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Previous: BLOCK MORTGAGE FINANCE ASSET BACKED CERTIFICATES SER 1998-1, 8-K, 1998-09-02 |
Next: NORWEST ASSET SEC CORP MORT PS THR CERT SER 1998-4 TRUST, 8-K, 1998-09-02 |
<PAGE>
Auditors' report
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 19, 1998
PRODUCTION RESOURCE GROUP, L.L.C.
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 333-46235 14-1786937
(State or other Jurisdiction (Commission File Number) (IRS Employer Identification No.)
of Formation)
</TABLE>
539 Temple Hill Road, New Windsor, New York 12553
(Address of Principal Executive Offices) (Zip Code)
(914) 567-5700
(Registrant's Telephone Number, Including Area Code)
<PAGE>
Explanatory Note
The Current Report on Form 8-K of Production Resource Group, L.L.C. (the
"Company" or "PRG"), initially filed with the Securities and Exchange Commission
(the "Commission") on July 6, 1998, is hereby amended by this Form 8-K/A so as
to comply with Item 7 of Form 8-K and the provisions of Rule 3-05 of Regulation
S-X. The consolidated historical financial statements for the most recent
three fiscal years of Light and Sound Designs Holdings Limited ("Holdings")
have been included in this Form 8-K/A. The pro forma effects of the acquisition
of Holdings on the Company's results of operations for the six months ended
June 30, 1998 and on its results of operations for the most recent fiscal year
are also presented in this Form 8-K/A. Since the acquisition of Holdings was
completed June 19, 1998, the effect of the acquisition on the Company's balance
sheet was reflected in the Company's balance sheet at June 30, 1998 in the Form
10-Q filed for such period.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
Holdings was acquired by the Company on June 19, 1998. The audited financial
statements of Holdings, and the related Auditor's Report as at March 31, 1998,
and 1997 and for the fiscal years ended March 31, 1998, 1997 and 1996 are
located at Addendum I.
(b) Pro Forma Financial Information
Pro forma Combined Financial Information (unaudited for the year ended December
31, 1997 and the six months ended June 30, 1998) is located at Addendum II.
(c) Exhibits
10.9 Share Purchase Agreement dated June 19, 1998 among N B Jackson &
Others and the Company (incorporated by reference from Form 8-K
filed on July 6, 1998)
10.10 Acquisition Agreement dated June 25, 1998 among Production Arts
Lighting Inc., Production Arts Lighting West, Inc., Production Arts
Europe, Inc., John T. McGraw, Steven R. Terry and the Company
(incorporated by reference from Form 8-K filed on July 6, 1998)
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRODUCTION RESOURCE GROUP, L.L.C.
September 2, 1998 By /s/ Robert A. Manners
- ------------------ -----------------------------------
Date Robert A. Manners
Sr. Vice President Business Affairs
and General Counsel
3
<PAGE>
Addendum I.
Report of the auditors to the members of Light & Sound Design Holdings
Limited:
We have audited the financial statements of Light & Sound Design Holdings
Limited set out on pages 5 to 32, which are expressed in pounds sterling.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom, which do not differ in any significant
respect from generally accepted auditing standards in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall consolidated financial statements presentation. We believe our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements set out on pages 1 to 27
present fairly, in all material respects, the consolidated financial position
of Light & Sound Design Holdings Limited as at 31 March 1998 and 1997, and the
consolidated results of its operations and cash flows for the two years ended
31 March 1998 and the period ended 31 March 1996 in conformity with generally
accepted accounting principles in the United Kingdom.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United Kingdom, which differ
in certain material respects from generally accepted accounting principles in
the United States. The effects of the significant differences in the
determination of retained profit and equity shareholders' funds are shown in
note 23 to the consolidated financial statements.
Arthur Andersen
Chartered Accountants and Registered Auditors
1 Victoria Square
Birmingham
B1 1BD
8 June 1998
4
<PAGE>
Consolidated profit and loss account
For the year ended 31 March 1998
<TABLE>
<CAPTION>
Notes 52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Turnover 2 18,893 16,865 11,709
Cost of sales (12,533) (10,959) (7,121)
---------- ---------- ----------
Gross profit 6,360 5,906 4,588
Other operating expenses (net) 3 (4,223) (4,510) (4,022)
---------- ---------- ----------
Operating profit 2,137 1,396 566
Interest receivable and similar income 4 24 40 17
Interest payable and similar charges 5 (6) (26) (49)
---------- ---------- ----------
Profit on ordinary activities before taxation 6 2,155 1,410 534
Tax on profit on ordinary activities 8 (802) (457) (334)
---------- ---------- ----------
Profit on ordinary activities after taxation 1,353 953 200
Dividends paid and proposed on non-equity shares 9 (140) (170) -
Other finance costs of non-equity shares 9 (2) (2) (160)
---------- ---------- ----------
Profit for the financial year 1,211 781 40
Transfers to capital redemption reserve - (61) -
Retained profit, beginning of year 922 200 -
Finance costs of non-equity shares 2 2 160
---------- ---------- ----------
Retained profit, end of year 2,135 922 200
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
A statement of movements on reserves is given in note 18.
