trade accounts receivable........................................... $20,195
Less allowance for doubtful accounts................................ (1,333)
-------
$18,862
=======
</TABLE>
Bad debt expense for the year ended March 31, 1998 and for the one month
ended April 30, 1998 was $169 and $19, respectively.
4. Inventories
Inventories consisted of the following at March 31, 1998:
<TABLE>
<S> <C>
Raw materials........................................................ $12,268
Work in process...................................................... 5,561
Finished goods....................................................... 6,293
-------
$24,122
=======
</TABLE>
5. Property, Plant and Equipment
Property, plant and equipment consisted of the following at March 31, 1998:
<TABLE>
<S> <C>
Land............................................................... $ 784
Buildings.......................................................... 8,626
Plant equipment.................................................... 30,139
Furniture, fixtures and office equipment........................... 5,865
Vehicles........................................................... 659
Leasehold improvements............................................. 4,247
Construction in progress........................................... 340
--------
50,660
Less accumulated depreciation and amortization..................... (30,448)
--------
$ 20,212
========
</TABLE>
Vehicles includes approximately $132 held under capital leases at March 31,
1998. Related accumulated amortization on those vehicles under capital leases
was $33. Depreciation and amortization expense was $3,365 and $297 for the year
ended March 31, 1998 and the one month ended April 30, 1998, respectively.
F-62
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
6. Accrued Expenses
Accrued expenses consisted of the following at March 31, 1998:
<TABLE>
<S> <C>
Accrued payroll....................................................... $1,943
Accrued other taxes................................................... 1,970
Accrued warranty...................................................... 1,540
Accrued commissions................................................... 1,145
Other................................................................. 2,964
------
$9,562
======
</TABLE>
7. Long-Term Debt
During fiscal year 1998, Weigh-Tronix Business repaid the remaining balance
on its two Minnesota Industrial Development Revenue Bonds, Series 1972 and
Series 1979, which had final payments originally scheduled for calendar year
1997 and 1999, respectively. Total principal payments made during the year were
$490. Interest expense for the year ended March 31, 1998 was $27.
8. Income Taxes
Income before provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Year One month
Ended Ended
March 31, April 30,
1998 1998
--------- ---------
<S> <C> <C>
Domestic................................................. $1,191 $ 395
Foreign.................................................. 2,695 390
------ -----
Total.................................................... $3,886 $ 785
------ -----
The provision for income taxes consists of the following:
Current:
Federal................................................ $1,041 $ 377
State.................................................. 195 71
Foreign................................................ 847 139
------ -----
2,083 587
------ -----
Deferred:
Federal................................................ 58 (194)
State.................................................. 11 (37)
Foreign................................................ 34 19
------ -----
103 (212)
------ -----
$2,186 $ 375
====== =====
</TABLE>
F-63
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
8. Income Taxes (Continued)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at March 31, 1998 are as follows:
<TABLE>
<CAPTION>
March 31,
1998
---------
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts.................................. $ 134
Reserve for obsolete and slow-moving inventory................... 1,505
Depreciation on property, plant and equipment.................... 245
Amortization of goodwill......................................... 1,295
Accrued expenses................................................. 790
Other............................................................ 497
Net operating loss carryforwards................................. 3,607
-------
Total gross deferred tax assets................................ 8,073
Less valuation allowance......................................... (3,962)
-------
Net deferred tax assets.......................................... 4,111
Deferred tax liabilities:
Depreciation on property, plant and equipment.................... 682
-------
Total gross deferred tax liabilities........................... 682
-------
Net deferred tax asset........................................... $ 3,429
=======
</TABLE>
As of March 31, 1998, Weigh-Tronix Business had net operating loss ("NOL")
carryforward deductions of $11,638 from its Canadian operations. The NOL asset
of approximately $3,607 expires in varying amounts between 1999 and 2002. A
valuation allowance has been recorded against all of these NOL carryforwards
and the remainder of the Canadian deferred tax assets because, in management's
opinion, it is more likely than not that the benefits of these assets will not
be realized.
Weigh-Tronix Business does not have any legal subsidiaries, however if the
Weigh-Tronix Business were a separate entity and structured in a parent-
subsidiary format, it could have potential deferred tax liabilities for
undistributed earnings of its 100% owned foreign subsidiaries which arose
during fiscal year 1998 and prior years. Weigh-Tronix Business has not provided
for any potential deferred tax liability for undistributed foreign earnings as
it currently does not expect those unremitted earnings to reverse and become
taxable to Weigh-Tronix Business in the foreseeable future.
As a result of the sale of the Weigh-Tronix Business by Staveley Industries
as discussed in Note 1 and Note 15, certain, if not all, of the deferred tax
assets held by the individual operating entities comprising Weigh-Tronix
Business may be unable to be utilized by Weigh-Tronix Business after May 1,
1998. No valuation allowance has been made in these financial statements for
this possibility.
F-64
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
8. Income Taxes (Continued)
The effective tax rate varies from the United States federal statutory rate
for the year ended March 31, 1998 and the one month ended April 30, 1998
principally due to the following:
<TABLE>
<CAPTION>
Year One Month
Ended Ended
March 31, April 30,
1998 1998
--------- ---------
<S> <C> <C>
Taxes computed at U.S. federal statutory rate............ 34.0% 34.0%
State income tax, net of federal benefit................. 4.0 4.0
Foreign income taxes..................................... (4.9) (3.1)
Non-deductible goodwill amortization..................... 23.2 9.2
Change in valuation allowance............................ (1.5) (2.0)
Other.................................................... 1.4 5.7
---- ----
Effective tax rate....................................... 56.2% 47.8%
==== ====
</TABLE>
9. Employee Benefit Plans
Substantially all of the employees of the Weigh-Tronix Business located in
the United States, United Kingdom, and Canada are covered by one of a number of
the Staveley Industries defined benefit pension plans. Weigh-Tronix Business
has treated its participation in the Staveley Industries Retirement Benefits
Scheme (SIRBS) under a multiple employer approach or as if it had a separate
pension plan for its employees and pooled its assets with those of the Staveley
Industries pension plans. The allocation of assets and liabilities from the
Staveley plans was performed based on the percentage of pensionable salaries of
active Weigh-Tronix participants to the total pensionable salaries of active
participants in each respective plan. The net period pension expense recorded
in the accompanying combined financial statements is based on an actuarial
calculation of cost related to service provided by Weigh-Tronix employees for
the year. Any pension expense previously allocated to Weigh-Tronix Business by
Staveley has been excluded from the accompanying combined financial statements.
The defined benefit pension plans which cover substantially all the Weigh-
Tronix Business employees provide for payment of retirement benefits, mainly
commencing between the ages of 60 and 65, and also for payment of certain
disability and severance benefits. After meeting certain qualifications, an
employee acquires a vested right to future benefits. The benefits payable under
the plans are generally determined on the basis of an employees length of
service and earnings.
The components of net pension costs are as follows:
<TABLE>
<CAPTION>
Year One Month
Ended Ended
March 31, April 30,
1998 1998
--------- ---------
<S> <C> <C>
Service cost............................................. $ 1,254 $ 119
Interest cost............................................ 1,184 127
Expected return on plan assets........................... (1,608) (167)
Net amortization and deferral............................ (208) (18)
------- -----
$ 622 $ 61
======= =====
</TABLE>
F-65
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
9. Employee Benefit Plans (Continued)
The reconciliation of the beginning and ending balances of benefit
obligations, fair value of plan assets, and the funded status of the plan are
as follows:
<TABLE>
<S> <C>
Change in benefit obligation:
Benefit obligation at April 1, 1997............................... $14,321
Service cost...................................................... 1,254
Interest cost..................................................... 1,184
Actuarial loss.................................................... 4,214
Participant's contributions....................................... 335
Benefits paid..................................................... (214)
Exchange rate changes............................................. 534
-------
Benefit obligation at March 31, 1998............................ $21,628
=======
Change in plan assets:
Fair value of plan assets at April 1, 1997........................ $17,371
Actual return on plan assets...................................... 3,927
Employer contributions............................................ 291
Participants' contributions....................................... 335
Benefits paid..................................................... (214)
Exchange rate changes............................................. 631
-------
Fair value of plan assets at March 31, 1998..................... $22,341
=======
Funded status at March 31, 1998..................................... $ 713
Unrecognized transition obligation.................................. (1,275)
Unrecognized prior service cost..................................... --
Unrecognized actuarial loss......................................... 1,923
-------
Net prepaid benefit cost............................................ $ 1,361
=======
Amounts recognized in the balance sheet as of March 31, 1998 are as follows:
Pension benefit cost................................................ $ 1,445
Accrued benefit liability........................................... (250)
Intangible assets................................................... 114
Accumulated other comprehensive income.............................. 52
-------
Net amount recognized............................................... $ 1,361
=======
Weighted average assumptions:
Discount rate..................................................... 6.79%
Expected long-term rate of return on plan assets.................. 9.00%
Rate of compensation increase..................................... 5.58%
</TABLE>
Pension benefit plan assets are held in two managed funds portfolios, the
managers of which have been appointed by Staveley Industries. Assets include
mainly equity investments of publicly-traded companies in the United Kingdom,
other international equities and fixed income investments.
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefits
obligations in excess of plan assets were $3,089, $2,858 and $2,504,
respectively, as of March 31, 1998.
F-66
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
9. Employee Benefit Plans (Continued)
Subsequent to May 1, 1998, participation in the SIRBS was ended for Weigh-
Tronix Business employees located in the United States and Canada. The benefits
for these employees were paid out directly to the individuals and a new Weigh-
Tronix Business defined contribution plan was established. All employees in the
United Kingdom who participated in the SIRBS as of May 1, 1998 were allowed to
continue their participation in this defined benefit pension plan with the
option to transfer to the new Weigh-Tronix Business plan. In April 1999, Salter
Weigh-Tronix Limited and Salter Housewares Limited established a defined
contribution plan for Weigh-Tronix Business employees in the United Kingdom.
10. Stock Option and Stock Savings Plans
Staveley Industries maintained stock savings plans for all employees located
in the United Kingdom and stock option plans for certain senior executives.
Seven senior executives of Weigh-Tronix Business participated in the Staveley
stock option plan.
Stock Option Plans
Grants of options to senior executives are normally granted at the market
price prevailing at the date of grant. Options are normally exercisable between
3 to 10 years from the date of grant, however, only after certain Staveley
Industries performance targets have been met.
<TABLE>
<CAPTION>
Outstanding Weighted
Stock Exercise
Options Price
----------- --------
<S> <C> <C>
At April 1, 1997........................................ 346,001 $2.99
Options granted......................................... -- --
Options exercised....................................... -- --
Options cancelled....................................... -- --
------- -----
At March 31, 1998....................................... 346,001 $2.99
======= =====
</TABLE>
Options outstanding at March 31, 1998:
<TABLE>
<CAPTION>
Weighted
Average
Weighted Range of Remaining
Exercise Exercise Contractual
Number Price Price Life (in Years)
------- -------- ----------- ---------------
<S> <C> <C> <C>
107,251 $2.63 $2.38-$2.81 4.25
146,250 $3.03 $2.82-$3.13 5.75
92,500 $3.34 $3.14-$3.48 6.75
</TABLE>
Subsequent to April 30, 1998, all 346,001 executive stock options lapsed
without being exercised.
Stock Savings Plans
Staveley Industries sponsored a stock savings plan whereby all eligible
employees could contribute a certain portion of their paycheck to a fund which
would allow them to purchase Staveley shares at a price 20 percent below the
market price at the date of grant. These options were normally exercisable
within 4 to 6 years from the grant date. During fiscal year 1998, Weigh-Tronix
Business employees exercised the right to obtain 18,454 Staveley shares within
the Staveley stock savings plan. Subsequent to November 1997, the Staveley
Industries share price declined below the exercise price and no further
exercises took place.
F-67
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
11. Transactions with Staveley Industries
Weigh-Tronix Business selling, general and administrative expenses in the
accompanying combined statement of operations include an allocation from
Staveley for centralized legal, accounting, insurance services, information
technology services, treasury and other Staveley Industries corporate and
infrastructure costs. The expense allocation of $2,120 has been determined on a
weighted average basis of headcount and sales revenue that Weigh-Tronix
Business considered to be a reasonable reflection of the utilization of
services provided to or the benefit received by the Weigh-Tronix Business.
Certain Weigh-Tronix Business units participated in the Staveley centralized
cash management services. Under this arrangement daily cash receipts were
collected in separate lock boxes and the amounts were swept on a daily basis
into an interest-bearing Staveley overnight account. The Weigh-Tronix Business
did not receive any interest income from this arrangement and none has been
allocated to the Weigh-Tronix Business in the accompanying combined financial
statements.
Account balances of the Weigh-Tronix Business, which are settled through
intercompany billings to Staveley Industries or its subsidiaries, have been
reported as part of the shareholder's net investment. Changes in shareholder's
net investment represent Staveley Industries' transfer of its net investment in
the Weigh-Tronix Business, after giving effect to the net earnings of the
Weigh-Tronix Business plus net cash transfers to or from Staveley Industries.
All receivables and payables to Staveley Industries and its non-Weigh-Tronix
subsidiaries have been accumulated in the balance of shareholder's net
investment.
12. Commitments and Contingencies
Lease Commitments
Weigh-Tronix Business leases certain manufacturing, warehousing and office
facilities in addition to certain office equipment and vehicles. Several leases
include options for renewal or purchase. Lease terms generally range from 1 to
15 years.
Future minimum lease payments for lease obligations at March 31, 1998 are as
follows:
<TABLE>
<CAPTION>
Capital Operating
leases leases
------- ---------
<S> <C> <C>
1999....................................................... $ 36 $1,544
2000....................................................... 64 923
2001....................................................... 16 616
2002....................................................... 34 501
2003....................................................... -- 118
Thereafter................................................. -- 13
---- ------
Total minimum lease payments............................... 150 $3,715
======
Less amounts representing interest......................... (20)
----
Present value of net minimum payments...................... 130
Less current portion....................................... (27)
----
$103
====
</TABLE>
Total rent expense under all operating lease agreements was $2,165 for the
year ended March 31, 1998 and $171 for the one month ended April 30, 1998.
F-68
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
12. Commitments and Contingencies (Continued)
Litigation
Certain claims, suits and complaints associated with the ordinary course of
business are pending or may arise against Weigh-Tronix Business, including all
of its direct and indirect subsidiaries. In the opinion of management, all
matters are adequately covered by insurance or, if not covered, are without
merit or are of such kind, or involve such amounts as would not have a material
effect on the financial position, results of operations and cash flows of the
Company if disposed of unfavorably.
13. Segment Information
The Weigh-Tronix Business has retroactively applied Statement of Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an
Enterprise and Related Information," to the accompanying combined financial
statements. SFAS 131 establishes standards for the reporting of information
about operating segments in annual and interim financial statements. Operating
segments are defined as components of an enterprise for which separate
financial information is available that is evaluated regularly by the chief
operating decision maker(s) in deciding how to allocate resources and in
assessing performance. SFAS 131 also requires disclosures about products and
services, geographic areas and major customers.
The Weigh-Tronix Business is organized for management purposes into three
reportable business segments: the North American Industrial division, the
European Industrial division and the Consumers division. Weigh-Tronix Business'
reportable business segments are managed separately based on differences in
their products and operations.
The North American Industrial division manufactures and markets industrial,
agricultural and postal weighing systems as well as force measurement products
throughout the United States and Canada. These products, which are primarily
electronic in nature, are manufactured at three facilities located in Fairmont,
Minnesota, Santa Rosa, California and Montreal, Canada. The industrial products
manufactured by Fairmont and Santa Rosa are sold through a network of
distributors who maintain their own aftermarket service centers. However,
distribution and service sales in Canada are primarily operated through an
internal sales and service force.
The Eurpoean Industrial division manufactures and sells industrial scales in
the United Kingdom as well as distributing specific models of electronic scales
that have been manufactured by the North American Industrial division. In
addition to the range of electronic scales, the European Industrial division
also manufactures mechanical scales at its location in West Bromwich, United
Kingdom. Most sales are made directly to the end user, with a large percentage
being after sales service, which are administered through Weigh-Tronix Business
owned service centers strategically located throughout the United Kingdom.
The Consumers division distributes residential scales to the retail sector
primarily in the United Kingdom and the United States. These residential scales
include consumer scale products used in kitchens and bathrooms.
F-69
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
13. Segment Information (Continued)
Weigh-Tronix Business evaluates performance and allocates resources based on
operating income. The reporting segments follow the same accounting policies
for the Weigh-Tronix Business combined financial statements as described in the
summary of significant accounting policies. The following is a tabulation of
the business segment information for each of the periods presented.
