SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): March 18, 1999
CHESAPEAKE CORPORATION
(Exact Name of Registrant as Specified in Charter)
Virginia 1-3203 54-0166880
-------- ------ -----------
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
1021 East Cary Street, Richmond, VA 23219
-----------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (804)697-1000
Page 1 of 9 pages. Exhibit Index appears on page 2.
Item 7 of the Current Report on Form 8-K dated March 18,
1999, filed by Chesapeake Corporation (the "Company" or
"Chesapeake") on April 2, 1999, is hereby amended as set forth
below.
Item 7: Financial Statements, Pro Forma Financial Information
and Exhibits.
a) Financial Statements of Business Acquired.
The consolidated financial statements of Field
Group plc as of April 4, 1999, and for the year
then ended are filed herewith as Exhibit 99.1.
b) Pro Forma Financial Information.
The unaudited Pro Forma Condensed Consolidated
Statements of Operations for the three months
ended March 31, 1999, and for the year ended
December 31, 1998 are set forth below under the
heading Pro Forma Financial Information.
c) Exhibits.
Number Exhibit
------ -------
99.1 Consolidated financial statements of
Field Group plc as of April 4, 1999, and
for the year then ended.
-2-
PRO FORMA FINANCIAL INFORMATION
On March 18, 1999, Chesapeake completed its acquisition of
substantially all of the outstanding capital shares of Field
Group plc ("Field Group"), a European specialty packaging company
headquartered in the United Kingdom. The acquisition was
effected through a tender offer by Chesapeake UK Acquisitions
plc, a wholly-owned subsidiary of Chesapeake, for all of the
outstanding capital shares of Field Group at a purchase price of
(pound)3.60 per share. As of April 30, 1999, Chesapeake acquired
compulsorily all remaining outstanding shares of Field Group.
The final purchase price of approximately US $367.6 million was funded
through a combination of approximately $323.6 million in
borrowings under a new credit facility, $22.0 million in
unsecured loan notes ("Loan Notes"), and $22.0 million in excess
cash. Including assumed debt of approximately $50 million, the
tender offer reflected a total enterprise value for Field Group
of approximately US $417 million.
The new credit facility ("Credit Facility") consists of a
$200 million 364-day revolving credit facility (which, at
Chesapeake's option, may be converted into a two-year term loan)
and a $250 million five-year revolving credit facility.
Borrowings under the Credit Facility bear interest and incur
facility fees at a variable rate per annum, which are initially
equal to an all-in cost of LIBOR plus 1.0%. The Credit Facility
contains customary representations, warranties and covenants,
including covenants that require Chesapeake to maintain certain
financial ratios. In addition, the Credit Facility includes a
provision that requires Chesapeake to apply no less than 50% of
the net proceeds of any sale of its timberlands to permanently
extinguish borrowings under the 364-day revolving credit
facility. The Loan Notes bear interest at a variable rate per
annum equal to the LIBOR rate for six month sterling deposits,
and are redeemable in whole or in part at the option of the
holder on each biannual interest payment date commencing March
31, 2000. If not earlier redeemed, the Loan Notes mature on
September 30, 2006.
The following unaudited Pro Forma Condensed Consolidated
Statements of Operations for the three months ended March 31,
1999, and for the year ended December 31, 1998, illustrate the
effect of the acquisition of Field Group as if the acquisition
had occurred as of January 1, 1998. An unaudited Pro Forma
Condensed Consolidated Balance Sheet is not presented as the
acquisition was already reflected in the Company's historical
balance sheet as of
-3-
March 31, 1999, as previously filed with the Company's Quarterly
Report on Form 10-Q for the three months ended March 31, 1999.
The unaudited Pro Forma Condensed Consolidated Statements of
Operations give effect to the following:
a) The acquisition of Field Group for a purchase price of $367.6
million.
b) The financing of the acquisition with borrowings on the
Credit Facility, Loan Notes and excess cash.
These unaudited Pro Forma Condensed Consolidated Statements
of Operations should be read in conjunction with the historical
financial statements of Chesapeake and Field Group. The
historical financial statements for Chesapeake are contained in
the Company's Quarterly Report on Form 10-Q for the three months
ended March 31, 1999, and in the Company's Annual Report on Form
10-K for the year ended December 31, 1998. The historical
financial statements for Field Group for the year ended April 4,
1999, are filed herein as Exhibit 99.1.
For pro forma presentation, Field Group's historical
consolidated statements of operations have been conformed to
correspond to Chesapeake's calendar year. The unaudited Pro
Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1998, include Field Group's historical results
for the fiscal year ended April 4, 1999, as adjusted by deducting
the results for three months ended April 4, 1999, and adding the
results for the comparable period from 1998. The unaudited Pro
Forma Condensed Consolidated Statement of Operations for the
three months ended March 31, 1999, include Field Group's
historical results for three months ending April 4, 1999.
The acquisition has been accounted for using the purchase
method. The results of operations of Field Group are included in
Chesapeake's historical consolidated statement of income since
the date of acquisition, March 18, 1999.
The unaudited Pro Forma Condensed Consolidated Statements of
Operations are presented for illustrative purposes only and are
not intended to be indicative of actual results that may have
been achieved had the transaction occurred as of the date
indicated above nor do they purport to indicate results which may
be attained in the future.
-4-
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(In millions, except per share amounts)
(unaudited)
Historical
------------------------------
Field
Group
Chesapeake Field 3/19/99- Pro Forma
Corporation Group 4/4/99(1) Adjustments Pro Forma
--------------------------------------------------
Net sales $239.1 $94.8 ($15.4) $ - $318.5
Costs and expenses:
Cost of products sold 170.9 83.6 (11.7) (5.0)(6) 237.8
Depreciation and cost
of timber harvested 17.1 6.5 (1.2) (0.1)(3) 22.3
Selling, general and
administrative
expenses 34.9 9.1 (1.4) - 42.6
------ ------ ------ ------ ------
Income (loss)
from operations 16.2 (4.4) (1.1) 5.1 15.8
Other income, net 2.9 (1.0) 0.5 (0.9)(2) 1.5
Interest expense, net (6.0) (0.6) 0.4 (5.5)(4) (11.5)
0.2 (5)
------ ------ ------ ------ ------
Income (loss) before
income taxes 13.1 (6.0) (0.2) (1.1) 5.8
Income taxes 4.6 (2.3) (0.1) (0.1)(7) 2.1
------ ------ ------ ------ ------
Net income (loss) $ 8.5 ($3.7) ($0.1) ($1.0) $ 3.7
====== ====== ====== ====== ======
Basic earnings per
share $ 0.40 $ 0.17
====== ======
Diluted earnings per
share $ 0.39 $ 0.17
====== ======
-5-
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(In millions, except per share amounts)
(unaudited)
Historical
------------------------
Chesapeake Field Pro Forma
Corporation Group Adjustments Pro Forma
--------------------------------------------
Net sales $950.4 $410.5 $ - $1,360.9
Costs and expenses:
Cost of products sold 679.8 316.1 - 995.9
Depreciation and cost
of timber harvested 59.7 24.7 (0.2)(3) 84.2
Selling, general and
administrative expenses 132.9 35.7 - 168.6
Restructuring/special
charges 11.8 - - 11.8
------ ------ ------ --------
Income from operations 66.2 34.0 0.2 100.4
Other income, net 8.5 (1.7) (3.6)(2) 3.2
Interest expense, net (18.9) (2.7) (21.9)(4) (42.7)
0.8(5)
------ ------ ------ --------
Income before income taxes
and cumulative effect of
accounting change 55.8 29.6 (24.5) 60.9
Income taxes 21.8 7.3 (6.3)(7) 22.8
------ ------ ------ --------
Income before cumulative
effect of accounting
change $ 34.0 $ 22.3 ($18.2) $ 38.1
====== ====== ====== ========
Earnings per share:
Basic earnings per share
before cumulative effect of
accounting change $ 1.60 $ 1.80
====== ======
Diluted earnings per share
before cumulative effect of
accounting change $ 1.57 $ 1.76
====== ======
-6-
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
1. This adjustment reflects the elimination of the historical
results of operations of Field Group from March 19, 1999 to April
4, 1999, which are included in the historical consolidated results
of operations for the Company.
2. Other income, net was adjusted to reflect the amortization of
the excess of consideration over net assets acquired ("goodwill")
using a straight-line method over an assumed life of 40 years.
Additionally, Field Group's historical goodwill amortization
period was adjusted from 20 to 40 years.
The following is a calculation of the estimated excess of
consideration over net assets acquired (in millions):
Total consideration $367.6
Less - Historical net book value
of net assets acquired (197.2)
Preliminary purchase accounting adjustments:
Fair value adjustment of property, plant
and equipment 2.2
------
Estimated excess of consideration over net
assets acquired $172.6
======
3. The pro forma adjustment to depreciation reflects a reduction
in depreciation arising from a $2.2 million decrease in the book
value of property, plant and equipment to reflect the appraised
fair value.
4. This adjustment represents interest expense on additional
borrowings of $345.6 million under the Credit Facility and Loan
Notes at a weighted-average interest rate of 6.0% and a reduction
of interest income for excess cash used of $22 million at an
average investment rate of 5.25%.
5. This adjustment reflects additional amortization of financing
costs of $3.0 million over the life of the related debt.
-7-
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS, Continued
6. In connection with the acquisition, Field Group incurred
certain one-time related expenses totaling $5.0 million, which are
added back to the results of operations in this adjustment.