The profit for the financial year is wholly derived from continuing
activities.
The accompanying notes are an integral part of this consolidated profit and
loss account.
5
<PAGE>
Consolidated statement of total recognised gains and losses
For the year ended 31 March 1998
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Profit for the financial year 1,353 953 200
Loss on foreign currency translation (172) (98) 131
---------- ---------- ----------
Total recognised gains and losses relating to the year 1,181 855 331
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
6
<PAGE>
Consolidated balance sheet
31 March 1998
<TABLE>
<CAPTION>
Notes 1998 1997
(pound)'000 (pound)'000
<S> <C> <C> <C>
Fixed assets
Intangible assets 10 450 -
Tangible assets 11 5,499 4,891
Investments 12 176 26
---------- ----------
6,125 4,917
Current assets
Stocks 13 583 196
Debtors 14 1,656 1,477
Cash at bank and in hand 755 1,329
---------- ----------
2,994 3,002
Creditors: Amounts falling due within one year 15 (3,056) (2,881)
---------- ----------
Net current (liabilities) assets (62) 121
---------- ----------
Total assets less current liabilities 6,063 5,038
Provisions for liabilities and charges 16 (353) (467)
---------- ----------
Net assets 5,710 4,571
---------- ----------
---------- ----------
Capital and reserves
Called-up share capital 17 1,119 1,119
Share premium account 18 1,570 1,570
Capital reserve 18 989 989
Capital redemption reserve 18 69 69
Foreign currency translation reserve 18 (172) (98)
Profit and loss account 18 2,135 922
---------- ----------
Shareholders' funds 5,710 4,571
---------- ----------
---------- ----------
Analysis of Shareholders' funds
Equity interests 3,359 2,138
Non-equity interests 2,351 2,433
---------- ----------
5,710 4,571
---------- ----------
---------- ----------
</TABLE>
Signed on behalf of the Board
J Reidy Director
8 June 1998
The accompanying notes are an integral part of this consolidated balance
sheet.
7
<PAGE>
Company balance sheet
31 March 1998
<TABLE>
<CAPTION>
Notes 1998 1997
(pound)'000 (pound)'000
<S> <C> <C> <C>
Fixed assets
Investments 12 2,377 2,227
---------- ----------
Current assets
Debtors 14 497 709
---------- ----------
497 709
Creditors: Amounts falling due within one year 15 (98) (118)
---------- ----------
Net current assets 399 591
---------- ----------
Total assets less current liabilities 2,776 2,818
---------- ----------
Net assets 2,776 2,818
---------- ----------
---------- ----------
Capital and reserves
Called-up share capital 17 1,119 1,119
Share premium account 18 1,570 1,570
Capital redemption reserve 18 69 69
Profit and loss account 18 18 60
---------- ----------
Shareholders' funds 2,776 2,818
---------- ----------
---------- ----------
Analysis of Shareholders' funds
Equity interests 425 385
Non-equity interests 2,351 2,433
---------- ----------
2,776 2,818
---------- ----------
---------- ----------
</TABLE>
Signed on behalf of the Board
J Reidy Director
8 June 1998
The accompanying notes are an integral part of this balance sheet.
8
<PAGE>
Consolidated cash flow statement
For the year ended 31 March 1998
<TABLE>
<CAPTION>
Notes 52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Net cash inflow from operating activities 20a 2,721 3,391 1,345
---------- ---------- ----------
Returns on investments and servicing of finance 20b (74) (85) (32)
Taxation 20b (477) (320) (381)
Capital expenditure and financial investment 20b (3,177) (1,827) (1,213)
Acquisitions and disposals - - (2,149)
---------- ---------- ----------
Cash (outflow) inflow before financing (1,007) 1,159 (2,430)
Financing 20b - (561) 3,250
---------- ---------- ----------
(Decrease) increase in cash in the year 20c (1,007) 598 820
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of this consolidated cash flow
statement.
9
<PAGE>
Notes to accounts
31 March 1998
1 Accounting policies
A summary of the principal accounting policies, all of which have been applied
consistently throughout the year is set out below.
a) Basis of accounting
The accounts have been prepared under the historical cost convention, and in
accordance with applicable accounting standards.
b) Basis of consolidation
The group accounts consolidate the accounts of Light & Sound Design Holdings
Limited and its subsidiary undertakings using the acquisition method of
accounting.
Under this method, the results of the subsidiary undertakings acquired in the
period are included in the consolidated profit and loss account from the date
of acquisition.
The capital reserve arising on consolidation (representing the excess of the
fair value of the separable net assets acquired over the fair value of the
consideration given) has been credited directly to reserves.
