<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 15, 1999 (August 2, 1999)
---------------------------------
Date of Report (Date of earliest event reported)
AMPCO-PITTSBURGH CORPORATION
----------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania
------------
(State or other jurisdiction of incorporation)
1-898 25-1117717
----- ----------
(Commission File Number) (I.R.S. Employer Identification No.)
600 Grant Street, Suite 4600, Pittsburgh, PA 15219
---------------------------------------------------
(Address of Principal Executive Offices)
412/456-4400
------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 7. Financial Statements and Exhibits.
On August 2, 1999, Ampco-Pittsburgh Corporation (the "Corporation") acquired the
stock of certain subsidiaries of Kvaerner PLC and disclosed such in its Form
10-Q dated August 13, 1999. The historical audited financial statements of each
of the subsidiaries and the required pro forma financial statements were not
included in the Form 10-Q dated August 13, 1999 and set forth that such
information would be filed within sixty (60) days.
This Form 8-K is being filed to include the historical audited financial
statements of each of the subsidiaries acquired, The Davy Roll Company Limited,
Turner Chilled Rolls Limited, and Kvaerner Formet Limited, (collectively,
"Davy") for the year ended December 31, 1998 and the unaudited financial
statements for the 7-months ended July 31, 1999, as well as the required pro
forma financial statements.
(a) Financial Statements of the Businesses Acquired.
The audited financial statements of The Davy Roll Company Limited, Turner
Chilled Rolls Limited, and Kvaerner Formet Limited as of and for the year ended
December 31, 1998 are included in Exhibit 99.1.
The unaudited financial statements of The Davy Roll Company Limited, Turner
Chilled Rolls Limited, and Kvaerner Formet Limited as of and for the
7-months ended July 31, 1999, are included in Exhibit 99.2.
(b) Pro Forma Financial Statements
The following unaudited pro forma consolidated financial statements present the
pro forma consolidated balance sheet at July 31, 1999, and the related pro forma
consolidated statements of income for the 7-months ended July 31, 1999 and for
the year ended December 31, 1998, giving effect to the August 2, 1999
acquisition of Davy as if the acquisition had been consummated at the beginning
of those periods.
The pro forma financial statements are based on the historical audited financial
statements of the Corporation and of Davy for the year ended December 31, 1998
and the unaudited financial statements for each of these companies for the
7-months ended July 31, 1999. The financial statements of Davy are prepared in
accordance with generally accepted accounting principles of the United Kingdom
(UK GAAP), which is a comprehensive basis of accounting other than generally
accepted accounting principles of the United States (US GAAP). Significant
differences between UK GAAP and US GAAP for Davy include accounting for pensions
under a defined benefit plan, accounting for deferred income taxes and
revaluation of fixed assets, each of which are discussed in the attached audited
financial statements.
<PAGE>
Assets and liabilities of Davy have been translated at the exchange rate in
effect at the end of the period. The statements of income have been translated
at the average exchange rate for each of the periods. Gains or losses resulting
from translating these foreign currency financial statements are included as a
component of capital reserves.
These unaudited pro forma financial statements are included for comparative
purposes only and are not intended to be indicative of the results that would
have occurred if the acquisition had been consummated at the beginning of those
periods or that may be obtained in the future. The pro forma adjustments are
based on available information and upon certain assumptions that management
believes are reasonable under the circumstances. These adjustments are directly
attributable to the consummated transaction and are expected to have a
continuing impact on the financial position and results of operations of the
Corporation. Adjustments are also based on preliminary Accounting Principles
Board Opinion (APB) No. 16, "Business Combinations", calculations. Further
adjustments to the purchase price allocation may arise as a result of the
finalization of certain pre-acquisition contingencies, primarily related to
accounting for pensions under a defined benefit plan.
The unaudited pro forma financial statements should be read in conjunction with
the audited financial statements of the related companies.
<PAGE>
Ampco-Pittsburgh Corporation
Unaudited Pro forma Consolidated Balance Sheet
July 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Consolidated
----Historical----- Pro Forma
Ampco Pro forma Balance Sheet
Pittsburgh Davy Adjustments (Unaudited)
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash $ 36,625 $ 10 $(23,600) a.
equivalents (500) e. $ 12,535
Accounts receivable,
net 36,712 12,822 49,534
Inventories 36,426 12,675 49,101
Other 4,074 166 4,240
----------- ----------- ----------- -----------
Total current assets 113,837 25,673 (24,100) 115,410
Property, plant
and equipment, net 78,085 16,059 (8,993) c. 85,151
Prepaid pension 14,177 0 14,177
Other noncurrent assets 13,406 0 13,406
----------- ----------- ----------- -----------
Total assets $219,505 $41,732 $(33,093) $228,144
----------- ----------- ----------- -----------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,750 $ 3,299 $ 12,049
Accrued payrolls
and employee benefits 8,544 1,251 9,795
Other accruals 10,179 3,692 $ 1,362 b.
(975) f. 14,258
----------- ----------- ----------- -----------
Total current
liabilities 27,473 8,242 387 36,102
Employee benefit
obligations 15,621 0 15,621
Industrial revenue
bond debt 14,661 0 14,661
Deferred income taxes 11,605 0 10 h. 11,615
Amounts due to affiliates 0 1,707 (1,707) d. 0
Other noncurrent
liabilities 1,958 0 1,958
----------- ----------- ----------- -----------
Total liabilities 71,318 9,949 (1,310) 79,957
----------- ----------- ----------- -----------
Shareholders' Equity
Preference stock 0 0 0
Common stock 9,590 0 9,590
Additional paid-in-
capital 102,669 0 102,669
Capital reserves 0 31,783 (31,783) g. 0
Retained earnings 34,897 0 34,897
Accumulated other
comprehensive income 1,031 0 1,031
----------- ----------- ----------- -----------
Total shareholders'
equity 148,187 31,783 (31,783) 148,187
----------- ----------- ----------- -----------
$219,505 $41,732 $(33,093) $228,144
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
Ampco-Pittsburgh Corporation
Unaudited Pro forma Consolidated Statement of Income
For the year ended December 31, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Consolidated
----Historical----- Pro Forma
Ampco Pro forma Stmt of Income
Pittsburgh Davy Adjustments (Unaudited)
----------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
Net sales $187,853 $64,496 $252,349
----------- ---------- ----------
Operating costs
and expenses:
Cost of products
sold (excluding
depreciation) 129,410 52,421 181,831
Selling and administrative 27,718 6,212 33,930
Depreciation 7,523 1,357 $ (865) i.
188 k. 8,203
----------- ----------- ----------- -----------
164,651 59,990 (677) 223,964
----------- ----------- ----------- -----------
Income from operations 23,202 4,506 677 28,385
Other income (expense) 419 (706) (1,203) j.
695 l. (795)
----------- ----------- ----------- -----------
Income before income
taxes 23,621 3,800 169 27,590
Income taxes 7,955 - 1,577 m. 9,532
----------- ----------- ----------- -----------
Net income $ 15,666 $ 3,800 $ (1,408) $18,058
=========== =========== =========== ===========
Earnings per share:
Basic $1.64 $1.89
Diluted $1.64 $1.89
Weighted average number
of common shares
outstanding 9,578 - - 9,578
</TABLE>
<PAGE>
Ampco-Pittsburgh Corporation
Unaudited Pro forma Consolidated Statement of Income
For the seven-months ended July 31, 1999
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Consolidated
----Historical----- Pro Forma
Ampco Pro forma Stmt of Income
Pittsburgh Davy Adjustments (Unaudited)
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Net sales $112,161 $29,916 $142,077
----------- ----------- -----------
Operating costs
and expenses:
Cost of products
sold (excluding
depreciation) 78,291 26,388 104,679
Selling and administrative 16,989 3,374 20,363
Depreciation 4,442 888 $ (545) i.
105 k. 4,890
----------- ----------- ----------- -----------
99,722 30,650 (440) 129,932
----------- ----------- ----------- -----------
Income (loss) from
operations 12,439 (734) 440 12,145
Other income (expense) 10 (364) (455) j.
426 l. (383)
----------- ----------- ----------- -----------
Income (loss) before
income taxes 12,449 (1,098) 411 11,762
Income taxes 4,360 - (56) m. 4,304
----------- ----------- ----------- -----------
Net income $ 8,089 $(1,098) $ 467 $ 7,458
=========== =========== =========== ===========
Earnings per share:
Basic $0.84 $0.78
Diluted $0.84 $0.78
Weighted average number
of common shares
outstanding 9,582 - - 9,582
</TABLE>
<PAGE>
Ampco-Pittsburgh Corporation
Notes to Unaudited Pro Forma Consolidated Financial Statements
Note 1: The unaudited pro forma consolidated balance sheet is based on the
individual balance sheet of Ampco-Pittsburgh Corporation (the "Corporation") and
the combined balance sheets of The Davy Roll Company Limited, Turner Chilled
Rolls Limited, and Kvaerner Formet Limited, which are presented as "Davy". The
pro forma adjustments are to reflect the acquisition as if it had taken place on
July 31, 1999.
a. To record distribution of $23.6 million cash for the purchase of Davy.
b. To recognize direct costs and additional purchase price liabilities assumed
as part of the acquisition.
c. The fair values of the assets acquired and the liabilities assumed exceeded
the purchase price. Accordingly, the value of property, plant and equipment was
reduced by the excess.
d. Amounts due to affiliates represent amounts due to Kvaerner PLC or one of
its subsidiaries. These amounts were repaid to Kvaerner PLC by the Corporation
at the time of the acquisition.
e. The Corporation incurred costs of approximately $500,000 in connection with
the acquisition which it funded internally.
f. Elimination of the government grant liability which the Corporation will not
have to repay.
g. Capital reserve accounts as of the beginning of the year are eliminated.
h. Deferred tax represents the difference between temporary differences in the
financial bases and tax bases of assets acquired and liabilities assumed.
Note 2: The unaudited pro forma consolidated statements of income are based on
the individual statements of income of the Corporation and the combined
statements of income of Davy. The pro forma adjustments are to reflect the
acquisition as if it had taken place as of the beginning of the periods (January
1, 1999 and January 1, 1998).
i. Reduction in depreciation expense due to the reduction in the value of
property, plant and equipment (see c. above).
j. Reduction in interest income due to the cash outlay to acquire the net
assets of Davy.
k. Elimination of amortization income associated with the government grant
liability (see f. above).
l. Elimination of management charges assessed by Kvaerner PLC and interest
assessed on amounts due to affiliates.
m. The current tax provision on pro forma net income at current effective tax
rates.
(c) Exhibits
99.1 Audited financial statements of The Davy Roll Company Limited, Turner
Chilled Rolls Limited, and Kvaerner Formet Limited as of and for the year
ended December 31, 1998.