7. The effective income tax rate is estimated to be 37.4% for
the year ended December 31, 1998, and 35.5% for the quarter ended
March 31, 1999. The effective rate is lower than Chesapeake's
historical rate for the year ended December 31, 1998, due to the
lower effective tax rates in the countries in which Field Group
does business.
Additionally, in the quarter ended March 31, 1999, and the
year ended December 31, 1998, Field Group incurred nonrecurring
charges of $3.5 ($2.3 million after taxes or $0.11 per diluted
share) and $3.5 million ($2.2 million after taxes or $0.10 per
diluted share), respectively, related to work force reductions.
Such amounts are not directly related to the acquisition and are
therefore not reflected in the accompanying unaudited Pro Forma
Condensed Consolidated Statements of Operations.
-8-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CHESAPEAKE CORPORATION
(Registrant)
Date: May 28, 1999 BY: /s/ William T. Tolley
William T. Tolley
Senior Vice President -
Finance & Chief
Financial Officer
-9-
Exhibit 99.1
Field Group plc
Annual Report and Accounts
52 Weeks ended 4 April 1999
Report of Independent Accountants
To the Board of Directors and Shareholders of Field Group plc and
Subsidiaries
In our opinion, the accompanying consolidated balance sheet and
the related consolidated profit and loss account, statement of
total recognized gains and losses, and statement of cash flows
present fairly in all material respects, the financial position
of Field Group plc and its subsidiaries at 4 April 1999, and the
results of their operations and their cash flows for the year
ended 4 April 1999, in conformity with accounting principles
generally accepted in the United Kingdom. These financial
statements are the responsibility of Field'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 Kingdom which do not differ in any
material respect from auditing standards generally accepted in
the United States. Those standards 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 make by management, and evaluating the overall
financial statement presentation. We believe our audits provide
a reasonable basis for the opinion expressed above.
Accounting principles generally accepted in the United Kingdom
vary in certain significant respects from accounting principles
generally accepted in the United States. The application of the
latter would have affected the determination of consolidated net
income expressed in pounds sterling for the year ended 4 April
1999 and the determination of consolidated shareholders' funds
and consolidated financial position also expressed in pounds
sterling at 4 April 1999 to the extent summarised in Note 34 to
the consolidated financial statements.
/s/PricewaterhouseCoopers
London, England
26 May 1999
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 4 APRIL 1999
52 weeks ended
4 April 1999
Note L'000
--------------
1 Turnover
Continuing operations 232,022
Acquisitions 9,909
--------------
241,931
--------------
2 Operating costs
Continuing operations (214,266)
Acquisitions (9,068)
--------------
(223,334)
--------------
Operating profit before exceptional costs
Continuing operations 17,756
Acquisitions (after L.193m goodwill
amortisation) 841
--------------
18,597
4 Exceptional costs - continuing operations (9,570)
--------------
Total operating profit
Continuing operations 8,186
Acquisitions 841
--------------
9,027
6 Net interest payable and similar charges (1,579)
--------------
1 Profit on ordinary activities before taxation 7,448
7 Tax on profit on ordinary activities (2,732)
--------------
Profit attributable to shareholders 4,716
8 Dividends (2,194)
--------------
Retained profit for the financial period 2,522
==============
10 Earnings per 10p share
Basic 7.80p
==============
Diluted 7.76p
==============
10 Earnings per 10p share before exceptional
costs and goodwill amortisation
Basic 20.21p
==============
Diluted 20.11p
==============
The accompanying notes are an integral part of these
financial statements.
GROUP BALANCE SHEET
4 April 1999
Note L'000
------------
Fixed assets
11 Intangible assets 4,768
12 Tangible fixed assets 123,312
------------
128,080
------------
Current assets
14 Stocks 24,063
15 Debtors 40,483
Cash at bank and in hand 3,559
------------
68,105
------------
Creditors: amounts falling due within one year
16 Creditors (51,600)
17 Bank borrowings and finance lease obligations (29,897)
------------
(81,497)
------------
Net current liabilities (13,392)
------------
Total assets less current liabilities 114,688
------------
Creditors: amounts falling due after more than
one year
16 Creditors -
17 Bank borrowings and finance lease obligations (3,422)
19 Provisions for liabilities and charges (3,970)
------------
Net assets 107,296
============
Capital and reserves
20 Called up share capital 6,056
20 Shares to be issued 1,715
20 Share premium account 70,002
21 Other reserves 1,553
21 Profit and loss account 27,970
------------
Equity shareholders' funds 107,296
============
The accompanying notes are an integral part of these
financial statements.
COMPANY BALANCE SHEET
4 April 1999
Note
L'000
------------
Fixed assets
12 Tangible fixed assets 89,672
13 Investments 28,856
------------
118,528
------------
Current assets
14 Stocks 20,014
15 Debtors 33,814
Cash at bank and in hand 135
------------
53,963
------------
Creditors: amounts falling due within one year
16 Creditors (37,316)
17 Bank borrowings (10,127)
------------
(47,443)
------------
Net current assets 6,520
------------
Total assets less current liabilities 125,048
------------
Creditors: amounts falling due after more than
one year
16 Creditors -
19 Provisions for liabilities and charges (3,876)
------------
Net assets 121,172
============
Capital and reserves
20 Called up share capital 6,056
20 Shares to be issued 1,715
20 Share premium account 70,002
21 Other reserves 7,142
21 Profit and loss account 36,257
------------
Equity shareholders' funds 121,172
============
The accompanying notes are an integral part of these financial
statements.
CONSOLIDATED CASH FLOW STATEMENT
52 weeks ended
4 April 1999
Note L'000 L'000
------- --------------
Net cash inflow from continuing activities 31,835
Net cash inflow from acquisitions 2,774
--------------
27 Net cash inflow from operating activities 34,609
Returns on investments and servicing of
finance
Interest received 122
Interest paid (1,452)
Interest element of finance lease payments (220)
-------
Net cash outflow from returns on investments
and servicing of finance (1,550)
Taxation (7,382)
Capital expenditure
Purchase of tangible fixed assets (18,654)
Sale of tangible fixed assets 907
--------
Net cash outflow for capital expenditure (17,747)
Acquisitions
30 Purchase of subsidiary undertakings (8,670)
31 Net overdrafts acquired with subsidiary
undertakings (914)
--------
Net cash outflow for acquisitions (9,584)
Equity dividends paid to shareholders (6,411)
--------------
Net cash outflow before financing (8,065)
Financing
Ordinary share capital issued 1,876
New loans 9,496
Decrease in borrowings (8,066)
Capital element of finance lease payments (1,207)
--------
2,099
--------------
29 Decrease in net cash (5,966)
==============
The accompanying notes are an integral part of these
financial statements.
An analysis of net debt is provided in note 29.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
GROUP
52 weeks ended
4 April 1999
L'000
--------------
Profit attributable to shareholders 4,716
Currency translation differences on foreign
currency net investments offset in reserves (230)
--------------
Total recognised gains (losses) for the
period 4,486
==============
Note of Historical Cost Profits and Losses
L'000
--------------
Profit on ordinary activities before taxation 7,448
Differences between historical cost
depreciation charge and actual depreciation
charge calculated on the revalued amount (71)
--------------
Historical cost profit on ordinary activities
before taxation 7,377
==============
Historical cost profit on ordinary activities
after taxation and dividends 2,451
==============
Reconciliation of Movements in Shareholders' Funds
L'000
--------------
Profit attributable to shareholders 4,716
Dividends payable (2,194)
--------------
2,522
Other recognised gains and losses relating
to the period (230)
New share capital subscribed 1,876
New share capital issued in respect of
acquisitions 825
Goodwill on acquisitions written off -
Goodwill on prior year acquisitions written
back 1,177
--------------
Net addition to shareholders' funds 6,170
Opening shareholders' funds 101,126
--------------
Closing shareholders' funds 107,296
==============
The accompanying notes are an integral part of these
financial statements.
PRINCIPAL ACCOUNTING POLICIES
1 Accounting Convention
The financial statements have been prepared using the
historical cost convention as modified by the revaluation of
certain fixed assets and in accordance with applicable
accounting standards.
Compliance with SSAP 19 "Accounting for Investment
Properties" requires departure from the requirements of the
Companies Act 1985 relating to depreciation and amortisation
and an explanation of the departure is given in accounting
policy number 11 below.
2 Basis of Consolidation
The consolidated financial statements include the company
and all its subsidiary undertakings. As permitted by
section 230(1) of the Companies Act 1985, Field Group plc
has not presented its own profit and loss account.
On acquisition of a subsidiary, all of the subsidiary's
assets and liabilities that exist at the date of acquisition
are recorded at their fair values reflecting their condition
at that date. All changes to those assets and liabilities,
and the resulting gains and losses, that arise after the
Group has gained control of the subsidiary are charged to
the post acquisition profit and loss account.
3 Goodwill Arising on Consolidation
In accordance with FRS 10, goodwill which is the difference
between the amount paid on the acquisition of a business and
the aggregate fair value of its separate net assets, has
been capitalised and written off in equal annual
installments over its estimated economic life.
Prior to 4 April 1998 goodwill arising on acquisitions was
set-off directly against reserves. Goodwill previously
eliminated against reserves has not been reinstated on
implementation of FRS 10. Positive goodwill arising on
acquisition since 5 April 1998 is capitalised, classified as
an asset on the balance sheet and amortised over its useful
economic life up to a presumed maximum of 20 years. It is
reviewed for impairment at the end of the first financial
year following the acquisition and in other periods if
events or changes in circumstances indicate that the
carrying value may not be recoverable.
If a subsidiary is subsequently sold or closed, any goodwill
arising on acquisition that was written off directly to
reserves or that has not been amortised through the profit
and loss account is taken into account in determining the
profit or loss on sale or closure.