No profit and loss account is presented for Light & Sound Design Holdings
Limited as provided by section 230 of the Companies Act 1985. The company's
loss for the financial year ended 31 March 1998, determined in accordance with
the Act, was (pound)42,000 (1997: profit of (pound)325,000 and 1996: profit of
(pound)346,000).
c) Tangible fixed assets
Tangible fixed assets are stated at cost, net of depreciation and provision
for permanent diminution in value.
Depreciation is provided at rates calculated to write off the cost, less
estimated residual value, of each asset on a straight-line basis over its
expected useful economic life as follows:
Hire equipment 15-25% per annum
Hire equipment spares 15% per annum
Plant and machinery 5-20% per annum
Motor vehicles 25% per annum
Fixtures and fittings 20% per annum
d) Development expenditure
Development expenditure is written off, except where the directors are
satisfied as to the technical, commercial and financial viability of
individual projects. In such cases, the identifiable expenditure is deferred
and amortised over the period which the company is expected to benefit.
e) Investments
Fixed asset investments are shown at cost less provision for permanent
diminution in value.
10
<PAGE>
Notes to accounts
31 March 1998
1 Accounting policies (continued)
f) Stocks
Stocks are stated at the lower of cost and net realisable value.
Net realisable value is based on estimated normal selling price, less further
costs expected to be incurred to completion and disposal. Provision is made
for obsolete, slow-moving or defective items where appropriate.
g) Taxation
Corporation tax payable is provided on taxable profits or losses at the
current rate.
The company is part of a UK group and accordingly may take advantage of group
relief provisions whereby current taxable profits may be offset by current
taxable losses in other companies in the group.
Advance corporation tax payable on dividends paid or provided for in the year
is written off, except when recoverability against corporation tax payable is
considered to be reasonably assured. Credit is taken for advance corporation
tax written off in previous years when it is recovered against corporation tax
liabilities.
Deferred taxation which arises from differences in the timing of the
recognition of items, principally depreciation, in the accounts and by the tax
legislation has been calculated on the liability method. Deferred taxation is
provided on timing differences which will probably reverse, at the rates of
tax likely to be in force at the time of the reversal. Deferred tax is not
provided on timing differences which, in the opinion of the directors, will
probably not reverse.
h) Pension costs
The group provides pensions to the majority of its employees through a defined
contribution scheme.
The assets of the scheme are held in independently administered funds. The
amount charged to the profit and loss account is the contributions payable in
the period and is described as "other pension costs" in note 7. Differences
between contributions payable in the period and contributions paid are shown
as accruals and prepayments in the balance sheet.
i) Foreign currency
Transactions denominated in foreign currencies are recorded at actual exchange
rates as of the date of the transaction or, where appropriate, at the rate of
exchange in a related forward exchange contract. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are
reported at the rates of exchange prevailing at that date or, where
appropriate, at the rate of exchange in a related forward exchange contract.
Any gain or loss arising from a change in exchange rates subsequent to the
date of the transaction is included as an exchange gain or loss in the profit
and loss account.
On consolidation of the US subsidiary undertaking the closing rate/net
investment method of translating the local currency financial statements is
used. Exchange differences arising from the retranslating of the opening net
investment in the US subsidiary undertaking at the closing rate is recorded as
a movement on reserves.
11
<PAGE>
Notes to accounts
31 March 1998
1 Accounting policies (continued)
j) Turnover
Turnover represents amounts receivable for goods and services provided in the
normal course of business, net of trade discounts, VAT and other sales related
taxes.
k) Leases
Rentals under operating leases are charged on a straight-line basis over the
lease term, even if the payments are not made on such a basis.
l) Finance costs
In accordance with Financial Reporting Standard Number 4, finance costs of
debt and non-equity shares are recognised in the profit and loss account over
the term of such instruments so as to provide a constant rate of charge on the
outstanding balance.
Finance costs of debt are included in the profit and loss account within
interest payable and similar charges. Finance costs of non-equity shares are
accounted for in the profit and loss account as an appropriation of profits
and are included within non-equity shareholders' funds in the balance sheet.
Debt and non-equity shares are initially recorded at the net proceeds
received. Each period the carrying value is increased by the finance cost
(excluding dividends payable in the case of non-equity shares) and reduced by
any repayments made.
m) Pure research
Pure research expenditure is written off as incurred.
