<PAGE>
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) March 31, 1998
-----------------------
ICO, Inc.
----------------------------------------------------------------------
(Exact name of Registrant as Specified in Its Charter)
Texas
-----------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-10068 76-0566682
----------------------------------- ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
11490 Westheimer, Suite 1000, Houston, TX 77077
-------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(281) 721-4200
---------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
___________________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
Page 1
<PAGE>
INFORMATION TO BE INCLUDED IN REPORT
The registrant hereby amends the following items, financial statements and
exhibits of its Form 8-K report filed April 15, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of J. R. Courtenay (N.Z.) Ltd. and Subsidiaries
The financial statements of J. R. Courtenay (N.Z.) Ltd. and
Subsidiaries required to be filed pursuant to Item 7 of Form 8-K are
attached hereto as Exhibit 99 and are incorporated by reference
herein.
(b) Pro Forma Financial Information
The pro forma financial information required to be filed pursuant to
Item 7 of Form 8-K is attached hereto as Item 7(b).
Page 2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, ICO, Inc.
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
ICO, INC.
Date: June 12, 1998 /s/ Asher O. Pacholder
---------------------------------------
Dr. Asher O. Pacholder
Chairman of the Board and
Chief Financial Officer
Page 3
<PAGE>
Item 7(b)
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information, including the notes
thereto, give effect to the acquisition of J. R. Courtenay (N.Z.) Ltd. ("JRC")
by ICO and are qualified in their entirety by reference to, and should be read
in conjunction with the historical consolidated financial statements and the
notes thereto of ICO and JRC.
The pro forma combined financial statements are based on the purchase method of
accounting. Purchase accounting values have been assigned on a preliminary basis
and will be adjusted upon the completion of a valuation study. An unaudited pro
forma combined condensed balance sheet at March 31, 1998 has not been presented
as the impact of the merger was reflected in the Company's balance sheet
included in the second quarterly report filed on Form 10-Q. The unaudited pro
forma combined condensed statements of operations assume the acquisition was
consummated as of the beginning of the fiscal year ended September 30, 1997.
The pro forma financial information is presented for informational purposes only
and is not necessarily indicative of the operating results or financial position
that would have occurred had the acquisition been consummated at the dates
indicated, nor is such data necessarily indicative of future operating results
or financial position. There is no assurance that similar results will be
achieved in the future.
<PAGE>
ICO/JRC UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL
------------------------ ADJUSTMENTS PRO FORMA
ICO JRC (1) (NOTE 2) COMBINED
----------- --------- ---------- ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales and services revenues $ 197,846 $ 23,618 -- $ 221,464
----------- --------- ---------- -----------
Costs and Expenses:
Cost of sales and services 141,302 18,230 -- 159,532
Selling, general and administrative 31,981 2,281 -- 34,262
Depreciation and amortization 10,332 457 34(a) 10,823
Goodwill amortization 1,017 -- 185(a) 1,202
(Gain) Loss on sale of fixed assets (196) -- -- (196)
----------- --------- ---------- -----------
Operating income (loss) 13,410 2,650 (219) 15,841
----------- --------- ---------- -----------
Interest expense, net 3,764 72 1,329(b) 5,165
Other, net (602) 4 -- (598)
----------- --------- ---------- -----------
Net income (loss) before income taxes 10,248 2,574 (1,548) 11,274
Income taxes (benefit) 4,150 893 (541)(c) 4,502
----------- --------- ---------- -----------
Net income (loss) $ 6,098 $ 1,681 $ (1,007) $ 6,772
=========== ========== ========== ===========
Preferred stock dividends 2,176 -- -- 2,176
----------- --------- ---------- -----------
Net income (loss) applicable to common stock $ 3,922 $ 1,681 $ (1,007) $ 4,596
=========== ========= ========== ===========
Basic earnings per common and common
equivalent share $.19 $.22
============ ===========
Diluted earnings per common and common
equivalent share $.19 $.22
============ ===========
Basic weighted average common shares
outstanding 20,918,059 20,918,059
============ ===========
Diluted weighted average common shares
outstanding 21,143,520 21,143,520
============ ===========
</TABLE>
_______________
(1) JRC historical amounts were derived from the unaudited financial statements
of JRC and subsidiary for the twelve months ending September 30, 1997,
translated from New Zealand dollars and Australian dollars at average exchange
rates of US$.6845 and US$.7693, respectively.