4 Financial Instruments
The Group uses derivative financial instruments to hedge its
exposures to fluctuations in interest and foreign exchange
rates. Instruments accounted for as hedges are designated as
a hedge at the inception of contracts. Receipts and payments
on interest rate instruments are taken to the profit and
loss account when incurred. Gains and losses on foreign
currency hedges are recognised on maturity of the underlying
transaction except for translational hedges of foreign
currency investments which are taken to reserves.
Short term debtors and creditors that meet the definition of
a financial asset or liability respectively have been
excluded from all FRS 13 analysis as permitted by the
Standard.
5 Foreign Currencies
Assets and liabilities of subsidiaries denominated in
foreign currencies are translated into sterling at rates of
exchange at the date of the balance sheet and the results
and cash flows of foreign subsidiary undertakings are
translated at the average rate of exchange for the period.
Differences on exchange resulting from the translation of
overseas assets, liabilities and related borrowings are
taken to reserves and shown in the statement of total
recognised gains and losses. All other foreign exchange
differences are taken to the profit and loss account in the
period in which they arise.
6 Turnover
Turnover, which excludes sales taxes, sales between group
companies and trade discounts, represents the invoiced value
of goods and services supplied.
7 Research and Development
Expenditure on research and development is written off to
the profit and loss account in the period in which it is
incurred.
8 Government Grants
Capital based grants and funding are carried in the balance
sheet as deferred income which is credited to the profit and
loss account at rates which reflect the expected useful
lives of the related assets. Amounts not yet released to
the profit and loss account are included in the balance
sheet as deferred income. Other grants are credited to the
profit and loss account to offset the matching expenditure.
9 Operating Leases
Leasing payments are charged to the profit and loss account
on a straight-line basis over the lease term.
10 Finance Leases
Leasing agreements which transfer to the Group substantially
all the benefits and risks of ownership are treated as if
the asset had been purchased outright. The assets are
included in fixed assets and the capital element of the
leasing commitments is shown as obligations under finance
leases. The lease rentals are treated as consisting of
capital and interest elements, and the interest element
calculated so as to give a constant periodic rate of charge
on the remaining balance outstanding at each accounting
period. Assets held under finance leases are depreciated
over the shorter of the lease terms and the useful lives of
equivalent owned assets.
11 Tangible Fixed Assets
Tangible fixed assets are stated at cost or valuation less
amounts provided for depreciation, except in the case of
freehold land which is not depreciated. The values of land
and buildings are reviewed on a regular basis.
Depreciation is calculated so as to write off the cost, or
valuation, of tangible fixed assets (excluding land and
investment properties), on a straight-line basis over their
estimated useful lives using the following percentages:
%
------------------------------------- ------
Freehold and long leasehold buildings 2-5
Plant and machinery 8-10
Computer equipment 20-33
Motor vehicles 25-33
In accordance with SSAP 19, investment properties are
revalued annually and the aggregate surplus or deficit is
transferred to a revaluation reserve. Any deficit on the
revaluation reserve is charged against the profit and loss
account. No provision is made for depreciation of freehold
investment properties or for amortisation of leasehold
investment properties held on leases having more than 20
years unexpired. This departure from the requirements of
the Companies Act 1985, which requires all properties to be
depreciated, is, in the opinion of the directors, necessary
for the accounts to show a true and fair view in accordance
with applicable accounting standards. The depreciation or
amortisation (which would, had the provisions of the Act
been followed, have reduced profit for the period) is only
one of the factors reflected in the annual valuation and the
amount attributable to this factor cannot reasonably be
separately identified or quantified.
12 Stocks and Work in Progress
Stocks and work in progress are stated at the lower of cost
and net realisable value. In general, cost is determined on
a first in first out basis and includes transport and
handling costs. In the case of manufactured products, cost
includes all direct expenditure and production overheads
based on the normal level of activity. Where necessary,
provision is made for obsolete, slow moving and defective
stocks.
13 Deferred Taxation
Deferred tax is provided using the liability method in
respect of all material timing differences, except where the
liability is not expected to crystallise in the foreseeable
future.
14 Pensions
The group operates a defined benefit pension scheme for
directors and employees in the United Kingdom. Pension
costs are charged to the profit and loss account so as to
spread the cost of pensions over the service lives of
employees in the scheme. Variations from the regular cost
are spread over the expected remaining service lives of
current employees in the scheme. The pension cost is
assessed in accordance with the advice of qualified
actuaries. The costs of defined contribution schemes are
charged directly to the profit and loss account as incurred.
15 Changes in presentation of financial information
FRS 10, `Goodwill and intangible assets', has been adopted
and, consequently, the balance on the goodwill reserve shown
in the financial statements for 4 April 1998 (included under
`other reserves') has been eliminated against the profit and
loss reserve under the transitional arrangements in FRS 10.
FRS 11, `Impairment of fixed assets and goodwill', came into
effect for these financial statements. The impairment loss
for the period is disclosed in Note 4.
FRS 12, `Provisions, contingent liabilities and contingent
assets', has been adopted. No restatement of prior year
information has been necessary, but additional disclosures
have been provided in accordance with the standard.
FRS 13, `Derivatives and other financial
instruments:disclosures', came into effect for companies with
accounting period ends on or after 23 March 1999.
Accordingly, the Group has adopted the provisions of FRS 13
and the disclosure requirements of the Standard have been
included in note 18 of these financial statements.
FRS 14, `Earnings per share', has been adopted and,
consequently, basic and diluted earnings per share have been
calculated in accordance with the new methodology in note 10
of these financial statements.
NOTES TO THE ACCOUNTS
1 Segmental and Geographic Information
52 weeks ended
4 April 1999
a. Geographically by source L'000 %
------- ----
Turnover:
United Kingdom 200,698 83.0
Continental Europe and Republic of Ireland 41,233 17.0
-------
241,931
=======
Profit on ordinary activities
before taxation:
Operating profit:
United Kingdom 5,849 64.8
Continental Europe and Republic of Ireland 3,178 35.2
-------
9,027
Net interest payable and similar charges (1,579)
-------
Profit on ordinary activities before taxation 7,448
=======
Net assets:
United Kingdom 112,254 80.8
Continental Europe and Republic of Ireland 26,617 19.2
-------
138,871
Cash at bank and in hand 3,559
Bank borrowings and finance lease obligations (33,319)
Creditors for corporation tax and dividends (1,815)
-------
107,296
=======
b. Geographically by destination
Turnover:
United Kingdom 192,118 79.4
Continental Europe 49,500 20.5
Rest of the World 313 0.1
-------
241,931
=======
NOTES TO THE ACCOUNTS
1 Segmental and Geographic Information (continued)
52 weeks ended
4 April 1999
L'000 %
------- ----
c. Analysis by class of business
Turnover:
International and Branded Products 128,203 52.9
Food and Household 54,872 22.7
Pharmaceuticals and Healthcare 58,856 24.4
-------
241,931
=======
There is some overlap of business between the sectors and
consequently this divisional analysis is an approximation. The
businesses acquired in the year operate principally in the
pharmaceuticals and healthcare division.
The directors are of the opinion that disclosure of further
segmental information would be prejudicial to the interests of
the group.
2 Operating Costs
52 weeks ended
4 April 1999
Continuing
Operations Acquisitions Total
L'000 L'000 L'000
--------- ------------ -------
Raw materials and consumables 97,951 3,138 101,089
Changes in stock of finished
goods and work in progress 4,450 54 4,504
Own work capitalised (345) 0 (345)
Other external charges 30,269 1,920 32,189
Staff costs (see note 3) 67,126 3,197 70,323
Depreciation of tangible fixed
assets 14,815 566 15,381
Goodwill amortisation 0 193 193
-------- ------------ -------
214,266 9,068 223,334
======== ============ =======
NOTES TO THE ACCOUNTS
2 Operating Costs (continued)
52 weeks ended
4 April 1999
Continuing
Operations Acquisitions Total
L'000 L'000 L'000
---------- ------------ -----
Operating costs include:
Hire of plant and machinery 283 35 318
Hire of other assets 221 4 225
Auditors' remuneration 126 10 136
Auditors' non-audit fees 54 0 54
Research and development
costs 1,360 0 1,360
Costs incurred in respect
of work performed on year
2000 modifications 190 10 200
Income from government grants (133) 0 (133)
(Profit)/loss on disposal of
fixed assets (499) 38 (461)
------- ------ ------
In addition to the amounts shown above, L81,000 was paid to
the auditors in connection with the financial review of
acquisitions in the period, and has been capitalised as part of
the cost of investment.
3 Employees and directors
52 weeks ended
4 April 1999
Number
--------------
a. The average weekly number of employees
in the period was:
United Kingdom 2,148
Continental Europe and Republic of
Ireland 644
--------------
2,792
==============
L'000
-------------
b. Staff costs (including directors) for
the period were:
Wages and salaries 59,718
Compensation for loss of office 111
Social security 6,758
Pension costs 3,736
-------------
70,323
=============
NOTES TO THE ACCOUNTS
4 Exceptional costs
Exceptional costs comprise: L'000
--------------
Restructuring costs 4,200
Takeover costs 3,070
Provision for impairment of tangible
fixed assets 2,300
--------------
9,570
==============
The exceptional restructuring costs represent a group
reorganisation programme predominantly targeted at streamlining
and automating the manufacturing process.
Exceptional takeover costs predominantly comprise legal and
professional costs incurred advising the company in respect of
the takeover of Field Group by Chesapeake Corporation.