2 Turnover
All turnover is derived from the group's principal activity. The analysis of
turnover by destination is as follows:
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
United Kingdom 4,379 5,050 2,532
Rest of Europe 965 537 366
North America 12,964 10,210 7,862
South America 389 52 344
Asia 74 694 460
Africa 4 92 97
Australia 118 230 48
---------- ---------- ----------
18,893 16,865 11,709
---------- ---------- ----------
---------- ---------- ----------
12
<PAGE>
Notes to accounts
31 March 1998
---------- ---------- ----------
13
<PAGE>
Notes to accounts
31 March 1998
2 Turnover (continued)
The analysis of turnover by origin is as follows:
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
United Kingdom 7,582 7,243 4,438
United States 11,311 9,622 7,271
---------- ---------- ----------
18,893 16,865 11,709
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
3 Other operating expenses (net)
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Distribution costs 2,307 2,677 2,345
Administrative expenses 1,916 1,833 1,677
---------- ---------- ----------
4,223 4,510 4,022
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
4 Interest receivable and similar income
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Bank interest 24 40 17
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
5 Interest payable and similar charges
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Bank loans and overdrafts 6 17 5
Other loans - 9 44
---------- ---------- ----------
6 26 49
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
14
<PAGE>
Notes to accounts
31 March 1998
6 Profit on ordinary activities before taxation
Profit on ordinary activities before taxation is
stated after crediting:
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Profit on disposal of fixed assets (141) (77) (241)
---------- ---------- ----------
and after charging:
Depreciation and amounts written off tangible fixed assets 1,897 1,477 1,069
Operating lease rentals for plant and machinery 133 205 192
Auditors' remuneration
- - audit fees 25 20 20
- - other 15 13 10
Research and development expenditure 284 482 349
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
7 Staff costs
Particulars of employees (including executive directors) are as shown below:
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Wages and salaries 2,472 2,592 2,081
Social security costs 360 390 436
Other pension costs 59 62 47
---------- ---------- ----------
2,891 3,044 2,564
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
15
<PAGE>
Notes to accounts
31 March 1998
7 Staff costs (continued)
The average monthly number of persons employed by the group during the year
was as follows:
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
Number Number Number
<S> <C> <C> <C>
Production 79 69 38
Administration 41 30 30
Sales and distribution 34 37 30
---------- ---------- ----------
154 136 98
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Directors' remuneration
Directors' remuneration in respect of directors of the company was as follows:
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Emoluments 332 323 246
Company contributions to money purchase schemes 12 11 4
---------- ---------- ----------
344 334 250
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
In addition to the above, (pound)10,000 was paid to Murray Johnstone for the
services of R A Collins as a director of the company (1997: (pound)10,000 and
1996: (pound)10,000 in respect of J N Diggins), and (pound)nil was paid to
Data Acquisition Limited for the services of J E Lawrence as a director and
chairman of the company (1997: (pound)14,000 and 1996:
(pound)5,000).
16
<PAGE>
Notes to accounts
31 March 1998
Directors' remuneration shown above included:
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Highest paid director:
Emoluments 96 93 99
Company contributions to money purchase schemes 2 2 1
---------- ---------- ----------
98 95 100
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
7 Staff costs (continued)
Pensions
The number of directors who were members of pension schemes was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
Number Number Number
<S> <C> <C> <C>
Money purchase schemes 4 4 4
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The group does not operate a long term incentive scheme.
8 Tax on profit on ordinary activities The tax charge comprises:
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
UK Corporation tax at 31% (1997: 33% and 1996: 33% ) 332 231 -
Adjustment in respect of prior year 55 - -
Deferred taxation (106) (62) (165)
---------- ---------- ----------
281 169 (165)
Overseas taxation 446 288 499
Adjustment in respect of prior year 75 - -
---------- ---------- ----------
802 457 334
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Deferred tax has been calculated on a full provision basis.
17
<PAGE>
Notes to accounts
31 March 1998
9 Dividends paid and proposed on non-equity shares and finance costs of
non-equity shares
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
8% preference dividend:
Paid 85 85 -
Proposed 43 85 -
CPPO dividend:
Paid 12 - -
---------- ---------- ----------
140 170 -
---------- ---------- ----------
---------- ---------- ----------
Other finance costs of non-equity shares 2 2 160
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Other finance costs of non-equity shares comprise the appropriation of
dividends and premiums payable in the future accounting periods so as to
provide a constant rate of charge on the outstanding amount.
(pound)42,000 of the final proposed dividend has been waived by the shareholders
(1997: (pound)nil, 1996: (pound)nil).
10 Intangible assets
Group
<TABLE>
<CAPTION>
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Development expenditure 450 -
---------- ----------
---------- ----------
</TABLE>
Development expenditure represents identifiable expenditure on projects where
the directors are satisfied as to the technical, commercial and financial
viability.