See Notes to Unaudited Pro Forma Financial Statements.
<PAGE>
ICO/JRC UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
HISTORICAL
------------------------ ADJUSTMENTS PRO FORMA
ICO JRC (1) (NOTE 2) COMBINED
----------- --------- ---------- ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales and services revenues $ 136,566 $ 10,447 -- $ 147,013
---------- --------- ---------- -----------
Costs and Expenses:
Cost of sales and services 101,957 8,547 -- 110,504
Selling, general and administrative 23,543 935 -- 24,478
Non-recurring litigation charges 1,200 -- -- 1,200
Depreciation and amortization 6,666 189 18(a) 6,873
Goodwill amortization 696 -- 91(a) 787
Write-down of inventories 100 -- -- 100
---------- --------- ---------- -----------
Operating income (loss) 2,404 776 (109) 3,071
---------- --------- ---------- -----------
Interest expense (income), net 4,808 (7) 399(b) 5,200
Gain on sale of equity investment (11,805) -- -- (11,805)
Other expense (income), net 4 (1) -- 3
---------- --------- ---------- -----------
Net income (loss) before income taxes 9,397 784 (508) 9,673
Income taxes (benefit) 4,623 273 (169)(c) 4,727
---------- --------- ---------- -----------
Net income (loss) $ 4,774 $ 511 $ (339) $ 4,946
=========== ========= ========== ===========
Preferred dividends 1,088 -- -- 1,088
---------- --------- ---------- -----------
Net income (loss) applicable to common stock $ 3,686 $ 511 $ (339) $ 3,858
========== ========= ========== ===========
Basic earnings per common and common
equivalent share $ .17 $ .18
========== ===========
Diluted earnings per common and common
equivalent share $ .17 $ .17
========== ===========
Basic weighted average common shares
outstanding 21,799,648 21,799,648
========== ===========
Diluted weighted average common shares
outstanding 22,037,069 22,037,569
========== ===========
</TABLE>
________________
(1) JRC historical amounts were derived from the unaudited financial statements
of JRC and subsidiary for the six months ending March 31, 1998, translated from
New Zealand dollars and Australian dollars at average exchange rates of US$.5523
and US$.6617, respectively.
See Notes to Unaudited Pro Forma Financial Statements.
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
NOTE 1 - PURCHASE PRICE ALLOCATION
Subject to adjustment, the Company acquired JRC for approximately $13,700,000
cash, including transaction costs. Preliminary purchase price adjustments were
included in the Company's second quarter report on form 10-Q.
These adjustments included: the step-down of fixed assets to fair value
($491,000), establishing the value of non-competition agreements ($179,000),
deferred tax assets relating to the step-down of fixed assets ($174,000) and
goodwill ($7,390,000).
NOTE 2 - PRO FORMA ADJUSTMENTS
(a) To increase amortization relating to goodwill, amortization of the fair
value allocated to non-compete agreements of (increased expense of $89,000
and $45,000 for the year ended September 30, 1997 and the six months ended
March 31, 1998, respectively) and to decrease depreciation for machinery
and equipment (decrease of expense equal to $55,000 and $27,000 for the
year ended September 30, 1997 and the six months ended March 31, 1998,
respectively) resulting from purchase price adjustments. Goodwill is
amortized over 40 years.
(b) To reflect an increase of net interest expense for cash used to consummate
the acquisition using a rate of 11% for periods before May 31, 1997 and
5.5% for periods after May 31, 1997. 11% is used prior to May 31, 1997
because the Company issued $120,000,000 in 10 3/8% Senior Notes early in
June 1997. 5.5% is equivalent to the average interest income earned on the
Company's excess cash balances.