Impairment losses on tangible fixed assets represent a reduction
in value of certain fixed assets used for manufacturing processes
which are no longer capable of generating an adequate return to the
business sufficient to sustain their carrying value.
5 Directors' Emoluments
Detailed disclosures of directors' share options are given in
the Directors' Report.
L
a. Aggregate disclosure:
Aggregate emoluments 1,263,421
---------
Aggregate emoluments include compensation paid to directors
who were not allocated options at the end of 1998 because they
were aware of takeover discussions and who subsequently would
otherwise have lost the benefits of the exercise of their options
on acquisition.
Aggregate gains made on the exercise
of share options 5,934
---------
Company pension contributions to money
purchase schemes 14,254
---------
Compensation for loss of office 111,000
---------
In addition to the compensation for loss of office, the
director concerned entered into a three month consultancy
agreement for a handover period pursuant to which a fee of
L92,400 will be payable.
Sums paid to third parties for directors'
services 17,884
---------
At 4 April 1999, retirement benefits were accruing to one
director under a money purchase scheme and to five directors
under a defined benefit scheme.
NOTES TO THE ACCOUNTS
5 Directors' Emoluments (continued)
b. Highest paid director:
Emoluments 384,470
---------
Defined benefit pension scheme:
Accrued pension at the end of the period 95,100
---------
6 Net Interest Payable and Similar Charges
52 weeks ended
4 April 1999
L'000
Interest payable on: --------------
Overdrafts and borrowings wholly
repayable within 5 years 1,449
Borrowings not wholly repayable within
5 years 32
Finance lease charges 220
-----------
1,701
Less: interest receivable (122)
-----------
1,579
===========
7 Tax on Profit on Ordinary Activities
L'000
-----------
UK corporation tax charge at 31% 1,825
Overseas tax charge 907
-----------
2,732
===========
Advanced corporation tax previously written off was credited
to the profit and loss account in 1998 as it was recoverable
against the UK corporation tax liability arising in that year.
8 Dividends
L'000
-----------
Interim dividends paid at 3.6p net per share 2,194
Final dividends accrued at 0.0p net per share 0
-----------
2,194
===========
NOTES TO THE ACCOUNTS
9 Profit for the financial year
As permitted by section 230 of the Companies Act 1985, the
parent company's profit and loss account has not been included in
these financial statements. The parent company's profit for the
financial year was L2.568m.
10 Earnings per Share
Basic earnings per share is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the year.
For diluted earnings per share, the weighted average number
of ordinary shares in issue is adjusted to assume conversion of
all dilutive potential ordinary shares. The Group has only one
category of dilutive potential ordinary shares: those shares
granted to employees where the exercise price is less than the
average market price of the Group's ordinary shares during the
year. The share option schemes in existence at the balance sheet
date are the SAYE and Executive schemes.
Reconciliations of the earnings and weighted average number
of shares used in the calculations are set out below.
1999
Weighted Per-
Average 10p
Earnings number share
L'000 of shares amount
-------- --------- ------
Basic EPS
Profit attributable to
shareholders 4,716 60,479,564 7.80
Effect of dilutive
securities: options - 323,339
----- ----------
Diluted EPS
Adjusted earnings 4,716 60,802,903 7.76
NOTES TO THE ACCOUNTS
10 Earnings per Share (continued)
Supplementary earnings per share information excluding goodwill
amortisation and exceptional costs
Weighted
Average Per 10p
Earnings number share
L'000 of shares amount
-------- --------- -------
Basic EPS 4,716 60,479,564 7.80
Effect of goodwill amortisation 193 - 0.32
Effect of exceptional costs 9,570 - 15.82
Tax credit on exceptional costs (2,254) - (3.73)
-------- ---------- -------
Basic EPS excluding goodwill
amortisation and exceptional
costs 12,225 60,479,564 20.21
======== ========== =======
Diluted EPS 4,716 60,802,903 7.76
Effect of goodwill amortisation 193 - 0.32
Effect of exceptional costs 9,570 - 15.74
Tax credit on exceptional costs (2,254) - (3.71)
-------- ---------- -------
Diluted EPS excluding goodwill
amortisation and exceptional
costs 12,225 60,802,903 20.11
======== ========== =======
Supplementary basic and diluted EPS have been calculated to
exclude the effect of goodwill amortisation in respect of the
subsidiaries acquired during the year and exceptional costs.
11 Intangible fixed assets
The company has no intangible fixed assets. Details of those
relating to the Group are as follows:
Goodwill
L'000
Cost ---------
At 5 April 1998 -
Additions (note 31) 4,961
---------
At 4 April 1999 4,961
=========
Aggregate amortisation
At 5 April 1998 -
Charge for the year (193)
---------
At 4 April 1999 (193)
=========
Net book amount at 4 April 1999 4,768
=========
The goodwill arising on the acquistion of Engelhard SA and Van Os
BV is being amortised on a straight-line basis over 20 years.
These periods are the periods over which the directors estimate
that the values of the underlying businesses acquired are
expected to exceed the value of the underlying assets.
NOTES TO THE ACCOUNTS
12 Tangible Fixed Assets
GROUP
Land and Plant and
Buildings Machinery Total
L'000 L'000 L'000
--------- --------- -------
Cost or valuation
At 5 April 1998 33,519 168,833 202,352
Additions 713 16,929 17,642
Disposals (20) (4,144) (4,164)
Acquisitions 1,488 5,509 6,997
Reclassification 0 0 -
Exchange movement 440 1,277 1,717
-------- -------- -------
At 4 April 1999 36,140 188,404 224,544
======== ======== =======
Depreciation
At 5 April 1998 3,626 80,175 83,801
Charge for the period 2,114 15,567 17,681
Disposals 0 (3,718) (3,718)
Acquisitions 579 2,198 2,777
Reclassification 0 0 -
Exchange movement 70 621 691
-------- -------- --------
At 4 April 1999 6,389 94,843 101,232
======== ======== ========
Net book value at
4 April 1999 29,751 93,561 123,312
======== ======== ========
The net book value of assets held under finance leases at 4
April 1999 was L6.819m. Depreciation in the period on these
assets amounted to L0.664m.
NOTES TO THE ACCOUNTS
12 Tangible Fixed Assets (continued)
COMPANY
Land and Plant and
Buildings Machinery Total
L'000 L'000 L'000
Cost or valuation --------- --------- -------
At 5 April 1998 24,346 136,961 161,307
Additions 414 7,974 8,388
Disposals (20) (2,441) (2,461)
--------- --------- -------
At 4 April 1999 24,740 142,494 167,234
========= ========= =======
Depreciation
At 5 April 1998 2,387 63,711 66,098
Charge for the period 1,581 12,062 13,643
Disposals 0 (2,179) (2,179)
--------- --------- -------
At 4 April 1999 3,968 73,594 77,562
========= ========= =======
Net book value at 4 April 1999 20,772 68,900 89,672
========= ========= =======
GROUP COMPANY
At 4 April 1999 At 4 April 1999
L'000 L'000
--------------- ---------------
Land and buildings at net
book value:
Freehold 24,930 18,416
Long leasehold 3,846 1,381
Freehold investment properties 975 975
------- -------
29,751 20,772
======= =======
The external valuation as at 31 March 1993 was prepared on an
open market existing use basis for operational properties
occupied by the Group and on an open market basis for investment
properties. The directors have reviewed the valuation of the
Group's investment properties at 4 April 1999, and in their
opinion the open market value is not materially different from
the amount stated in the accounts.
NOTES TO THE ACCOUNTS
12 Tangible Fixed Assets (continued)
On an historical cost basis, land and buildings would have been
included as follows:
GROUP COMPANY
At 4 April 1999 At 4 April 1999
L'000 L'000
--------------- ---------------
Cost 38,912 27,512
Accumulated depreciation (7,639) (5,518)
-------- --------
Net book value 31,273 21,994
======= =======
13 Investments
The Group has no investments. Details of those relating to the
company are as follows:
At 4 April 1999
Shares in group undertakings L'000
---------------
At 5 April 1998 29,426
Adjustments to purchase consideration (1,177)
Exchange difference 607
--------
At 4 April 1999 28,856
========
NOTES TO THE ACCOUNTS
13 Investments (continued)
Interests in principal subsidiary undertakings (at 4 April 1999)
The following information relates to those subsidiary
undertakings whose results or financial positions are material to
the figures of the group. All the issued shares represent
ordinary shares or their equivalent except where stated.
<TABLE>
<CAPTION>
Proportion of
nominal value
of issued shares
and of voting
rights held
Country of by the
incorporation/ Description
registration Principal of shares Group Company
Name of undertaking and operation activities held % %
------------------- -------------- ---------- ----------- ----- -------
<S> <C> <C> <C> <C> <C>
Label Access Ltd
(formerly Alvax
Supplies Ltd) England and Wales Label L1 each 100 100
manufacturer
E F Taylor Ltd England and Wales Carton L1 each 100 100
manufacturer
Ethical Print &
Packaging Limited England and Wales Carton/ L1 each 100 100
leaflet
manufacturer
Field, Sons & Co
Ltd England and Wales Holding L1 each 100 100
company
Tudor Labels Ltd England and Wales Label L1 each 100 100
manufacturer
Field Packaging
Belgium NV Belgium Holding Bef 1000 each 100 -
company
Mareen NV Belgium Carton Bef 9600 each 100 -
manufacturer
Press Pharma NV Belgium Leaflet/ Bef 1000 each 100 -
booklet
manufacturer
Field Packaging
France SA France Holding FFr 1000 each 100 -
company
Ph. Bourgeot & Cie
SA France Label FFr 1700 each 100 -
manufacturer
Engelhard SA France Carton FFr 3750 each 100 -
manufacturer
Avery Label Ltd Republic of Label IRL1 each 100 100
Ireland manufacturer
Van Os BV Netherlands Leaflet Dfl 100 each 100 -
manufacturer
</TABLE>
NOTES TO THE ACCOUNTS
14 Stocks and Work in Progress
GROUP COMPANY
At 4 April 1999 At 4 April 1999
L'000 L'000
Raw materials and consumables 7,225 5,223
Work in progress 3,660 2,364
Finished goods 13,178 12,427
--------- ---------
24,063 20,014
========= =========
There were no significant differences between replacement cost
and the values shown above at either date.