18
<PAGE>
Notes to accounts
31 March 1998
11 Tangible fixed assets
Group
<TABLE>
<CAPTION>
Plant,
Hire machinery
Hire equipment and
equipment spares equipment Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Cost
Beginning of year 6,847 207 311 7,365
Additions 2,419 - 399 2,818
Disposals (177) - (50) (227)
Transfers to stock - (207) - (207)
Exchange adjustment (11) - (1) (12)
---------- ---------- ---------- ----------
End of year 9,078 - 659 9,737
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Depreciation
Beginning of year 2,353 65 56 2,474
Charge 1,767 - 130 1,897
Disposals (46) - (16) (62)
Transfers to stock - (65) - (65)
Exchange adjustment (6) - - (6)
---------- ---------- ---------- ----------
End of year 4,068 - 170 4,238
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net book value
Beginning of year 4,494 142 255 4,891
---------- ---------- ---------- ----------
End of year 5,010 - 489 5,499
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
19
<PAGE>
Notes to accounts
31 March 1998
12 Investments
<TABLE>
<CAPTION>
Company
---------------------------
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Cost of shareholdings in subsidiary undertakings 260 260
Loans to subsidiary undertakings 1,941 1,941
Other 176 26
---------- ----------
2,377 2,227
---------- ----------
---------- ----------
</TABLE>
Fixed asset investments in subsidiary undertakings represent the cost of the
company's investment in its wholly owned subsidiary undertakings, Light &
Sound Design Limited and Light & Sound Design, Inc., registered in England and
Wales and California USA respectively. The principal activities of these
companies are the production and hire of lighting equipment and the provision
of ancillary services. The results of the wholly owned subsidiary undertakings
are included in these consolidated accounts from the date of acquisition.
The loans to the subsidiary undertakings were provided on their acquisition
and are stated at cost.
Other investment
<TABLE>
<CAPTION>
(pound)'000
<S> <C>
Cost
Beginning of year 26
Addition 150
----------
End of year 176
----------
----------
</TABLE>
The addition in the year represents the group's investment in 25 per cent of
the share capital of Powerlight B.A.G., a company incorporated in Switzerland.
13 Stocks
<TABLE>
<CAPTION>
Group
---------------------------
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Raw materials and consumables 583 196
---------- ----------
</TABLE>
There is no material difference between the balance sheet value of stocks and
their replacement cost.
20
<PAGE>
Notes to accounts
31 March 1998
14 Debtors
<TABLE>
<CAPTION>
Group Company
----------------------------- ----------------------------
1998 1997 1998 1997
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Amounts falling due within one year:
Trade debtors 1,053 752 - -
Amounts owed by group undertakings - - 479 694
Prepayments and accrued income 592 704 7 15
Amounts falling due after more than one year:
ACT recoverable 11 21 11 -
---------- ---------- ---------- ----------
1,656 1,477 497 709
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
15 Creditors: Amounts falling due within one year
<TABLE>
<CAPTION>
Group Company
----------------------------- ----------------------------
1998 1997 1998 1997
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Bank overdraft 513 - - -
Trade creditors 1,144 708 - -
ACT on proposed dividend 11 21 11 21
Other creditors
- - Corporation tax payable 723 284 31 -
- - Social security and PAYE 52 41 - -
- - VAT 57 15 - -
Accruals and deferred income 513 1,727 13 12
Proposed dividend 43 85 43 85
---------- ---------- ---------- ----------
3,056 2,881 98 118
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The bank overdraft is secured via fixed and floating charges on certain assets
of the company.
16 Provisions for liabilities and charges
The group's liability to deferred taxation is as follows:
Deferred taxation on:
<TABLE>
<CAPTION>
Group
----------------------------
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Accelerated capital allowances 353 467
---------- ----------
---------- ----------
</TABLE>
21
<PAGE>
Notes to accounts
31 March 1998
16 Provisions for liabilities and charges (continued)
The movement on deferred taxation comprises:
<TABLE>
<CAPTION>
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Beginning of year 467 559
Arising on acquisitions of subsidiary undertakings - -
Credited to profit and loss account (106) (62)
Exchange movement (8) (30)
---------- ----------
End of year 353 467
---------- ----------
---------- ----------
</TABLE>
There was no unprovided deferred taxation for the company or group at the end
of either year.
17 Called-up share capital
<TABLE>
<CAPTION>
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Authorised
Equity:
319,445 ordinary shares of 10p each 32 32
Non-equity:
305,555 variable rate cumulative participating preferred ordinary
shares of 10p each 30 30
2,125,000 cumulative redeemable preference shares of 50p each 1,063 1,063
---------- ----------
1,125 1,125
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Allotted, called-up and fully paid
Equity-
258,333 ordinary shares of 10p each 26 26
Non-equity-
305,555 variable rate cumulative participating preferred ordinary shares of 10p 30 30
each 2,125,000 cumulative redeemable preference shares of 50p each 1,063 1,063
---------- ----------
1,119 1,119
---------- ----------
---------- ----------
</TABLE>
22
<PAGE>
Notes to accounts
31 March 1998
17 Called-up share capital (continued)
Ordinary shares
The variable rate cumulative participating preferred ordinary (CPPO) shares
carry the same voting rights as the ordinary shares.
The shares also attract a participating dividend which is dependent on the
pre-tax profits of the group, payable on a varying percentage basis at the
following levels:
Per cent
Year ended
31 March 1998 5
31 March 1999 7.5
thereafter 10
----------
Preference shares
The cumulative redeemable preference shares are to be redeemed in tranches
over the period 30 September 1998 to 31 March 2002, at a total premium of
(pound)212,500. The shares are the first to be redeemed on liquidation or
capital reduction, at (pound)1.10 per share, plus an accrual for the
outstanding preference dividends. Dividends on these shares are cumulative and
are payable at a rate of 8p per share.