(c) To reflect the tax effect of pro forma adjustments.
<PAGE>
EXHIBIT 99
JR Courtenay (N.Z.) Limited
Consolidated Financial Statements
For the year ended 31 March 1998
<PAGE>
JR Courtenay (N.Z.) Limited
Financial Statements
For the year ended 31 March 1998
INDEX PAGE
Consolidated balance sheet 1
Consolidated statement of operations 2
Consolidated statement of cash flows 3
Consolidated statement of stockholders' equity 4
Notes to the financial statements 5-11
Report of Independent Chartered Accountants 12
<PAGE>
JR Courtenay (N.Z.) Limited Page 1
Consolidated Balance Sheet
As at 31 March 1998
(In thousands of New Zealand dollars)
ASSETS 1998
CURRENT ASSETS
Cash 541
Trade receivables (less allowance for doubtful debts of $141) 5,743
Inventories 5,502
Prepaid expenses and other 361
Tax receivable 30
-------
TOTAL CURRENT ASSETS 12,177
Property, plant and equipment, at cost 7,861
Less: accumulated depreciation and amortisation (2,487)
------
5,374
OTHER NON-CURRENT ASSETS
Long term trade loan 349
Future income tax benefit 197
------
TOTAL ASSETS 18,097
======
LIABILITIES & SHAREHOLDERS EQUITY
CURRENT LIABILITIES
Bank overdraft 871
Short term borrowings - current 31
Owing to related parties 3,464
Accounts payable 2,842
Income taxes payable 301
Accrued expenses 849
------
TOTAL CURRENT LIABILITIES 8,358
Deferred income taxes 866
------
TOTAL LIABILITIES 9,224
------
STOCKHOLDERS EQUITY
Common stock (1,000 shares authorised and issued) 1,000
Foreign currency translation reserve 626
Retained earnings 7,247
------
8,873
------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 6)
18,097
======
The accompanying notes form an integral part of these financial statements.
<PAGE>
JR Courtenay (N.Z.) Limited Page 2
Consolidated Statement of Operations
For the year ended 31 March 1998
(In thousands of New Zealand dollars)
REVENUE
Product sales 35,970
------
TOTAL NET REVENUES 35,970
------
COST AND EXPENSES
Cost of sales (23,194)
Selling, general and administrative (8,407)
Depreciation and amortization (733)
Research and development (166)
Loss on sale of fixed assets (24)
------
(32,524)
------
Operating income 3,446
OTHER INCOME AND EXPENSE
Interest income 46
Interest expense (78)
------
Income before taxes 3,414
Income tax expense (1,257)
------
NET INCOME 2,157
======
The accompanying notes form an integral part of these financial statements.
<PAGE>
JR Courtenay (N.Z.) Limited Page 3
Consolidated Statement of Cash Flows
For the year ended 31 March 1998
(In thousands of New Zealand dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash was provided from:
Customer receipts 36,577
Interest received 46
-------
36,623
-------
CASH WAS APPLIED TO:
Pay suppliers and employees (28,936)
Interest paid (78)
Tax paid (818)
-------
NET CASH INFLOW FROM OPERATING ACTIVITIES 6,791
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (610)
Dispositions of property, plant and equipment 260
-------
NET CASH USED FOR INVESTING ACTIVITIES (350)
-------
Cash flows from financing activities:
Payment of dividend on common stock (6,275)
Decrease in borrowings (50)
-------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (6,325)
-------
Net change in cash held 116
Effects of exchange rate on foreign currency balance 6
Cash at beginning of year 419
-------
CASH AT END OF YEAR 541
=======
The accompanying notes form an integral part of these financial statements.
<PAGE>
JR Courtenay (N.Z.) Limited Page 4
Consolidated Statement of Stockholders' Equity
For the year ended 31 March 1998
(In thousands of New Zealand dollars)
COMMON STOCK FOREIGN
----------------- CURRENCY RETAINED
SHARES AMOUNT RESERVE EARNINGS TOTAL
Balance at 31 March 1997 1,000 1,000 95 7,668 8,763
Cash dividend (2,578) (2,578)
Other movements 531 531
Net income 2,157 2,157
----- ----- ----- ----- -----
BALANCE AT 31 MARCH 1998 1,000 1,000 626 7,247 8,873
===== ===== ===== ===== =====
The accompanying notes form an integral part of these financial statements.