<TABLE>
<CAPTION>
North
American European Inter-
Industrial Industrial Consumers Segment Total
---------- ---------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1998:
External product sales..... $52,813 $17,054 $18,982 $ -- $ 88,849
External service sales..... 13,338 11,664 -- -- 25,002
------- ------- ------- ------- --------
Total external sales....... $66,151 $28,718 $18,982 $ -- $113,851
======= ======= ======= ======= ========
Intersegment sales......... $ 2,881 $ 238 $ -- $ -- $ 3,119
Gross profit............... 19,874 9,283 5,335 -- 34,492
Depreciation and
amortization.............. 4,598 832 250 -- 5,680
Operating income........... 1,097 1,720 1,093 15 3,925
Interest income............ (35) (7) -- -- (42)
Interest expense........... 27 -- -- -- 27
Other (income) expense,
net....................... (56) -- 29 81 54
Provision for income
taxes..................... 1,305 553 328 -- 2,186
------- ------- ------- ------- --------
Net income (loss).......... $ (144) $ 1,174 $ 736 $ (66) $ 1,700
======= ======= ======= ======= ========
One Month Ended April 30,
1998:
External product sales..... $ 5,270 $ 1,627 $ 1,632 $ -- $ 8,529
External service sales..... 1,238 1,097 -- -- 2,335
------- ------- ------- ------- --------
Total external sales....... $ 6,508 $ 2,724 $ 1,632 $ -- $ 10,864
======= ======= ======= ======= ========
Intersegment sales......... $ 255 $ 12 $ -- $ -- $ 267
Gross profit............... 2,138 893 444 -- 3,475
Depreciation and
amortization.............. 380 88 22 -- 490
Operating income........... 418 229 78 26 751
Interest income............ (4) -- -- -- (4)
Interest expense........... -- -- -- -- --
Other (income) expense,
net....................... -- -- (37) 7 (30)
Provision for income
taxes..................... 217 121 37 -- 375
------- ------- ------- ------- --------
Net income................. $ 205 $ 108 $ 78 $ 19 $ 410
======= ======= ======= ======= ========
March 31, 1998:
Long-lived assets.......... $38,238 $ 7,431 $ 1,164 $ -- $ 46,833
Total assets............... $72,313 $20,496 $ 9,441 $(2,863) $ 99,387
Year ended March 31, 1998:
Capital expenditures....... $ 2,506 $ 957 $ 212 $ -- $ 3,675
One Month Ended April 30,
1998:
Capital expenditures....... $ 45 $ 100 $ 64 $ -- $ 209
</TABLE>
F-70
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
13. Segment Information (Continued)
Net sales by customer location for the year ended March 31, 1998 and the one
month ended April 30, 1998 were as follows:
<TABLE>
<CAPTION>
Year One Month
Ended Ended
March 31, April 30,
1998 1998
--------- ---------
<S> <C> <C>
Net sales:
United States............................................ $ 55,736 $ 5,360
United Kingdom........................................... 35,704 3,059
Canada................................................... 9,395 1,002
Australia................................................ 2,978 164
Other.................................................... 10,038 1,279
-------- -------
$113,851 $10,864
======== =======
</TABLE>
Long-lived assets by location as of March 31, 1998 were as follows:
<TABLE>
<CAPTION>
March 31,
1998
---------
<S> <C>
Long-lived assets:
United States...................................................... $36,632
United Kingdom..................................................... 8,360
Canada............................................................. 1,606
Australia.......................................................... 235
-------
$46,833
=======
</TABLE>
14. Supplemental Financial Information
<TABLE>
<CAPTION>
Additions
---------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
One month ended April
30, 1998............... $1,333 $ 20 $-- $ -- $1,353
Twelve months ended
March 31, 1998......... $1,315 $ 197 $-- $(179) $1,333
Deferred tax asset
valuation allowance:
One month ended April
30, 1998............... $3,962 $ -- $-- $ (49) $3,913
Twelve months ended
March 31, 1998......... $4,159 $ -- $-- $(197) $3,962
Inventory reserve for
obsolescence:
One month ended April
30, 1998............... $5,944 $ 176 $-- $ (82) $6,038
Twelve months ended
March 31, 1998......... $4,879 $1,572 $-- $(507) $5,944
</TABLE>
15. Subsequent Event
On May 1, 1998, Staveley PLC signed a Stock and Asset Purchase Agreement to
sell Weigh-Tronix Business for approximately $81,800.
On March 8, 2000, a subsidiary of Weigh-Tronix, LLC entered into an
agreement to acquire the Avery Berkel Group from Marconi Corporation plc for
(Pounds)105.0 million (approximately $165.9 million). Avery Berkel
F-71
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
15. Subsequent Event (Continued)
is a leading manufacturer, distributor and servicer of industrial and food
retail weighing systems and other food processing equipment. The acquisition is
expected to be completed in May 2000 and will be accounted for as a purchase.
In connection with the acquisition, a subsidiary of Weigh-Tronix, LLC will
enter into a New Senior Credit Facility and issue Senior Subordinated Notes due
in 2010 (See Note 16).
16. Supplemental Combining Financial Statements
The following summarized combined financial information presents guarantor
and non-guarantor results of operations, financial position, and cash flows of
Weigh-Tronix Business under the Senior Subordinated Notes. The Senior
Subordinated Notes are guaranteed fully and unconditionally, jointly and
severally, on an unsecured senior subordinated basis by the guarantor
subsidiaries.
The summarized combined financial information was prepared using the same
combination policies as presented in Note 2--Summary of Significant Accounting
Policies. Management asserts that separate complete financial statements of the
Issuer and subsidiary guarantors or the senior subordinated notes would not
provide additional material information that would be useful in assessing the
financial composition of the guarantors or the sufficiency of the guarantees.
Combined Balance Sheet as of March 31, 1998
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Total
------------ ------------- ------------ -------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash........................ $ 4,767 $ 312 $ -- $ 5,079
Accounts receivable, net.... 21,090 325 (2,553) 18,862
Inventories, net............ 23,933 499 (310) 24,122
Deferred income taxes....... 2,807 9 -- 2,816
Prepaid expenses and other
current assets............. 1,061 1 -- 1,062
-------- ------ ------- -------
Total current assets...... 53,658 1,146 (2,863) 51,941
Property, plant and equipment,
net.......................... 19,977 235 -- 20,212
Goodwill...................... 25,312 -- -- 25,312
Deferred income taxes......... 612 1 -- 613
Other assets.................. 1,285 24 -- 1,309
-------- ------ ------- -------
Total assets.............. $100,844 $1,406 $(2,863) $99,387
======== ====== ======= =======
Liabilities and Shareholder's
Net Investment
Current liabilities:
Accounts payable............ $ 9,286 $ 324 $(2,472) $ 7,138
Accrued expenses............ 9,461 101 -- 9,562
Deferred revenue............ 836 -- -- 836
Current portion of
obligations under capital
leases..................... -- 27 -- 27
-------- ------ ------- -------
Total current
liabilities.............. 19,583 452 (2,472) 17,563
Obligations under capital
leases, net of current
portion...................... -- 103 -- 103
-------- ------ ------- -------
Total liabilities......... 19,583 555 (2,472) 17,666
Commitments and contingencies
(Note 12)
Shareholder's net investment.. 81,261 851 (391) 81,721
-------- ------ ------- -------
Total liabilities and
shareholder's net
investment............... $100,844 $1,406 $(2,863) $99,387
======== ====== ======= =======
</TABLE>
F-72
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
16. Supplemental Combining Financial Statements (Continued)
Combined Statement of Operations for the Year Ended March 31, 1998
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Total
------------ ------------- ------------ --------
<S> <C> <C> <C> <C>
Revenues:
Product sales.............. $ 94,677 $1,935 $(7,763) $ 88,849
Services................... 24,739 263 -- 25,002
-------- ------ ------- --------
Total revenues........... 119,416 2,198 (7,763) 113,851
Cost of revenues:
Cost of products sold...... 69,164 1,185 (7,778) 62,571
Cost of services........... 16,721 67 -- 16,788
-------- ------ ------- --------
Cost of revenues........... 85,885 1,252 (7,778) 79,359
-------- ------ ------- --------
Gross profit............... 33,531 946 15 34,492
Operating expenses:
Selling, general and
administrative............ 25,771 828 -- 26,599
Depreciation and
amortization.............. 3,917 51 -- 3,968
-------- ------ ------- --------
Operating income......... 3,843 67 15 3,925
Interest income.............. (35) (7) -- (42)
Interest expense............. 27 -- -- 27
Other (income) expense, net.. (26) -- 80 54
-------- ------ ------- --------
Income before provision
for income taxes........ 3,877 74 (65) 3,886
Provision for income taxes... 2,167 19 -- 2,186
-------- ------ ------- --------
Net income............... $ 1,710 $ 55 $ (65) $ 1,700
======== ====== ======= ========
</TABLE>
F-73
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
16. Supplemental Combining Financial Statements (Continued)
Combined Statement of Cash Flows for the Year Ended March 31, 1998
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Total
------------ ------------- ------------ -------
<S> <C> <C> <C> <C>
Net cash provided by operating
activities................... $ 3,541 $ 113 $(116) $ 3,538
Cash flows from investing
activities:
Expenditures for property
and equipment.............. (3,638) (37) -- (3,675)
Proceeds from sales of
property and equipment..... 159 -- -- 159
------- ----- ----- -------
Net cash used in investing
activities................... (3,479) (37) -- (3,516)
Cash flows from financing
activities:
Payments made on capital
lease obligations.......... -- (68) -- (68)
Repayment of debt........... (490) -- -- (490)
Net change in amount due to
Staveley Industries........ (4,133) (146) -- (4,279)
------- ----- ----- -------
Net cash used in financing
activities................... (4,623) (214) -- (4,837)
Effect of exchange rates on
cash......................... 167 (72) 116 211
------- ----- ----- -------
Net decrease in cash.......... (4,394) (210) -- (4,604)
Cash, beginning of the
period....................... 9,161 522 -- 9,683
------- ----- ----- -------
Cash, end of the period....... $ 4,767 $ 312 $ -- $ 5,079
======= ===== ===== =======
</TABLE>
F-74
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
16. Supplemental Combining Financial Statements (Continued)
Combined Statement of Operations for the One Month Ended April 30, 1998
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Total
------------ ------------- ------------ -------
<S> <C> <C> <C> <C>
Revenues:
Product sales............... $ 9,127 $121 $(719) $ 8,529
Services.................... 2,311 24 -- 2,335
------- ---- ----- -------
Total revenues............ 11,438 145 (719) 10,864
Cost of revenues:
Cost of products sold....... 6,541 78 (745) 5,874
Cost of services............ 1,508 7 -- 1,515
------- ---- ----- -------
Cost of revenues.......... 8,049 85 (745) 7,389
------- ---- ----- -------
Gross profit.............. 3,389 60 26 3,475
Operating expenses:
Selling, general and
administrative............. 2,347 73 -- 2,420
Depreciation and
amortization............... 299 5 -- 304
------- ---- ----- -------
Operating income (loss)... 743 (18) 26 751
Interest income............... (4) -- -- (4)
Interest expense.............. -- -- -- --
Other (income) expense, net... (37) -- 7 (30)
------- ---- ----- -------
Income before provision
(benefit) for income
taxes.................... 784 (18) 19 785
Provision (benefit) for income
taxes........................ 381 (6) -- 375
------- ---- ----- -------
Net income (loss)......... $ 403 $(12) $ 19 $ 410
======= ==== ===== =======
</TABLE>
F-75
<PAGE>
WEIGH-TRONIX SCALE PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands of U.S. Dollars)
16. Supplemental Combining Financial Statements (Continued)
Combined Statement of Cash Flows for the One Month Ended April 30, 1998
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Total
------------ ------------- ------------ -------
<S> <C> <C> <C> <C>
Net cash provided by (used
in) operating activities.... $ 1,021 $(29) $(81) $ 911
Cash flows from investing
activities:
Expenditures for property
and equipment............. (209) -- -- (209)
Proceeds from sales of
property and equipment.... -- -- -- --
------- ---- ---- -------
Net cash used in investing
activities.................. (209) -- -- (209)
Cash flows from financing
activities:
Payments made on capital
lease obligations......... -- -- -- --
Repayment of debt.......... -- -- -- --
Net change in amount due to
Staveley Industries....... (1,442) (12) 15 (1,439)
------- ---- ---- -------
Net cash used in financing
activities.................. (1,442) (12) 15 (1,439)
Effect of exchange rates on
cash........................ (15) (6) 66 45
------- ---- ---- -------
Net decrease in cash......... (645) (47) -- (692)
Cash, beginning of the
period...................... 4,767 312 -- 5,079
------- ---- ---- -------
Cash, end of the period...... $ 4,122 $265 $-- $ 4,387
======= ==== ==== =======
</TABLE>
F-76
<PAGE>
INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF THE AVERY BERKEL GROUP
We have audited the accompanying combined balance sheets of the Avery Berkel
Group as of 31 March 2000, 1999 and 1998, and the related statements of income,
cash flows, and retained earnings for each of the three years in the period
ended 31 March 2000, all expressed in pounds sterling. The financial statements
are the responsibility of the Group's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards required that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, expressed in
pounds sterling, present fairly, in all material respects, the financial
position of the Avery Berkel Group as at 31 March 2000, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended 31 March 2000, in conformity with accounting principles generally
accepted in the United Kingdom (which differ in certain material respects from
generally accepted accounting principles in the United States of America--see
Note 28).
Our audits were made for the purpose of forming an opinion on the combined
financial statements taken as a whole. The supplemental schedule of valuation
and qualifying amounts listed in note 30 is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the
basic financial statements. The schedule is the responsibility of the Group's
management. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, based on
our audits, fairly states in all material respects the financial data required
to be set forth therein in relation to the basic financial statements taken as
a whole.
Deloitte & Touche
Colmore Gate
2 Colmore Row
Birmingham, England
B3 2BN
July 20, 2000
F-77
<PAGE>
AVERY BERKEL GROUP
COMBINED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
Note 2000 1999 1998
---- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Turnover............................. 1 155,484 146,346 149,031
Costs of Sales....................... (96,696) (90,003) (91,036)
------- ------- -------
Gross Profit......................... 58,788 56,343 57,995
------- ------- -------
Net operating expenses
Distribution Costs................. (31,495) (29,488) (29,815)
Administration expenses............ (22,488) (22,037) (20,224)
Other Operating income............. 654 560 344
------- ------- -------
(53,329) (50,965) (49,695)
------- ------- -------
Operating profit..................... 5,459 5,378 8,300
Share of operating profit of
associates.......................... 471 564 990
------- ------- -------
Total operating profit............... 1,2 5,930 5,942 9,290
Profit on sale of fixed assets....... 1,120 1,965 2,247
Interest receivable.................. 2,030 422 663
Interest payable..................... (167) (171) (212)
Share of associate interest.......... (6) 22 49
------- ------- -------
Profit on ordinary activities before
taxation............................ 8,907 8,180 12,037
Taxation on profit on ordinary
activities.......................... 3 (2,230) (3,030) (3,465)
------- ------- -------
Profit on ordinary activities after
taxation............................ 6,677 5,150 8,572
Equity Minority interests ........... (71) (115) --
------- ------- -------
Profit on ordinary activities
attributable to shareholders........ 6,606 5,035 8,572
Dividends paid....................... 4 (39,870) -- (4,100)
------- ------- -------
Retained (loss)/profit for the year.. 15 (33,264) 5,035 4,472
======= ======= =======
</TABLE>
All activities derive from continuing operations.