The dividends on non-equity shares have been appropriated in the profit and
loss account, so as to spread the total financing cost over the anticipated
term of issue. This treatment is in accordance with Financial Reporting
Standard Number 4.
18 Reserves
Of the total reserves shown in the group's balance sheet, the following
amounts are regarded as distributable or otherwise:
<TABLE>
<CAPTION>
1998 1997
----------------------------- ----------------------------
Group Company Group Company
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Distributable
- - profit and loss account 2,178 18 922 60
Non-distributable
- - share premium account 1,570 1,570 1,570 1,570
- - capital reserve 989 - 989 -
- - capital redemption reserve 69 69 69 69
- - foreign currency translation reserve (172) - (98) -
---------- ---------- ---------- ----------
Total reserves 4,634 1,657 3,452 1,699
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
23
<PAGE>
Notes to accounts
31 March 1998
18 Reserves (continued)
<TABLE>
<CAPTION>
Foreign
Share Capital currency Profit and
premium redemption Capital translation loss
account reserve reserve reserve account Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
Company
Beginning of year 1,570 69 - - 60 1,699
(Loss) profit for the
financial year - - - - (44) (44)
Other finance costs of
non-equity shares (note 9) - - - - 2 2
---------- ---------- ---------- ---------- ---------- ----------
End of year 1,570 69 - - 18 1,657
---------- ---------- ---------- ---------- ---------- ----------
Group
Beginning of year 1,570 69 989 (98) 922 3,452
Profit for the financial year - - - - 1,211 1,211
Other finance costs of
non-equity shares (note 9) - - - - 2 2
Loss on foreign currency
translation - - - (74) - (74)
---------- ---------- ---------- ---------- ---------- ----------
End of year 1,570 69 989 (172) 2,135 4,591
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
24
<PAGE>
Notes to accounts
31 March 1998
19 Reconciliation of movements in shareholders' funds
<TABLE>
<CAPTION>
1998 1997
----------------------------- ----------------------------
Group Company Group Company
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Profit for the financial year 1,353 98 953 495
Dividends paid and proposed on non-equity shares and
other finance costs (142) (142) (172) (172)
---------- ---------- ---------- ----------
1,211 (44) 781 323
Other finance costs of non-equity shares 2 2 2 2
Issue of share capital - - 8 8
Redemption of shares - - (69) (69)
Movement on foreign currency translation (74) - (221) -
---------- ---------- ---------- ----------
Net addition to shareholders' funds 1,139 (42) 501 264
Opening shareholders' funds 4,571 2,818 4,070 2,554
---------- ---------- ---------- ----------
Closing shareholders' funds 5,710 2,776 4,571 2,818
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
20 Cash flow information
a) Reconciliation of operating profit to operating cash flows
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Operating profit 2,137 1,396 566
Depreciation charges 1,897 1,477 1,069
Profit on sale of tangible fixed assets (141) (77) (241)
Increase in stocks (182) (106) 5
(Increase) decrease in debtors (216) 518 (1,415)
(Decrease) increase in creditors (774) 183 1,361
---------- ---------- ----------
Net cash inflow from operating activities 2,721 3,391 1,345
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
All operating cash flows are derived from continuing operations.
25
<PAGE>
Notes to accounts
31 March 1998
20 Cash flow information (continued)
b) Analysis of cash flows
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Returns on investments and servicing of finance
Interest received 23 36 17
Interest paid - (36) (49)
Preference dividends paid (97) (85) -
---------- ---------- ----------
Net cash outflow (74) (85) (32)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Taxation
Overseas tax paid (477) (320) (381)
---------- ---------- ----------
Net cash outflow (477) (320) (381)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Capital expenditure and financial investment
Research and development expenditure (450) -
Purchase of tangible fixed assets (2,818) (2,126) (1,580)
Purchase of trade investments (150) (26) -
Sale of tangible fixed assets 241 325 367
---------- ---------- ----------
Net cash outflow (3,177) (1,827) (1,213)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
26
<PAGE>
Notes to accounts
31 March 1998
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Acquisitions and disposals
Purchase of subsidiary undertaking - - (2,149)
---------- ---------- ----------
Net cash outflow - - (2,149)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
20 Cash flow information (continued)
b) Analysis of cash flows (continued)
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Financing
Issue of share capital - 8 2,750
Redemption of shares - (69) -
Repayment of secured loan - (500) -
New secured loan - - 500
---------- ---------- ----------
Net cash (outflow) inflow - (561) 3,250
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
c) Analysis and reconciliation of net debt
<TABLE>
<CAPTION>
1 April Exchange 31 March
1996 Cash flow movement 1997
<S> <C> <C> <C> <C>
Cash in hand, at bank 860 598 (129) 1,329
Loan stock (500) 500 - -
---------- ---------- ---------- ----------
Net funds 360 1,098 (129) 1,329
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
1 April Exchange 31 March
1997 Cash flow movement 1998
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Cash in hand, at bank 1,329 (494) (80) 755
Bank overdraft - (513) - (513)
---------- ---------- ---------- ----------
Net funds 1,329 (1,007) (80) 242
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
27
<PAGE>
Notes to accounts