15 Debtors
L'000 L'000
Amounts falling due within one year:
Trade debtors 33,058 21,660
Amounts owed by parent undertaking 1,750 1,750
Amounts owed by subsidiary
undertakings - 5,468
Other debtors 685 347
Prepayments and accrued income 3,387 2,986
Amounts falling due after more
than one year:
ACT recoverable 1,603 1,603
---------- ---------
40,483 33,814
========== =========
16 Creditors
L'000 L'000
Amounts falling due within one year:
Trade creditors 29,226 22,592
Other creditors 9,827 6,589
Taxation and social security 6,364 4,918
Accruals and deferred income 2,555 1,232
Dividends payable - -
Deferred acquisition consideration 3,628 1,985
------ ------
51,600 37,316
Amounts falling due after more
than one year:
Deferred acquisition consideration - -
------ ------
51,600 37,316
====== ======
The total deferred acquisition consideration of L3.628 million
is analysed further in note 31.
NOTES TO THE ACCOUNTS
17 Bank Borrowings and Finance Lease Obligations
GROUP COMPANY
At 4 April 1999 At 4 April 1999
L'000 L'000
Bank borrowings and obligations
under finance leases are payable
as follows:
Within one year 29,897 10,127
Between one and two years 1,367 -
Between two and five years 934 -
In more than five years 1,121 -
--------- ---------
After more than one year 3,422 -
--------- ---------
33,319 10,127
========= =========
Bank borrowings 30,252 10,127
Finance lease obligations 3,067 -
--------- ---------
33,319 10,127
========= =========
Not wholly repayable within five years:
Bank borrowings repayable by
instalments ending,
June 2005 149 -
October 2006 302 -
--------- ---------
451
Finance lease obligations,
March 2012 1,528 -
--------- ---------
1,979 -
========= =========
The company is bound by certain covenants concerning the
financial performance and activity of the group.
18 Financial instruments
The Group's financial instruments, other than derivatives,
comprise borrowings, some cash and liquid resources, and various
items that arise directly from its operations such as trade
debtors and trade creditors. The main purpose of these financial
instruments is to raise finance for the Group's operations.
The Group also enters into derivatives transactions comprising
forward foreign currency contracts and interest rate caps. The
purpose of such transactions is to manage the currency risks
arising from fixed asset purchases where the invoice is
denominated in foreign currency and the Group's exposure to
sudden increases in interest rates.
NOTES TO THE ACCOUNTS
18 Financial instruments (continued)
It is, and has been throughout the period under review, the
Group's policy that no trading in financial instruments should be
undertaken.
The main risks arising from the Group's financial investments
are interest rate risk, liquidity risk and foreign currency risk.
The Board reviews and agrees policies for managing each of these
risks and they are summarised below. These policies have remained
unchanged since 1991.
Interest rate risk profile of financial liabilities
The Group finances its operations through a mixture of
retained profits and bank borrowings. The Group's currency policy
is to take advantage of historically low floating rates of
interest and to use interest rate caps to protect the Group's
exposure to interest rate rises. The Group's fixed rate loans
have been largely acquired with subsidiaries. At the year-end,
32.5% of the Group's borrowings were at fixed rates. Of the
Group's floating rate borrowings, 77.7% were protected by
interest rate caps.
Floating rate financial liabilities include all drawings
within the Group's main facility under terms of which interest
rates on drawings are set at the date of advance and are normally
fixed for a period of six months.
The interest rate risk profile of the Group's financial
liabilities at 4 April 1999 was:
Floating
Rate Fixed rate
financial financial
Total liabilities liabilities
Currency L'000 L'000 L'000
Sterling 6,517 5,919 598
Belgian francs 12,488 11,040 1,448
French francs 11,732 2,959 8,773
Irish L 2,582 2,582 -
--------- ----------- -----------
Total borrowings 33,319 22,500 10,819
Cash balancesSterling (1,237) (1,237) -
Belgian francs (1,102) (1,102) -
French francs
(overdraft) 1,039 1,039 -
Dutch guilders (500) (500) -
Irish L (1,759) (1,759) -
--------- ----------- -----------
Net borrowings at
4 April 1999 29,760 18,941 10,819
========= =========== ===========
Cash on deposit is generally available on instant notice and
earns interest based on market rates existing at the time of
deposit.
NOTES TO THE ACCOUNTS
18 Financial instruments (continued)
To protect the Group's exposure to interest rate increases, the
following interest rate caps have been taken out:
Floating Uncapped
rate floating
Interest rate financial rate
caps liabilities liabilites
Currency L'000 L'000 L'000
Sterling 7,500 5,919 -
Belgian francs 10,018 11,040 (1,022)
French francs 1,540 2,959 (1,419)
Irish L 0 2,582 (2,582)
------- ------- -------
Total interest rate capped
borrowings 19,058 22,500 (5,023)
======= ======= =======
The nominal amount of the interest caps in operation at the year
end, together with the expiry date and the cap rate is:
Currency of cap Amount Cap rate Expiry date
Sterling L7,500,000 8% 31/10/2000
Belgian francs 600,000,000BF 7% 30/04/99
French francs 15,000,000F 6% 3/6/2002
French francs 40,000,000F 8% 30/4/99
The Group's fixed rate loans have the following interest rate and
maturity profile:
Weighted
Weighted average period
Average for which
Interest rate rate is fixed
Currency % Years
Sterling 7.8% 1.7
Belgian francs 5.1% 2.4
French francs 5.5% 5.8
------ ------
At 4 April 1999 5.5% 5.5
====== ======
Floating rate financial liabilities bear interest at rates, based
on relevant national LIBOR equivalents, which are fixed in
advance for periods of between one month and six months.
NOTES TO THE ACCOUNTS
18 Financial instruments (continued)
Liquidity risk
The Group manages liquidity risk by maintaining committed
facilities sufficient to fund forecast working capital and
capital expenditure requirements and to finance further
acquisitions.
Maturity of financial liabilities
The maturity profile of the carrying amount of the group's
financial liabilities, other than short-term creditors such as
trade creditors and accruals, at 4 April was as follows:
Bank Finance
borrowings leases Total
L'000 L'000 L'000
Within 1 year, or on demand 28,863 1,034 29,897
Between 1 and 2 years 664 703 1,367
Between 2 and 5 years 576 358 934
Over 5 years 149 972 1,121
-------- -------- --------
At 4 April 1999 30,252 3,067 33,319
======== ======== ========
Under the terms of the Group's bank covenants, the takeover by
Chesapeake Corporation triggered an event of default under its
main group facilities. An extension on the existing facilities of
up to three months has been obtained from the banks in order to
allow new facilities to be put in place.
Borrowing facilities
The Group has the following undrawn committed borrowing
facilities available at 4 April in respect of which all
conditions precedent had been met at that date other than the
change of control clause noted above:
Floating Fixed 1999
rate rate Total
Lm Lm Lm
Expiring within 1 year - - -
Expiring between 1 and 2 years 41.0 1.3 42.3
Expiring in more than 2 years - - -
------- ------- -------
At 4 April 1999 41.0 1.3 42.3
======= ======= =======
All the above facilities incur commitment fees at market rates.
NOTES TO THE ACCOUNTS
18 Financial instruments (continued)
Fair values of financial assets and financial liabilities
The following table provides a comparison by category of the
carrying amounts and the fair values of the group's financial
assets and financial liabilities at 4 April 1999. Fair value is
the amount at which a financial instrument could be exchanged in
an arm's length transaction between informed and willing parties,
other than a forced or liquidation sale and excludes accrued
interest. Where available, market values have been used to
determine fair values.
Where market values are not available, fair values have been
calculated by discounting expected cash flows at prevailing
interest and exchange rates. Set out below the table is a summary
of the methods and assumptions used for each category of
financial instrument.
1999
Book value Fair value
At 4 April 1999: L'000 L'000
Primary financial instruments
held or issued to finance
the group's operations:
Long-term borrowings 10,819 11,724
Derivative financial instruments
held to manage the interest rate
and currency profile:
Interest rate caps - 4
For the purposes of the above table, the book value of the
relevant asset or liability is shown gross of the effect of the
hedging instrument.
Summary of methods and assumptions
Interest rate caps Fair value is based on market price of
comparable instruments at the
balance sheet date.
Short-term deposits and
borrowings The fair value of short-term deposits,
loans and overdrafts approximates
to the carrying amount because of
the short term maturity of these
instruments.
Long-term borrowings The fair value of the floating rate
bank loans approximates to the
carrying value reported in the
balance sheet as they are reset to
market rates at intervals of less
than six months.
NOTES TO THE ACCOUNTS
18 Financial instruments (continued)
Currency exposures
To mitigate the effect of currency exposures arising from its
net investments overseas the Group borrows in the local
currencies of its main operating units. Any exchange risk to the
value of the Group's net assets is minimised by broadly matching the
assets of the overseas subsidiaries with loans in those
currencies. Gains and losses arising on net investments overseas
and the financial instruments used to hedge the currency
exposures are recognized in the statement of total recognized
gains and losses.