F-78
<PAGE>
AVERY BERKEL GROUP
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
31 March 31 March 31 March
Note 2000 1999 1998
---- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Fixed Assets
Intangible Assets.................... 5 77 81 --
Tangible Assets...................... 7 16,040 18,950 19,471
Investments.......................... 8 1,983 1,972 3,741
------- ------- -------
18,100 21,003 23,212
Current Assets
Stocks............................... 10 31,693 28,880 25,222
Debtors.............................. 11 41,478 47,522 41,197
Cash at Bank and in hand............. 8,168 8,134 7,228
------- ------- -------
81,339 84,536 73,647
Creditors: Amounts falling due within
one year............................ 12 (92,376) (75,254) (71,418)
------- ------- -------
Net Current (Liabilities)/Assets..... (11,037) 9,282 2,229
------- ------- -------
Total Assets less Current
Liabilities......................... 7,063 30,285 25,441
Creditors: Amounts falling due after
one year............................ 12 (153) (87) (110)
Provisions for Liabilities and
Charges............................. 13 (6,774) (7,494) (7,812)
------- ------- -------
136 22,704 17,519
Minority Interest.................... (3,115) (3,193) --
------- ------- -------
Total Net (Liabilities)/Assets....... (2,979) 19,511 17,519
======= ======= =======
Capital and Reserves
Called up Share Capital.............. 14 10,646 10,809 10,720
Profit and Loss Account.............. 15 (13,625) 8,702 6,799
------- ------- -------
Equity Shareholder (Deficit)/Funds... 16 (2,979) 19,511 17,519
======= ======= =======
</TABLE>
These financial statements were approved by the Board of Directors on
2000
Signed on behalf of the Board of Directors
___________________________ ___________________________
DIRECTOR DIRECTOR
F-79
<PAGE>
AVERY BERKEL GROUP
COMBINED CASHFLOW STATEMENTS
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
Note 2000 1999 1998
---- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Net cash inflow from operating
activities.......................... 20 2,313 10,167 11,229
Dividends received from associates... 143 361 332
Returns on investments and servicing
of finance.......................... 21 1,714 (1) 451
Taxation............................. 21 5,323 (3,690) (3,419)
Capital expenditure and financial
investment.......................... 21 (1,801) (3,341) (2,712)
Acquisitions and disposals........... 23 16 442 (665)
Equity dividends paid................ (39,870) -- (4,100)
------- ------- -------
Cash inflow/(outflow) before use of
liquid resources and financing...... (32,162) 3,938 1,116
Management of liquid resources....... 22 2,986 (2,876) 108
Financing--Marconi loans............. 22 18,390 (4,973) 5,216
------- ------- -------
Increase/(decrease) in cash in the
period.............................. (10,786) (3,911) 6,440
======= ======= =======
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET DEBT................ 22
Increase/(decrease) in cash in the
period.............................. (10,786) (3,911) 6,440
Cash inflow/(outflow) from
increase/(decrease) in debt and
lease financing..................... (18,390) 4,973 (5,216)
Net debt acquired with subsidiary.... -- 1,276 --
Cash inflow/(outflow) from
decrease/(increase) in liquid
resources........................... (2,986) 2,876 (108)
------- ------- -------
Change in net debt resulting from
cash flows.......................... (32,162) 5,214 1,116
Effect of Carve out adjustments...... 6,380 412 (4,099)
Translation difference............... 4,630 (2,308) 4,583
------- ------- -------
(21,152) 3,318 1,600
Net debt brought forward............. (23,944) (27,262) (28,862)
------- ------- -------
Net debt carried forward............. (45,096) (23,944) (27,262)
======= ======= =======
</TABLE>
F-80
<PAGE>
AVERY BERKEL GROUP
COMBINED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Profit for the financial period........... 6,606 5,035 8,572
Currency translation difference on foreign
currency net investment.................. 4,394 (3,455) 3,320
------ ------ ------
Total recognised gains and losses relating
to the period............................ 11,000 1,580 11,892
====== ====== ======
</TABLE>
F-81
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS
ACCOUNTING POLICIES
The financial statements have been prepared in accordance with applicable UK
accounting standards. The particular accounting policies adopted by the
directors are described below.
(i) ACCOUNTING CONVENTION
The accounts have been prepared under the historical cost convention.
(ii) BASIS OF COMBINATION
The combined financial statements of the Avery Berkel Group incorporate Avery
Berkel Holdings Limited (formerly GEC Avery International Limited) and
Maatschappij van Berkel's Patent B.V. and their subsidiary companies included
in the sale to Weigh-Tronix UK Limited (see note 25). All intercompany accounts
and transactions have been eliminated. Information on companies included in the
combined statements is set out in note 9.
Assets, liabilities, income, expenditure and cash flows of subsidiaries and
operations that do not form part of the sale to Weigh-Tronix UK Limited, have
been excluded from the combined financial statements. These operations have
been segregated as carve out adjustments for purposes of presenting
reconciliations of profit and loss reserves, reconciliation of movement in
shareholders funds and analysis of cash flows (see notes 15, 16, 22 and 28).
These carve out adjustments include items such as the proceeds and profit from
the sale of the excluded companies; previous recapitalisations of certain of
the excluded companies by Maatschappij van Berkel's Patent B.V.; and dividends
received from the excluded companies.
(iii) ACQUISITIONS AND DISPOSALS
On the acquisition of a business, including an interest in an associated
undertaking, fair values are attributed to the group's share of net separable
assets. Where the cost of acquisition exceeds the fair values attributable to
such net assets the difference is treated as purchased goodwill and, following
the implementation of FRS10 for the year ended 31 March 1999, is capitalised in
the combined balance sheet in the year of acquisition. Previously purchased
goodwill was written off directly to reserves as noted below.
The results and cash flows relating to a business are included in the
combined profit and loss account and the combined cash flow statement from the
date of acquisition or up to the date of disposal.
(iv) GOODWILL AND INTANGIBLE FIXED ASSETS
For acquisitions of a business, including an interest in an associated
undertaking, following the implementation of FRS10 "Goodwill and Intangible
Assets", purchased goodwill is capitalised in the year in which it arises and
amortised over its estimated useful life up to a maximum of 20 years with a
full year's charge for amortisation in the year of acquisition. The directors
regard 20 years as a reasonable maximum for the estimated useful life of
goodwill since it is difficult to make projections exceeding this period.
Capitalised purchased goodwill in respect of subsidiaries is included within
intangible fixed assets. Capitalised purchased goodwill relating to associates
is included within the carrying value of the associate.
Goodwill which arose on the acquisition of a business, including an interest
in an associated undertaking, in prior periods and was written off to the
profit and loss account reserve as a matter of accounting policy remains
eliminated in that reserve and will be charged or credited in the profit and
loss account as appropriate on the subsequent disposal of the business to which
it related.
F-82
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
(v) FIXED ASSETS
Depreciation is calculated on the straight line basis to write off initial
cost at the following rates per annum.
Leasehold land and buildings are amortised over a period of fifty years, or
where less, the remaining term of the lease at the time of acquisition.
Freehold buildings are amortised over a period of fifty years or over the
remaining useful life of the building at the time of acquisition where this is
less than fifty years. Freehold land is not depreciated.
<TABLE>
<S> <C>
Hire equipment:
Weighbridges..................................................... 20%
Other............................................................ 50%
Tooling............................................................ 20%-33%
IT Equipment....................................................... 20%-33%
Motor Vehicles..................................................... 25%
Other assets....................................................... 10%-25%
</TABLE>
When assets are sold or scrapped, the cost of the asset and the related
accumulated depreciation are removed from the respective accounts, and any
profits or losses are recognised.
(vi) INVESTMENTS
Except as stated below, investment held as fixed assets are stated at cost
less provision for any permanent diminution in value.
In the combined accounts, shares in associated undertakings are accounted
for using the equity method. The combined profit and loss accounts include the
Group's share of the pre tax profits and attributable taxation of the
associated undertakings based on unaudited financial statements for the period
covered by the combined financial statements. Certain of the associated
undertaking have a year end of 31 December which is non coterminus with the
Avery Berkel Group. In the combined balance sheets, the investment in
associated undertakings is shown at the Groups share of the net assets of the
associated undertakings. Following the implementation of FRS's 9 and 10 in the
year ended 31 March 1999, goodwill arising on acquisition of an associate is
capitalised, as part of the carrying amount in the combined balance sheet, and
amortised over its estimated useful life. Previously such goodwill was written
off to reserves as a matter of accounting policy. (See note above on Goodwill
and Intangible fixed assets).
(vii) STOCKS
Stocks and work in progress are valued at the lower of cost and estimated
net realisable value. Cost comprises materials, direct labour and a share of
production overheads appropriate to the relevant stage of production. Net
realisable value is based on estimated selling price less all further costs to
completion and relevant marketing, selling and distribution costs.
(viii) DEFERRED TAXATION
Deferred Taxation is provided in full on timing differences relating to
pension and other post retirement benefits calculated at the rates at which it
is expected that tax will arise.
Deferred Taxation is provided on other timing differences which are expected
to reverse in the future without replacement, at the rate of tax anticipated to
apply in the year of assessment.
F-83
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
(ix) FOREIGN CURRENCIES
Transactions denominated in foreign currencies are translated into the
functional currency at the rates ruling at the date of transaction. Monetary
assets and liabilities denominated in foreign currencies are translated into
sterling at the rates of exchange ruling at the balance sheet date. Transaction
differences arising are dealt with in the profit and loss account.
The financial statements of foreign subsidiaries are translated into
sterling at the closing rates of exchange and the differences arising from the
translation of the opening net investment in subsidiaries at the closing rate
are taken directly to reserves.
(x) LEASES
Rental costs under operating leases are charged to profit and loss account
in equal annual amounts over the periods of the leases.
(xi) PENSIONS AND POST RETIREMENT BENEFITS
The expected costs of providing pensions, and other post retirement
benefits, as calculated by professionally qualified independent actuaries, is
charged to the profit and loss account, so as to spread the cost over the
expected average remaining service lives of current employees in such a way
that the pension is a substantial percentage of current and expected future
pensionable payroll.
The group also operates a number of defined contribution schemes for certain
of its employees. The group's contributions to these schemes are charged to the
profit and loss account as incurred.
(xii) TURNOVER
Turnover represents the invoiced value, excluding value added tax, of sales
of goods and services excluding sales to other combining companies in the Avery
Berkel Group. Products turnover is recognised at the time the product is
despatched or installed where installation is required under the terms of the
sale. Service turnover is recognised as the related services are performed.
Contract service revenue invoiced in advance for fixed periods is taken to
turnover in equal monthly instalments over the period of the contract.
(xiii) RESEARCH AND DEVELOPMENT
Research and development expenditure is written off in the period in which
it is incurred.
1. ANALYSIS OF TURNOVER, OPERATING PROFIT AND NET ASSETS
Geographical analysis of turnover by destination
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom........................... 71,396 67,395 67,665
Rest of Europe........................... 37,000 36,808 37,972
The Americas............................. 20,235 19,370 20,999
Asia Pacific............................. 17,318 12,232 10,031
Africa................................... 9,535 10,541 12,364
------- ------- -------
155,484 146,346 149,031
======= ======= =======
</TABLE>
F-84
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
In the opinion of the Directors, the group has only one class of business
being design, manufacture, sale and service of weighing machines, slicers and
other food processing equipment and systems. A geographical analysis of
turnover, operating profits and net assets by location is given below.
Geographical analysis of turnover by location
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom........................... 83,362 77,436 79,585
Rest of Europe........................... 29,759 30,799 30,276
The Americas............................. 19,009 18,545 19,873
Asia Pacific............................. 14,749 10,228 7,862
Africa................................... 8,605 9,338 11,435
------- ------- -------
155,484 146,346 149,031
======= ======= =======
</TABLE>
Geographical analysis of operating profit by location
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom .......................... 5,247 3,443 7,724
Rest of Europe........................... (511) (432) (999)
The Americas............................. 244 894 368
Asia Pacific............................. 527 792 91
Africa................................... (48) 681 1,116
Associated Companies..................... 471 564 990
------- ------- -------
5,930 5,942 9,290
======= ======= =======
Geographical analysis of net assets by location
<CAPTION>
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom........................... 24,571 50,871 46,631
Rest of Europe........................... (25,042) (29,807) (27,249)
The Americas............................. (12,514) (11,761) (11,209)
Asia Pacific............................. 7,680 8,083 1,677
Africa................................... 3,458 3,346 3,928
Associated undertakings.................. 1,983 1,972 3,741
Minority interests....................... (3,115) (3,193) --
------- ------- -------
(2,979) 19,511 17,519
======= ======= =======
</TABLE>
F-85
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
2. OPERATING PROFIT
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Operating profit is arrived at after
charging:
Depreciation of owned tangible fixed
assets............................... 5,664 6,483 6,016
Goodwill amortisation................. 4 2 --
Rentals under operating leases;
Hire of plant and machinery......... 1,740 837 471
Other operating leases.............. 910 934 624
Research and development.............. 4,667 4,313 2,725
Exceptional costs in respect of year
2000................................. 1,702 2,937 933
===== ===== =====
</TABLE>
3. TAXATION
Taxation is based upon the profit of the year and comprises:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom corporation tax at 30%
for the year ended 31 March 2000 (31%--
other years) .......................... 1,773 1,478 2,673
Overseas Taxation....................... 611 1,009 237
Associates undertakings................. 219 219 274
Deferred taxation....................... 42 (11) 316
----- ----- -----
2,645 2,695 3,500
(Over)/under provision of UK Corporation
tax ................................... (611) 90 (55)
(Over)/under provision of overseas tax.. 136 264 (123)
(Over)/under provision of deferred
taxation............................... 60 (19) 143
----- ----- -----
2,230 3,030 3,465
===== ===== =====
</TABLE>
4. DIVIDENDS
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
On ordinary shares:
Interim dividend paid.................... 39,500 -- 4,100
Dividend in specie paid.................. 370 -- --
------ ---- -----
39,870 -- 4,100
====== ==== =====
</TABLE>
F-86
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
5. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
Goodwill
-----------
(Pounds)000
<S> <C>
Cost
At 1 April 1997 and 31 March 1998................................ --
Additions in year ended 31 March 1999............................ 83
---
At 31 March 1999 and 31 March 2000............................... 83
===
Accumulated Amortisation
At 1 April 1997 and 31 March 1998................................ --
Charge for the year.............................................. 2
---
At 31 March 1999................................................. 2
Charge for the year.............................................. 4
---
At 31 March 2000................................................. 6
===
Net Book Value
At 31 March 2000................................................. 77
===
At 31 March 1999................................................. 81
===
At 31 March 1998................................................. --
===
</TABLE>
6. ACQUISITIONS
a) Avery India Limited
In August 1998, the group acquired a further 11.1% of the issued share
capital of Avery India Limited, increasing the group's interest to 51%. This
acquisition has been accounted for using the acquisition method of accounting.
The amount of goodwill arising as a result of the acquisition is
(Pounds)83,000. This has been capitalised on the group balance sheet.
The profits after taxation of Avery India Limited, prior to acquisition,
were as follows:
<TABLE>
<CAPTION>
Profit after
Tax
------------
(Pounds)000
<S> <C>
1 April 1998 to date of acquisition........................... 83
---
Financial year ended 31 March 1998............................ 696
===
</TABLE>
F-87
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
The following table explains the fair value of the assets and liabilities of
Avery India Limited included in the combined financial statements at the date
of acquisition:
<TABLE>
<CAPTION>
Book and
fair value
-----------
(Pounds)000
<S> <C>
Net assets acquired:
Tangible fixed assets........................................ 882
Investments.................................................. 145
Stocks....................................................... 1,980
Debtors...................................................... 4,531
Cash at bank and in hand..................................... 1,718
Creditors and provision...................................... (4,019)
Taxation..................................................... (357)
Liquid Resources............................................. 1,276
Minority interest............................................ (3,016)
------
3,140
Goodwill....................................................... 83
------
3,223
======
Satisfied by:
Cash......................................................... 1,276
Equity investment in existing 39.9% shareholding............. 1,947
------
3,223
======
</TABLE>
Avery India Limited contributed an outflow of (Pounds)295,000 to the group's
net operating cash flow, paid (Pounds)109,000 in respect of net return on
investment and servicing of finance, paid (Pounds)266,000 in respect of
taxation and utilised (Pounds)57,000 for investing activities during the year
ended 31 March 1999.
b) Weighbridge Hire
In March 1998, the Group acquired the trade and certain assets of
Weighbridge Hire for a total consideration of (Pounds)665,000. The tangible
assets acquired principally related to weighbridges amounting to
(Pounds)228,000. Goodwill of (Pounds)437,000 arising on the acquisition has
been written off to reserves.