31 March 1998
<TABLE>
<CAPTION>
52 weeks 52 weeks 50 weeks
ended ended ended
31 March 31 March 31 March
1998 1997 1996
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
(Decrease) increase in cash in the year (1,007) 1,098 320
Cash outflow from decrease in debt financing - (500) 500
---------- ---------- ----------
Change in net funds resulting from cash flows (1,007) 598 820
Translation difference (80) (129) 40
---------- ---------- ----------
Movement in net funds in year (1,087) 469 860
Net funds, beginning of year 1,329 860 -
---------- ---------- ----------
Net funds, end of year 242 1,329 860
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
28
<PAGE>
Notes to accounts
31 March 1998
21 Guarantees and other financial commitments
a) Capital commitments
At the end of the year, capital commitments were:
<TABLE>
<CAPTION>
Group
----------------------------
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Contracted for but not provided for - 81
---------- ----------
---------- ----------
</TABLE>
21 Guarantees and other financial commitments (continued)
b) Lease commitments
The minimum annual rentals under non-cancellable operating leases are:
<TABLE>
<CAPTION>
1998 1997
------------------------------ ----------------------------
Land and Land and
buildings Other buildings Other
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Group
Operating leases which expire
- - within 1 year - 17 - 129
- - between 2 and 5 years - 102 - 135
- - after 5 years 120 - 110 7
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
22 Related party transactions
The company has traded with the following related parties; Powerlight B.A.G. a
company in which Light & Sound Design Holdings Limited holds 25% of the share
capital and Icon Japan Limited a company in which Light & Sound Design
Holdings Limited holds 25% of the share capital.
During the year the company made sales of (pound)667,000 to these companies
and made purchases of (pound)63,000.
All sales and purchases are made at arms length.
29
<PAGE>
Notes to accounts
31 March 1998
23 Differences between accounting principles generally accepted in the
United Kingdom and the United States
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United Kingdom (UK GAAP),
which differ in certain material respects from generally accepted accounting
principles in the United States (US GAAP). The effects of the significant
differences in the determination of retained profit and equity shareholders'
funds are set out below.
Principal activities
The principal activities of the group are the production and hire of lighting
equipment and the provision of ancillary services.
Use of estimates
The preparation of consolidated financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Goodwill
Under UK GAAP negative goodwill arising on the acquisition of subsidiaries and
associates is credited immediately to reserves and is considered to be
non-distributable. Under US GAAP negative goodwill is allocated to reduce
proportionately the values assigned to non-current assets in determining their
fair values with any remainder being classified as a deferred credit and
amortised to income over the period estimated to be benefited.
<TABLE>
<CAPTION>
52 weeks 52 weeks
ended ended
31 March 31 March
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Retained profit under UK GAAP 1,211 781
Revaluation in depreciation due to capital reserve on acquisition 148 148
---------- ----------
Net income as adjusted in accordance with US GAAP 1,359 929
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
31 March 31 March
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Equity shareholders' funds under UK GAAP 3,359 2,138
Reduction in accumulated depreciation due to capital reserve on acquisition 438 290
Assignment of capital reserve on acquisition to non-current assets (989) (989)
---------- ----------
Equity shareholders' funds as adjusted in accordance with US GAAP 2,808 1,439
---------- ----------
---------- ----------
</TABLE>
30
<PAGE>
Notes to accounts
31 March 1998
31
<PAGE>
Notes to accounts
31 March 1998
23 Differences between accounting principles generally accepted in the United
Kingdom and the United States (continued)
Consolidated statement of cash flows
The consolidated cash flow statements prepared in accordance with UK GAAP
presents substantially the same information as that required under US GAAP. UK
GAAP and US GAAP differ, however, with regard to the classification of certain
items within the statements and as regards to the definition of cash and cash
equivalents.
The categories of consolidated cash flow activity under US GAAP can be
summarised as follows:
<TABLE>
<CAPTION>
52 weeks 52 weeks
ended ended
31 March 31 March
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Net cash provided by operating activities 2,267 3,071
Net cash utilised by investing activities (3,257) (1,956)
Net cash provided by financing activities (97) (646)
---------- ----------
Net (decrease) increase in cash and cash equivalents (1,087) 469
Cash and cash equivalents at beginning of year 1,329 860
---------- ----------
Cash and cash equivalents at end of year 242 1,329
---------- ----------
---------- ----------
</TABLE>
Lease commitments
<TABLE>
<CAPTION>
1998 1997
------------------------------ ----------------------------
Land and Land and
buildings Other buildings Other
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Group
Operating leases which expire
- - within 1 year - 17 - 129
- - between 1 and 2 years - 55 - 43
- - between 2 and 3 years - 25 - 55
- - between 3 and 4 years - 12 - 25
- - between 4 and 5 years - 10 - 12
- - after 5 years 120 - 110 7
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
32
<PAGE>
Addendum II.