<PAGE>
JR Courtenay (N.Z.) Limited Page 5
Notes to the Financial Statements
For the year ended 31 March 1998
1. STATEMENT OF ACCOUNTING POLICIES
(I) BASIS OF REPORTING/DESCRIPTION OF BUSINESS
The financial statements presented here are the consolidated financial
statements of the group comprising JR Courtenay (N.Z.) Ltd and its wholly
owned subsidiaries - Courtenay Polymers Pty Ltd based in Australia and
Nandella Holdings Limited based in New Zealand.
The group operates in the rotational moulding industry processing resin
into powder form to be used by customers for production of thermo plastic
products.
Effective on 31 March 1998 the group was sold to ICO Inc., a publicly
listed company based in Houston, Texas USA which operates in the oil field
service and petrochemical processing industries.
These financial statements have been prepared in conformity with
accounting principles generally accepted within the United States.
(II) BASIS OF CONSOLIDATION
The consolidated financial statements include the holding company and its
subsidiaries accounted for using the purchase method. Subsidiaries include
in-substance subsidiaries being companies or entities controlled by the
holding company. All significant intercompany transactions and balances
are eliminated on consolidation.
(III) FIXED ASSETS
All fixed assets are recorded at cost initially and depreciated using the
straight line method over the estimated useful lives of the various
classes of assets as follows:
CLASSIFICATION YEARS
Leasehold improvements 10 years
Plant and equipment 15-25 years
Motor vehicles 5 years
Office furniture & fittings 5 years
Office equipment 5 years
Computer software 5 years
(IV) INVENTORIES
Inventory and work-in-progress are stated at the lower of cost and net
realisable value. Cost is principally determined on FIFO basis and, in the
case of manufactured goods, includes direct materials, labor and direct
production overheads associated with putting the inventories in their
present location and condition.
(V) REVENUE AND RELATED COST RECOGNITION
For product sales, revenues and related expenses are recognised when title
is transferred, generally when the products are shipped.
<PAGE>
JR Courtenay (N.Z.) Limited Page 6
Notes to the Financial Statements
For the year ended 31 March 1998
1. STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
(VI) ACCOUNTS RECEIVABLE
Accounts receivable are stated at estimated realisable value, after due
allowance for amounts which are not considered recoverable.
(VII) RESEARCH AND DEVELOPMENT
All research and development projects are written off as incurred.
(VIII) CURRENCY TRANSLATION
Amounts in foreign currencies are translated using the translation
procedures specified in SFAS No. 52, "foreign currency translation".
Amounts receivable and payable in foreign currencies at balance date have
been converted at rates of exchange approximating those ruling at balance
sheet date.
Transactions in overseas currencies during the year have been converted
at the rates approximating the monthly average exchange rates for the
month the transaction occurred.
Gains and losses arising from exchange fluctuations are taken to the
statement of operations in the period in which they arise.
Exchange gains and losses and hedging costs arising on contracts entered
into as hedges of specific revenue or expense transactions are deferred
until the date of such transactions at which time they are included in
the determination of such revenue and expenses.
Assets and liabilities of independent overseas subsidiaries are
translated at exchange rates existing at balance date and the exchange
gain or loss arising on translation is carried direct to a foreign
currency translation reserve.
Net foreign currency transaction gains or losses are not material in the
periods presented.
(IX) CONCENTRATION OF CREDIT RISK
The group's accounts receivable, is not subject to significant
concentration of credit risk. Receivables are spread over a number of
customers. The group regularly evaluates the financial structure of its
customers which is generally considered sound.
(X) FAIR VALUE OF FINANCIAL INSTRUMENTS
The group's financial instruments consist of cash, accounts receivable
and accounts payable. The carrying amounts of cash, accounts receivable
and accounts payable approximate fair value due to the highly liquid
nature of these short term instruments.