99.2 Unudited financial statements of The Davy Roll Company Limited, Turner
Chilled Rolls Limited, and Kvaerner Formet Limited as of and for the
7-months ended July 31, 1999.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMPCO-PITTSBURGH CORPORATION
BY: /s/Robert A. Paul
_______________________________
Robert A. Paul, President and
Chief Executive Officer
Dated: October 15, 1999
<PAGE>
Exhibit 99.1
THE DAVY ROLL COMPANY LIMITED
-----------------------------
DIRECTORS' REPORT AND ACCOUNTS
------------------------------
FOR THE YEAR ENDED
------------------
31/ST/ DECEMBER 1998
--------------------
REGISTERED IN ENGLAND
---------------------
NUMBER 162966
-------------
<PAGE>
THE DAVY ROLL COMPANY LIMITED
-----------------------------
DIRECTORS REPORT
----------------
The directors have pleasure in submitting their Report and Audited Accounts for
the year ended 31/st/ December 1998.
Principal Activity
- ------------------
The Company carried on the manufacture of rolls throughout the year.
Business Review
- ---------------
The Directors do not anticipate any change in the principal activities of the
Company in the near future.
Results
- -------
The results for the year are set out in the Profit and Loss Account on page 7.
Retained profits of (Pounds)1,662,000 (1997: (Pounds)2,317,000) have been
transferred to reserves.
Dividends
- ---------
The directors do not propose to recommend the payment of any dividend on the
issued ordinary share capital of the Company in respect of the year ended 31
December 1998 (1997: Nil).
Directors
- ---------
The following persons were directors of the Company during the year:-
Mr.R.B.Begley Dismissed 23.9.98.
Mr.C.Hersey
Mr.M.G.Foster
Mr.M.Hannah Resigned 29.5.98.
Dr.B.Phillipo Appointed 23.9.98.
<PAGE>
Directors' Interests
- --------------------
None of the Directors at 31 December 1998 had any interests requiring to be
disclosed under the Companies Act 1985.
There were no changes in the Directors' interests between 31 December 1998 and
the date of this report.
No Director during the year had a material interest in any contract significant
to the Company's business.
The Environment
- ---------------
The Company is required to pursue policies that comply with the relevant
legislation and standards applicable to their particular industries.
Employment Policies
- -------------------
The Company is committed to a policy of providing equal opportunities for all,
regardless of race, religion, sex or disability.
The Company is committed to training and management development, so as to ensure
a supply of trained and skilled employees.
The Company keeps employees informed about its current activities and progress
by various methods, including in-house publications.
Contributions for Political and Charitable Purposes
- ---------------------------------------------------
During the year the Company made donations to various charitable organisations
amounting to (Pounds)1,000 (Year ended 31 December 1997 (Pounds)1,000).
No political donations were made.
<PAGE>
Policy on payment of suppliers
- ------------------------------
The Company is responsible for agreeing the terms and conditions under which
business transactions with their suppliers are conducted. It is the Company
policy that payments to suppliers are made in accordance with these terms,
provided that the supplier is also complying with all relevant terms and
conditions.
The number of days billing from suppliers outstanding at 31 December 1998 was
54.
Year 2000
- ---------
The Company operates various computerised systems, and other equipment
containing embedded microchips. Such systems and equipment are potentially
susceptible to malfunction after 31 December 1999 due to the way in which they
manipulate date information. This is commonly referred to as the "year 2000
problem".
The Company has established a dedicated project team to ensure that the risks,
issues and costs associated with computer problems relating to the Year 2000
date change are properly assessed and that sufficient resources are committed to
ensure that The Company is not adversely affected by the use of dates beyond 31
December 1999.
The total cost of modifications to our computer hardware and software is
estimated at (Pounds)75,000 most of which will be charged to operating costs of
1998/99.
The Euro
- --------
A working party is investigating the likely impact of the Euro on our business.
The aim is to ensure that the Company is fully prepared in readiness for the
introduction of the Euro and, in particular, for the business implications of
the United Kingdom's potential entry into the EMU.
By Order of the Board
C.HERSEY
DIRECTOR
Registered Office
P.O.Box 21
Close Works
Gateshead
Tyne & Wear
NE8 3DX
<PAGE>
Statement of Directors Responsibilities
- ---------------------------------------
Company law requires the directors to prepare accounts for each financial year
which give true and fair view of the state of affairs of the company as at the
end of the financial year and of the profit or loss of the company for that
year. In preparing those accounts, the directors are required to :-
- - select suitable accounting policies and apply them consistently;
- - make judgments and estimates that are reasonable and prudent;
- - state whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the financial statements;
- - prepare the accounts on a going concern basis unless it is inappropriate to
presume the company will continue in business.
The directors are responsible for ensuring that the company keeps accounting
records which disclose with reasonable accuracy at any time the financial
position of the company and which enable them to ensure that the accounts comply
with the Companies Act 1985. They have responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the company and to
prevent and detect fraud and other irregularities.
<PAGE>
Auditors' report
To the Members of The Davy Roll Company Limited:
We have audited the financial statements on pages 7 to 21 which have been
prepared under the historical cost convention, as modified by the revaluation of
land and buildings and the accounting policies set out on pages 10 and 12.
Respective responsibilities of directors and auditors
As described on page 4 the company's directors are responsible for the
preparation of the financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board which are substantially consistent with generally
accepted accounting standards in the United States. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements and of whether the accounting policies are appropriate
to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Going concern
In forming our opinion, we have considered the adequacy of the disclosures set
out in note 21 relating to the post balance sheet events, strategic review and
financing of the ultimate holding company, Kvaerner ASA, and its subsidiaries,
including The Davy Roll Company Limited. In particular, we draw attention to
the disclosure of the uncertainties relating to the compliance of the Kvaerner
ASA group with the covenants related to the new banking arrangements entered
into since 31 December 1998. In view of the significance of these matters and
their potential impact on the going concern basis adopted, in these accounts, we
believe that they should be brought to your attention. Our opinion is not
qualified in this respect.
Opinion
In our opinion the financial statements give a true and fair view of the state
of the company's affairs at 31 December 1998 and of its profit for the year then
ended and have been properly prepared in accordance with the Companies Act 1985.
<PAGE>
Auditors' report (continued)
US GAAP information
Accounting practices used by the Group in preparing the accompanying accounts
conform with generally accepted accounting principals in the United Kingdom, but
do not conform with generally accepted accounting principals in the United
States. A description of significant differences is set out in note 23.
Arthur Andersen
Chartered Accountants and Registered Auditors
Pearl Assurance House
7 New Bridge Street
Newcastle upon Tyne
NE1 8BQ
16 July 1999 (except with respect to the matters discussed in note 23, as to
which the date is 15 October 1999).
<PAGE>
THE DAVY ROLL COMPANY LIMITED
- -----------------------------
Profit & Loss Account for the Year Ended 31/st/ December 1998
<TABLE>
<CAPTION>
Notes Year Ended Year Ended
31.12.98 31.12.97
(Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Turnover (continuing
activities) 2 33,900 31,892
Cost of Sales (31,207) (28,639)
--------- -------
GROSS PROFIT 2,693 3,253
Net Operating Expenses (919) (877)
--------- -------
OPERATING PROFIT 1,774 2,376
Interest Receivable 63 121
Interest payable 3 (175) (180)
--------- --------
PROFIT ON ORDINARY 4 1,662 2,317
ACTIVITIES
BEFORE TAXATION
Tax on Profit on 5 - -
Ordinary activities
RETAINED PROFIT FOR THE 17 1,662 2,317
FINANCIAL YEAR --------- --------
</TABLE>
The accompanying notes form an integral part of these accounts.
<PAGE>
Balance Sheet at 31 December 1998
<TABLE>
<CAPTION>
Notes 1998 1997
As
restated
(Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
FIXED ASSETS
Tangible Assets 8 9,136 9,376
CURRENT ASSETS
Stocks & Work in Progress 10 7,334 6,946
Debtors 11 8,983 7,693
Cash at bank and in hand 2,094 2,789
------- -------
18,411 17,428
------- -------
CREDITORS:AMOUNTS FALLING DUE
WITHIN ONE YEAR
Borrowings 12 - (17)
Other Creditors 13 (13,351) (14,143)
------- -------
(13,351) (14,160)
------- -------
NET CURRENT ASSETS 5,060 3,268
------- -------
TOTAL ASSETS LESS CURRENT 14,196 12,644
LIABILITIES ------- -------
CREDITORS:AMOUNT FALLING DUE
AFTER MORE THAN ONE YEAR
Other Creditors 14 (554) (664)
------- -------
Net Assets 13,642 11,980
------- -------
CAPITAL RESERVES
Called up share capital 15 60 60
Share premium account 16 3,205 3,205
Revaluation reserve 17 103 103
Profit and loss account 17 10,274 8,612
------- -------
Equity Shareholders' Funds 13,642 11,980
------- -------
- -------------------------------------------------------------------
</TABLE>
These accounts were approved by the Board of Directors on 16/th/ July 1999 and
signed on its behalf by:
C.HERSEY
<PAGE>
Statement of total recognised gains and losses for year ended 31 December 1998.
<TABLE>
<CAPTION>
Year Ended Year Ended
31.12.98 31.12.97
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Profit for the 1,662 2,317
financial year
Prior year adjustment (750) -
(as explained in note ----- -----
13)
Total gains and 912 2,317
losses since last ===== =====
annual report
</TABLE>
Reconciliation of movements in shareholders' funds for the year ended 31/st/
December 1998.
<TABLE>
<CAPTION>
Yr.Ended
Yr.Ended 31.12.97
31.12.98 As restated
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Profit for the 1,662 2,317
financial year
Prior period - (750)
adjustments ------
Opening 11,980 10,413
Shareholders' funds ------ ------
Closing 13,642 11,980
Shareholders' funds ------ ------
</TABLE>
<PAGE>
Notes to the Accounts
1. The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the company's
financial statements. The affect of a prior period adjustment is set out in
Note 13.
a. Accounting Conventions
The financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost
accounting rules as modified by the revaluation of land and buildings.
b. Cash Flow Statement
The company has taken advantage of the exemption under the rules of
FRS1 (revised) not to produce a cash flow statement, as the accounts of
the parent company, which it is a wholly owned subsidiary, are publicly
available.
c. Foreign Currencies
Assets and liabilities are translated into sterling at the rates ruling
at the year end except where rates of exchange are fixed under
contractual arrangements, with differences taken to the profit and loss
account. Transactions undertaken in foreign currencies are translated
at the rate of exchange prevailing at the date of the transaction.
d. Turnover
Turnover, which includes inter company trading, represents the value of
work performed during the year by reference to amounts derived from
goods supplied and services provided which are all continuing and
arises wholly within the United Kingdom.
e. Research and Development
Expenditure is charged against profit in the year in which it is
incurred.
f. Taxation
Deferred taxation is provided at the anticipated tax rates on timing
differences arising from the inclusion of items of income and
expenditure in taxation computations in periods different from those in
which they are included in the accounts to the extent that it is
probable that a liability or asset will crystallise in the future.