The table below shows the extent to which group companies have
monetary assets and liabilities in currencies other than their
local currency. Foreign exchange differences on retranslation of
the assets and liabilities are taken to the profit and loss
account of the Group companies and the Group.
Net foreign currency assets
EU
1999 Sterling Currencies Total
Foreign currency L'000 L'000 L'000
of Group operation:
Sterling - 1,024 1,024
EU currencies
(excluding Sterling) 574 - 574
-------- -------- --------
Total 574 1,024 1,598
======== ======== ========
Hedges
The Group has no unrecognised gains and losses in respect of
hedging instruments at 4 April 1999. The Group uses foreign
currency borrowings to hedge its foreign currency investments.
Any gains and losses on these borrowings are recognised in the
statement of total recognised gains and losses. For the year
ended 4 April 1999, losses on these borrowings of L507,000 were
able to be offset against net gains on assets of L277,000 and a
net loss of L230,000 taken to the statement of total recognised
gains and losses.
Financial instruments held for trading purposes
The Group does not trade in financial instruments.
NOTES TO THE ACCOUNTS
19 Provisions for Liabilities and Charges
GROUP COMPANY
Reorganisation
Costs Pensions Total Total
L'000 L'000 L'000 L'000
-------------- -------- ----- -----
a Provisions for
reorganisation costs
and pensions
At 5 April 1998 129 1,601 1,730 1,730
Provided in the period 4,219 678 4,897 4,803
Utilised in the period (2,657) 0 (2,657) (2,657)
------- ------- ------ -------
At 4 April 1999 1,691 2,279 3,970 3,876
======= ======= ====== =======
Reorganisation
A description of the reorganisation costs is provided in note
4.
Pensions
A description of the pension provision is provided in note 26.
GROUP COMPANY
At 4 April 1999 At 4 April 1999
L'000 L'000
b The analysis of the potential
deferred tax liability is as
follows:
Accelerated capital allowances 14,630 10,692
Reorganisation costs (861) (861)
Other timing differences (88) (88)
------- -------
13,681 9,743
======= =======
No provision for deferred tax has been made.
NOTES TO THE ACCOUNTS
20 Share Capital
AUTHORISED ISSUED AND FULLY PAID
Ordinary shares of Nominal Nominal
10p each Number Value Number Value
L L
At 5 April 1998 118,740,856 11,874,086 60,239,572 6,023,957
Issued in the period - - 318,144 31,814
----------- ---------- ---------- ---------
At 4 April 1999 118,740,856 11,874,086 60,557,716 6,055,771
=========== ========== ========== =========
SHARE CAPITAL TO BE ISSUED
Number Nominal Value
L
At 4 April 1999 723,268 72,327
The shares to be issued represent outstanding executive and
SAYE share options which have been exercised but not issued at
the year end. These shares were issued on 7 May 1999.
Movements in share capital and share premium
Share Share
Number Capital Premium
L L
At 5 April 1998 60,239,572 6,023,957 69,048,340
Issued on exercise of options 64,043 6,404 152,319
Issued as part consideration
for acquisitions 254,101 25,410 800,672
---------- --------- ----------
At 4 April 1999 60,557,716 6,055,771 70,001,331
========== ========= ==========
NOTES TO THE ACCOUNTS
20 Share Capital (continued)
Outstanding share options at 4 April 1999
Date of Number of Exercise
Grant Shares Price
Field Group Executive
Share Option Scheme 7 Jul 1993 145,875 250p
14 Jun 1994 112,240 250p
15 Jun 1995 256,150 294p
16 Dec 1998 294,718 166p
-------
808,983
Field Group Savings Related
Share Option Scheme 21 Mar 1994 1,201,317 247p
---------
Total share options
outstanding at 4 April 1999 2,010,300
=========
Following the acquisition of Field Group by Chesapeake
Corporation on 5 March 1999, all the share options which were in
the money (exercisable below the acquisition price per share of
L3.60) became immediately exercisable on the acquisition date.
Shares options which were out of the money lapsed on the date of
acquisition.
The latest exercise date for the outstanding options is 26 May
1999. All options will automatically lapse after this date.
21 Reserves
GROUP COMPANY
Profit and Other Profit and Other
Loss Account Reserves Loss Account Reserves
L'000 L'000 L'000 L'000
------------ -------- ------------ --------
At 5 April 1998 44,876 (18,822) 38,718 4,279
Retained profit for the
period 2,522 0 374 0
Goodwill written back 1,177 0 0 0
Amortisation of goodwill (20,375) 20,375 (2,863) 2,863
Exchange movement (230) 0 28 0
------------ -------- ------------ --------
At 4 April 1999 27,970 1,553 36,257 7,142
============ ======== ============ ========
NOTES TO THE ACCOUNTS
21 Reserves (continued)
Goodwill Goodwill Net Goodwill
Written off amortised written off
L'000 L'000 L'000
----------- --------- -------
At the beginning of the
period 22,376 (2,001) 20,375
----------- --------- -------
Movement in the period (22,376) 2,001 (20,375)
----------- --------- -------
At the end of the period - - -
=========== ========= =======
22 Capital Commitments
GROUP COMPANY
At At
4 April 4 April
Capital commitments authorised by 1999 1999
the directors were as follows: L'000 L'000
------- -------
Authorised and contracted for 5,386 4,848
Authorised but not contracted for 1,042 859
------- -------
6,428 5,707
======= =======
23 Contingent Liabilities
In the normal course of business the group's bankers have been
indemnified for guarantees given by them to third parties and
bridging loans to employees under the company relocation scheme.
The directors do not expect any loss to arise in respect of these
arrangements.
24 Related Party Transactions
There have been no related party transactions that require
disclosure in the period ended 4 April 1999.
NOTES TO THE ACCOUNTS
25 Leasing Obligations
GROUP COMPANY
At 4 April 1999 At 4 April 1999
L'000 L'000
--------------- ---------------
Annual commitments under
non-cancellable operating
leases:
Property leases expiring:
Between one and five years 108 80
=============== ===============
Other leases expiring:
Within one year 26 16
Between one and five years 160 57
After five years 6 -
--------------- ---------------
192 73
=============== ===============
26 Pensions
The group operates a defined benefit pension scheme for
directors and direct employees of the company in the United
Kingdom, the Field Group Pension Scheme (the "Scheme"). The
assets of the Scheme are administered by the trustee and held
separately from those of the group. The pension scheme's accounts
are independently audited.
Pension costs are assessed on the advice of an independent
consulting actuary, Bacon & Woodrow, using the projected unit
method. The funding of the Scheme is based on regular actuarial
valuations. The most recent valuation was carried out as at 5
April 1998 when the market value of the assets was L107.5
million. The actuarial value of these assets represented 106% of
the value of the benefits which had accrued to members, after
allowing for expected future increases in salaries.
A market value based approach was adopted for the valuation
at 5 April 1998. The principal actuarial assumptions used (in
real terms using price inflation of 3.1%), were a rate of return
on investments of 3.8% (for active members) and 2.8% (for other
members) and pay increases of 1.5%. Pensions in payment were
assumed to increase in line with price inflation.
The members' contributions during the year were at a rate of
6% of Eligible Earnings. The group has continued to pay
contributions to the Scheme at the rate of 8% of eligible
earnings, the rate set at 1 April 1996 following the valuation as
at 5 April 1995. In light of the results of the 1998 valuation,
the Group's contributions have been increased from 8% to 9% of
eligible earnings with effect from 1 April 1999.
The pension cost to the group in the period ended 4 April
1999 in respect of the Field Group Pension Scheme was L3.155m.
An amount of L2.279m is included within provisions for
liabilities and charges which represents the difference between
the amounts recognised in the profit and loss account and the
amounts paid into the Scheme.
NOTES TO THE ACCOUNTS
26 Pensions (continued)
The group also provides pension benefits for certain employees
of subsidiaries in the UK and overseas. These arrangements are
principally defined contribution plans. Contributions in respect
of these schemes are charged to the profit and loss account in
the period to which they relate. The pension cost to the group
in the period ended 4 April 1999 in respect of these employees
was L.581m.
27 Reconciliation of Operating Profit to Net Cash Inflow from
Operating Activities
52 weeks ended
4 April 1999
L'000
--------------
Operating profit 9,027
Depreciation charges 17,681
Amortisation of goodwill 193
Profit on sales of fixed assets (461)
Decrease in stocks 5,383
Decrease in debtors 6,526
Increase in amounts owed by parent undertaking (1,750)
Decrease in creditors (4,230)
Increase in provisions 4,897
Payments in respect of reorganisation costs (2,657)
--------------
Net cash inflow from operating activities 34,609
==============
Net cash inflow from continuing activities 31,835
Net cash inflow from acquisitions 2,774
--------------
Net cash inflow from operating activities 34,609
==============
28 Reconciliation of Net Cash Flow to Movement in Net Debt
52 weeks ended
4 April 1999
L'000
--------------
Decrease in cash in the period (5,966)
Cash outflow from increase in debt and lease
financing (223)
--------------
Change in net debt resulting from cash flows (6,189)
Borrowings and finance leases acquired with
acquisitions (1,280)
Issue of unsecured loan notes (330)
Exchange movements (1,197)
--------------
Movement in net debt in the period (8,996)
Net debt at the beginning of the period (20,764)
--------------
Net debt at the end of the period (29,760)
==============
NOTES TO THE ACCOUNTS
29 Analysis of Net Debt
<TABLE>
<CAPTION>
At Cash Acquisi- Non-cash Exchange At
5 April 1998 Flow tions Changes Movements 4 April 1999
L'000 L'000 L'000 L'000 L'000 L'000
------------ ------ --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash at bank
and in hand 9,501 (5,966) - - 24 3,559
------------ ------ --------- -------- -------- ------------
Borrowings (27,149) (1,430) (248) (330)(1) (1,095) (30,252)
Finance
leases (3,116) 1,207 (1,032) 0 (126) (3,067)
------------ ------ --------- -------- -------- ------------
Total
borrowings (30,265) (223) (1,280) (330) (1,221) (33,319)
------------ ------ --------- -------- -------- ------------
Total net
debt (20,764) (6,189) (1,280) (330) (1,197) (29,760)
------------ ------ --------- -------- -------- ------------
</TABLE>
(1) During the period the company issued unsecured loan
notes of L.330m as partial settlement of the deferred consideration
payable for Tudor Labels (see note 31).