F-88
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
7. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Plant
Machinery
Leasehold Properties Equipment &
Freehold ------------------------- Motor
Properties Long Short Vehicles Total
------------ ------------ ------------ ------------ ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
Cost
At 1 April 1997......... 8,061 1,299 267 46,344 55,971
Transfers in............ -- -- -- 25 25
Business acquired....... -- -- -- 228 228
Additions............... 155 -- 2 5,900 6,057
Disposals............... (291) (170) (45) (7,223) (7,729)
Foreign Exchange
translation
difference............. (245) (2) (13) (1,533) (1,793)
------ ----- --- ------- -------
At 31 March 1998........ 7,680 1,127 211 43,741 52,759
====== ===== === ======= =======
Cost
At 1 April 1998......... 7,680 1,127 211 43,741 52,759
Subsidiary acquired..... 486 -- 96 2,254 2,836
Additions............... 7 -- 6 6,986 6,999
Disposals............... (1,009) (102) (63) (4,042) (5,216)
Foreign Exchange
translation
difference............. (33) -- -- (225) (258)
------ ----- --- ------- -------
At 31 March 1999........ 7,131 1,025 250 48,714 57,120
====== ===== === ======= =======
Cost
At 1 April 1999......... 7,131 1,025 250 48,714 57,120
Reclassification........ 171 (83) (94) 6 --
Additions............... 9 -- -- 4,208 4,217
Disposals............... (572) (461) (40) (12,043) (13,116)
Foreign Exchange
translation
difference............. (105) -- (4) (420) (529)
------ ----- --- ------- -------
At 31 March 2000........ 6,634 481 112 40,465 47,692
====== ===== === ======= =======
</TABLE>
<TABLE>
<CAPTION>
Plant
Machinery
Leasehold Properties Equipment &
Freehold ------------------------- Motor
Properties Long Short Vehicles Total
------------ ------------ ------------ ------------ ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
Accumulated Depreciation
At 1 April 1997......... 3,083 364 131 31,378 34,956
Transfers in............ -- -- -- 7 7
Charge for the year..... 154 30 6 5,826 6,016
Disposals............... (118) (74) (6) (6,437) (6,635)
Foreign Exchange
translation
difference............. (71) (2) (4) (979) (1,056)
----- --- --- ------ ------
At 31 March 1998........ 3,048 318 127 29,795 33,288
===== === === ====== ======
</TABLE>
F-89
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
7. TANGIBLE FIXED ASSETS (Continued)
<TABLE>
<CAPTION>
Plant
Machinery
Leasehold Properties Equipment &
Freehold ------------------------- Motor
Properties Long Short Vehicles Total
------------ ------------ ------------ ------------ ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
Accumulated Depreciation
At 1 April 1998......... 3,048 318 127 29,795 33,288
Subsidiary acquired..... 182 -- 74 1,698 1,954
Charge for the year..... 189 27 5 6,262 6,483
Disposals............... (262) (57) (27) (3,181) (3,527)
Foreign Exchange
translation
difference............. (16) -- 1 (13) (28)
----- ---- --- ------- -------
At 31 March 1999........ 3,141 288 180 34,561 38,170
===== ==== === ======= =======
Accumulated Depreciation
At 1 April 1999......... 3,141 288 180 34,561 38,170
Reclassification........ 107 (46) (48) (13) --
Charge for the period... 159 19 1 5,485 5,664
Disposals............... (204) (146) (40) (11,430) (11,820)
Foreign Exchange
translation
difference............. (34) -- (3) (325) (362)
----- ---- --- ------- -------
At 31 March 2000........ 3,169 115 90 28,278 31,652
===== ==== === ======= =======
Net Book Value
31 March 2000........... 3,465 366 22 12,187 16,040
===== ==== === ======= =======
31 March 1999........... 3,990 737 70 14,153 18,950
===== ==== === ======= =======
31 March 1998........... 4,632 809 84 13,946 19,471
===== ==== === ======= =======
</TABLE>
Included in freehold properties above is land at a cost of (Pounds)1,132,000
(31 March 1999--(Pounds)1,361,000, 31 March 1998--(Pounds)1,455,000) which is
not subject to depreciation.
F-90
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
8. INVESTMENTS
<TABLE>
<CAPTION>
Associated
undertakings
Share of Other
Net Assets Investments Total
------------ ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Cost and net book value
At 1 April 1997.......................... 3,710 6 3,716
Additions................................ -- -- --
Disposals................................ -- -- --
Profits retained for the year............ 439 -- 439
Foreign Exchange translation
differences............................. (414) -- (414)
------ --- ------
At 31 March 1998......................... 3,735 6 3,741
====== === ======
At 1 April 1998.......................... 3,735 6 3,741
Other investments held by acquired
subsidiary.............................. -- 145 145
Additions................................ -- -- --
Disposals................................ (1,947) (6) (1,953)
Profits retained for the year............ 174 -- 174
Foreign Exchange translation
differences............................. (138) 3 (135)
------ --- ------
At 31 March 1999......................... 1,824 148 1,972
====== === ======
At 1 April 1999.......................... 1,824 148 1,972
Additions................................ -- -- --
Disposals................................ (16) -- (16)
Profits retained for the period.......... 112 -- 112
Foreign Exchange translation
differences............................. (82) (3) (85)
------ --- ------
At 31 March 2000......................... 1,838 145 1,983
====== === ======
</TABLE>
F-91
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
9. ADDITIONAL INFORMATION ON COMBINING COMPANIES AND ASSOCIATED UNDERTAKINGS
The principal companies included in the combined financial statements are
set out below.
<TABLE>
<CAPTION>
Country of
incorporation Guarantor/
Name and operation Activity Shareholding Non-Guarantor
---- ------------------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Avery Berkel Holdings
Limited (formerly GEC
Avery International
Limited)............... Great Britain Holding Co. Guarantor
Maatschappij van
Berkel's Patent B.V.... Netherlands Holding Co. Non-Guarantor
Subsidiaries of Avery
Berkel Holdings Limited
(formerly GEC Avery
International Limited)
Avery Berkel Limited
(formerly GEC Avery
Limited)............... Great Britain Trading 100% Guarantor
Avery Berkel Properties
Limited (formerly GEC
Avery Properties
Limited)............... Great Britain Non Trading 100% Guarantor
GEC Avery Australia
(Pty) Limited.......... Australia Non Trading 100% Non-Guarantor
W & T Avery (Malawi)
Limited................ Malawi Trading 100% Non-Guarantor
Avery Malaysia Sdn Bhd.. Malaysia Trading 100% Non-Guarantor
GEC Avery Zimbabwe (Pvt)
Limited................ South Africa Trading 100% Non-Guarantor
GEC Avery (Private)
Limited................ Pakistan Trading 100% Non-Guarantor
Avery Zambia Limited.... Zambia Non Trading 100% Non-Guarantor
S.A. Scale Co (Pty)
Limited................ South Africa Trading 100% Non-Guarantor
Berkel (Africa) (Pty)
Limited................ South Africa Non Trading 100% Non-Guarantor
Avery Berkel S.A........ Spain Trading 100% Non-Guarantor
Berkel (Ireland)
Limited................ Ireland Trading 100% Guarantor
Avery India Limited..... India Trading 51% Non-Guarantor
Subsidiaries of
Maatschappij van
Berkel's
Patent B.V.
Berkel Sud Americana SAC
EI..................... Argentina Non Trading 100% Non-Guarantor
Berkel Deutschland
GmbH................... Germany Trading 100% Non-Guarantor
Berkel Operations GmbH.. Germany Non Trading 100% Non-Guarantor
Berkel S.A.............. France Trading 100% Non-Guarantor
Brevetti van Berkel
S.p.A.................. Italy Trading 100% Non-Guarantor
B.V. Handel-en Industrie
Maatschappij
Handustrie............. Netherlands Non Trading 100% Non-Guarantor
Avery Berkel Central
European Warehouse
B.V.................... Netherlands Non Trading 100% Non-Guarantor
Berkel International
B.V.................... Netherlands Non Trading 100% Non-Guarantor
Berkel Services B.V..... Netherlands Trading 100% Non-Guarantor
Z.A.M tot exploitatie
van het Patent van
Berkel................. Netherlands Non Trading 100% Non-Guarantor
Schember Berkel
Ges.m.b.H.............. Austria Trading 100% Non-Guarantor
Berkel USA Inc.......... United States of America Non Trading 100% Guarantor
Berkel Inc.............. United States of America Trading 100% Guarantor
Berkel Products Co.
Limited................ Canada Trading 100% Guarantor
Berkel AB............... Sweden Trading 100% Non-Guarantor
</TABLE>
The trading activity of those companies detailed above and the associated
undertakings set out below, comprises the design, manufacture, sale and service
of weighing machines, slicers and other food processing equipment and systems.
F-92
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Details of Associated undertakings are set out below
<TABLE>
<CAPTION>
Country of Total Portion
incorporation issued held
Name and operation Class of shares shares %
---- ------------- ------------------------------- ------- -------
<S> <C> <C> <C> <C>
Associates of
Maatschappij van
Berkel's Patent B.V.
Constructora de Basculas A ordinary shares of MxN peso
S.A. de C.V............ Mexico each 306,000 --
B Ordinary shares of MxN peso
each 294,000 100%
Berkel Scanvekt AS...... Ordinary shares of Nok 1,000
Norway each 3,000 49%
Berkel Obrecht A.G...... Switzerland Ordinary shares of CHF 1,000
each 800 48%
8% non cumulative Preference
shares CHF 100,000 each 6 100%
Associates of Avery
Berkel Holdings Limited
(formerly GEC Avery
International Limited)
Avery Kenya Limited..... A Ordinary shares of Kenyan
Kenya Schilling 20 367,200 --
B Ordinary shares of Kenyan
Schilling 20 352,800 49%
</TABLE>
10. STOCKS
<TABLE>
<CAPTION>
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Raw Materials.......................... 4,487 4,462 2,970
Work-in-progress....................... 3,878 5,928 4,757
Finished Goods and Service Parts....... 23,328 18,490 17,495
------ ------ ------
31,693 28,880 25,222
====== ====== ======
11. DEBTORS
<CAPTION>
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Amounts falling due within one year:
Trade Debtors........................ 36,243 36,046 30,583
Amounts owed by Associated
Undertakings........................ 1,356 571 1,211
Dividends receivable from
Associates.......................... 18 32 218
Other Debtors........................ 2,798 2,867 1,747
Prepayments and Accrued Income....... 907 837 715
Corporation Tax recoverable.......... -- 6,999 6,115
------ ------ ------
41,322 47,352 40,589
Amounts falling due after more that one
year:
Other Debtors........................ 156 170 608
------ ------ ------
41,478 47,522 41,197
====== ====== ======
</TABLE>
F-93
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
12. CREDITORS:
<TABLE>
<CAPTION>
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Amounts falling due within one year
Bank loans and overdrafts (unsecured).. 8,500 730 570
Trade Creditors........................ 17,544 19,799 15,138
Bills of Exchange payable.............. 71 -- --
Loans owed to Marconi Group Companies.. 44,764 31,348 33,920
Other amounts owed to Marconi Group
Companies............................. 842 1,699 1,743
Amounts owed to Associated
Undertakings.......................... -- 3 47
Corporation Tax........................ 658 473 142
Other Taxation and Social Security..... 2,423 3,015 2,864
Other Creditors........................ 3,690 6,330 3,424
Accruals and Deferred Income........... 13,884 11,857 13,570
------ ------ ------
92,376 75,254 71,418
====== ====== ======
<CAPTION>
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Amounts falling due after one year
Accruals and Deferred Income........... 153 32 --
Other creditors........................ -- 55 110
------ ------ ------
153 87 110
====== ====== ======
</TABLE>
13. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
Deferred Overseas Other
Taxation Restructuring Pension Provision Total
------------ ------------- ----------- ----------- -----------
(Pounds)'000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
At 1 April 1997......... (578) 6,112 5,750 1,859 13,143
Utilised during the
year................... -- (5,603) (745) (307) (6,655)
Charge for the year..... 316 1,689 537 44 2,586
Under provision in prior
years.................. 143 -- -- -- 143
Exchange differences.... 19 (725) (591) (108) (1,405)
---- ------ ----- ----- ------
At 31 March 1998........ (100) 1,473 4,951 1,488 7,812
Utilised during the
year................... -- (813) (477) (321) (1,611)
Charge for the year..... (11) 7 779 199 974
Over provision in prior
years.................. (19) -- -- -- (19)
Exchange differences.... (18) 82 243 31 338
---- ------ ----- ----- ------
At 31 March 1999........ (148) 749 5,496 1,397 7,494
Utilised during the
period................. -- (584) (666) (510) (1,760)
Charge for the period... 42 195 817 319 1,373
Under provision in prior
years.................. 60 -- -- -- 60
Exchange differences.... 1 (38) (331) (25) (393)
---- ------ ----- ----- ------
At 31 March 2000........ (45) 322 5,316 1,181 6,774
==== ====== ===== ===== ======
</TABLE>
F-94
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Re-structuring
The provision for re-structuring costs stands at (Pounds)322,000 at the
period end. This represents the costs of the ongoing reorganisation of certain
of the Group's operations. It is expected that this expenditure will all be
incurred during the year ended 31 March 2001.
Overseas pensions
These are discussed in detail in note 19.
Other provisions
Other provisions largely comprise provision for product warranties which
have been recognised for expected claims against product guarantees on products
sold during the last financial year. It is expected that most of this
expenditure will be incurred in the next financial year, and all will be
incurred within two years of the balance sheet date. The provision has not been
discounted since the effect of discounting is not material.
Deferred taxation
The amounts of provided and unprovided deferred taxation assets are:
<TABLE>
<CAPTION>
Provided Unprovided
31 March 31 March 31 March 31 March 31 March 31 March
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
Capital Allowance in
excess of
Depreciation........... 40 (17) 21 (452) (525) (372)
Short-term timing
differences............ (85) (131) (121) -- -- --
--- ---- ---- ---- ---- ----
(45) (148) (100) (452) (525) (372)
=== ==== ==== ==== ==== ====
</TABLE>
No provision has been made for taxation that would arise in the event of
overseas subsidiaries distributing the balance of their reserves as these
amounts are retained for investment in the business.
14. CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Allotted and fully paid share capital
Avery Berkel Holdings Limited (formerly
GEC Avery International Limited)...... 9,225 9,225 9,225
36,900,500 ordinary shares of 25p each
Maatschappij van Berkel's Patent B.V.
65,244,080 ordinary shares of NLG 0.08
each (NLG 5,219,526).................. 1,421 1,584 1,495
200 Priority shares of NLG 0.08 each
(NLG 16).............................. -- -- --
------ ------ ------
10,646 10,809 10,720
====== ====== ======
</TABLE>
F-95
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
15. PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
(Pounds)000
<S> <C>
At 1 April 1997................................................ 3,343
Retained profit for the year................................... 4,472
Goodwill written off........................................... (437)
Foreign exchange translation difference on issued share
capital....................................................... 200
Foreign exchange translation differences on net investment..... 3,320
Carve out adjustments.......................................... (4,099)
-------
At 31 March 1998............................................... 6,799
=======
At 1 April 1998................................................ 6,799
Retained profit for the year................................... 5,035
Foreign exchange translation difference on issued share
capital....................................................... (89)
Foreign exchange translation differences on net investment..... (3,455)
Carve out adjustments.......................................... 412
-------
At 31 March 1999............................................... 8,702
=======
At 1 April 1999................................................ 8,702
Retained loss for the period................................... (33,264)
Foreign exchange translation difference on issued share
capital....................................................... 163
Foreign exchange translation differences on net investment..... 4,394
Carve out adjustments.......................................... 6,380
-------
At 31 March 2000............................................... (13,625)
=======
</TABLE>
The cumulative total of goodwill written off against reserves at March 2000,
March 1999 and March 1998 is (Pounds)437,000.
16. RECONCILIATION OF MOVEMENTS IN SHAREHOLDER (DEFICIT)/FUNDS
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Profit after taxation for the financial
year ................................. 6,677 5,150 8,572
Minority interest...................... (71) (115) --
Dividends paid......................... (39,870) -- (4,100)
Carve out adjustments.................. 6,380 412 (4,099)
Goodwill written off................... -- -- (437)
Foreign exchange translation
differences........................... 4,394 (3,455) 3,320
------- ------ ------
Net (reduction in)/addition to
shareholders funds.................... (22,490) 1,992 3,256
Opening shareholders funds............. 19,511 17,519 14,263
------- ------ ------
Closing shareholders (deficit)/funds... (2,979) 19,511 17,519
======= ====== ======
</TABLE>
17. CAPITAL COMMITMENTS
Capital commitments at 31 March 2000 were (Pounds)335,000 (31 March 1999:
(Pounds)893,000 31 March 1998: (Pounds)411,000)
F-96
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
18. OPERATING LEASE COMMITMENTS
At 31 March 2000 the company has annual commitments under operating leases:
<TABLE>
<CAPTION>
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Land and Buildings
Leases which expire:
Within one year........................ 322 245 213
Within 2 to 5 years.................... 448 748 274
After 5 years.......................... 238 214 197
----- ----- ---
1,008 1,207 684
===== ===== ===
Other
Leases which expire:
Within one year........................ 175 257 161
Within 2 to 5 years.................... 2,073 1,618 245
After 5 years.......................... -- -- --
----- ----- ---
2,248 1,875 406
===== ===== ===
</TABLE>
Several of the leases for land and buildings are subject to rent review over
various periods of time.
19. PENSIONS
The group operates a number of pension schemes throughout the world. The
major schemes in the UK, US, Germany, Austria, South Africa and Ireland are of
the defined benefit type.
The majority of Avery Berkel UK employees are part of the GEC 1972 Plan.
Pension plan assets are held in trustee-administered funds independent of the
Group's finances. The principal pension scheme, the G.E.C. 1972 ("the Plan')
covers nearly 86 per cent of Marconi plc employees who are members of pension
plans in the UK and 49 per cent of worldwide scheme members. Benefits are
primarily of the "defined benefit' type.
The Plan was last valued by the Scheme Actuary as at 5 April 1997, using the
"projected unit' method. The main financial assumptions for the future were
that the return on investments would be 8.25 per cent per annum, that equity
dividends would increase in the long-term by 4.5 per cent per annum, that
increase in pensionable earnings due to inflation would average 6.0 per cent
per annum, that present and future pensions would increase at the rate of 3.75
per cent per annum and state pensions by 4.0 per cent per annum.
The accumulated assets of the Plan were sufficient to finance 101 per cent
of the past service liabilities including provision for future inflation. The
market value of the assets was (Pounds)4,715 million at the valuation date. The
actuary advised that, taking account of members' contributions of 3 per cent
and the residual surplus, the Group's contribution rate could be reduced from
the long-term annual rate of 7.1 per cent to 6.6 per cent of pensionable
earnings with effect from 6 April 1998.