No provision is made for any tax on capital gains not covered by losses
that could arise from the future disposal of any fixed assets shown in
the accounts valuation.
<PAGE>
1. Accounting Policies (Continued)
g. Depreciation
Freehold properties and long leasehold properties are not depreciated.
It is the company's policy to maintain its properties in a sound state
of repair and accordingly, the Directors consider that the lives the
properties are so long and residual values are of such a level that
depreciation is immaterial. Other fixed assets are depreciated over
their estimated useful lives on a straight line basis as follows :-
Plant and Machinery 5-25 years
Motor Vehicles 4 years
Computer 5-7 years
Office furniture,fixture
& fitting 10 years.
h. Leased Assets
Assets acquired under finance leases that give rights approximating to
ownership are treated as if they had been purchased and an amount
equivalent to their cost is included under tangible fixed assets.
Depreciation is provided in accordance with the company's normal policy.
Leasing payments are treated as consisting of capital and finance charge
elements and the finance charge is charged to the profit and loss
account. All other leases are operating leases and the annual rentals
are charged wholly to the profit and loss account.
i. Stocks & Work in Progress
Stocks have been valued at the lower of cost and net realisable value.
Work in Progress is stated at direct costs of materials with the
addition of all relevant overheads including labour under a full
absorption costing system.
j. Government Grants
Government grants generally comprise regional development grants
receivable which are being released by equal instalments per the average
expected life of the assets to which they apply and deducted from the
depreciation charge in the profit and loss account.
Deferred credits in respect of grants are included in accruals and
deferred income in the balance sheet.
<PAGE>
k. Revaluation Reserve
Surpluses and deficits arising on the revaluation of tangible fixed
assets are credited or debited to a non distributable reserve known as
the revaluation reserve. In accordance with FRS3, the profit or loss on
sale of a tangible fixed asset is the difference between the disposal
proceeds and the carrying value of the asset, including any revaluation.
Any amount in the revaluation reserve relating to such an asset is
transferred directly to the profit and loss reserve and is not included
in the profit for the financial year.
l. Pensions
The expected cost to the company of pensions in respect of defined
benefit and defined contribution pension schemes is charged to the
profit and loss account so as to spread the cost of pensions over the
service lives of employees in the schemes
2. Analysis of Turnover
In accordance with S55(5) Schedule 4 Companies Act 1985, an analysis of
turnover all of which relates to the principal activity, has not been
given. In the opinion of the directors this could be seriously prejudicial
to the interests of the company.
3. Interest Payable
<TABLE>
<CAPTION>
Year ended Year ended
31.12.98. 31.12.97.
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Finance charges allocated 1 -
to the year in respect of
finance leases.
Loans from ultimate Parent 174 180
Company --- ---
175 180
--- ---
</TABLE>
<PAGE>
4. Profit on ordinary activities before taxation
---------------------------------------------
<TABLE>
<CAPTION>
Yr.Ended Yr.Ended
31.12.98. 31.12.97.
(Pounds)' (Pounds)'
<S> <C> <C>
Profit on ordinary
activities before taxation
is stated after charging/
(crediting)
Auditors' remuneration 13 8
Depreciation Owned assets 836 728
Leased assets 21 21
Research and development 133 172
Government Grant released (114) (116)
Operating Lease Payments - 13 13
Land & Buildings
Operating Lease Payments - 40 40
Motor Vehicles
Operating Lease Payments - 14 6
Office Equipment ---- ----
</TABLE>
5. Taxation on profit on ordinary activities
-----------------------------------------
There is no charge for Corporation Tax on the profit for the year as relief
will be obtained for losses incurred by other Companies in the Group
surrendered for no consideration.
No provision for deferred taxation is required as it is anticipated that no
deferred taxation will materialise in the foreseeable future.
<PAGE>
The full potential deferred taxation liability calculated on the liability
method at 30% (1997 31%) is:
<TABLE>
<CAPTION>
Yr.Ended 31.12.98. Yr.Ended 31.12.97.
(Pounds)000 (Pounds)000
<S> <C> <C>
Accelerated 1,344 1,266
depreciation
Other timing (199) (241)
differences ----- -----
1,145 1,025
----- -----
</TABLE>
6. Staff Numbers and Costs
-----------------------
The average monthly number of employees, all of whom were engaged in the
United Kingdom on the company's principal activity, was:
<TABLE>
<CAPTION>
Yr.Ended Yr.Ended
31.12.98. 31.12.97.
<S> <C> <C>
Management and 27 27
administration
Technical 21 23
Manufacturing 416 407
--- ---
464 457
--- ---
</TABLE>
<PAGE>
Staff costs including directors' emoluments were as follows:
<TABLE>
<CAPTION>
Yr.Ended 31.12.98. Yr.Ended 31.12.97.
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Wages & Salaries 10,819 10,045
Social Security Costs 929 874
Other Pension Costs 888 850
------ ------
12,636 11,769
------ ------
</TABLE>
7. Directors Remuneration
----------------------
Remuneration
------------
The remuneration of the directors was as follows:-
<TABLE>
<CAPTION>
Yr.Ended Yr.Ended
31.12.98. 31.12.97.
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Emoluments 122 123
Compensation for loss of office 15 -
Company contributions to money purchase 8 8
pension schemes --- ---
145 131
--- ---
</TABLE>
<PAGE>
Pensions
--------
The number of directors who were members of pension schemes was as
follows:-
<TABLE>
<CAPTION>
Yr.Ended Yr.Ended
31.12.98. 31.12.97.
<S> <C> <C>
Money purchase schemes 2 2
--------- ---------
</TABLE>
8. Tangible Fixed Assets
---------------------
<TABLE>
<CAPTION>
Land & Plant & Total
Buildings Equipment
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Cost or valuation:
At 1/st/ January 1998 1,800 17,735 19,535
Additions 116 501 617
Disposals - (18) (18)
----- ------- -------
At 31 December 1998 1,916 18,218 20,134
----- ------- -------
Accumulated
depreciation:
At 1 January 1998 - (10,159) (10,159)
Charge for the year - (857) (857)
Depreciation on - 18 18
Disposals ----- ------- -------
At 31 December 1998 - (10,998) (10,998)
----- ------- -------
Net Book Value:
At 31 December 1998 1,916 7,220 9,136
----- ------- -------
At 1 January 1998 1,800 7,576 9,376
----- ------- -------
</TABLE>
<PAGE>
Cost
----
Land and Buildings were valued on 30 September 1995 at an open market
existing use value by Messrs. Herring Son & Daw, Chartered Surveyors as
follows :-
<TABLE>
<CAPTION>
31 December 31 December
1998 1997
------------------------ ------------------------
Freehold Long Freehold Long
Leasehold Leasehold
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Buildings 1,129 145 1,129 145
Land 403 123 403 123
----- --- ----- ---
1,532 268 1,532 268
----- --- ----- ---
The Comparable
amounts on a
historic basis are as
follows: 1,849 209 1,849 209
----- --- ----- ---
</TABLE>
Plant and equipment includes motor vehicles, machinery, and computer
equipment. The net book value of leased assets included in plant and
equipment is (Pounds)117,000 (1997 - (Pounds)137,000).
<PAGE>
9. Leased Assets
-------------
Finance Leases
--------------
Net obligations under finance leases, included in creditors in notes 13 and
14, are payable as follows :-
<TABLE>
<CAPTION>
31.12.98. 31.12.97.
(Pounds)000 (Pounds)000
<S> <C> <C>
Within one year - 17
Between two and five years - -
After five years - -
-------- ---------
- 17
-------- ---------
</TABLE>
Operating Leases
<TABLE>
<CAPTION>
31.12.98. 31.12.97.
(Pounds)000 (Pounds)000
<S> <C> C>
Land & Buildings:
After five years 13 13
-------- ---------
Other:
In respect of leases expiring within one - -
year
Between two and five years 54 46
-------- ---------
Total 67 59
-------- ---------
</TABLE>
<PAGE>
10. Stocks
------
<TABLE>
<CAPTION>
31.12.98. 31.12.97.
(Pounds)000 (Pounds)000
<S> <C> <C>
Raw Materials and consumables 3,328 2,624
Work-in-Progress 4,006 4,322
-------- ---------
7,334 6,946
-------- ---------
</TABLE>
11. Debtors
-------
<TABLE>
<CAPTION>
31.12.98. 31.12.97.
(Pounds)000 (Pounds)000
<S> <C> <C>
Amounts falling due within one year
Trade debtors 8,747 7,456
Amounts owed by fellow subsidiary 120 237
undertaking
Prepayments and accrued income 116 -
---------- -----
8,983 7,693
---------- -----
</TABLE>
<PAGE>
12. Borrowings
----------
<TABLE>
<CAPTION>
31.12.98. 31.12.97.
(Pounds)000 (Pounds)000
<S> <C> <C>
Borrowings are repayable as follows:
Less than one year - 17
Between two and five years - -
---------- ----------
17
----------
</TABLE>
13. Creditors: Amounts falling due within one year
----------------------------------------------
<TABLE>
<CAPTION>
31.12.97.
31.12.98. As restated
(Pounds)000 (Pounds)000
<S> <C> <C>
Trade creditors 2,444 2,570
Amounts owned to subsidiary undertakings 7,605 8,953
Other creditors including taxes and social 302 295
security
Accruals and deferred income 3,000 2,325
---------- ----------
13,351 14,143
---------- ----------
</TABLE>
Accruals and deferred income in 1997 is restated after a prior period
adjustment of (Pounds)750,000 resulting from a change in accounting policy
to provide for future warranty costs.
<PAGE>
14. Creditors: Amounts falling due after more than one year
--------------------------------------------------------
<TABLE>
<CAPTION>
31.12.98. 31.12.97.
(Pounds)000 (Pounds)000
<S> <C> <C>
Accruals and deferred income 554 664
---------- ----------
</TABLE>
15. Share Capital
-------------
<TABLE>
<CAPTION>
31.12.98. 31.12.97.
(Pounds)000 (Pounds)000
<S> <C> <C>
Authorised: Allotted, called up and fully
paid:
60,000 Ordinary Shares of (Pounds)1 each 60 60
---------- ----------
</TABLE>
16. Share Premium Account
---------------------
<TABLE>
<CAPTION>
31.12.98. 31.12.97.
(Pounds)000 (Pounds)000
<S> <C> <C>
As at beginning and end of year 3,205 3,205
----- -----
</TABLE>
<PAGE>
17. Reserves
--------
<TABLE>
<CAPTION>
Profit & Loss
Revaluation Account
Reserve As restated
(Pounds)000 (Pounds)000
<S> <C> <C>
Account
- -------
As at 1 January 1998 103 8,612
Retained profit for the year - 1,662
--- ------
As at 31 December 1998 103 10,274
--- ------
</TABLE>
18. Capital Commitments
-------------------
There are no capital commitments at 31 December 1998 (31 December 1997
Nil).