Pro forma combined financial data
The following unaudited pro forma combined statements of operations for the year
ended December 31, 1997 (March 31, 1998 for Holdings), and the period January 1,
1998 to June 30, 1998 (June 19, 1998 for Holdings) give effect to the
acquisition of Holdings by the Company if such acquisition occurred on the first
day of the period covered by the statement of operations. The pro forma
financial information is based on the historical financial statements of the
Company and the historical results of operations of Holdings adjusted to conform
to generally accepted accounting principles of the United States and have been
translated into United States Dollars based upon appropriate exchange rates. The
unaudited pro forma combined statements of operations give effect to the
combination under the purchase method of accounting.
The unaudited pro forma combined statements of operations have been prepared
by the management of the Company and Holdings based upon historical
information included herein and other financial information. These pro forma
statements do not purport to be indicative of the results of operations
which would have been achieved had the transaction described above taken place
at the dates indicated and should not be construed as representative of the
Company's financial position or results of operations for any future date or
period.
The effect of the acquisition, which closed on June 19, 1998, was reflected in
the Company's June 30, 1998 Balance Sheet, which was included in the Form 10-Q
for the period.
33
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
Unaudited Pro Forma Combined Statements of Operations
($ In thousands)
<TABLE>
<CAPTION>
PRG Holdings
For the year ended For the year ended
December 31, 1997 March 31, 1998 Pro Forma Company
Adjustments Pro Forma
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
$ 75,180 $ 31,638 $ $106,818
Direct production expenses:
Direct production costs 46,131 18,133 64,264
Depreciation expense 6,181 2,607 8,788
------------------------------------------------------------------
52,312 20,740 73,052
------------------------------------------------------------------
Gross profit 22,868 10,898 33,766
Selling, general and administrative expenses 16,185 6,854 23,039
Other depreciation and amortization 2,182 518 (1) 300 3,000
Non recurring compensation expense 2,125 -- 2,125
------------------------------------------------------------------
Operating profit 2,376 3,526 300 5,602
Interest expense 3,956 10 (3) 1,161 5,127
Interest (income) (117) (40) (157)
------------------------------------------------------------------
Income (loss) from continuing operations before income (1,463) 3,556 (1,461) 632
taxes, extraordinary item and minority interest
Provision for income taxes 392 1,343 1,735
------------------------------------------------------------------
Income (loss) from continuing operations (1,855) 2,213 (1,461) (1,103)
Discontinued operations:
Loss from operations of discontinued
Themed Attraction Permanent Installation Business (5,302) -- (5,302)
------------------------------------------------------------------
Income (loss) before minority interest and extraordinary item (7,157) 2,213 (1,461) (6,405)
Minority interest (2) 126 (126)
Extraordinary item (614) (614)
------------------------------------------------------------------
Net income (loss) $ (7,771) $ 2,213 $(1,587) $ (7,145)
------------------------------------------------------------------
------------------------------------------------------------------
</TABLE>
1. To record the estimated goodwill amortization attributable to the
transaction. Goodwill is amortized over a period of twenty five years.
2. To record minority interest for the year.
3. To record the effect of interest expense on borrowings incurred by the
Company to fund the acquisition.
34
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
Unaudited Pro Forma Combined Statements of Operations
($ In thousands)
<TABLE>
<CAPTION>
PRG Holdings
For the six months For the period
ended June 30, 1998 January 1, 1998 to Pro Forma Company
June 19, 1998 Adjustments Pro Forma
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
$ 55,365 $ 13,551 $ $ 68,916
Direct production expenses:
Direct production costs 32,548 7,477 40,025
Depreciation expense 4,761 1,481 6,242
---------------------------------------------------------------------
37,309 8,958 46,267
---------------------------------------------------------------------
Gross profit 18,056 4,593 22,649
Selling, general and administrative expenses 13,463 3,518 16,981
Other depreciation and amortization 2,247 (4) 138 2,385
---------------------------------------------------------------------
Operating profit 2,346 1,075 (138) 3,283
Interest expense 6,233 3 (6) 532 6,768
Interest (income) (433) -- (433)
---------------------------------------------------------------------
Income (loss) before income taxes and minority interest (3,454) 1,072 (670) (3,052)
Provision for income taxes 193 433 626
---------------------------------------------------------------------
Income (loss) before minority interest (3,647) 639 (670) (3,678)
Minority interest (11) (5) (21) (32)
---------------------------------------------------------------------
Net income (loss) $ (3,658) $ 639 $ (691) $ (3,710)
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>
4. To record the estimated goodwill amortization attributable to the
transaction. Goodwill is amortized over a period of twenty five years.
5. To record minority interest for the year.
6. To record the effect of interest expense on borrowings incurred by the
Company to fund the acquisition.
35
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