The pension costs charge of the Avery Berkel Group in respect of UK
employees who are members of the Plan consists of employers' contributions
payable which are similar across the Group as a whole as a percentage of
pensionable earnings. Based on the advice of the Scheme Actuary, the Avery
Berkel contribution to the plan in the year to 31 March 2000 amounted to
(Pounds)1,300,000 (year to 31 March 1999 (Pounds)1,300,000, year to 31 March
1998 (Pounds)1,200,000) calculated at 6.6 per cent of members' pensionable pay
(1999 and 1998--7.1%).
F-97
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Total pension costs for other pension plans overseas charged to the profit
and loss account in the year to 31 March 2000 amounted to (Pounds)986,000 (year
to 31 March 1999 (Pounds)704,000, year to 31 March 1998 (Pounds)456,000). The
charge has been determined in accordance with local best practice and
regulations.
20. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Operating profit........................ 5,459 5,378 8,300
Depreciation charges.................... 5,668 6,485 6,016
(Increase)/Decrease in stocks........... (3,296) (1,838) 1,399
(Increase)/Decrease in debtors.......... (2,280) (1,203) (2,163)
Increase/(Decrease) in creditors........ (2,815) 1,954 2,356
Increase/(Decrease) in provisions....... (423) (609) (4,679)
------ ------ ------
Net cash inflow operating activities.... 2,313 10,167 11,229
====== ====== ======
</TABLE>
21. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Returns on investments and servicing
of finance
Interest and other investment income
received............................. 2,030 428 663
Interest paid......................... (167) (171) (212)
Dividend paid to minority interests... (149) (258) --
------ ------ ------
1,714 (1) 451
====== ====== ======
Taxation
UK Corporation tax received/(paid)
(including
advance corporation tax)............. 5,902 (2,521) (2,506)
Overseas Tax paid..................... (579) (1,169) (913)
------ ------ ------
5,323 (3,690) (3,419)
====== ====== ======
Capital expenditure and finance
investment
Payments to acquire tangible fixed
assets............................... (4,217) (6,999) (6,075)
Receipts from sales of fixed assets... 2,416 3,658 3,363
------ ------ ------
(1,801) (3,341) (2,712)
====== ====== ======
</TABLE>
F-98
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
22. ANALYSIS OF NET DEBT
<TABLE>
<CAPTION>
Acqusitions
and
31 March disposals Carve out Exchange 31 March
1997 Cash flow Excl. cash adjustments amounts 1998
----------- ----------- ----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
Cash at bank and in
hand................... 4,116 6,334 -- (4,099) 34 6,385
Overdraft............... (773) 106 -- -- 97 (570)
------- ------- ----- ------ ------ -------
Total Cash............ 3,343 6,440 -- (4,099) 131 5,815
------- ------- ----- ------ ------ -------
Liquid resources........ 1,269 (108) -- -- (318) 843
------- ------- ----- ------ ------ -------
Marconi Loans........... (33,474) (5,216) -- -- 4,770 (33,920)
------- ------- ----- ------ ------ -------
Total debt due within
1 year............... (33,474) (5,216) -- -- 4,770 (33,920)
------- ------- ----- ------ ------ -------
Total................. (28,862) 1,116 -- (4,099) 4,583 (27,262)
======= ======= ===== ====== ====== =======
<CAPTION>
Acqusitions
and
31 March disposals Carve out Exchange 31 March
1998 Cash flow Excl. cash adjustments amounts 1999
----------- ----------- ----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
Cash at bank and in
hand................... 6,385 (3,661) -- 412 (1) 3,135
Overdraft............... (570) (250) -- -- 90 (730)
------- ------- ----- ------ ------ -------
Total Cash............ 5,815 (3,911) -- 412 89 2,405
------- ------- ----- ------ ------ -------
Liquid resources........ 843 2,876 1,276 -- 4 4,999
------- ------- ----- ------ ------ -------
Marconi Loans........... (33,920) 4,973 -- -- (2,401) (31,348)
------- ------- ----- ------ ------ -------
Total debt due within
1 year............... (33,920) 4,973 -- -- (2,401) (31,348)
------- ------- ----- ------ ------ -------
Total................. (27,262) 3,938 1,276 412 (2,308) (23,944)
======= ======= ===== ====== ====== =======
<CAPTION>
Acqusitions
and
31 March disposals Carve out Exchange 31 March
1999 Cash flow Excl. cash adjustments amounts 2000
----------- ----------- ----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
Cash at bank and in
hand................... 3,135 (3,001) -- 6,380 (142) 6,372
Overdraft............... (730) (7,785) -- -- 15 (8,500)
------- ------- ----- ------ ------ -------
Total Cash............ 2,405 (10,786) -- 6,380 (127) (2,128)
------- ------- ----- ------ ------ -------
Liquid resources........ 4,999 (2,986) -- -- (217) 1,796
------- ------- ----- ------ ------ -------
Marconi Loans........... (31,348) (18,390) -- -- 4,974 (44,764)
------- ------- ----- ------ ------ -------
Total debt due within
1 year............... (31,348) (18,390) -- -- 4,974 (44,764)
------- ------- ----- ------ ------ -------
Total................. (23,944) (32,162) -- 6,380 4,630 (45,096)
======= ======= ===== ====== ====== =======
</TABLE>
F-99
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
23. ANALYSIS OF CASH FLOWS FROM ACQUISITIONS AND DISPOSAL
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Investment in subsidiary companies..... -- (1,276) --
Investment in Weighbridge Hire......... -- -- (665)
Net cash acquired with subsidiaries.... -- 1,718 --
Disposal of interest in associates..... 16 -- --
------ ------ ----
Net cash inflow/(outflow) from
acquisitions and disposals............ 16 442 (665)
====== ====== ====
</TABLE>
24. CONTINGENCIES
The group is subject to certain lawsuits, investigations and claims arising
out of the conduct of its business, including those related to product
liability. In the opinion of management, the resolution of these matters will
not materially impact the group's financial position, liquidity, or results of
operations.
25. ULTIMATE PARENT UNDERTAKING
The group's ultimate parent undertaking and controlling party is Marconi
plc. On 8 March 2000, Marconi plc signed a conditional share sale and purchase
agreement to dispose of its shareholding in the Avery Berkel Group to Weigh-
Tronix UK Limited, a company incorporated and registered in England. On 13 June
2000 this sale was concluded.
26. RELATED PARTY TRANSACTIONS
The group sells product to a number of Marconi plc subsidiaries and also
distributes a number of products purchased from Marconi plc subsidiaries. Such
transactions are in the ordinary course of business at negotiated prices
comparable to these transactions with other customers and suppliers. In
addition, in the UK, the group leases motor vehicles from a Marconi plc
subsidiary and pays rentals on properties leased from a Marconi plc subsidiary.
The amount of these transactions are as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Sales to Marconi Group................. 2,857 2,338 2,597
----- ----- -----
Purchases from Marconi Group........... 3,000 3,519 3,851
----- ----- -----
Motor vehicles leased from Marconi
Group................................. 1,450 479 --
----- ----- -----
Property rentals paid to Marconi
Group................................. 76 71 33
----- ----- -----
Management fees paid to Marconi Group.. -- -- 750
===== ===== =====
</TABLE>
Sales to the associated undertakings of the Avery Berkel Group, as set out
in note 9 were as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Sales to associated companies............ 3,262 3,085 3,622
===== ===== =====
</TABLE>
F-100
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
27. POST BALANCE SHEET EVENTS
In April 2000 Maatschappij van Berkel's Patent B.V. increased its authorised
and issued share capital as follows:
<TABLE>
<CAPTION>
Existing
No. Revised No.
Authorised share capital ----------- Authorised share capital -----------
<S> <C> <C> <C>
Ordinary share of NLG
0.08 each.............. 105,000,000 Ordinary shares of Euro 100 each 1,000,000
Priority shares of NLG
0.08 each.............. 200
<CAPTION>
Allotted and fully paid Allotted and fully paid share
share capital capital
<S> <C> <C> <C>
Ordinary shares of NLG
0.08 each.............. 36,900,500 Ordinary shares of Euro 100 each 790,732
Priority shares of NLG
0.08 each.............. 200
</TABLE>
Marconi plc increased its shareholding from 23,686 ordinary shares of Euro
100 each to 790,732 shares of Euro 100 each for the following consideration:
<TABLE>
<CAPTION>
NLG (Pounds)000
----------- -----------
<S> <C> <C>
Conversion of existing Loan and interest............. 167,345,323 45,548
Cash................................................. 1,689,677 460
----------- ------
169,035,000 46,008
=========== ======
</TABLE>
If this recapitalisation had been undertaken prior to 31 March 2000, the pro
forma balance sheet restated would be as follows:
<TABLE>
<CAPTION>
31 March
Proforma 2000
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
Fixed Assets
Intangible Assets....................................... 77 77
Tangible Assets......................................... 16,040 16,040
Investments............................................. 1,983 1,983
------- -------
18,100 18,100
Current Assets
Stocks.................................................. 31,693 31,693
Debtors................................................. 41,478 41,478
Cash at Bank and in hand................................ 8,628 8,168
------- -------
81,799 81,339
Creditors: Amounts falling due within one year.......... (46,828) (92,376)
------- -------
Net Current Assets/(liabilities)........................ 34,971 (11,037)
------- -------
Total Assets less Current Liabilities................... 53,071 7,063
Creditors: Amounts falling due after one year .......... (153) (153)
Provisions for Liabilities and Charges.................. (6,774) (6,774)
------- -------
46,144 136
Minority Interest ...................................... (3,115) (3,115)
------- -------
Total Net Assets/(liabilities).......................... 43,029 (2,979)
======= =======
Capital and Reserves
Called up Share Capital................................. 56,654 10,646
Profit and Loss Account ................................ (13,625) (13,625)
------- -------
Equity Shareholder Funds/(deficit)...................... 43,029 (2,979)
======= =======
</TABLE>
F-101
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
28. SUMMARY OF DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN
THE UNITED KINGDOM AND THE UNITED STATES
The combined financial statements have been prepared in accordance with
accounting principles generally accepted in the United Kingdom ("UK GAAP"),
which differ in certain material respects from generally accepted accounting
principles in the United States of America ("US GAAP"). Such differences
involve methods for measuring the amounts shown in the financial statements, as
well as additional disclosures required by US GAAP.
The following is a summary of the material adjustments to combined profit on
ordinary activities after taxation and combined net equity that would have been
required in applying the significant differences between UK and US GAAP.
RECONCILIATION OF COMBINED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Combined profit/(loss) on ordinary
activities attributable to shareholders as
reported under UK GAAP.................... 6,606 5,035 8,572
US GAAP adjustments:
(a) Pensions and other employee
benefits................................ 501 517 57
(b) Deferred income taxes................ (39) (146) (538)
(c) Restructuring........................ -- -- (363)
(d) Vacation accrual..................... 204 (102) 91
(e) Push down expenses................... (20) (20) (20)
(f) Goodwill............................. (44) (44) --
(g) Associated undertakings.............. (7) 24 (45)
Net tax effect of US GAAP adjustments...... (184) (122) 4
----- ----- -----
Net US GAAP adjustments.................... 411 107 (814)
----- ----- -----
Combined net income under US GAAP.......... 7,017 5,142 7,758
===== ===== =====
</TABLE>
RECONCILIATION OF COMBINED EQUITY SHAREHOLDER FUNDS
<TABLE>
<CAPTION>
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Combined equity shareholder funds as
reported under UK GAAP................... (2,979) 19,511 17,519
US GAAP adjustments:
(a) Pensions and other employee
benefits............................... 3,155 3,078 2,595
(b) Deferred income taxes............... 7,274 7,313 7,459
(d) Vacation accrual.................... (748) (952) (850)
(e) Push down expenses.................. (60) (40) (20)
(f) Goodwill............................ 349 393 437
(g) Associated undertakings............. 427 434 410
Net tax effect of US GAAP adjustment...... (704) (647) (535)
------ ------ ------
Net US GAAP adjustments................... 9,693 9,579 9,496
------ ------ ------
Combined equity shareholder funds in
accordance with US GAAP.................. 6,714 29,090 27,015
====== ====== ======
</TABLE>
F-102
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
A summary of principal differences and additional disclosures applicable are
set out below:
(a) PENSION, TERMINATION, POST-EMPLOYMENT, AND POST-RETIREMENT BENEFITS
Avery Berkel employees participate in certain retirement and other post-
employment and retirement benefits schemes. The benefit offered to a specific
employee varies based upon the location and past business decisions made by a
specific business unit, as well as local statutory requirements.
Pension plans
Nearly all employees are eligible for defined benefit pension benefits,
after minimum service requirements are met. Such benefits to an individual
employee are calculated using a formula which is specific to the applicable
pension scheme, based upon years of credited service and average earnings of
the employee. The Group funds its defined benefit pension obligations at a
level which meets or exceeds local legal requirements. Funded pension scheme
assets are primarily invested in equity and debt securities.
Actuarially determined data with respect to benefit obligations under SFAS
132 are as follows:
UK Pension Benefits
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Net periodic benefits
cost
Service cost............ 2,116 2,072 1,503
Interest cost........... 3,033 2,873 3,257
Expected return on
funded assets.......... (4,068) (3,896) (3,650)
Amortisation of
transition
obligations............ (90) (90) (90)
------ ------ ------
Net periodic benefits
cost/(return).......... 991 959 1,020
====== ====== ======
</TABLE>
Overseas Pension Benefits
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Net periodic benefits cost
Service cost........................... 112 111 128
Interest cost.......................... 589 560 567
Expected return on funded assets....... (315) (301) (277)
Recognized prior service costs......... 173 169 170
Amortization of transition
obligations........................... 59 56 58
Amortization of actuarial gains and
losses--net........................... 7 8 14
---- ---- ----
Net periodic benefits cost/(return).... 625 603 660
==== ==== ====
</TABLE>
F-103
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
UK Pension Benefits
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Net periodic benefits cost
Change in benefit obligation
Benefit obligation, beginning of period... 50,546 47,886 40,708
Service cost.............................. 2,131 2,075 1,496
Interest cost............................. 3,032 2,873 3,257
Plan participants' contributions.......... 600 600 600
Actuarial (gain)/loss..................... -- (2,888) 1,825
------ ------ ------
Benefit obligation, end of period......... 56,309 50,546 47,886
====== ====== ======
Change in scheme assets
Fair value of assets, beginning of
period................................... 53,256 50,988 42,052
Actual return on plan assets.............. 1,153 368 7,136
Group funding of benefits................. 1,300 1,300 1,200
Participant funding....................... 600 600 600
------ ------ ------
Fair value of assets, end of period....... 56,309 53,256 50,988
====== ====== ======
Funded status--(liability)/asset.......... -- 2,710 3,102
Unrecognized net actuarial loss/(gain).... 1,904 (1,025) (1,668)
Unrecognized prior service cost........... -- -- --
Unrecognised transition
obligation/(asset)....................... (360) (450) (540)
------ ------ ------
Net assets/(liability) recognised......... 1,544 1,235 894
====== ====== ======
Amounts recognised in the statement of
financial position consists of:
Prepaid benefit cost.................... 1,544 1,235 894
====== ====== ======
</TABLE>
F-104
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Overseas Pension Benefits
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Net periodic benefits cost
Change in benefit obligation
Benefit obligation, beginning of period... 9,791 9,085 9,251
Service cost.............................. 112 111 128
Interest cost............................. 589 559 567
Plan participants' contributions.......... -- -- 106
Actuarial (gain)/loss..................... 52 293 239
Foreign exchange.......................... (295) 434 (613)
Acquired obligations...................... -- -- 106
Benefits paid to participants............. (744) (691) (699)
------ ------ ------
Benefit obligation, end of period......... 9,505 9,791 9,085
====== ====== ======
Change in scheme assets
Fair value of assets, beginning of
period................................... 3,440 3,246 2,943
Actual return on plan assets.............. 313 300 400
Foreign exchange.......................... 42 123 (63)
Acquired assets........................... -- -- --
Group funding of benefits................. 49 33 278
Participant funding....................... -- -- --
Benefits paid to participants............. (297) (262) (312)
------ ------ ------
Fair value of assets, end of period....... 3,547 3,440 3,246
====== ====== ======
Funded status--(liability)/asset.......... (5,958) (6,351) (5,839)
Unrecognized net actuarial loss........... 541 739 484
Unrecognized prior service cost........... 1,374 1,531 1,643
Unrecognised transition
obligation/(asset)....................... 338 428 462
------ ------ ------
Net asset/(liability) recognised.......... (3,705) (3,653) (3,250)
====== ====== ======
Amounts recognised in the statement of
financial position consists of:
Accrued benefit liability............... (5,940) (6,426) (5,803)
Intangible asset........................ 1,677 1,946 2,053
Accumulated other comprehensive income.. 558 827 500
------ ------ ------
Net asset/(liability) recognised.......... (3,705) (3,653) (3,250)
====== ====== ======
</TABLE>
F-105
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
As required under SFAS 132, the prepaid pension asset/(accrued benefit
liability), reduction in equity and intangible assets are shown below for
those plans whose accrued benefit obligation (ABO) exceeds assets:
<TABLE>
<CAPTION>
(Accrued
liability)/
Prepaid Equity Intangible
asset ABO Assets reduction asset
------------ ------------ ------------ ------------ ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
Value at 31 March 2000
Berkel Inc Employee's
Pension Plan........... 292 4,052 3,547 552 245
Berkel Inc Deferred
Contribution Plan...... (305) 1,507 -- 5 1,197
Berkel Deutschland GmBH
Plan................... (2,707) 2,941 -- -- 234
Schember Berkel Ges mbH
Plan................... (173) 137 -- -- --
Value at 31 March 1999
Berkel Inc Employee's
Pension Plan........... 341 3,977 3,441 561 316
Berkel Inc Deferred
Contribution Plan...... (209) 1,559 -- 36 1,314
Berkel Deutschland GmBH
Plan................... (2,778) 3,322 -- 229 315
Schember Berkel Ges mbH
Plan................... (175) 152 -- -- --
Value at 31 March 1998
Berkel Inc Employee's
Pension Plan........... 385 3,694 3,246 455 378
Berkel Inc Deferred
Contribution Plan...... (95) 1,534 -- 45 1,394
Berkel Deutschland GmBH
Plan................... (2,618) 2,899 -- -- 281
Schember Berkel Ges mbH
Plan................... (148) 135 -- -- --
</TABLE>
The actuarial assumptions used to develop the periodic benefit cost and
funded status were as follows:
UK Pension Benefits
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Weighted average assumption
Benefit obligation discount rate......... 6.0% 6.0% 6.0%
Expected return on plan assets........... 7.5% 7.5% 7.5%
Rate of compensation increase............ 5.0% 5.0% 5.0%
Rate of pension increases................ 3.0% 3.0% 3.0%
</TABLE>
Overseas Pension Benefits
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Weighted average assumption
Benefit obligation discount rate......... 7.0% 7.0% 7.0%
Expected return on plan assets........... 9.5% 9.5% 9.5%
Rate of compensation increase............ 4.0% 4.0% 4.0%
Rate of pension increases................ 1.5% 1.5% 1.5%
</TABLE>
F-106
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
(b) DEFERRED TAXATION
Under UK GAAP, deferred tax liabilities are provided only to the extent that
a liability is expected to crystallise in the foreseeable future. In addition,
deferred tax assets are recognised only when they are expected to be recovered
in the foreseeable future.