19. Contingent Liabilities
----------------------
The company has contingent liabilities under guarantees given to bankers in
support of banking facilities of other group companies. It is not expected
that any unprovided liability will arise under the above arrangements.
20. Pensions
--------
The company's employees are members of defined benefit and defined
contribution pension schemes operated by Kvaerner PLC under which
contributions are paid by the company and by employees. The assets of the
schemes are held in trustee administered funds separate from the finances
of the group.
<PAGE>
The company's contributions are based on the expected cost of pensions
across the Kvaerner PLC Group as a whole and are charged to the profit and
loss account so as to spread the cost of pensions over the service lives of
employees within group schemes. Details of the actuarial valuation of the
group schemes are contained in the report and accounts of Kvaerner PLC.
21. Post Balance Sheet Events and Going Concern
-------------------------------------------
Kvaerner plc and other members of the Kvaerner ASA group are co-dependent
on each other for funding support. In this connection, it should be noted
that on 13 April 1999, Kvaerner ASA announced a far-reaching strategic
restructuring with a view to returning the Group to profitable performance
and significantly reducing Group borrowings. The restructuring will involve
the divestiture of the group's shipping activities and other loss making
non-core businesses. In order to provide additional support and a robust
base to the planned restructuring, the Kvaerner Board proposed a rights
issue of NOK 2 billion. The rights issue took place on 22 June 1999, was
approved by Kvaerner ASA group shareholders at the Annual General Meeting
on 6 May and was fully subscribed and paid in.
Kvaerner ASA and its subsidiaries are also exposed to various uncertainties
inherent in projects subject to long term contracts, details of which are
disclosed in the accounts of Kvaerner plc.
The Kvaerner ASA group principal loan facilities contain certain financial
covenants relating to gross borrowings to tangible net worth, net
borrowings to shareholders' equity and interest coverage. In April 1999,
the Kvaerner ASA group's lenders agreed to suspend the financial covenants
of such loan facilities to facilitate the changes arising in connection
with the strategic restructuring and to amend the financial covenants for
the remaining terms of the facilities, commencing 1 April 1999. Certain of
the accounting provisions created in connection with the
<PAGE>
restructuring programme relate to potential losses anticipated on the sale
of the Kvaerner ASA group's shipbuilding activities. Kvaerner ASA group
considers that the agreement with the lenders excludes gains and losses
arising from the exit of the shipbuilding business. Therefore Kvaerner ASA
group in its calculation of the financial covenants have excluded the
provision and is of the opinion that it is in compliance with the
covenants. Accordingly, the directors have prepared the accounts on a going
concern basis.
There can be no assurance over the Kvaerner ASA group's ability to meet all
covenants contained in its lending agreements or the lenders' willingness
to extend waivers or amend terms to avoid any actual or anticipated
breaches of such covenants.
22. Ultimate Parent Company
-----------------------
Kvaerner PLC heads the smallest group in which the results of the Company
are consolidated.
The ultimate Parent Company and controlling party is Kvaerner ASA which
heads the largest group in which the results of the Company are
consolidated.
Copies of the respective financial statements can be obtained from Kvaerner
PLC at St.James House, 23, King Street, London SWIY 6QY.
Under FRS8, Related party disclosures, the Company is exempt from the
requirement to provide details of transactions with other members of the
group headed by Kvaerner ASA.
<PAGE>
23. Summary of significant differences between U.K. GAAP and U.S. GAAP
-------------------------------------------------------------------
The Davy Roll Company Limited's financial statements are prepared in
accordance with U.K. GAAP which differ in certain significant respects from
U.S. GAAP. Set forth below is a brief description of certain major
differences between U.K. GAAP and U.S. GAAP as of December 1998. This
description is not intended to provide a comprehensive listing of such
differences specifically related to The Davy Roll Company Limited or the
industry in which it operates. U.S. GAAP is generally more restrictive and
comprehensive than U.K. GAAP regarding recognition and measurement of
transactions, account clarification and disclosure requirements. No attempt
has been made to identify disclosure, presentation or classification
differences that would affect the manner in which transactions and events
are presented in the financial information or notes thereto. The Company
has not prepared a quantitative assessment of differences between U.S.
GAAP and U.K. GAAP treatments that may have highlighted other differences.
Deferred taxation
Under U.K. GAAP the Company provides for deferred taxation using the
liability method on a material timing differences to the extent that it is
considered probable that the liabilities will crystallise in the
foreseeable future.
Under U.S. GAAP deferred taxation is provided for all temporary differences
between the book and the tax bases of the assets and liabilities in the
liability method. Deferred tax assets are recognised to the extent that it
is more likely than not that the benefit will be realised.
Defined benefit pension costs
The Company accounts for the costs of pensions under the rules set out in
U.K. GAAP. U.S. GAAP is more prescriptive in respect of the actuarial
assumptions, which must be used, and the allocation of costs to accounting
periods.
Under U.K. GAAP the pension cost is calculated based upon the actuary's
best estimate of the assumptions taken as a whole. The annual cost charged
to the profit and loss account comprises the regular cost and variations.
The regular cost is calculated so that it represents a reasonably stable
percentage of pensionable payroll. Variations from the regular cost of
providing pensions are generally spread over the expected remaining service
lives of current employees in the scheme.
U.S. GAAP requires each significant assumption to determine annual pension
cost to be a best estimate with respect to that individual assumption. For
example, the discount rate used should be that for 'AAA' rated bonds with a
similar maturity to the pension obligations and the value of the scheme
assets should be based upon market values at each balance sheet data.
Whilst U.S. GAAP also adopts a spreading approach to allocating variations
it is more restrictive. As a result certain variations, for example refunds
from the scheme, would be recognised immediately rather than being spread
forward. U.S. GAAP treats increases in pensions as a past service cost and
accordingly
<PAGE>
amortises its effects over the working lives of the members after the
increase is awarded. U.K. GAAP encourages expected increases to be provided
for in advance by being built in the actuarial assumptions.
Fixed asset revaluations
U.K. GAAP permits revaluations of tangible fixed assets to their fair value
with any resulting revaluation surplus recorded in a revaluation reserve.
Depreciation on the revalued amount is charged to the profit and loss
account.
The revaluation of fixed assets is not permitted under U.S. GAAP (except in
connection with certain purchase transactions).
Non depreciation of fixed assets
Under U.K. GAAP it is permitted not to charge depreciation if the asset is
maintained to such a standard that it's residual value approximates to
cost.
Under U.S. GAAP buildings would be depreciated over the useful life.
Cash flow statements
U.K. GAAP does not require disclosure of cash flow information under
certain circumstances.
If a cash flow statement had been prepared under U.K. GAAP, it would report
the movement in cash.
Under U.S. GAAP a cashflow statement would be required and would report the
movement in cash and cash equivalents.
<PAGE>
TURNER CHILLED ROLLS LIMITED
DIRECTORS' REPORT AND ACCOUNTS
YEAR ENDED 31st December 1998
(Registered Number 1180365)
<PAGE>
TURNER CHILLED ROLLS LIMITED
----------------------------
DIRECTORS' REPORT
-----------------
FOR THE YEAR ENDED 31ST DECEMBER 1998
-------------------------------------
The directors have pleasure in submitting their Report and Statement of
Accounts for the year ended 31st December 1998.
PRINCIPAL ACTIVITIES
- ---------------------
The company carried on the business of rollmaking throughout the period.
BUSINESS REVIEW
- ---------------
The Directors consider that the level of business and the financial position at
31st December 1998 were satisfactory.
RESULTS
- -------
The results for the year are set out in the profit and loss account on page 4.
Retained profits of (Pounds)359,000 (period ended 31st December 1997 Profit
(Pounds)256,000) have been transferred to reserves.
DIVIDENDS
- ---------
The Directors do not propose to recommend the payment of any dividend on the
issued ordinary share capital of the company in respect of the period ended 31st
December 1998.
DIRECTORS
- ---------
The following persons were directors of the company during the period:-
Mr J Rylatt
Mr M G Foster
Mr M H Hannah (Resigned 29.5.98)
DIRECTORS INTERESTS
- -------------------
No director had any interest in the shares of the company or of the ultimate
holding company Kvaerner ASA.
EMPLOYEE INVOLVEMENT
- --------------------
During the period the group maintained the practice of keeping employees
informed about current activities and progress by various methods including In-
House Publications. Participation and involvement are encouraged through formal
Trade Union channels.
AUDITORS
- --------
Pursuant to Section 386 of the Companies Act 1985 an elective resolution to
dispense with the obligation to appoint auditors annually is in force.
MILLENNIUM COMPLIANCE
- ---------------------
Turner Chilled Rolls Limited have a dedicated project team in place adapting our
systems and preparing contingency plans for the Millennium. These tasks will be
largely completed in the current year. The incremental costs of modifications
specifically related to year 2000 compliance are not anticipated to be
significant.
THE INTRODUCTION OF THE EURO
- ----------------------------
Turner Chilled Rolls Limited are preparing for the introduction of the common
European currency which will have an impact on commercial arrangements and
financial systems. We anticipate that the company will be fully prepared for
the introduction of the euro and in particular, for the business implications of
the United Kingdoms' potential entry into the EMU
By Order of the Board
Turner Chilled Rolls Limited.
Farthing Road
Ipswich J. Rylatt
Suffolk Managing Director
IP1 5AP
<PAGE>
TURNER CHILLED ROLLS LIMITED
----------------------------
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare financial statements of each
financial year which give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period. In preparing
those accounts, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the accounts; and
prepare the accounts on the going concern basis unless it is inappropriate
to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the accounts comply with the Companies
Act 1985. They are also responsible for safeguarding the assets of the company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
<PAGE>
Auditor's report
To the Shareholders of Turner Chilled Rolls Limited:
We have audited the financial statements on pages 4 to 10 which have been
prepared under the historical cost convention and the accounting policies set
out on pages 6 and 7.
Respective responsibilities of directors and auditors
As described on page 2, the company's directors are responsible for the
preparation of the financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board which are substantially consistent with generally
accepted accounting standards in the United States. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements and of whether the accounting policies are appropriate
to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state
of the company's affairs at 31 December 1998 and of its profit for the year then
ended and have been properly prepared in accordance with the Companies Act 1985.
US GAAP information
Accounting practices used by the Group in preparing the accompanying accounts
conform with generally accepted accounting principals in the United Kingdom, but
do not conform with generally accepted accounting principals in the United
States. A description of significant differences is set out in note 19.
Arthur Andersen
Chartered Accountants and Registered Auditors
Pearl Assurance House
7 New Bridge Street
Newcastle upon Tyne
NE1 8BQ
26 April 1999 (except with respect to the matters discussed in note 19, as to
which the date is 15 October 1999).