<PAGE>
JR Courtenay (N.Z.) Limited Page 7
Notes to the Financial Statements
For the year ended 31 March 1998
1. STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
(XI) INCOME TAX
The group adopts the liability method of tax effect accounting on a
comprehensive basis. The tax effect of temporary differences which arise
from items recorded in different periods for income tax and accounting
purposes are carried forward on the balance sheet as a deferred tax
liability. Deferred tax assets arising from temporary differences are not
recorded unless it is more likely than not that the asset will be
realised.
The recovery of deferred tax assets (both recognised and unrecognised) is
contingent upon sufficient taxable income being earned in future periods,
continuation of relevant tax laws and the group continuing to comply with
the appropriate legislation.
(XII) LEASED ASSETS
Capital lease
Assets acquired under capital leases are included as fixed assets in the
balance sheet. Capital leases effectively transfer from the lessor to the
lessee substantially all the risks and benefits of ownership of the
leased property. Leased assets are recognised initially at the lower of
the present value of the minimum lease payments or their fair value and
depreciated on the same basis as equivalent fixed assets.
A corresponding liability is also established and each lease payment is
allocated between the liability and interest expense.
Operating leases
Other leases where all the risks and benefits of ownership are
effectively retained by the lessor are classified as operating leases.
Operating lease payments are charged to expense over the periods of
expected benefit.
(XIII) ASSESSMENT OF IMPAIRMENT OF LONG LIVED ASSETS
The group reviews property, plant and equipment, and intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying value of such assets may not be recoverable and an estimate of
future undiscounted cash flow is less than the carrying amount of the
asset. Impairment is recorded based on a determination of fair market
value as compared to carrying value.
(XIV) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States requires management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities, if any, at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates. Management believes
that the estimates are reasonable.
(XV) FOREIGN CURRENCY HEDGES
The group routinely enters into foreign exchange forward contracts to
hedge against movements in US dollar amounts. The group does not use
derivative financial instruments for speculative purposes.
<PAGE>
JR Courtenay (N.Z.) Limited Page 8
Notes to the Financial Statements
For the year ended 31 March 1998
At 31 March 1998 the group had open contracts which had an unrealized gain
amount of NZ$47,195. These open contracts mature at various dates over the
following two months.
2. INVENTORIES NZ$'000
INVENTORIES AT 31 MARCH 1998 CONSISTED OF THE FOLLOWING:
Raw materials 1,462
Work in progress 627
Finished goods 3,413
------
5,502
======
3. FIXED ASSETS
FIXED ASSETS, AT COST, CONSISTED OF THE FOLLOWING AT 31 MARCH 1998:
LEASEHOLD IMPROVEMENTS
At cost 492
PLANT AND EQUIPMENT
At cost 6,441
FURNITURE AND FITTINGS
At cost 121
MOTOR VEHICLES
At cost 434
COMPUTER EQUIPMENT
At cost 373
------
7,861
Accumulated depreciation 2,487
------
5,374
======
Depreciation expense for the year ended 31 March 1998 was approximately
$718,000.
4. LOANS PAYABLE TO RELATED PARTIES
(A) ICO INC.
Unsecured, repayable on demand, not subject to interest 2,887
(B) JR COURTENAY INVESTMENTS LTD
Unsecured, subject to interest at 11% p.a. repayable on
30 June 1998 577
------
3,464
======
5. BANK OVERDRAFT
The bank overdraft is secured by a floating charge over all assets of the group,
and is subject to interest at the prevailing overdraft interest rates (13.9% at
31 March 1998).
<PAGE>
JR Courtenay (N.Z.) Limited Page 9
Notes to the Financial Statements
For the year ended 31 March 1998
6. COMMITMENTS AND CONTINGENCIES
The group is involved in various legal proceedings and claims arising in the
ordinary course of business. In the opinion of management, the amount of
ultimate liability in respect of these actions will not materially affect the
financial position or future results of the group.