Under US GAAP, deferred tax assets and liabilities are recognised for
differences between the financial and tax basis of assets and liabilities and
for tax loss carry forwards at the statutory rate at each reporting date. A
valuation allowance is established when it is more likely than not that some
portion or all of the deferred tax assets will not be realised.
The income tax provisions were calculated based upon the following
components of income before taxes:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom.......................... 7,809 5,247 9,852
Rest of Europe.......................... (347) (236) (595)
The Americas............................ 217 830 243
Asia Pacific............................ 634 981 162
Africa.................................. 129 772 1,336
Profit from associates.................. 465 586 1,039
----- ----- ------
8,907 8,180 12,037
===== ===== ======
</TABLE>
The components of the provision for income taxes under UK GAAP are
summarized as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Tax Provision (Benefit) include:
Current Taxes
United Kingdom......................... 1,235 1,760 2,650
Rest of Europe......................... 132 392 162
The Americas........................... 28 6 32
Asia Pacific........................... 436 422 (660)
Africa................................. 78 261 548
Associated undertakings................ 219 219 274
----- ----- -----
Total Current Taxes.................. 2,128 3,060 3,006
Deferred Taxes
United Kingdom......................... 59 (49) 232
Rest of Europe......................... -- 8 31
The Americas........................... -- -- --
Asia Pacific........................... 23 26 196
Africa................................. 20 (15) --
----- ----- -----
Total Deferred Taxes................. 102 (30) 459
----- ----- -----
Total Tax............................ 2,230 3,030 3,465
===== ===== =====
</TABLE>
F-107
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Classification of Avery Berkel's deferred tax liabilities and assets under
US GAAP is as follows:
<TABLE>
<CAPTION>
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Deferred tax liabilities:
Accelerated tax depreciation.......... (38) (17) (32)
Provisions............................ -- -- (50)
Pensions.............................. (946) (954) (804)
------- ------- -------
Total deferred tax liabilities...... (984) (971) (886)
Deferred tax assets:
Accelerated tax depreciation.......... 503 525 372
Provisions............................ 5,031 4,981 4,407
Losses................................ 32,750 37,580 38,193
Pensions.............................. -- -- --
Other................................. 44 44 34
------- ------- -------
Gross deferred taxation under US GAAP... 37,344 42,159 42,120
------- ------- -------
Less: valuation allowances.............. (30,747) (35,357) (35,102)
------- ------- -------
Net deferred taxation under US GAAP..... 6,597 6,802 7,018
======= ======= =======
</TABLE>
The following table relates the applicable UK statutory tax rate to the
effective US GAAP tax rate of Avery Berkel:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- -----------
<S> <C> <C> <C>
UK statutory corporation tax rate...... 30 % 31 % 31 %
Income tax provision at UK statutory
corporate tax rate.................... 2,862 2,652 3,645
Timing differences not recognised...... 306 330 595
Permanent differences.................. (476) (168) 325
Differences in overseas tax rates...... 176 149 (531)
----- ----- -----
2,868 2,963 4,034
Adjustment to prior years.............. (415) 335 (35)
----- ----- -----
2,453 3,298 3,999
===== ===== =====
Effective tax rate before adjustment to
prior years........................... 30.06 % 34.63 % 34.31 %
Effective tax rate..................... 25.71 % 38.55 % 34.01 %
</TABLE>
F-108
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Total tax expense is as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
UK GAAP:
Current tax expense.................. 2,128 3,060 3,006
Deferred tax expense................. 102 (30) 459
----- ----- -----
UK GAAP tax expense.................... 2,230 3,030 3,465
US GAAP:
Current tax expense.................. 2,122 3,054 3,000
Deferred tax expense................. 331 244 999
----- ----- -----
US GAAP tax expense.................... 2,453 3,298 3,999
----- ----- -----
Difference between UK and US GAAP tax
expense............................... (223) (268) (534)
===== ===== =====
</TABLE>
(c) RESTRUCTURING
With the introduction of FRS 12, which is effective for Avery Berkel in the
years ended 31 March 2000 and 31 March 1999, UK GAAP requires restructuring
provisions to be made only when an entity has a restructuring plan and has
raised a valid expectation in those affected that it will carry out the
restructuring by starting to implement that plan or announcing its main
features to those affected by it. This is consistent with US GAAP.
However, prior to FRS 12 a restructuring provision could be made in
accordance with UK GAAP without raising a valid expectation in those affected
by the restructuring plan. This is not consistent with US GAAP. Accordingly,
certain restructuring provisions brought forward at 1 April, 1997 and fully
utilised by 31 March 1998 under UK GAAP should be created and fully utilised in
the year ended 31 March 1998 under US GAAP.
(d) VACATION ACCRUAL
US GAAP requires an employer to accrue a liability for vacation and similar
benefits that employees have earned but have not taken. No such accrual is
required under UK GAAP. A summary of the movements in the additional accrual
required under US GAAP is shown in the table below:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Additional vacation accrual at start
of period............................ 952 850 941
Increase/(decrease) in accrual........ (204) 102 (91)
---- --- ---
Additional vacation accrual at end of
period............................... 748 952 850
==== === ===
</TABLE>
F-109
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
(e) PUSH DOWN EXPENSES
The combined financial statements of Avery Berkel comprise a group of
companies that have never formerly been reported on as a separate entity and
therefore do not include certain allocations of expenses to or from other group
companies. Under US GAAP these "carve out" combined financial statements would
typically include a direct allocation of expenses to and from other group
companies. This allocation of expenses is not necessarily indicative of the
expenses that would have been incurred had Avery Berkel been a separate,
independent entity. Central management's estimate of the allocation of expenses
is (Pounds)20,000 per annum.
(f) GOODWILL
With the introduction of FRS 10, which is effective for Avery Berkel in the
years ended March 31, 2000 and March 31, 1999, UK GAAP now requires goodwill to
be capitalised and amortised periodically against income. This is consistent
with US GAAP. As permitted by FRS 10, all goodwill written off in prior periods
against reserves under Avery Berkel's former accounting policy remains
eliminated against those reserves and has not been reinstated to Avery Berkel's
balance sheet. This is not permitted under US GAAP, and accordingly an
adjustment is required under US GAAP to capitalise and amortise periodically
through the income statement all goodwill eliminated against shareholders'
funds. For the purposes of this reconciliation, a useful life of 10 years has
been adopted for goodwill arising on the acquisition of Weighbridge Hire.
(g) ASSOCIATED UNDERTAKINGS
For the purposes of the reconciliation to US GAAP the earnings of associated
companies accounted for arising the equity method have been determined using
valuation principles prescribed by US GAAP.
(h) OTHER DISCLOSURES REQUIRED BY US GAAP
The consolidated cash flow statement prepared under UK GAAP differs in
certain presentational respects from the format required under Statement of
Financial Accounting Standards No. 95 "Statement of Cash Flows" ("SFAS 95").
Under UK GAAP, a reconciliation of profit from operations to cash flows from
operating activities is presented in a note, and cash paid for interest and
taxation on profit are presented separately from cash flows from operating
activities. Under SFAS 95, cash flows from operating activities are based on
net profit, include interest and taxation on profit, and are presented on the
face of the statement.
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Cash flows from operating activities... 9,350 6,476 8,261
Cash flows used in investing
activities............................ (1,658) (2,980) (2,380)
Net cash used in financing activities.. (13,694) (3,095) 248
Effect of exchange rate changes on
cash.................................. (344) 93 (187)
Effect of carve out adjustments........ 6,380 412 (4,099)
------- ------ ------
Net change............................. 34 906 1,843
Cash at bank and in hand, beginning of
period................................ 8,134 7,228 5,385
------- ------ ------
Cash at bank and in hand, end of
period................................ 8,168 8,134 7,228
======= ====== ======
Cash paid during the period for:
Interest............................. 167 171 212
Income taxes (received)/paid......... (5,323) 3,690 3,419
------- ------ ------
(5,156) 3,861 3,631
======= ====== ======
</TABLE>
F-110
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Use of estimates
The combined financial statements of Avery Berkel have been prepared in
accordance with generally accepted accounting principles which require
management to make estimates and assumptions that affect the amounts reported
in the financial statements. Actual results could differ from those estimates.
Reportable segments
Management assess the overall performance of Avery Berkel based principally
upon differences in the geographic areas in which it operates. Accordingly,
Avery Berkel is deemed to have the following reportable segments based upon the
management approach described in SFAS 131; United Kingdom, other European
Countries, the Americas, Asia Pacific and Africa.
The tables below present UK GAAP information by US GAAP reportable segment.
Operating Profit
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom........................... 5,247 3,443 7,724
Other European Countries................. (511) (432) (999)
The Americas............................. 244 894 368
Asia Pacific............................. 527 792 91
Africa................................... (48) 681 1,116
Associated Companies..................... 471 564 990
----- ----- -----
5,930 5,942 9,290
===== ===== =====
</TABLE>
Revenue
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom........................... 83,362 77,436 79,585
Other European Countries................. 29,759 30,799 30,276
The Americas............................. 19,009 18,545 19,873
Asia Pacific............................. 14,749 10,228 7,862
Africa................................... 8,605 9,338 11,435
------- ------- -------
155,484 146,346 149,031
======= ======= =======
</TABLE>
F-111
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Interest revenue
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom........................... 1,667 -- 244
Other European Countries................. 202 196 275
The Americas............................. 50 60 35
Asia Pacific............................. 94 164 25
Africa................................... 17 2 84
----- --- ---
2,030 422 663
===== === ===
</TABLE>
Interest expense
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom........................... 17 -- --
Other European Countries................. 48 25 52
The Americas............................. 77 124 160
Asia Pacific............................. 2 -- --
Africa................................... 23 22 --
--- --- ---
167 171 212
=== === ===
</TABLE>
Depreciation and Amortisation
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom........................... 4,403 5,223 4,553
Other European Countries................. 393 426 460
The Americas............................. 185 178 197
Asia Pacific............................. 297 204 234
Africa................................... 390 454 572
------ ------- ------
5,668 6,485 6,016
====== ======= ======
Total assets
<CAPTION>
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
United Kingdom........................... 50,241 55,298 56,523
Other European Countries................. 21,174 21,785 21,284
The Americas............................. 9,054 10,499 9,171
Asia Pacific............................. 13,147 12,767 2,989
Africa................................... 5,823 5,190 6,892
------ ------- ------
99,439 105,539 96,859
====== ======= ======
</TABLE>
F-112
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
All revenues are generated from the supply and related servicing of weighing
and food equipment. Total revenue from the sale of products and service were as
follows:
Revenues
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Product.................................. 85,792 80,645 80,937
Service.................................. 69,692 65,701 68,094
------- ------- -------
155,484 146,346 149,031
======= ======= =======
Gross Profit
Product.................................. 19,653 20,535 21,692
Service.................................. 39,135 35,808 36,303
------- ------- -------
58,788 56,343 57,995
======= ======= =======
</TABLE>
Operating Lease Commitments
Avery Berkel leases certain facilities and equipment under operating leases.
Total rental expense was as set out below:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
31 March 31 March 31 March
2000 1999 1998
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Operating Lease Charges:
Land and buildings..................... 910 934 624
Other Items............................ 1,740 837 471
----- ----- -----
2,650 1,771 1,095
===== ===== =====
</TABLE>
Minimum future rental commitments under operating leases, by year and in the
aggregate, under non-cancellable leases with initial or remaining terms of one
year or more consisted of the following at 31 March 2000:
<TABLE>
<CAPTION>
(Pounds)000
<S> <C>
2001........................................................... 2,906
2002........................................................... 2,126
2003........................................................... 902
2004........................................................... 374
2005........................................................... 260
After 2005..................................................... 1,209
-----
Total........................................................ 7,777
=====
</TABLE>
F-113
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Stock based compensation plans
Avery Berkel does not operate any stock based compensation plans. The
following "carve out" disclosures relate to those employees of Avery Berkel who
participate in share options schemes of Marconi plc:
Avery Berkel has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for employee share options. All options are
granted with exercise prices equal to market value. Had compensation expense
for employees' share options been determined based upon the fair value at the
date of the grant, consistent with the methodology prescribed under SFAS No.
123 "Accounting for Stock-Based Compensation", the compensation expense would
have been (Pounds)104,000 for the year to 31 March 2000, (Pounds)80,000 for the
year ended 31 March 1999 and (Pounds)9,000 for the year ended 31 March 1998.
Avery Berkel's US GAAP net income would have been (Pounds)7,113,000 for the
year to 31 March 2000, (Pounds)5,062,000 for the year ended 31 March 1999 and
(Pounds)7,749,000 for the year ended 31 March 1998.
In accordance with SFAS 123 the fair values of options granted are estimated
using the Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
Year ended 31 Year ended 31 Year ended 31
March 2000 March 1999 March 1998
------------- ------------- -------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Risk-free interest rate......... 6.10% 6.10% 6.10%
Expected life (years)........... 5.5 5.5 3.5
Assumed volatility.............. 42.61% 42.61% 33.10%
Expected dividends.............. (Pounds)0.128 (Pounds)0.128 (Pounds)0.128
</TABLE>
Provision for doubtful debts
Debtors is disclosed net of a provision for doubtful debts of
(Pounds)1,804,000, (Pounds)1,691,000, and (Pounds)1,698,000 as at 31 March
2000, 31 March 1999 and 31 March 1998 respectively.
Fair Values and Concentration of Credit Risk
Financial instruments which potentially subject Avery Berkel to credit risk
are cash and cash equivalents and trade accounts receivable. Concentration of
credit risk with respect to trade accounts receivable is limited due to the
large number of customers comprising the entity's customer base and their break
down among several industries and geographical locations. No single customer
accounts for more than ten percent of revenues. The entity is exposed to credit
risk with respect to cash and cash equivalents in the event of non-performance
by the counter parties to these financial instruments, which are major
financial institutions. Management believes that the risk of incurring material
losses related to this credit risk is remote. The carrying values of financial
instruments approximated their fair values based on current market prices and
rates.
Litigation
The Group is subject to certain lawsuits, investigations and claims arising
out of the conduct of its business, including those related to product
liability. In the opinion of management, the resolution of these matters will
not materially impact the Group's financial position, liquidity, or results of
operations.