<PAGE>
TURNER CHILLED ROLLS LIMITED
----------------------------
PROFIT AND LOSS ACCOUNT
-----------------------
FOR THE YEAR ENDED 31ST DECEMBER 1998
-------------------------------------
1998 1997
---- ----
NOTES (Pounds)'000 (Pounds)'000
----- ------------ ------------
Turnover 2 1580 1617
Cost of sales 1197 1331
---- ----
Gross profit 383 286
Administration expenses 95 76
---- ----
Operating profit 288 210
Interest receivable 3 71 46
---- ----
Profit on ordinary activities
before taxation 4 359 256
Tax on profit on ordinary
activities 5 -- --
---- ----
Profit on ordinary activities
after taxation being profit
for the financial year 13 359 256
==== ====
The notes on pages 6 to 9 form a part of this profit and loss account.
The company has no recognised gains or losses other than the profit for the
financial year. Accordingly a statement of total recognised gains and losses has
not been prepared. All of the results are derived from continuing operations.
<PAGE>
TURNER CHILLED ROLLS LIMITED
----------------------------
BALANCE SHEET AS AT
-------------------
31ST DECEMBER 1998
------------------
1998 1997
---- ----
NOTES (Pounds)'000 (Pounds)'000
----- ------------ ------------
FIXED ASSETS
Tangible assets 7 505 491
---- ---
CURRENT ASSETS
Stock and work in progress 8 237 199
Debtors 9 2827 2678
Cash at bank in hand 426 330
---- ----
3490 3207
CREDITORS: AMOUNTS FALLING
DUE WITHIN ONE YEAR 10 192 254
---- ----
NET CURRENT ASSETS 3298 2953
---- ----
TOTAL ASSETS LESS CURRENT LIABILITIES 3803 3444
NET ASSETS 3803 3444
==== ====
CAPITAL AND RESERVES
Called-up share capital 11 139 139
Revaluation reserve 12 124 124
Profit and loss account 12 3540 3181
---- ----
TOTAL SHAREHOLDERS' FUNDS-
ALL EQUITY 13 3803 3444
==== ====
The notes on pages 6 to 9 form a part of this balance sheet.
These accounts were approved by the board of directors on 26th March 1999 and
signed on its
behalf by:
J. Rylatt
Managing Director
<PAGE>
TURNER CHILLED ROLLS LIMITED
----------------------------
NOTES TO THE ACCOUNTS
---------------------
31ST DECEMBER 1998
------------------
1. ACCOUNTING POLICIES
-------------------
The following accounting policies have been applied consistently throughout
the year and the preceding year dealing with items which are considered material
in relation to the company's financial statements.
a) Basis of accounting
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost accounting rules as modified
by the revaluation of freehold land and buildings and include the results of
activities described in the directors report, all of which are continuing.
b) Cash flow statement
The company has taken advantage of the exemption under the rules of FRS1
(revised) not to produce a cash flow statement. The appropriate amounts have
been included in the consolidated accounts of Kvaerner PLC. (note 17).
c) Foreign currencies
Monetary assets and liabilities denominated in foreign currencies at the
balance sheet date are translated into sterling at the rates ruling at the
period end except where rates of exchange are fixed under contractual
arrangements. Transactions in foreign currencies are recorded at the rate of
exchange at the date of the transaction or, if hedged, at the forward contract
rate.
d) Turnover
Turnover represents the value of work performed during the period by
reference to amounts derived from goods supplied and services provided, net of
trade discounts, VAT and other sales related taxes.
e) Taxation
Corporation tax payable is provided on taxable profits at the current rate.
Deferred taxation is provided at the anticipated tax rates on timing differences
arising from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are included in the
accounts to the extent that it is probable that a liability or asset will
crystallise in the future.
No provision is made for any tax on capital gains not covered by losses that
could arise from the future disposal of any fixed assets shown in the accounts
at valuation.
f) Depreciation
Tangible fixed assets are stated at cost or valuation, net of depreciation
and any provision for impairment. Freehold properties are not depreciated. It is
the company's policy to maintain its properties in a sound state of repair and
accordingly, the Directors consider that the lives of the properties are so long
and residual values are at such a level that depreciation is immaterial. Other
fixed assets are depreciated over their estimated useful lives on a straight
line basis as follows:
Motor vehicles 4 years
Plant and machinery 10-15 years
Office furniture, fixtures and fittings 5-10 years
g) Leased assets
Assets acquired under finance leases that give rights approximating to
ownership are treated as if they had been purchased and an amount equivalent to
their cost is included under tangible fixed assets. Depreciation is provided in
accordance with the company's normal policy. Leasing payments are treated as
consisting of capital and finance charge elements and the finance charge is
charged to the profit and loss account. All other leases are operating leases
and the annual rentals are charged wholly to the profit and loss account.
h) Stocks and work in progress
Stock is stated at the lower of cost and net realisable value.
Work in progress is stated at direct cost of materials and labour with the
addition of attributable manufacturing overheads or at net realisable value if
lower.
Net realisable value is based on estimated selling price, less further costs
expected to be incurred to completion and disposal. Provision is made for
obsolete slow-moving or defective items where appropriate.
<PAGE>
TURNER CHILLED ROLLS LIMITED
----------------------------
NOTES TO THE ACCOUNTS (Continued)
---------------------
i) Revaluation reserve
Surpluses and deficits arising on the revaluation of tangible fixed assets
are credited or debited to non distributable reserve known as the revaluation
reserve. In accordance with FRS3, the profit or loss on sale of a tangible fixed
asset is the difference between the disposal proceeds and the carrying value of
the asset, including any revaluation.
Any amount in the revaluation reserve relating to such an asset is
transferred directly to the profit and loss reserve and is not included in the
profit for the financial period.
j) Pension costs
For defined benefit schemes the amount charged to the profit and loss account
in respect of pension costs is the etimated regular cost of providing the
benefits accrued in the year. The assets of the scheme are held in an
independently administered fund.
For defined contribution schemes the amount charged to the profit and loss
account in respect of pension costs is the contributions payable in the year.
2. ANALYSIS OF TURNOVER
In accordance with S55(5) Schedule 4 Companies Act 1985, a geographical
analysis of turnover, all of which is in respect of the principal activity, has
not been given. In the opinion of the directors this could be seriously
prejudicial to the interests of the company.
3. INTEREST RECEIVABLE 1998 1997
(Pounds)'000 (Pounds) '000
------------ -------------
Bank Interest 30 5
Interest on loans to parent undertaking 41 41
---- ----
71 46
==== ====
4. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit on ordinary activities before taxation is stated after charging:
1998 1997
(Pounds)'000 (Pounds)'000
------------ ------------
Auditors' remuneration for audit work 2 2
Depreciation 18 15
==== ====
5. TAX ON PROFIT ON ORDINARY ACTIVITIES
There is no charge for Corporation tax on the profit for the year (as for
the year ended 31st December 1997) as relief will be obtained for losses
incurred by other companies in the Group surrendered for no consideration.
6. PROVISIONS FOR LIABILITIES AND CHARGES
No provision for deferred tax is required as it is anticipated that no
deferred taxation will crystallise in the foreseeable future. The potential
amount of deferred taxation calculated on the liability method at current rate
is:
(Pounds)'000 (Pounds)'000
------------ ------------
Accelerated capital allowances 10 8
Other timing differences (13) (6)
==== ====
(3) 2
==== ====
7. STAFF NUMBERS AND COSTS
a) The average monthly number of employees, including executive directors
was:
Number Number
Manufacturing 26 26
Administration 6 6
---- ----
32 32
==== ====
b) Staff costs
(Pounds)'000 (Pounds)'000
------------ ------------
Wages and salaries 492 526
Social security costs 43 45
Other pension costs (note 15) 43 46
---- ----
578 617
==== ====
c) Directors emoluments
The directors received no emoluments during the period (1997:nil)
<PAGE>
TURNER CHILLED ROLLS LIMITED
----------------------------
NOTES TO THE ACCOUNTS (Continued)
---------------------
8. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Freehold Plant and
Land and Buildings Machinery Total
------------------ ------------- -------------
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------------ ------------- -------------
<S> <C> <C> <C>
Cost or valuation
at 1st January 1998 400 436 836
Additions - 33
33
Disposal - - -
------ ---- -----
at 31st December 1998 400 469 869
------ ---- -----
Accumulated depreciation
at 1st January 1998 - (346) (346)
Charge for the period - (18) (18)
Depreciation on disposal - -
---- -----
at 31st December 1998 - (364) ( 364)
------ ---- -----
Net book value at 31st December 1998 400 105 505
====== ==== =====
Net book value at 31st December 1997 400 91 491
====== ==== =====
</TABLE>
The company's freehold property was valued by Jones Lang Wooton , Chartered
Surveyors on 30th September 1993. In their opinion the market value for existing
use at that time was (Pounds) 400,000 as compared to the net book amount of
(Pounds) 600,000. The valuation has been included in the balance sheet and the
deficit of (Pounds)200,000 has been deducted from the revaluation reserve.
The valuation of the freehold land included in land and buildings is (Pounds)
150,000 (1997:(Pounds)150,000)
The comparable amount of land and buildings on the historical cost basis are
as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Cost 276 276
Depreciation - -
---- ----
276 276
==== ====
</TABLE>
9. STOCK AND WORK IN PROGRESS
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Raw materials and consumables 83 64
Finished goods and goods for resale 24
19
Work In Progress 130 116
---- ----
237 199
==== ====
</TABLE>
There is no material difference between the balance sheet value of stocks and
their replacement cost.
10. DEBTORS
<TABLE>
<CAPTION>
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Amounts falling due within one year:
Trade debtors 343 393
Amounts owed from fellow subsidiary undertakings 2484 2285
---- ----
2827 2678
==== ====
</TABLE>
<PAGE>
TURNER CHILLED ROLLS LIMITED
----------------------------
NOTES TO THE ACCOUNTS (Continued)
---------------------
11. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR.
<TABLE>
<CAPTION>
1998 1997
(Pounds)'000 (Pounds)'000
------------- ------------
<S> <C> <C>
Trade creditors 89 124
Amounts owed to fellow subsidiary undertakings 32 38
Taxation and social security (8) 6
Accruals and deferred income 79 86
---- ----
192 254
==== ====
</TABLE>
12. CALLED-UP SHARE CAPITAL
<TABLE>
<CAPTION>
(Pounds)'000 (Pounds)'000
------------- ------------
<S> <C> <C>
Authorised, allotted, called-up and fully paid
138830 ordinary shares of (Pounds)1 each 139 139
==== ====
</TABLE>
13. RESERVES
<TABLE>
<CAPTION>
Revaluation Profit and
Reserve loss account
------------ ------------
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Balance at 1st January 1998 124 3181
Retained profit for the financial year - 359
---- ----
Balance at 31st December 1998 124 3540
==== ====
</TABLE>
14. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1998 1997
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Opening shareholders' funds 3444 3188
Profit for the financial year 359 256
---- ----
Closing shareholders funds 3803 3444
==== ====
</TABLE>
<PAGE>
15. CONTINGENT LIABILITIES
The company has contingent liabilities under guarantees given to bankers in
support of banking facilities of other group companies. It is not expected that
any unprovided liability will arise under the above arrangements.