30 Acquisition Cash Flow
a The total cash flows in respect of businesses acquired in the period are as
follows:
L'000 L'000
----- -----
Cash inflows from operating activities 2,774
Returns on investments and servicing of finance (62)
Capital expenditure (1,420)
Taxation (768)
Financing
Loans repaid (89)
Capital element of finance lease payments (389)
----
(478)
------
Increase in cash, in respect of acquired businesses 46
======
b Summary of total cash payments in the period
in respect of Acquisitions
L'000
-----
Initial cash consideration and costs (see note 31) 6,629
Less: costs accrued not yet paid (29)
------
Initial cash consideration and costs paid 6,600
Payment of deferred consideration in respect of
prior year acquisitions (see note 31) 2,070
------
Total cash payments in the period in respect of
acquisitions 8,670
======
NOTES TO THE ACCOUNTS
31 Acquisitions
On 28 April 1998, the group acquired 100% of the shares of Engelhard SA
("Engelhard"), a folded carton manufacturer based in Angouleme, south-west
France.
On 6 August 1998, the group acquired 100% of the shares of Van Os BV ("Van
Os"), a specialist printed leaflet manufacturer based in Oss near Eindhoven,
Holland.
The total adjustments required to the book values of the assets and
liabilities of the companies acquired in order to present the net assets of
those companies at fair values in accordance with group accounting principles
were L0.859m, details of which are set out in table b) below.
a The details of the transactions are summarised in the table below:
Total
Engelhard Van Os Other Acquisitions
L'000 L'000 L'000 L'000
--------- ------ ----- ------------
Assets and liabilities
acquired at fair value:
Fixed assets 3,220 1,000 - 4,220
Stocks 1,112 116 - 1,228
Debtors 2,578 383 - 2,961
Creditors (2,149) (290) - (2,439)
Cash at bank and in hand (1,181) 267 - (914)
Borrowings (248) 0 - (248)
Finance lease obligations (1,032) 0 - (1,032)
Taxation (270) (124) - (394)
Deferred tax 0 (8) - (8)
-------- ------ ----- ---------
Assets acquired 2,030 1,344 - 3,374
Goodwill capitalised 2,528 2,433 0 4,961
Adjustment to goodwill
written off in prior
years 0 0 (1,177) (1,177)
-------- ------ ------ ---------
Purchase consideration
and acquisition costs 4,558 3,777 (1,177) 7,158
======== ====== ====== =========
Analysis of purchase
consideration:
Initial consideration -
cash and acquisition
costs 2,766 3,777 86 6,629
- shares 149 0 0 149
-------- ------ ------ ---------
Total initial
consideration 2,915 3,777 86 6,778
Estimated deferred
consideration 1,643 0 (1,263) 380
-------- ------ ------ ---------
Purchase consideration and
acquisition costs 4,558 3,777 (1,177) 7,158
======== ====== ====== =========
<TABLE>
<CAPTION>
b Engelhard Van Os
----------------------------- ----------------------------
Book Accounting Fair Value Book Revaluation Fair Value
Policy
Alignment
L'000 L'000 L'000 L'000 L'000 L'000
----- ---------- ---------- ----- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets and
liabilities
acquired at
book value and
adjustments
required to
calculate fair
value:
Fixed assets 1,014 2,206 3,220 1,152 (152) 1,000
Stocks 1,190 (78) 1,112 116 0 116
Debtors 1,458 1,120 2,578 383 0 383
Creditors (1,963) (186) (2,149) (290) 0 (290)
Cash at bank
and in hand/
(overdraft) (61) (1,120) (1,181) 267 0 267
Borrowings (248) 0 (248) 0 0 -
Finance lease
obligations (101) (931) (1,032) 0 0 -
Taxation (270) 0 (270) (124) 0 (124)
Deferred tax 0 0 0 (8) 0 (8)
------ ------ ------ ----- ------ --------
Assets
acquired 1,019 1,011 2,030 1,496 (152) 1,344
====== ====== ====== ===== ====== ========
</TABLE>
The adjustments for accounting policy alignment in respect of Engelhard SA
comprise the following:
1. Under French GAAP the leasing payments on finance leased assets are charged
to the profit and loss account as incurred. In contrast, SSAP 21 requires these
assets to be capitalised in the balance sheet and depreciated. As a result,
fixed assets have been increased by L2.206m and a liability of L0.931m for the
outstanding capital amount payable under the leasing agreements has been
included under finance lease obligations.
2. The adjustment of L0.078m in respect of stocks represents a reduction in
the value of work in progess and finished goods as a result of a reduction in
the value of production overheads included in the stock valuation.
3. Under French GAAP, discounted notes are treated as debtor payments. To
adjust the figures to UK GAAP, L1.120m has been added back to debtors and a
corresponding amount added to bank indebtedness.
4. The increase in creditors represents an accrual for retirement benefits
payable to employees of the company.
The adjustment for revaluation in respect of Van Os BV respresents a
reduction in the value of freehold property from its purchase price on
acquisition to a fair market value.
NOTES TO THE ACCOUNTS
31
c Any deferred consideration is generally payable subject to the achievement
by the acquired company of certain profit targets in the two years post
acquisition. The deferred consideration due, based on an estimate of the amounts
expected to be paid, is included in creditors. The balance sheet amount at 4
April 1999 comprises the following:
<TABLE>
<CAPTION>
Tudor Avery Ethical Print Total
Labels Label E F Taylor & Packaging Engelhard Deferred
L'000 L'000 L'000 L'000 L'000 L'000
------ ------ ---------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Analysis of deferred
consideration:
At 5 April 1998 2,500 2,254 7 1,477 - 6,238
Cash paid (300) (630) (7) (1,133) - (2,070)
Shares issued (332) - - (344) - (676)
Loan notes issued (330) - - - - (330)
Increase/(decrease)
in amount payable (1,263) - - - 1,643 380
Exchange - 86 - - - 86
------ ------ ---------- ------------- --------- --------
At 4 April 1999 275 1,710 - - 1,643 3,628
====== ====== ========== ============= ========= ========
Analysis of deferred
consideration at
4 April 1999:
Due in less than one
year 275 1,710 - - 1,643 3,628
====== ====== ========== ============= ========= ========
</TABLE>
32 Ultimate parent company
The directors regard Chesapeake Corporation as the ultimate parent company.
According to the register kept by the company Chesapeake Corporation owned 93%
of the equity capital at 4 April 1999. Chesapeake is a listed company on the New
York stock exchange.
33 Post balance sheet event
On 10 May 1999 the company acquired the whole of the share capital of Berry
(Holding) Limited and its subsidiaries, a pharmaceutical leaflet and label
manufacturer based in Westport, Ireland.
NOTES TO THE ACCOUNTS
34 Reconciliation of Financial Information to United States
Generally Accepted Accounting Principles
The accompanying consolidated 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 ("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 accompanying consolidated financial statements have
not been adjusted for the push-down of purchase method
accounting for the period beginning March 18, 1999, (the date of
acquisition by Chesapeake Corporation) through April 4, 1999.
The results of operations for that period and the impact of
purchase method accounting was immaterial.
The principle differences between UK GAAP and US GAAP are
described as follows:
Reconciliation of consolidated profit and loss accounts
(In L000's except earnings per share) Year ended
April 4,
Notes 1999
----- ----------
Profit on ordinary activities after
taxation as reported under UK GAAP
4,716
US GAAP adjustments:
Business combinations (a) (2,701)
Pensions (b) 2,165
Deferred tax (c) 371
Revaluation of fixed assets (d) 2,300
Stock compensation (e) (192)
Restructuring charges (f) (129)
Interest rate cap agreements (g) (69)
Depreciation of investment
properties (h) (25)
-------
Net US GAAP adjustments 1,720
Tax effects of net US GAAP
adjustments (735)
-------
Net income under US GAAP 5,701
=======
Earnings per share in
accordance with US GAAP:
Basic 0.09
Diluted 0.09
Weighted average number of
shares outstanding (in
thousands of shares):
Basic 60,480
Diluted 60,803
NOTES TO THE ACCOUNTS
34 Reconciliation of Financial Information to United States
Generally Accepted Accounting Principles (continued)
Reconciliation of consolidated shareholders' funds
(In L000's) Year ended
April 4,
Notes 1999
----- ----------
Total shareholders' funds as reported
under UK GAAP 107,296
US GAAP adjustments:
Business combinations (a) 20,036
Pensions (b) 9,189
Deferred tax (c) (15,647)
Revaluation of fixed assets (d) 2,300
Interest rate cap agreements (g) 40
Depreciation of investment
properties (h) (222)
---------
Net US GAAP adjustments 15,696
---------
Stockholders' equity under
US GAAP 122,992
=========
Movements in stockholders' equity in accordance with US
GAAP
(In L000's)
Year ended
April 4,
1999
----------
Balance, beginning of year 121,189
Net income 5,701
New share capital issued 2,701
Dividends paid (6,411)
Foreign currency translation (230)
Other 42
--------
Balance, end of year 122,992
========
(a) Business combinations
Both UK GAAP and US GAAP require purchase consideration to be
allocated to the net assets acquired at their fair value on the
date of acquisition, with the excess of consideration over the
fair value of the identifiable net assets recorded as goodwill.