F-114
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 133--"Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS 133 as amended by SFAS 137 is effective for fiscal years beginning after
June 15, 2000. Avery Berkel has not completed an evaluation of the impact of
adopting this statement.
29. SUPPLEMENTAL SUMMARISED COMBINED FINANCIAL STATEMENTS
Senior Subordinated Notes Guarantees Disclosure
The following summarised combined financial information presents guarantor
and non-guarantor results of operations, financial position, and cash flows of
the Avery Berkel subsidiaries under the Senior Subordinated Notes. The Notes
are fully and unconditionally guaranteed, jointly and severally, on an
unsecured senior subordinated basis by the guarantor subsidiaries. The combined
summarised statement of cash flows segregates the effect of carve out
adjustments relating to historical cash flows of subsidiaries and operations
that do not form part of the sale to Weigh-Tronix UK Limited.
Combined statement of operations:
<TABLE>
<CAPTION>
Guarantor Non-guarantor Consolidation US GAAP
subsidiaries operations adjustments Total
Year ended 31 March 2000 ------------ ------------- ------------- ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Revenues
Product Sales......... 68,820 31,105 (14,133) 85,792
Services.............. 52,952 18,490 (1,750) 69,692
------- ------- ------- -------
Total revenues........ 121,772 49,595 (15,883) 155,484
------- ------- ------- -------
Cost of revenues
Cost of products
sold................. (54,700) (24,893) 14,133 (65,460)
Cost of services...... (22,886) (9,421) 1,750 (30,557)
------- ------- ------- -------
Total cost of reve-
nues................. (77,586) (34,314) 15,883 (96,017)
------- ------- ------- -------
Gross profit............ 44,186 15,281 -- 59,467
Operating expenses
Selling, general and
administrative....... (32,953) (14,702) -- (47,655)
Depreciation and
amortisation......... (4,806) (906) -- (5,712)
------- ------- ------- -------
Operating income........ 6,427 (327) -- 6,100
Share of operating
profit of associates... 56 408 -- 464
------- ------- ------- -------
Total operating income.. 6,483 81 -- 6,564
Profit on sale of fixed
assets................. 906 214 -- 1,120
Dividends receivable.... 22,622 -- (22,622) --
Interest expense........ (905) (113) 851 (167)
Interest income......... 1,727 1,154 (851) 2,030
Share of associates in-
terest................. -- (6) -- (6)
------- ------- ------- -------
Profit before provision
for income taxes....... 30,833 1,330 (22,622) 9,541
Provision for income
taxes.................. (1,497) (956) -- (2,453)
------- ------- ------- -------
Profit after taxation... 29,336 374 (22,622) 7,088
Equity Minority Inter-
ests................... -- (71) -- (71)
------- ------- ------- -------
Net Income.............. 29,336 303 (22,622) 7,017
======= ======= ======= =======
</TABLE>
F-115
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Combined statement of operations:
<TABLE>
<CAPTION>
Guarantor Non-guarantor Consolidation US GAAP
subsidiaries operations adjustments Total
Year ended 31 March 1999 ------------ ------------- ------------- ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Revenues
Product Sales......... 63,023 29,505 (11,883) 80,645
Services.............. 50,614 17,278 (2,191) 65,701
------- ------- ------- -------
Total revenues........ 113,637 46,783 (14,074) 146,346
------- ------- ------- -------
Cost of revenues
Cost of products
sold................. (49,142) (22,107) 11,883 (59,366)
Cost of services...... (22,480) (9,604) 2,191 (29,893)
------- ------- ------- -------
Total cost of
revenues............. (71,622) (31,711) 14,074 (89,259)
------- ------- ------- -------
Gross profit............ 42,015 15,072 -- 57,087
Operating expenses
Selling, general and
administrative....... (32,016) (12,813) -- (44,829)
Depreciation and
amortisation......... (5,474) (1,055) -- (6,529)
------- ------- ------- -------
Operating income........ 4,525 1,204 -- 5,729
Share of operating
profit of associates... 148 440 588
------- ------- ------- -------
Total operating income.. 4,673 1,644 -- 6,317
Profit on sale of fixed
assets................. 1,832 133 -- 1,965
Dividends receivable.... 3,696 -- (3,696) --
Interest expense........ (879) (47) 755 (171)
Interest income......... 76 1,101 (755) 422
Share of associates
interest............... 16 6 -- 22
------- ------- ------- -------
Profit before provision
for income taxes....... 9,414 2,837 (3,696) 8,555
Provision for income
taxes.................. (2,239) (1,059) -- (3,298)
------- ------- ------- -------
Profit after taxation... 7,175 1,778 (3,696) 5,257
Equity Minority
Interests.............. -- (115) -- (115)
------- ------- ------- -------
Net Income.............. 7,175 1,663 (3,696) 5,142
======= ======= ======= =======
</TABLE>
F-116
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Combined statement of operations:
<TABLE>
<CAPTION>
Guarantor Non-guarantor Consolidation US GAAP
subsidiaries operations adjustments Total
Year ended 31 March 1998 ------------ ------------- ------------- ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Revenues
Product Sales......... 66,431 28,222 (13,716) 80,937
Services.............. 52,988 18,147 (3,041) 68,094
------- ------- ------- -------
Total revenues........ 119,419 46,369 (16,757) 149,031
------- ------- ------- -------
Cost of revenues
Cost of products
sold................. (50,856) (21,352) 13,716 (58,492)
Cost of services...... (24,217) (10,615) 3,041 (31,791)
------- ------- ------- -------
Total cost of
revenues............. (75,073) (31,967) 16,757 (90,283)
------- ------- ------- -------
Gross profit............ 44,346 14,402 -- 58,748
Operating expenses
Selling, general and
administrative....... (30,495) (14,172) -- (44,667)
Depreciation and
amortisation......... (4,845) (1,171) -- (6,016)
------- ------- ------- -------
Operating income........ 9,006 (941) -- 8,065
Share of operating
profit of associates... 522 423 -- 945
------- ------- ------- -------
Total operating income.. 9,528 (518) -- 9,010
Profit on sale of fixed
assets................. 1,880 367 -- 2,247
Dividends receivable.... 5,273 249 (5,522) --
Interest expense........ (875) (181) 844 (212)
Interest income......... 289 1,218 (844) 663
Share of associates
interest............... 38 11 -- 49
------- ------- ------- -------
Profit before provision
for income taxes....... 16,133 1,146 (5,522) 11,757
Provision for income
taxes.................. (3,531) (468) -- (3,999)
------- ------- ------- -------
Profit after taxation... 12,602 678 (5,522) 7,758
Equity Minority
Interests.............. -- -- -- --
------- ------- ------- -------
Net Income.............. 12,602 678 (5,522) 7,758
======= ======= ======= =======
</TABLE>
F-117
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Combined balance sheet of:
<TABLE>
<CAPTION>
Guarantor Non-guarantor Consolidation US GAAP
subsidiaries operations adjustments Total
Year ended 31 March 2000 ------------ ------------- ------------- ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Current Assets
Cash and cash
equivalents........... 2,015 6,153 -- 8,168
Accounts receivable,
net................... 27,615 16,658 (6,674) 37,599
Inventories, net....... 22,588 9,105 -- 31,693
Prepaid expenses and
other current assets.. 2,798 2,625 -- 5,423
Deferred income taxes.. 4,824 1,773 -- 6,597
------- ------- ------- -------
Total Current Assets.... 59,840 36,314 (6,674) 89,480
Property, plant and
equipment, net......... 13,672 2,368 -- 16,040
Intangibles, net........ 426 -- -- 426
Investments in
associates............. 392 2,018 -- 2,410
Investments in
subsidiaries........... 17,087 (4,810) (12,277) --
Intercompany Loans...... 14,328 22,499 (36,827) --
Loans owed by Marconi
Group Companies........ -- -- -- --
------- ------- ------- -------
Total Assets............ 105,745 58,389 (55,778) 108,356
======= ======= ======= =======
Liabilities & Members
Equity
Current Liabilities
Bank overdrafts........ 8,315 185 -- 8,500
Accounts payable....... 15,907 9,224 (6,674) 18,457
Accrued expenses....... 6,216 4,341 -- 10,557
Deferred revenue....... 6,575 3,673 -- 10,248
Liability Provisions... 1,045 4,163 -- 5,208
Corporation Tax........ 259 381 -- 640
------- ------- ------- -------
Total Current
Liabilities............ 38,317 21,967 (6,674) 53,610
Loans owed to Marconi
Group Companies........ -- 44,764 -- 44,764
Accrued expenses payable
in more than one year.. -- 153 -- 153
Intercompany Loans...... 31,224 5,603 (36,827) --
Minority Interest....... -- 3,115 -- 3,115
------- ------- ------- -------
Total Liabilities....... 69,541 75,602 (43,501) 101,642
------- ------- ------- -------
Members Equity
Share Capital.......... 9,225 1,421 -- 10,646
Accumulated Reserves... 26,979 (18,634) (12,277) (3,932)
------- ------- ------- -------
Total Members Equity.... 36,204 (17,213) (12,277) 6,714
------- ------- ------- -------
Total Liabilities and
Members Equity......... 105,745 58,389 (55,778) 108,356
======= ======= ======= =======
</TABLE>
F-118
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Combined balance sheet of:
<TABLE>
<CAPTION>
Guarantor Non-guarantor Consolidation US GAAP
subsidiaries operations adjustments Total
Year ended 31 March 1999 ------------ ------------- ------------- ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Current Assets
Cash and cash
equivalents........... 2,571 5,563 -- 8,134
Accounts receivable,
net................... 26,344 17,755 (7,482) 36,617
Inventories, net....... 20,817 8,063 -- 28,880
Prepaid expenses and
other current assets.. 2,648 2,493 -- 5,141
Corporation tax........ 6,999 12 -- 7,011
Deferred income taxes.. 4,973 1,829 -- 6,802
------- ------- ------- -------
Total Current Assets.... 64,352 35,715 (7,482) 92,585
Property, plant and
equipment, net......... 16,127 2,823 -- 18,950
Intangibles, net........ 474 -- -- 474
Investments in
associates............. 433 1,973 -- 2,406
Investments in
subsidiaries........... 16,828 (8,325) (8,503) --
Intercompany loans...... 9,385 19,075 (28,460) --
Loans owed by Marconi
Group Companies........ 15,675 3,920 (19,595) --
------- ------- ------- -------
Total Assets............ 123,274 55,181 (64,040) 114,415
======= ======= ======= =======
Liabilities & Members
Equity
Current Liabilities
Bank overdrafts........ -- 730 -- 730
Accounts payable....... 18,777 10,206 (7,482) 21,501
Accrued expenses....... 6,548 5,166 -- 11,714
Deferred revenue....... 7,145 3,335 -- 10,480
Liability Provisions... 1,082 4,717 -- 5,799
Corporation Tax........ 304 169 -- 473
------- ------- ------- -------
Total Current
Liabilities............ 33,856 24,323 (7,482) 50,697
Loans owed to Marconi
Group Companies........ 1,553 49,390 (19,595) 31,348
Accrued expenses payable
in more than one year.. 55 32 -- 87
Intercompany loans...... 25,220 3,240 (28,460) --
Minority Interest....... -- 3,193 -- 3,193
------- ------- ------- -------
Total Liabilities....... 60,684 80,178 (55,537) 85,325
------- ------- ------- -------
Members Equity
Share Capital.......... 9,225 1,584 -- 10,809
Accumulated Reserves... 53,365 (26,581) (8,503) 18,281
------- ------- ------- -------
Total Members Equity.... 62,590 (24,997) (8,503) 29,090
------- ------- ------- -------
Total Liabilities and
Members Equity......... 123,274 55,181 (64,040) 114,415
======= ======= ======= =======
</TABLE>
F-119
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Combined balance sheet of:
<TABLE>
<CAPTION>
Guarantor Non-guarantor Consolidation US GAAP
subsidiaries operations adjustments Total
Year ended 31 March 1998 ------------ ------------- ------------- ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Current Assets
Cash and cash
equivalents........... 5,094 2,134 -- 7,228
Accounts receivable,
net................... 29,124 13,106 (10,436) 31,794
Inventories, net....... 18,592 6,630 -- 25,222
Prepaid expenses and
other current assets.. 2,464 1,718 -- 4,182
Corporation Tax........ 6,113 8 -- 6,121
Deferred income taxes.. 5,221 1,797 -- 7,018
------- ------- ------- -------
Total Current Assets.... 66,608 25,393 (10,436) 81,565
Property, plant and
equipment, net......... 16,780 2,691 -- 19,471
Intangibles, net........ 437 -- -- 437
Investments in
associates............. 2,731 1,420 -- 4,151
Investments in
subsidiaries........... 14,750 (7,789) (6,961) --
Intercompany loans...... 24,165 19,794 (43,959) --
Loans owed by Marconi
Group Companies........ 8,535 2,438 (10,973) --
------- ------- ------- -------
Total Assets............ 134,006 43,947 (72,329) 105,624
======= ======= ======= =======
Liabilities & Members
Equity
Current Liabilities
Bank overdrafts........ -- 570 -- 570
Accounts payable....... 18,855 8,509 (10,436) 16,928
Accrued expenses....... 6,405 4,300 -- 10,705
Deferred revenue....... 7,663 2,360 -- 10,023
Liability Provisions... 935 5,276 -- 6,211
Corporation Tax........ 151 (9) -- 142
------- ------- ------- -------
Total Current
Liabilities............ 34,009 21,006 (10,436) 44,579
Loans owed to Marconi
Group Companies........ 2,277 42,616 (10,973) 33,920
Accrued expenses payable
in more than one year.. 110 -- -- 110
Intercompany loans...... 41,851 2,108 (43,959) --
Minority Interest....... -- -- -- --
------- ------- ------- -------
Total Liabilities....... 78,247 65,730 (65,368) 78,609
Members Equity
Share Capital.......... 9,225 1,495 -- 10,720
Accumulated Reserves... 46,534 (23,278) (6,961) 16,295
------- ------- ------- -------
Total Members Equity.... 55,759 (21,783) (6,961) 27,015
------- ------- ------- -------
Total Liabilities and
Members Equity......... 134,006 43,947 (72,329) 105,624
======= ======= ======= =======
</TABLE>
F-120
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
Combined summarised statements of cash flow:
<TABLE>
<CAPTION>
Guarantor Non-guarantor Consolidation US GAAP
operations operations adjustments Total
Year ended 31 March 2000 ------------ ------------- ------------- ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Cash flows from
operating activities... 10,312 (962) 9,350
Cash flows used in
investing activities... (1,372) (286) -- (1,658)
Net cash used in
financing activities... (16,288) 2,594 -- (13,694)
Effect of exchange rate
changes on cash........ -- (344) -- (344)
Effect of carve out
adjustments............ 6,776 (396) -- 6,380
------- ----- ------ -------
Net change.............. (572) 606 -- 34
Cash at bank and in
hand, beginning of
period................. 2,571 5,563 -- 8,134
------- ----- ------ -------
Cash at bank and in
hand, end of period.... 1,999 6,169 -- 8,168
======= ===== ====== =======
</TABLE>
<TABLE>
<CAPTION>
Guarantor Non-guarantor Consolidation US GAAP
operations operations adjustments Total
Year ended 31 March 1999 ------------ ------------- ------------- ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Cash flows from
operating activities... 6,576 (100) 6,476
Cash flows used in
investing activities... (2,261) (719) -- (2,980)
Net cash used in
financing activities... (8,617) 5,522 -- (3,095)
Effect of exchange rate
changes on cash........ -- 93 -- 93
Effect of carve out
adjustments............ 1,779 (1,367) -- 412
------ ------ ------ ------
Net change.............. (2,523) 3,429 -- 906
Cash at bank and in
hand, beginning of
period................. 5,094 2,134 -- 7,228
------ ------ ------ ------
Cash at bank and in
hand, end of period.... 2,571 5,563 -- 8,134
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Guarantor Non-guarantor Consolidation US GAAP
operations operations adjustments Total
Year ended 31 March 1998 ------------ ------------- ------------- ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Cash flows from
operating activities... 3,926 4,335 8,261
Cash flows used in
investing activities... (2,282) (98) -- (2,380)
Net cash used in
financing activities... 1,772 (1,524) -- 248
Effect of exchange rate
changes on cash........ -- (187) -- (187)
Effect of carve out
adjustments............ 950 (5,049) -- (4,099)
------ ------ ------ ------
Net change.............. 4,366 (2,523) -- 1,843
Cash at bank and in
hand, beginning of
period................. 728 4,657 -- 5,385
------ ------ ------ ------
Cash at bank and in
hand, end of period.... 5,094 2,134 -- 7,228
====== ====== ====== ======
</TABLE>
F-121
<PAGE>
AVERY BERKEL GROUP
NOTES TO THE ACCOUNTS--(Continued)
30. SUPPLEMENTAL SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Stock Debtor
Provisions Provisions
------------ ------------
(Pounds)'000 (Pounds)'000
<S> <C> <C>
At 1 April 1997.................................... 7,487 1,787
Profit and loss charge............................. 1,251 500
Utilised........................................... (1,381) (413)
Foreign exchange difference........................ (360) (176)
------ -----
At 31 March 1998................................... 6,997 1,698
Business acquired.................................. 385 115
Profit and loss charge............................. 1,810 290
Utilised........................................... (511) (439)
Foreign exchange difference........................ 71 27
------ -----
At 31 March 1999................................... 8,752 1,691
Profit and loss charge............................. 1,280 486
Utilised........................................... (418) (290)
Foreign exchange difference........................ (136) (83)
------ -----
At 31 March 2000................................... 9,478 1,804
====== =====
</TABLE>
F-122
<PAGE>
We have not authorized any dealer, salesperson or other person to give any
information or to make any representations not contained in this prospectus in
connection with the exchange offer made by this prospectus and you must not
rely on any such information or representations as having been authorized by
us. Neither the delivery of this prospectus nor any sale made hereunder will,
under any circumstances, create any implication that there has been no change
in our affairs since the date as of which information is given in this
prospectus. We have undertaken to update this prospectus to reflect any
subsequent events that represent a fundamental change in the information
contained herein. This prospectus is not an offer to sell these securities and
it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
----------------
(Euro)100,000,000
TABLE OF CONTENTS
SWT Finance B.V.