16. PENSIONS
The company's employees are members of the defined benefit pension
scheme or defined contribution pension schemes operated by Kvaerner PLC Group
under which contributions are paid by the company and by employees. The assets
of the schemes are held in trustee administered funds separate from the finances
of the group. The pension cost charge for the company for the year in respect of
both types of schemes is (Pounds)43,853.
The company's contributions are based on the expected cost of pensions
across the Kvaerner PLC Group as a whole and are charged to the profit and loss
account so as to spread the cost of the pensions over the service lives of
employees within the group schemes. Details of the actuarial valuation of the
group schemes are contained in the report and accounts of Kvaerner PLC.
17. ULTIMATE PARENT UNDERTAKING
Kvaerner PLC heads the smallest group in which the results of the company
are consolidated.
The ultimate parent company is Kvaerner ASA which heads the largest group
in which the results of the company are consolidated.
Copies of the respective financial statements can be obtained from Kvaerner
PLC at St James's House, 23 King Street, London. SW1Y 6QY.
18. RELATED PARTY TRANSACTIONS
As a consequence of being a wholly owned subsidiary, the company is exempt
from the requirement of Financial Reporting Standard No. 8 "Related party
disclosures" to disclose transactions with other group members.
<PAGE>
19. Summary of significant differences between U.K. GAAP and U.S. GAAP
-------------------------------------------------------------------
Turner Chilled Rolls Limited's financial statements are prepared in
accordance with U.K. GAAP which differ in certain significant respects from
U.S. GAAP. Set forth below is a brief description of certain major
differences between U.K. GAAP and U.S. GAAP as of December 1998. This
description is not intended to provide a comprehensive listing of such
differences specifically related to Turner Chilled Rolls Limited or the
industry in which it operates. U.S. GAAP is generally more restrictive and
comprehensive than U.K. GAAP regarding recognition and measurement of
transactions, account clarification and disclosure requirements. No attempt
has been made to identify disclosure, presentation or classification
differences that would affect the manner in which transactions and events
are presented in the financial information or notes thereto. The Company
has not prepared a quantitative assessment of differences between U.S.
GAAP and U.K. GAAP treatments that may have highlighted other differences.
Deferred taxation
Under U.K. GAAP the Company provides for deferred taxation using the
liability method on a material timing differences to the extent that it is
considered probable that the liabilities will crystallise in the
foreseeable future.
Under U.S. GAAP deferred taxation is provided for all temporary differences
between the book and the tax bases of the assets and liabilities in the
liability method. Deferred tax assets are recognised to the extent that it
is more likely than not that the benefit will be realised.
Defined benefit pension costs
The Company accounts for the costs of pensions under the rules set out in
U.K. GAAP. U.S. GAAP is more prescriptive in respect of the actuarial
assumptions, which must be used, and the allocation of costs to accounting
periods.
Under U.K. GAAP the pension cost is calculated based upon the actuary's
best estimate of the assumptions taken as a whole. The annual cost charged
to the profit and loss account comprises the regular cost and variations.
The regular cost is calculated so that it represents a reasonably stable
percentage of pensionable payroll. Variations from the regular cost of
providing pensions are generally spread over the expected remaining service
lives of current employees in the scheme.
U.S. GAAP requires each significant assumption to determine annual pension
cost to be a best estimate with respect to that individual assumption. For
example, the discount rate used should be that for 'AAA' rated bonds with a
similar maturity to the pension obligations and the value of the scheme
assets should be based upon market values at each balance sheet data.
Whilst U.S. GAAP also adopts a spreading approach to allocating variations
it is more restrictive. As a result certain variations, for example refunds
from the scheme, would be recognised immediately rather than being spread
forward. U.S. GAAP treats increases in pensions as a past service cost and
accordingly
<PAGE>
amortises its effects over the working lives of the members after the
increase is awarded. U.K. GAAP encourages expected increases to be provided
for in advance by being built in the actuarial assumptions.
Fixed asset revaluations
U.K. GAAP permits revaluations of tangible fixed assets to their fair value
with any resulting revaluation surplus recorded in a revaluation reserve.
Depreciation on the revalued amount is charged to the profit and loss
account.
The revaluation of fixed assets is not permitted under U.S. GAAP (except in
connection with certain purchase transactions).
Non depreciation of fixed assets
Under U.K. GAAP it is permitted not to charge depreciation if the asset is
maintained to such a standard that it's residual value approximates to
cost.
Under U.S. GAAP buildings would be depreciated over the useful life.
Cash flow statements
U.K. GAAP does not require disclosure of cash flow information under
certain circumstances.
If a cash flow statement had been prepared under U.K. GAAP, it would
report the movement in cash.
Under U.S. GAAP a cashflow statement would be required and would report
the movement in cash and cash equivalents.
<PAGE>
KVAERNER FORMET LIMITED
DIRECTORS' REPORT AND ACCOUNTS
Year ended 31st December 1998
(Registered in England, Number 1025431)
<PAGE>
KVAERNER FORMET LIMITED
-----------------------
DIRECTORS' REPORT
-----------------
The directors have pleasure in submitting their Report, the Auditors' Report and
Accounts for year ended 31st December 1998.
PRINCIPAL ACTIVITY
- ------------------
The principal activity of the company is the provision of forgings of high
quality metals to a wide range of industries.
BUSINESS REVIEW
- ---------------
The directors consider that the level of business and the financial position at
31st December 1998 were satisfactory given the current market conditions.
RESULTS
- -------
The results for the year are set out in the profit and loss account on page 4.
Retained profits of (Pounds)271,000 (year to 31st December 1997 Profit
(Pounds)351,000) have been transferred to reserves.
DIVIDENDS
- ---------
The Directors do not propose to recommend the payment of any dividend on the
issued ordinary share capital of the company in respect of the year ended 31st
December 1998. (1997:nil)
DIRECTORS
- ---------
The following persons were directors of the company during the year:-
Mr J Rylatt
Mr M G Foster
Mr M H Hannah (Resigned 29.5.98)
DIRECTORS INTERESTS
- -------------------
No director had any interest in the shares of the company or of the ultimate
holding company Kvaerner ASA.
EMPLOYEE INVOLVEMENT
- --------------------
During the year the company maintained the practice of keeping employees
informed about current activities and progress by various methods including in-
house Publications. Participation and involvement are encouraged through formal
Trade Union channels.
AUDITORS
- --------
The directors appointed Arthur Andersen auditors of the company on 6th November
1996.
Pursuant to Section 386 of the Companies Act 1985 an elective resolution to
dispense with the obligation to appoint auditors annually was passed at an
Extraordinary General Meeting of the Company held on 1st December 1992.
MILLENNIUM COMPLIANCE
- ---------------------
Kvaerner Formet have a dedicated project team in place adapting our systems and
preparing contingency plans for the Millennium. The directors do not consider
the risk of disruption to be significant and are confident that any improvements
and changes required to the company's systems and equipment in order to mitigate
the risk of the year 2000 problem will be completed in the current year. The
incremental costs of modifications specifically related to year 2000 compliance
are not anticipated to be significant.
THE INTRODUCTION OF THE EURO
- ----------------------------
Kvaerner Formet is preparing for the introduction of the common European
currency which will have an impact on commercial arrangements and financial
systems. We anticipate that the company will be fully prepared for the
introduction of the euro and in particular, for the business implications of the
United Kingdoms' potential entry into the EMU.
By Order of the Board
S. Marshall
Secretary
<PAGE>
KVAERNER FORMET LIMITED
-----------------------
STATEMENT OF DIRECTORS RESPONSIBILITIES
---------------------------------------
Company law requires the directors to prepare accounts for each financial year
which give a true and fair view of the state of affairs of the company as at the
end of the financial year and of the profit or loss of the company for the year.
In preparing those accounts, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed;
prepare the accounts on the going concern basis unless it is inappropriate
to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and to enable them to ensure that the accounts comply with the Companies
Act 1985. They are also responsible for safeguarding the assets of the company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
<PAGE>
Auditors' report
Shareholders of Kvaerner Formet Limited:
We have audited the financial statements on pages 4 to 10 which have been
prepared under the historical cost convention and the accounting policies set
out on pages 6 and 7.
Respective responsibilities of directors and auditors
As described on page 2 the company's directors are responsible for the
preparation of the financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board which are substantially consistent with generally
accepted accounting standards in the United States. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements and of whether the accounting policies are appropriate
to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state
of the company's affairs at 31 December 1998 and of its profit for the year then
ended and have been properly prepared in accordance with the Companies Act 1985.
US GAAP information
Accounting practices used by the Group in preparing the accompanying accounts
conform with generally accepted accounting principals in the United Kingdom, but
do not conform with generally accepted accounting principals in the United
States. A description of significant differences is set out in note 19.
Arthur Andersen
Chartered Accountants and Registered Auditors
Pearl Assurance House
7 New Bridge Street
Newcastle upon Tyne
NE1 8BQ
26 March 1999 (except with respect to the matters discussed in note 19, as to
which the date is 15 October 1999).
<PAGE>
KVAERNER FORMET LIMITED
-----------------------
PROFIT AND LOSS ACCOUNT
-----------------------
FOR YEAR ENDED 31ST DECEMBER 1998
---------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
31ST 31ST
DECEMBER DECEMBER
NOTES 1998 1997
------------- ------------
(Pounds)'000 (Pounds)'000
------------- ------------
<S> <C> <C> <C>
Turnover 2 3282 2694
Cost of Sales 2958 2329
---- ----
Gross Profit 324 365
Administration 118 90
Expenses ---- ----
Operating Profit 206 275
Interest Receivable 3 65 76
---- ----
Profit on ordinary 4 271 351
activities
before taxation
Tax on profit on 5 - -
ordinary
activities
Retained profit for the 13 271 351
financial year
</TABLE>
The notes on pages 6 to 10 form a part of these accounts.
The company has no recognised gains or losses other than the profit for the
financial period. Accordingly a statement of total recognised gains and losses
has not been prepared. All of the results are derived from continuing
operations.
<PAGE>
KVAERNER FORMET LIMITED
-----------------------
BALANCE SHEET AS AT
-------------------
31ST DECEMBER 1998
------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
31ST 31ST
DECEMBER DECEMBER
NOTES 1998 1997
------------ ------------
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 8 605 330
---- ----
TOTAL FIXED ASSETS 605 330
CURRENT ASSETS
Stock 9 562 541
Debtors 10 957 1332
Cash at bank and in hand 1078 679
---- ----
TOTAL CURRENT ASSETS 2597 2552
CREDITORS: AMOUNG 11 440 391
FALLING DUE WITHIN ONE ---- ----
YEAR
NET CURRENT ASSETS 2157 2161
---- ----
TOTAL NET ASSETS 2762 2491
==== ====
CAPITAL AND RESERVES
Calledup share interest 12 3 3
Share premium account 13 26 26
Profit and loss account 13 2733 2462
---- ----
EQUITY SHAREHOLDERS 14 2762 2491
FUNDS ==== ====
</TABLE>
The notes on pages 6 to 10 form a part of these accounts.