7. RELATED PARTY TRANSACTIONS
There are no related party transactions which are material to the group. Loans
payable to related parties are discussed in Note 4.
8. INCOME TAX
A reconciliation of the income tax expense/(benefit) at the statutory rate to
the group's effective rate is as follows:
NZ$'000
Tax expense/(benefit) at statutory rate 1,127
Non-deductible expenses and other, net 73
Foreign tax rate differential 57
-----
1,257
=====
Deferred tax assets/(liabilities) result from the cumulative effect of temporary
differences in the recognition of expenses/(revenues) between tax returns and
financial statements. The significant components of the balances are as
follows:
NZ$'000
DEFERRED TAX ASSETS
Bad debt allowance 104
Compensation accruals 69
Other timing differences 24
-----
197
DEFERRED TAX LIABILITIES
Depreciation (815)
Other timing differences (51)
-----
(866)
Valuation allowance on deferred tax assets -
-----
Net deferred tax assets/(liabilities) (669)
=====
<PAGE>
JR Courtenay (N.Z.) Limited Page 10
Notes to the Financial Statements
For the year ended 31 March 1998
9. SALES TO MAJOR CUSTOMERS
The group has a diverse range of customers which are primarily locally based.
During the year the group had sales to two customers in excess of ten percent of
total sales. The group made sales of approximately NZ$10.4 million and NZ$5.6
million to T.E.A.M. Poly Pty Limited and Linpac Polycast Pty, respectively.
10. RECONCILIATION OF NET INCOME AFTER TAX TO NET OPERATING CASH FLOW
<TABLE>
<CAPTION>
NZ$'000
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income after tax 2,157
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Depreciation and amortization 733
Loss on disposition of property, plant and equipment 24
Changes in assets and liabilities
Trade receivables 893
Inventories 715
Prepaid expenses and other assets (242)
Income tax (19)
Deferred tax 364
Accounts payable (1,101)
Accrued expenses and others 2,396
Bank overdraft 871
-------
TOTAL ADJUSTMENTS 4,634
-------
Net cash provided by/(used for) operating activities 6,791
=======
</TABLE>
11. FOREIGN OPERATIONS INFORMATION
The group operates in the same industry in the following two countries:
NEW ZEALAND AUSTRALIA TOTAL
NZ$'000 NZ$'000 NZ$'000
Net revenue (including interest)
Year ended 31 March 1998 9,967 26,049 36,016
Operating income
Year ended 31 March 1998 1,777 1,669 3,446
Identifiable assets
At year end 31 March 1998 6,654 11,443 18,097
<PAGE>
JR Courtenay (N.Z.) Limited Page 11
Notes to the Financial Statements
For the year ended 31 March 1998
12. EMPLOYEE BENEFIT PLANS
The group contributes to benefit plans for employees of both JR Courtenay (N.Z.)
Limited and Courtenay Polymers Pty Limited.
Employees of JR Courtenay (N.Z.) Limited are eligible for participation in the
staff superannuation scheme upon completing six months of service. Under the
provisions of the scheme, the company contributes between 5-10% of gross
salary/wages for each participant depending on the number of years of service.
In addition, each eligible employee may contribute 5% of their gross
salary/wages.
Courtenay Polymers Pty Limited does not operate a superannuation scheme on
behalf of its employees. However, as required by Australian law the company
does contribute to an independent superannuation scheme for each employee.
Contributions are made to selected superannuation schemes at an amount of 6% of
employees gross salary/wages.
Total expense for the employee benefit plans included in the consolidated
results of operations for year was approximately $161,522.
<PAGE>
Page 12
Report of Independent Chartered Accountants
To the Board of Directors and Shareholders of
JR Courtenay (N.Z.) Limited
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the financial position of JR Courtenay (N.Z.)
Limited and its subsidiaries at March 31, 1998 and the results of their
operations and their cash flows for the year in conformity with generally
accepted accounting principles in the United States of America. These financial
statements are the responsibility of the company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse
Price Waterhouse
Auckland, New Zealand
10 June 1998