Under UK GAAP, goodwill arising on acquisitions made on or
before April 4, 1998 has been written off directly to reserves
in the year of acquisition, and goodwill arising on acquisitions
subsequent to April 4, 1998, has been capitalised and is being
amortised over 20 years. Under US GAAP goodwill has been
capitalised as an intangible asset and amortised over periods
not to exceed 40 years.
Under UK GAAP, the contingent consideration payable by the Group
for acquired businesses has been estimated at acquisition and
subsequently adjusted against goodwill. Such consideration is
not recognised under US GAAP until
NOTES TO THE ACCOUNTS
34 Reconciliation of Financial Information to United States
Generally Accepted Accounting Principles (continued)
the contingency is resolved or the amount is determinable.
Additionally, under US GAAP, a determination must be made
whether or not such consideration should be recorded as an
adjustment to purchase price or compensation expense. Such
adjustments to compensation expense have been made.
(b) Pensions
Under UK GAAP, the cost of providing pension benefits has been
expensed over the average expected service lives of eligible
employees in accordance with the provisions of SSAP 24,
Accounting for Pension Costs ("SSAP 24"). SSAP 24 produces an
estimate of cost based on long-term actuarial assumptions.
Variations from the regular pension cost arising from, for
example, experience deficiencies or surpluses, are charged or
credited to the profit and loss account over the expected
average remaining service lives of current employees in the
schemes.
Under US GAAP, the annual pension cost comprises the estimated
cost of benefits accruing in the period as determined in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 87, which requires readjustment of the significant
actuarial assumptions annually to reflect current market and
economic conditions. Under SFAS No. 87, a pension asset
representing the excess of plan assets over benefit obligations has
been recognised in the balance sheet. The pension benefit
obligation is calculated by using a projected unit credit
method.
The net periodic pension cost under US GAAP for the Group's
defined benefit pension plan is as follows:
Components of pension cost
(In L000's) Year ended
April 4,
1999
----------
Net service cost 4,300
Interest cost 5,950
Amortisation of net transition asset (590)
Expected return on plan assets (8,670)
---------
Net periodic pension cost 990
=========
NOTES TO THE ACCOUNTS
34 Reconciliation of Financial Information to United States
Generally Accepted Accounting Principles (continued)
The funded status under US GAAP for the Group's defined benefit
pension plan is as follows:
Funded status
(In L000's) Year ended
April 4,
1999
-------------
Fair value of plan assets 111,650
Projected benefit obligation 112,620
--------
Funded status (970)
Unrecognised net actuarial (gain) loss 9,080
Unrecognised transition asset (1,200)
Unrecognised prior service cost -
--------
Net amount recognised-prepaid benefit cost 6,910
========
Changes in the project benefit obligation and plan assets during
the year were as follows:
Changes in projected benefit obligation
(In L000's) Year ended
April 4,
1999
----------
Benefit obligation, beginning of period/
year 92,860
Service cost 4,300
Interest cost 5,950
Plan participant contributions 1,780
Benefits paid (2,500)
Actuarial (gains) losses 10,230
--------
Benefit obligation, end of period/year 112,620
========
Changes in plan assets
(In L000's) Year ended
April 4,
1999
----------
Fair value of plan assets,
beginning of period/year 107,530
Actual return on plan assets 2,360
Employer contributions 2,480
Plan participants' contributions 1,780
Benefits paid (2,500)
--------
Fair value of plan assets, end of period/
year 111,650
========
NOTES TO THE ACCOUNTS
34 Reconciliation of Financial Information to United States
Generally Accepted Accounting Principles (continued)
The assumptions used to determine pension cost for the Group's
defined benefit pension plan were as follows:
Year ended
April 4,
1999
----------
Discount rate 5.5%
Expected rate of return on plan assets 7.5%
Expected rate of compensation increase 4.0%
Rate of inflation 2.5%
(c) Deferred tax
Under UK GAAP, a provision is recorded for deferred taxation
under the partial provision method to the extent that such
taxation is expected to be realised within the reasonable
future. The full potential liability is not necessarily
provided. Additionally, deferred tax assets are recognised only
when they are expected to be recoverable within the foreseeable
future.
Under US GAAP, deferred tax is provided for on a full liability
basis. Under the full liability method, deferred tax assets or
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.
(d) Revaluation of fixed assets
Under UK GAAP, companies are permitted to perform revaluations
of properties on a periodic basis and adjust the carrying values
to the revalued market value. Under US GAAP, Statement of
Financial Accounting Standard No, 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" ("SFAS 121") requires that companies undertake an
evaluation for permanent impairment when management has reason
to believe that a permanent impairment has occurred.
Furthermore, unless an analysis of the gross, undiscounted cash
flows attributable to the asset over the remaining useful life
is less than the carrying value of the asset, no permanent
impairment is recognized. Based on this analysis, it was
determined that no permanent impairment under SFAS 121 existed
for assets written down pursuant to UK GAAP.
(e) Stock compensation
The Group has discounted stock purchase plans which are non-
compensatory under UK GAAP and considered compensatory under US
GAAP. Such compensation expense has been recorded as a US GAAP
adjustment.
NOTES TO THE ACCOUNTS
34 Reconciliation of Financial Information to United States
Generally Accepted Accounting Principles (continued)
(f) Restructuring charges
The Group entered into a restructuring plan when under UK GAAP the
decision to restructure part of a company's operations allowed
for provisions to be made for redundancy and other costs. US
GAAP requires a number of specific criteria to be met before
such anticipated costs can be recognised as a liability. As
these criteria were not met at April 4, 1998, the accruals have
been reversed under US GAAP.
(g) Interest rate cap agreements
The Group entered into a hedging arrangement to cap interest
rates on its borrowings. The instrument held by the Group is
for purposes other than trading. Under UK GAAP, any premiums
recorded for entering into these agreements are expensed when
incurred. Under US GAAP, the premium is amortized over the life
of the agreement.
(h) Depreciation of investment properties
Under UK GAAP, certain properties that are held for investment
purposes are not depreciated. Under US GAAP, such properties
are depreciated over their useful economic lives.
Cash flow information
Under UK GAAP, the Group's cash flow statements present
substantially the same information as is required under US GAAP
with the following differences:
- - Under UK GAAP, the Group's cash balances are comprised of
cash in hand and at bank. For purposes of presenting cash flow
information in accordance with US GAAP, cash equivalents are
regarded as highly liquid investments with maturities of three
months or less.
- - Under UK GAAP, cash flows are presented for operating
activities; returns on investments and servicing of finance;
taxation; capital expenditure and financial investment;
acquisitions and disposals; equity dividends paid; and
management of liquid resources and financing. US GAAP requires
the classification of cash flows resulting from operating,
investing and financing activities.
- - Cash flows under UK GAAP in respect of interest received,
interest paid, investment income and taxation are included
within operating activities under US GAAP. Capital expenditure
and financial investment and cash flows from acquisitions and
disposals are included within investing activities. Equity
dividends paid and management of liquid resources are included
within financing activities.
NOTES TO THE ACCOUNTS
34 Reconciliation of Financial Information to United States
Generally Accepted Accounting Principles (continued)
A summary of the Group's operating, investing and financing
activities, classified in accordance with US GAAP, utilising the
amounts shown in the UK GAAP Group's cash flow statement, are as
follows (L000's):
Year ended
April 4,
1999
Net cash provided by (used in)
operating activities 25,677
Net cash provided by (used in)
investing activities (27,331)
Net cash provided by (used in)
financing activities (4,312)
Effect of foreign exchange on cash 24
-------
Net increase (decrease) in cash
and cash equivalents (5,942)
Cash and cash equivalents under US GAAP,
beginning of year 9,501
-------
Cash and cash equivalents under US GAAP,
end of year 3,559
=======
Comprehensive income
Comprehensive income disclosures are substantially similar to
those presented in the Statement of Total Recognised Gains and
Losses as prepared under UK GAAP.
Exceptional items
Items classified as exceptional under UK GAAP do not meet the
definition of "extraordinary" under US GAAP and, accordingly,
are classified as operating expenses.
Recently issued accounting standards
United Kingdom
In 1998, the UK Financial Reporting Standards Board issued FRS
No. 15, Tangible Fixed Assets ("FRS 15"). FRS 15 sets out
principles of accounting for the initial measurement, valuation
and depreciation of tangible fixed assets with the objective of
ensuring that such assets are accounted for on a consistent
basis and where a policy of revaluation is adopted, that
revaluations are kept up to date. FRS 15 is effective for all
accounting periods ending on or after March 23, 2000 and the
Group is currently reviewing the likely impact in adopting this
Standard on its financial statements.
NOTES TO THE ACCOUNTS
34 Reconciliation of Financial Information to United States
Generally Accepted Accounting Principles (continued)
United States
In 1998, the US Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133, which is effective for fiscal years
beginning after June 15, 1999, requires companies to record
derivatives on the balance sheet as assets or liabilities,
measured at the fair market value. The Group is currently
reviewing the likely impact of adopting this statement on its
measurement of derivative financial instruments, and on the
disclosures currently provided in its financial statements.