These accounts were approved by the board of directors on 26th March 1999 and
signed on its behalf by:
J. Rylatt
Director
<PAGE>
KVAERNER FORMET LIMITED
-----------------------
NOTES TO THE ACCOUNTS
---------------------
31ST DECEMBER 1998
------------------
1. ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the company's
accounts.
a) Accounting convention
The accounts have been prepared in accordance with applicable accounting
standards and under the historical cost accounting rules and include the
results of the activity described in the directors report, which is
continuing.
b) Cash flow statement
The company has taken advantage of the exemption under the rules of FRS1
(revised) not to produce a cash flow statement. The appropriate amounts
have been included in the consolidated accounts of Kvaerner PLC.
c) Foreign Currencies
Transactions in foreign currencies are recorded at the rate of exchange at
the date of the transactionor, if hedged, at the forward contract rate.
Assets and liabilities denominated in foreign currencies are translated
into sterling at the rates ruling at the year-end except where rates of
exchange are fixed under contractual arrangements.
d) Turnover
Turnover represents the value of work performed during the year by
reference to amounts derived from goods supplied and services provided.
e) Research and Development
Revenue expenditure on research and development is written off as incurred.
f) Taxation
Deferred taxation is provided at the anticipated tax rates on timing
differences arising from the inclusion of items of income and expenditure
in taxation computations in periods different from those in which they are
included in the accounts to the extent that it is probable that a liability
or asset will crystallise in the future.
g) Depreciation
Depreciation is provided on a straight line basis on all assets to write
off the original cost of assets over their estimated useful lives as
follows:
Short leasehold properties over the period of the lease
Plant and machinery 3-15 years
h) Leased assets
Assets acquired under finance leases that give rights approximating to
ownership are treated as if they had been purchased and an amount
equivalent to their cost is included under tangible fixed assets.
Depreciation is provided in accordance with the company's normal policy.
Leasing payments are treated as consisting of capital and finance charge
elements and the finance charge is charged to the profit and loss account.
All other leases are operating leases and the annual rentals are charged
wholly to the profit and loss account.
i) Stocks and Work in Progress
Stock is stated at the lower of cost and net realisable value. Work in
progress is stated at direct cost of materials and labour with the addition
of all manufacturing overheads or at net realisable value if lower.
Provision is made for obsolete, slow-moving or defective items where
appropriate.
j) Government Grants
Government grants generally comprise of regional development grants
received which are being released by equal instalments over the average
expected life of the assets to which they apply and deducted from the
depreciation charge in the profit and loss account. Deferred credits in
respect of grants are included in accruals and deferred income in the
Balance Sheet.
<PAGE>
KVAERNER FORMET LIMITED
-----------------------
NOTES TO THE ACCOUNTS
---------------------
31ST DECEMBER 1998
------------------
k) Pension Costs
The expected cost to the company of pensions in respect of the defined
benefit and defined contribution pension schemes is charged to the profit
and loss account so as to spread the cost of the pensions over the service
lives of the employees in the schemes.
2. ANALYSIS OF TURNOVER
The analysis of turnover, all of which relates to the principal activity,
by geographical area is as follows:
<TABLE>
<CAPTION>
Year ended Year ended
31/st/ December 31/st/ December
1998 1997
--------------- ---------------
(Pounds)'000 (Pounds)'000
--------------- ---------------
<S> <C> <C>
United Kingdom 3140 2620
Europe - EEC 64 22
Europe - Non EEC 60 37
North America 15 2
Asia - South East 3 13
---- ----
3282 2694
==== ====
</TABLE>
3. INTEREST RECEIVABLE
<TABLE>
<S> <C> <C>
Bank interest 61 20
receivable
Inter company interest 4 56
receivable -- --
65 76
== ==
</TABLE>
4. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit on ordinary activities before taxation is stated after charging
<TABLE>
<CAPTION>
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Auditors' remuneration for 2 2
audit work
Operating lease payments - 28 20
plant and machinery
Depreciation 52 45
== ==
</TABLE>
5. TAX ON PROFIT ON ORDINARY ACTIVITIES
There is no charge for Corporation Tax on the profit for the year (as for
the year ended 31st December 1997) as relief will be obtained for losses
incurred by other companies in the Group surrendered for no consideration.
There is no material unprovided liability for deferred tax at 31st December
1998. (31st December 1997 - (Pounds) nil)
6. STAFF NUMBERS AND COSTS
a) The average number of employees, all of whom were engaged in the United
Kingdom on the company's principal activity:
<TABLE>
<CAPTION>
Number Number
<S> <C> <C>
Manufacturing 25 23
Administration 12 11
-- --
37 34
== ==
</TABLE>
b) Staff costs including directors emoluments:
<TABLE>
<CAPTION>
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Wages and salaries 656 572
Social security costs 68 55
Other pension costs (note 17) 37 30
--- ---
761 657
=== ===
</TABLE>
<PAGE>
KVAERNER FORMET LIMITED
-----------------------
NOTES TO THE ACCOUNTS
---------------------
31ST DECEMBER 1998
------------------
7. DIRECTORS' EMOLUMENTS
Directors' Emoluments set out below include taxable salaries and the
estimated value of benefits in kind
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
In respect of managing the 65 65
affairs of the company ==== ====
(Excluding pension contributions)
</TABLE>
Three directors were members of defined benefit pension schemes during
the year.
8. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Short
Leasehold
Land and Plant and
buildings Machinery Total
------------- ------------ ------------
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------- ------------ ------------
<S> <C> <C> <C>
Cost at 1st January 1998 119 730 849
Additions at 31st December 1998 - 327 327
--- ---- ----
119 1057 1176
--- ---- ----
Accumulated depreciation at 1st January 1998 59 460 519
Charge for the year at 31st December 1998 4 48 52
--- ---- ----
63 508 571
--- ---- ----
Net book value at 31st December 1998 56 549 605
=== ==== ====
Net book value at 31st December 1997 60 270 330
=== ==== ====
</TABLE>
Plant and equipment includes machinery, motor vehicles, fixtures
and fittings and computer equipment.
9. STOCK AND WORK IN PROGRESS
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Raw materials and consumables 444 403
Work in Progress 118 138
---- ----
562 541
==== ====
</TABLE>
10. DEBTORS
<TABLE>
<CAPTION>
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Amounts falling due within one year
Trade debtors 654 466
Amounts owed by fellow subsidiary 303 866
undertakings --- ----
957 1332
=== ====
</TABLE>
11. CREDITORS
<TABLE>
<CAPTION>
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Amounts falling due within one year
Trade creditors 301 275
Amounts owed to fellow subsidiary 28 7
undertakings
Taxation and social security 43 40
Accruals and deferred income 68 69
--- ---
440 391
=== ===
</TABLE>
<PAGE>
KVAERNER FORMET LIMITED
-----------------------
NOTES TO THE ACCOUNTS
---------------------
31ST DECEMBER 1998
------------------
12. SHARE CAPITAL
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Authorised, allotted, called up and
fully paid
3000 ordinary shares of (Pounds)1 each 562 541
==== ====
</TABLE>
13. RESERVES
<TABLE>
<CAPTION>
Profit
Share and loss
Premium account
------------ ------------
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Balance at 1st January 1998 26 2462
-- ----
Retained profit for the financial year 271
====
Balance at 31st December 1998 26 2733
== ====
</TABLE>
14. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
Year Year
ended ended
31/st/ 31/st/
December December
1998 1997
------------ ------------
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Profit for the financial year 271 351
Opening equity shareholders' funds 2491 2140
---- ----
Closing equity shareholders' funds 2762 2491
==== ====
</TABLE>
15. CONTINGENT LIABILITIES
The company has contingent liabilities under guarantees given to bankers in
support of banking facilities of other group companies. It is not expected
that any unprovided liability will arise under the above arrangements.
16. OPERATING LEASES
Commitments to operating lease payments within one year are as follows:
<TABLE>
<CAPTION>
Plant and Machinery
--------------------------
1998 1997
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
In respect of leases expiring:
Within one year 38 16
Within two to five years 73 20
---- ----
111 36
==== ====
</TABLE>
17. PENSIONS
The company's employees are members of the defined benefit pension scheme
or defined contribution pension schemes operated by Kvaerner PLC under
which contributions are paid by the company and by employees. The assets of
the schemes are held in trustee administered funds separate from the
finances of the group. The company's contributions are based on the
expected cost of pensions across Kvaerner PLC as a whole and are charged to
the profit and loss account so as to spread the cost of the pensions over
the service lives of employees within the group schemes. Details of the
actuarial valuation of the group schemes are contained in the report and
accounts of Kvaerner PLC.
<PAGE>
KVAERNER FORMET LIMITED
-----------------------
NOTES TO THE ACCOUNTS
---------------------
31ST DECEMBER 1998
------------------
18. ULTIMATE PARENT UNDERTAKING
Kvaerner PLC heads the smallest group in which the results of the company
are consolidated.
The ultimate parent company is Kvaerner ASA which heads the largest group
in which the results of the company are consolidated.
As a subsidiary of Kvaerner ASA the company has taken advantage of the
exemption in FRS 8 'Related Party Disclosures' not to disclose transactions
with other members of the group headed by Kvaerner ASA.
Copies of the respective financial statements can be obtained from Kvaerner
PLC at St James's House, 23 King Street, London. SW1Y 6QY.
19. Summary of significant differences between U.K. GAAP and U.S. GAAP
Kvaerner Formet Limited's financial statements are prepared in
accordance with U.K. GAAP which differ in certain significant respects from
U.S. GAAP. Set forth below is a brief description of certain major
differences between U.K. GAAP and U.S. GAAP as of December 1998. This
description is not intended to provide a comprehensive listing of such
differences specifically related to Kvaerner Formet Limited or the
industry in which it operates. U.S. GAAP is generally more restrictive and
comprehensive than U.K. GAAP regarding recognition and measurement of
transactions, account clarification and disclosure requirements. No attempt
has been made to identify disclosure, presentation or classification
differences that would affect the manner in which transactions and events
are presented in the financial information or notes thereto. The Company
has not prepared a quantitative assessment of differences between U.S.
GAAP and U.K. GAAP treatments that may have highlighted other differences.
Deferred taxation
Under U.K. GAAP the Company provides for deferred taxation using the
liability method on a material timing differences to the extent that it is
considered probable that the liabilities will crystallise in the
foreseeable future.
Under U.S. GAAP deferred taxation is provided for all temporary differences
between the book and the tax bases of the assets and liabilities in the
liability method. Deferred tax assets are recognised to the extent that it
is more likely than not that the benefit will be realised.
Defined benefit pension costs
The Company accounts for the costs of pensions under the rules set out in
U.K. GAAP. U.S. GAAP is more prescriptive in respect of the actuarial
assumptions, which must be used, and the allocation of costs to accounting
periods.