<TABLE> Weigh Tronix, LLC
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 19
The Exchange Offer.................... 31
Capitalization........................ 40
The Guarantors........................ 42
Description of Certain Indebtedness... 46
Description of the Exchange Notes..... 50
Unaudited Pro Forma Combined Financial
Data................................. 98
Selected Historical Financial
Information for Weigh-Tronix......... 107
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 116
Business.............................. 140
Management............................ 157
Security Ownership of Certain
Beneficial Owners and Management..... 161
Certain Relationships and Related
Party Transactions................... 163
Tax Considerations.................... 169
Plan of Distribution.................. 171
Legal Matters......................... 171
Experts............................... 171
Where You Can Find More Information... 172
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
Offer to Exchange
12 1/2% Senior Subordinated Notes
due 2010
of
SWT Finance B.V.
----------------
PROSPECTUS
----------------
[ ], 2000
Dealer Prospectus Delivery Obligation
Until [ ], 2000, all broker dealers that effect transactions in the
exchange notes, whether or not participating in the exchange offer, may be
required to deliver a prospectus. This is in addition to the obligation of
broker-dealers to deliver a prospectus when acting as underwriters and with
respect to any unsold allotments or subscriptions.
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers.
Indemnification
The Operating Agreement of Weigh-Tronix, LLC provides that the board of
managers, each member, and the officers of Weigh-Tronix, LLC shall not be
liable, responsible or accountable in damages or otherwise to Weigh-Tronix, LLC
or any member for any loss or damage incurred by reason of any act or omission
performed or omitted by the indemnified party in good faith either on behalf or
in the interests of Weigh-Tronix, LLC and in a manner reasonably believed by
that person to be within the scope of the authority granted
to him by the operating agreement, provided that the person was not guilty of
gross negligence, willful misconduct or any other breach of duty with respect
to such act or omission. To the fullest extent permitted by law, Weigh-Tronix,
LLC, out of its assets and not out of the assets of the members, will indemnify
and hold harmless each indemnified party who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
any action by or in the right of Weigh-Tronix, LLC), by reason of any act or
omission or alleged act or omission arising out of that person's activities as
a board of managers, as a member or as an officer if such activities were
performed in good faith either on behalf or in the interests of Weigh-Tronix,
and in a manner reasonably believed by that person to be within the scope of
the authority conferred by the operating agreement, against losses, damages, or
expenses for which that person has not otherwise been reimbursed (including
attorneys' fees, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by that person in connection with such action, suit or
proceeding so long as that person was not guilty of gross negligence, willful
misconduct or any other breach of duty with respect to such acts or omissions,
and, with respect to any criminal action or proceeding, and had no reasonable
cause to believe its conduct was unlawful and provided that the satisfaction of
any indemnification and any holding harmless shall be from and limited to
Weigh-Tronix, LLC assets and the members shall not have any personal liability
on account thereof.
ITEM 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
The following is a complete list of Exhibits filed as part of this
registration statement, which are incorporated herein:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
*2.1 Share Sale and Purchase Agreement in respect of Avery Berkel
between Marconi Corporation PLC and Weigh-Tronix UK Limited
*3.1 Certificate of Formation of Weigh-Tronix, LLC
**3.2 Second Amended and Restated Operating Agreement of Weigh-Tronix,
LLC
*4.1 Indenture by and among SWT Finance B.V. as Issuer, Weigh-Tronix,
LLC, Certain Other Guarantors and Bankers Trust Company as
Trustee, Registrar and Paying Agent dated of June 13, 2000
*4.2 Form of SWT Finance B.V. 12.5% Senior Subordinated Note due 2010
*4.3 Supplemental Indenture by and among SWT Finance B.V., Weigh-
Tronix, LLC, Bankers Trust Company and additional Guarantors,
dated as of June 13, 2000
***5.1 Legal Opinion
*10.1 Amended and Restated Credit Agreement among Weigh-Tronix, LLC,
SWT Finance B.V. and Weigh-Tronix Canada, ULC, as Borrowers, The
Several Lenders from Time to Time Parties Hereto, Lehman
Brothers Inc., as Sole Advisor, Lehman Brothers Inc. and
FleetBoston Robertson Stephens Inc., as Arrangers, Lehman
Commercial Paper Inc., as Syndication Agent and Fleet National
Bank, as Administrative Agent and Security Agent, dated as of
June 13, 2000
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
*10.2 Amended and Restated Members' Agreement dated as of June 13,
2000
*10.3 Registration Rights Agreement among SWT Finance B.V., Weigh-
Tronix, LLC, the Guarantors and Lehman Brothers International
dated as of June 13, 2000
*10.4 Warrant Agreement between Weigh-Tronix, LLC and Marconi, Inc.
dated as of June 13, 2000
**10.5 Guarantee and Collateral Agreement made by Weigh-Tronix, LLC and
certain of its subsidiaries in favor of Fleet National Bank,
dated as of June 13, 2000.
**10.6 Subscription Agreement between Marconi, Inc. and Weigh-Tronix,
LLC, dated June 13, 2000
**12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges
**21.1 Subsidiaries
**23.1 Consent of PricewaterhouseCoopers LLP
**23.2 Consent of PricewaterhouseCoopers
**23.3 Consent of Deloitte & Touche
***23.4 Consent of Hutchins, Wheeler & Dittmar, A Professional
Corporation (included in their opinion filed in Exhibit 5.1)
*24.1 Power of Attorney (included on the signature page of the
registration statement)
**25.1 Form T-1 Statement of Eligibility of Bankers Trust Company to
act as Trustee under the Indenture
**27.1 Financial Data Schedule
**99.1 Form of Letter of Transmittal
**99.2 Form of Notice of Guaranteed Delivery
</TABLE>
--------
*Previously filed
**Filed with this Registration Statement
***To be filed by Amendment
****Supersedes previously filed exhibit
(b) Financial Statement Schedules.
None. Schedules other than those listed above have been omitted since the
information is not applicable, not required or is included in the financial
statements or notes thereto.
ITEM 22. Undertakings.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20 above or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission the indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against these liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by the director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
the indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of the issue.
II-2
<PAGE>
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
the request, and to send the incorporated documents by first class mail or
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(e) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Amsterdam, The
Netherlands, on the 16 day of October, 2000.
SWT Finance B.V.
By: *
----------------------------------
Name: John J. McCann III
Title:Chief Executive Officer and
Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
D.L. Trust B.V.
By: *
----------------------------------
Name: Gerald Kotterman
Title:Trustee of D.L. Trust B.V.,
Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title: Chief Financial Officer and
Authorized U.S. Representative
*By: /s/ Donald Mackenzie
----------------------------------
Donald MacKenzie
(Attorney-in-Fact)
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Providence, Rhode
Island, on the 16 day of October, 2000.
Weigh-Tronix, LLC
By: *
----------------------------------
Name: John J. McCann III
Title:President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:Chief Financial Officer and
U.S. Representative
By: *
----------------------------------
Name: Larry Gunning
Title:Director
By: *
----------------------------------
Name: David Castle
Title:Director
By: *
----------------------------------
Name: Roger Evans
Title: Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Amsterdam, The
Netherlands, on the 16 day of October, 2000.
SWT Holdings B.V.
By: *
----------------------------------
Name: John J. McCann III
Title:President and Director
(principal financial and
accounting officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
D.L. Trust B.V.
By: *
----------------------------------
Name: Gerald Kotterman
Title:Trustee of D.L. Trust B.V.,
Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:Authorized U.S.
Representative
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fairmont, Minnesota, on
the 16 day of October, 2000.
Weigh-Tronix, Inc.
By: *
----------------------------------
Name: John J. McCann III
Title:Vice President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:Chief Financial Officer
By: *
----------------------------------
Name: David R. Castle
Title:President and Director
By: *
----------------------------------
Name: Roger Evans
Title:Director
By: *
----------------------------------
Name: Larry Gunning
Title:Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Santa Rosa, California,
on the 16 day of October, 2000.
Mecmesin, Inc.
By: *
----------------------------------
Name: David Castle
Title:President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: John J. McCann
Title:Vice President
By: *
----------------------------------
Name: Arden Kuhn
Title:Controller
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of West Midlands, United
Kingdom, on the 16 day of October, 2000.
Salter Weigh-Tronix Ltd
By: *
-----------------------------------
Name: Larry Gunning
Title:President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
-----------------------------------
Name: Roger W. Evans
Title:Treasurer and Director
By: *
-----------------------------------
Name: David Castle
Title:Director
By: *
-----------------------------------
Name: John J. McCann III
Title:Director
By: /s/ Donald MacKenzie
-----------------------------------
Name: Donald MacKenzie
Title:Authorized U.S.
Representative
By:/s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Pointe Claire, Quebec,
Canada, on the 16 day of October, 2000.
Weigh-Tronix Canada, ULC
By: *
----------------------------------
Name:David Castle
Title:President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: Arden Kuhn
Title: Treasurer
By: *
----------------------------------
Name: John J. McCann III
Title: Vice President and Director
By: *
----------------------------------
Name: Roger Evans
Title: Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title: Authorized U.S.
Representative
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Tonbridge, United
Kingdom, on the 16 day of October, 2000.
Salter Housewares Holdings LTD
By: *
----------------------------------
Name: R.W. Evans
Title:President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: C.S. Howe
Title:Director and Chief
Financial Officer
By: *
----------------------------------
Name: John J. McCann III
Title:Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:Authorized U.S.
Representative
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, United
Kingdom, on the 16 day of October, 2000.
Weigh-Tronix UK Ltd
By: *
----------------------------------
Name: John J. McCann III
Title:President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: David Castle
Title:Director
By: *
----------------------------------
Name: Roger Evans
Title:Director
By: *
----------------------------------
Name: Larry Gunning
Title:Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:Chief Financial Officer and
Authorized U.S. Representative
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Blackburn, Australia, on
the 16 day of October, 2000.
Salter Housewares Ltd
By: *
----------------------------------
Name: R.W. Evans
Title: President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: C.S. Howe
Title: Chief Financial Officer
By: *
----------------------------------
Name: John J. McCann III
Title: Director
By: *
----------------------------------
Name: R.W. Evans
Title: Director
By: *
----------------------------------
Name: David Sulkin
Title: Director
By: *
----------------------------------
Name: David R. Castle
Title: Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title: Authorized U.S.
Representative
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Providence, Rhode
Island, on the 16 day of October, 2000.
Weigh-Tronix Delaware, Inc.
By: *
----------------------------------
Name: Roger W. Evans
Title: President (principal
financial and accounting officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: John J. McCann III
Title: Director
By: *
----------------------------------
Name:Larry Gunning
Title: Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of LaPorte, Indiana, on the
16 day of October, 2000.
Berkel USA, Inc.
By: *
----------------------------------
Name: J.B. Stanley
Title: President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: D.G. Steffen
Title: Director
By: *
----------------------------------
Name: T.J. Cooper
Title: Treasurer and Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of LaPorte, Indiana, on the
16 day of October, 2000.
Berkel, Inc.
By: *
----------------------------------
Name: J.B. Stanley
Title: President, Treasurer and
Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: T.J. Cooper
Title: Director
By: *
----------------------------------
Name: John J. McCann III
Title: Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Toronto, Canada, on the
16 day of October, 2000.
Berkel Products Co. Limited
By: *
----------------------------------
Name: D.G. Steffen
Title: CEO, Treasurer and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: Tom Cassidy
Title: Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title: Authorized U.S.
Representative
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, United
Kingdom, on the 16 day of October, 2000.
Avery Berkel Limited
By: *
----------------------------------
Name: T.J. Cooper
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: R. Wilkinson
Title: Finance Director
By: *
----------------------------------
Name: T.J. Cooper
Title: President
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title: Authorized U.S.
Representative
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, United
Kingdom, on the 16 day of October, 2000.
Avery Berkel Properties Limited
By: *
----------------------------------
Name: R. Wilkinson
Title: Finance Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: R. Wilkinson
Title: Finance Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title: Authorized U.S.
Representative
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, United
Kingdom, on the 16 day of October, 2000.
Avery Berkel Holdings Limited
By: *
----------------------------------
Name: T.J. Cooper
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: T.J. Cooper
Title: President
By: *
----------------------------------
Name: R. Wilkinson
Title: Finance Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title: Authorized U.S.
Representative
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, United
Kingdom, on the 16 day of October, 2000.
Berkel (Ireland) Limited
By: *
----------------------------------
Name: Kieran Killoran
Title: President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on October 16, 2000:
By: *
----------------------------------
Name: T.J. Cooper
Title: Treasurer and Director
By: *
----------------------------------
Name: K. Killoran
Title: Director
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title: Authorized U.S.
Representative
By: /s/ Donald MacKenzie
----------------------------------
Name: Donald MacKenzie
Title:(Attorney-in-Fact)
II-21
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
*2.1 Share Sale and Purchase Agreement in respect of Avery Berkel
between Marconi Corporation PLC and Weigh-Tronix UK Limited
*3.1 Certificate of Formation of Weigh-Tronix, LLC
**3.2 Second Amended and Restated Operating Agreement of Weigh-Tronix,
LLC
*4.1 Indenture by and among SWT Finance B.V. as Issuer, Weigh-Tronix,
LLC, Certain Other Guarantors and Bankers Trust Company as
Trustee, Registrar and Paying Agent dated as of June 13, 2000
*4.2 Form of SWT Finance B.V. 12.5% Senior Subordinated Note due 2010
*4.3 Supplemental Indenture by and among SWT Finance, B.V., Weigh-
Tronix, LLC, Bankers Trust Company and additional Guarantors,
dated as of June 13, 2000
***5.1 Legal Opinion
*10.1 Amended and Restated Credit Agreement among Weigh-Tronix, LLC,
SWT Finance B.V. and Weigh-Tronix Canada, ULC, as Borrowers, The
Several Lenders from Time to Time Parties Hereto, Lehman
Brothers Inc., as Sole Advisor, Lehman Brothers Inc. and
FleetBoston Robertson Stephens Inc., as Arrangers, Lehman
Commercial Paper Inc., as Syndication Agent and Fleet National
Bank, as Administrative Agent and Security Agent, dated as of
June 13, 2000.
*10.2 Amended and Restated Members' Agreement dated as of June 13,
2000
*10.3 Registration Rights Agreement among SWT Finance B.V., Weigh-
Tronix, LLC, the Guarantors and Lehman Brothers International
dated as of June 13, 2000
*10.4 Warrant Agreement between Weigh-Tronix, LLC and Marconi, Inc.
dated as of June 13, 2000
**10.5 Guarantee and Collateral Agreement made by Weigh-Tronix, LLC and
certain of its subsidiaries in favor of Fleet National Bank,
dated as of June 13, 2000.
**10.6 Subscription Agreement between Marconi, Inc. and Weigh-Tronix,
LLC, dated June 13, 2000
**12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges
**21.1 Subsidiaries
**23.1 Consent of PricewaterhouseCoopers LLP
**23.2 Consent of PricewaterhouseCoopers
**23.3 Consent of Deloitte & Touche
***23.4 Consent of Hutchins, Wheeler & Dittmar, A Professional
Corporation (included in their opinion filed in Exhibit 5.1)
*24.1 Power of Attorney (included on the signature page of the
registration statement)
**25.1 Form T-1 Statement of Eligibility of Bankers Trust Company to
act as Trustee under the Indenture
**27.1 Financial Data Schedule
**99.1 Form of Letter of Transmittal
**99.2 Form of Notice of Guaranteed Delivery
</TABLE>
--------
*Previously filed.
**Filed with this Registration Statement.
***To be filed by amendment.
****Supersedes previously filed exhibit.