Under U.K. GAAP the pension cost is calculated based upon the actuary's
best estimate of the assumptions taken as a whole. The annual cost charged
to the profit and loss account comprises the regular cost and variations.
The regular cost is calculated so that it represents a reasonably stable
percentage of pensionable payroll. Variations from the regular cost of
providing pensions are generally spread over the expected remaining service
lives of current employees in the scheme.
U.S. GAAP requires each significant assumption to determine annual pension
cost to be a best estimate with respect to that individual assumption. For
example, the discount rate used should be that for 'AAA' rated bonds with a
similar maturity to the pension obligations and the value of the scheme
assets should be based upon market values at each balance sheet data.
Whilst U.S. GAAP also adopts a spreading approach to allocating variations
it is more restrictive. As a result certain variations, for example refunds
from the scheme, would be recognised immediately rather than being spread
forward. U.S. GAAP treats increases in pensions as a past service cost and
accordingly amortises its effects over the working lives of the members
after the increase is awarded. U.K. GAAP encourages expected increases to
be provided for in advance by being built in the actuarial assumptions.
Cash flow statements
U.K. GAAP does not require disclosure of cash flow information under
certain circumstances.
If a cash flow statement had been prepared under U.K. GAAP, it would
report the movement in cash.
Under U.S. GAAP a cashflow statement would be required and would report
the movement in cash and cash equivalents.
<PAGE>
Exhibit 99.2
The Davy Roll Company Limited
Turner Chilled Rolls Limited
Kvaerner Formet Limited
Unaudited Financial Statements
As of and for the seven months ended 31st July, 1999.
<PAGE>
The Davy Roll Company Limited
Balance Sheet
As of 31st July, 1999
<TABLE>
<S> <C>
Assets:
Current assets
Cash (Pounds) 4,499
Accounts receivable, net 6,728,300
Other current assets 34,631
Inventories 6,945,693
------------------
Total current assets 13,713,123
Property, plant & equipment, net 8,676,341
------------------
Total assets (Pounds)22,389,464
==================
Liabilities:
Accounts payable (Pounds) 1,789,186
Accrued payrolls and employee benefits 707,553
Other current liabilities 2,186,989
Amount due to affiliates 4,848,003
------------------
Total current liabilities 9,531,731
------------------
Capital and Reserves:
Capital reserves 13,641,042
Current period income (loss) (783,309)
------------------
Total 12,857,733
------------------
(Pounds)22,389,464
==================
</TABLE>
<PAGE>
The Davy Roll Company Limited
Statement of Income
For the 7 - months ended 31 July, 1999 and 1998
<TABLE>
<CAPTION>
For the seven months
ended 31 July,
1999 1998
---- ----
<S> <C> <C>
Net sales (Pounds)16,293,897 (Pounds)19,489,406
------------------ ------------------
Operating costs and expenses:
Cost of products sold (excluding depreciation) 14,605,397 15,804,262
Selling and administrative 1,721,049 1,748,901
Depreciation 479,906 435,000
------------------ ------------------
16,806,352 17,988,163
------------------ ------------------
Income (loss) from operations (512,455) 1,501,243
Other income (expense) (270,854) (93,631)
------------------ ------------------
Income (loss) before income taxes (783,309) 1,407,612
Income taxes 0 0
------------------ ------------------
Net income (loss) (Pounds) (783,309) (Pounds) 1,407,612
================== ==================
</TABLE>
<PAGE>
The Davy Roll Company Limited
Statement of Cash Flows
For the 7 - months ended 31 July, 1999 and 1998
<TABLE>
<CAPTION>
For the seven months
ended 31 July,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) (Pounds) (783,309) (Pounds) 1,407,612
Adjustments to reconcile net income (loss)
to net cash flows from operating activities:
Depreciation 479,906 435,000
Changes in assets/liabilities
Accounts receivable 2,033,936 (2,937,533)
Other current assets 35,944 164,294
Inventories 387,390 (676,577)
Accounts payable (1,127,603) 419,559
Accrued payrolls and employee benefits (296,936) 44,830
Other current liabilities (160,427) (130,814)
------------------ ------------------
Net cash flows provided by (used in)
operating activities 568,901 (1,273,629)
------------------ ------------------
Cash flows from investing activities
Purchase of property, plant and equipment (25,230) (341,208)
------------------ ------------------
Net cash flows used in investing activities (25,230) (341,208)
------------------ ------------------
Cash flows from financing activities
Proceeds from (payments to) affiliates (2,636,740) (919,965)
------------------ ------------------
Net cash flows used in financing activities (2,636,740) (919,965)
------------------ ------------------
Net increase (decrease) in cash (2,093,069) (2,534,802)
Cash at the beginning of the year 2,097,568 2,789,948
------------------ ------------------
Cash at the end of the year (Pounds) 4,499 (Pounds) 255,146
================== ==================
</TABLE>
<PAGE>
Turner Chilled Rolls Limited
Balance Sheet
As of 31 July, 1999
<TABLE>
<S> <C>
Assets:
Current assets
Cash (Pounds) 657
Accounts receivable, net 426,513
Other current assets 15,063
Inventories 226,021
Amount due from affiliates 2,890,169
-----------------
Total current assets 3,558,423
Property, plant & equipment, net 495,060
-----------------
Total assets (Pounds)4,053,483
=================
Liabilities:
Accounts payable (Pounds) 55,286
Accrued payrolls and employee benefits 10,736
Other current liabilities 44,960
-----------------
Total current liabilities 110,982
-----------------
Capital and Reserves:
Capital reserves 3,803,708
Current period income (loss) 138,793
-----------------
Total 3,942,501
-----------------
(Pounds)4,053,483
=================
</TABLE>
<PAGE>
Turner Chilled Rolls Limited
Statement of Income
For the 7 - months ended 31 July, 1999 and 1998
<TABLE>
<CAPTION>
For the seven months
ended 31 July,
1999 1998
---- ----
<S> <C> <C>
Net Sales (Pounds)796,230 (Pounds)981,866
--------------- ---------------
Operating costs and expenses:
Cost of products sold (excluding depreciation) 520,845 601,481
Selling and administrative 157,262 169,901
Depreciation 10,499 17,500
--------------- ---------------
688,606 788,882
--------------- ---------------
Income (loss) from operations 107,624 192,984
Other income (expense) 31,169 39,660
--------------- ---------------
Income (loss) before income taxes 138,793 232,644
Income taxes 0 0
--------------- ---------------
Net income (Pounds)138,793 (Pounds)232,644
=============== ===============
</TABLE>
<PAGE>
Turner Chilled Rolls Limited
Statement of Cash Flows
For the 7 - months ended 31 July, 1999 and 1998
<TABLE>
<CAPTION>
For the seven months
ended 31 July,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (Pounds)138,793 (Pounds)232,644
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation 10,499 17,500
Changes in assets/liabilities
Accounts receivable (94,162) (29,618)
Other current assets 2,762 11,039
Inventories 11,284 (33,461)
Accounts payable (52,380) (22,386)
Accrued payrolls and employee benefits (10,321) 4,439
Other current liabilities (10,987) 26,884
--------------- ---------------
Net cash flows (used in) provided by
operating activities (4,512) 207,041
--------------- ---------------
Cash flows from investing activities
Purchase of property, plant and equipment 0 (28,367)
--------------- ---------------
Net cash flows used in investing activities 0 (28,367)
--------------- ---------------
Cash flows from financing activities
Proceeds from (payments to) affiliates (420,430) (13,875)
--------------- ---------------
Net cash flows used in financing activities (420,430) (13,875)
--------------- ---------------
Net increase (decrease) in cash (424,942) 164,799
Cash at the beginning of the year 425,599 330,560
--------------- ---------------
Cash at the end of the year (Pounds) 657 (Pounds)495,359
--------------- ---------------
</TABLE>
<PAGE>
Kvaerner Formet Limited
Balance Sheet
As of 31 July, 1999
<TABLE>
<S> <C>
Assets:
Current assets
Cash (Pounds) 15,450
Accounts receivable, net 722,283
Other current assets 8,082
Inventories 615,385
Amount due from affiliate 939,247
-----------------
Total current assets 2,300,447
Property, plant & equipment, net 694,395
-----------------
Total assets (Pounds)2,994,842
=================
Liabilities:
Accounts payable (Pounds) 182,295
Accrued payrolls and employee benefits 49,972
Other current liabilities 36,210
-----------------
Total current liabilities 268,477
-----------------
Capital and Reserves:
Capital reserves 2,761,319
Current period income (loss) (34,954)
-----------------
Total 2,726,365
-----------------
(Pounds)2,994,842
=================
</TABLE>
<PAGE>
Kvaerner Formet Limited
Statement of Income
For the 7 - months ended 31 July, 1999 and 1998
<TABLE>
<CAPTION>
For the seven months
ended 31 July,
1999 1998
---- ----
<S> <C> <C>
Net Sales (Pounds)1,412,745 (Pounds)1,929,477
----------------- -----------------
Operating costs and expenses:
Cost of products sold (excluding depreciation) 1,194,410 1,479,676
Selling and administrative 208,743 248,846
Depreciation 58,820 28,726
----------------- -----------------
1,461,973 1,757,248
----------------- -----------------
Income (loss) from operations (49,228) 172,229
Other income (expense) 14,274 39,711
----------------- -----------------
Income (loss) before income taxes (34,954) 211,940
Income taxes 0 0
----------------- -----------------
Net income (loss) (Pounds) (34,954) (Pounds) 211,940
================= =================
</TABLE>
<PAGE>
Kvaerner Formet Limited
Statement of Cash Flows
For the 7 - months ended 31 July, 1999 and 1998
<TABLE>
<CAPTION>
For the seven months
ended 31 July,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) (Pounds)(34,954) (Pounds)211,940
Adjustments to reconcile net income (loss)
to net cash flows from operating activities:
Depreciation 58,820 28,726
Changes in assets/liabilities
Accounts receivable (14,432) (476,156)
Other current assets (5,254) 46,463
Inventories (53,278) (27,984)
Accounts payable (146,331) 147,940
Accrued payrolls and employee benefits (9,223) 1,068
Other current liabilities (15,459) (38,988)
--------------- ---------------
Net cash flows used in operating activities (220,111) (106,991)
--------------- ---------------
Cash flows from investing activities
Purchase of property, plant and equipment (148,084) (255,173)
--------------- ---------------
Net cash flows used in investing activities (148,084) (255,173)
--------------- ---------------
Cash flows from financing activities
Proceeds from (payments to) affiliates (693,742) 537,019
--------------- ---------------
Net cash flows (used in) provided by
financing activities (693,742) 537,019
--------------- ---------------
Net increase (decrease) in cash (1,061,937) 174,855
Cash at the beginning of the year 1,077,387 679,378
--------------- ---------------
Cash at the end of the year (Pounds) 15,450 (Pounds)854,233
=============== ===============
</TABLE>
