<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 10, 1996 (April 30,
1996)*
GUNDLE/SLT ENVIRONMENTAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation
<TABLE>
<S> <C>
1-9307 22-2731074
(Commission File Number) (IRS Employer Identification No.)
</TABLE>
19103 GUNDLE ROAD, HOUSTON, TEXAS 77073
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 443-8564
NOT APPLICABLE
(Former name or former address, if changed since last report.)
- ---------------
* Amending Form 8-K report filed May 13, 1996 to include financial statements of
acquired company.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 2.
On April 30, 1996, GSE (UK) Limited, a United Kingdom company and a
wholly-owned subsidiary of Gundle/SLT Environmental, Inc., a Delaware
corporation (the "Company"), acquired all of the outstanding capital stock (the
"Stock") of S.G.S. Holdings Limited, a United Kingdom company ("S.G.S.") for a
cash consideration of L3,560,000 and the assumption of certain obligations of
S.G.S. in the amount of L391,000. S.G.S. manufactures synthetic lining material
and will continue to be utilized in this capacity by the Company. The Stock was
acquired from R.A. Young, J.R. Young and S.E. Mitchell (collectively, the
"Sellers"). The amount of the consideration was determined through direct
negotiation with the Sellers and was paid out of general working capital of the
Company.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
<TABLE>
<S> <C>
(i) Audited Consolidated Financial Statements of S.G.S. Holdings Limited
for the Three Years Ended December 31, 1995.........................
(ii) Unaudited Consolidated Financial Statements of S.G.S. Holdings
Limited for the Three Months Ended March 31, 1996 and 1995..........
</TABLE>
(b) Pro Forma Financial Information (Unaudited)
<TABLE>
<S> <C>
(i) Pro Forma Consolidated Financial Statements for the Year Ended
December 31, 1995 and for the Three Months Ended March 31, 1996.....
</TABLE>
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
10.1 Agreement for the acquisition of the whole of the issued share capital of
S.G.S. Holdings Limited dated April 30, 1996, between GSE (UK) Limited and R.
A. Young, Esq., J. R. Young, Esq., and Mrs. S. E. Mitchell (incorporated by
reference to Exhibit No. 10.1 to Registrant's Current Report on Form 8-K
filed on May 13, 1996).
23.1 Consent of Finn-Kelcey & Chapman, Chartered Accountants
</TABLE>
3
<PAGE> 4
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.
GUNDLE/SLT ENVIRONMENTAL, INC.
By: /s/ ROGER J. KLATT
____________________________
Roger J. Klatt
Chief Financial Officer
4
<PAGE> 5
S.G.S. HOLDINGS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED 31ST DECEMBER 1995
<PAGE> 6
INDEX TO THE FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED 31ST DECEMBER 1995
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors........................................................ 1
Consolidated Profit and Loss Account.................................................. 2
Consolidated Balance Sheet............................................................ 3
Consolidated Cash Flow Statements..................................................... 4-5
Notes to the Financial Statements..................................................... 6-15
</TABLE>
<PAGE> 7
REPORT OF INDEPENDENT AUDITORS
TO THE DIRECTORS OF S.G.S. HOLDINGS LIMITED
We have audited the accompanying consolidated balance sheets of S.G.S.
Holdings Limited as of December 31, 1995 and 1994, and the related profit and
loss accounts and statements of cashflows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with United Kingdom auditing
standards which do not differ in any significant respect from United States
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurances about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of S.G.S.
Holdings Limited at December 31, 1995 and 1994 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1995 in conformity with accounting principles generally accepted in the United
Kingdom which differ in certain respects from those followed in the United
States (see Note 23 of the notes to the Financial Statements).
Finn-Kelcey & Chapman 24th May 1996
Chartered Accountants Ashford, England
<PAGE> 8
S.G.S. HOLDINGS LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE THREE YEARS ENDED 31ST DECEMBER 1995
<TABLE>
<CAPTION>
NOTES 1995 1994 1993
----- ---------- ---------- ----------
L L L
<S> <C> <C> <C> <C>
TURNOVER......................................... 3 6,639,370 4,072,935 3,974,700
COST OF SALES.................................... (5,087,890) (3,101,989) (2,784,399)
---------- ---------- ----------
GROSS PROFIT..................................... 1,551,480 970,946 1,190,301
DISTRIBUTION COSTS............................... (452,838) (377,781) (343,346)
ADMINISTRATIVE EXPENSES.......................... (585,046) (296,723) (323,486)
---------- ---------- ----------
OPERATING PROFIT................................. 4 513,596 296,442 523,469
Other interest receivable and similar income..... 5 845 827 1,217
Interest payable and similar charges............. 6 (77,313) (74,113) (104,835)
---------- ---------- ----------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION.... 437,128 223,156 419,851
Tax on profit on ordinary activities............. 7 (111,218) (64,427) (111,904)
---------- ---------- ----------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION..... 325,910 158,729 307,947
Dividends........................................ 8 (23,625) -- --
---------- ---------- ----------
RETAINED PROFIT FOR THE FINANCIAL YEAR........... 17 302,285 158,729 307,947
========== ========== ==========
</TABLE>
A summary of the significant adjustments to profit on ordinary activities
after taxation (net income) which would be required if U.S. GAAP had been
applied instead of U.K. GAAP is set forth in note 23 of the notes to the
financial statements.
There are no recognized gains and losses other than those passing through
the profit and loss account. The above amounts all relate to continuing
operations.
NOTE OF HISTORICAL COST PROFITS AND LOSSES
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
L L L
<S> <C> <C> <C>
REPORTED PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION.......... 437,128 223,156 419,851
Difference between an historical cost depreciation charge and
the actual depreciation charge of the year calculated on the
revalued amount............................................... 19,615 19,615 19,615
------- ------- -------
HISTORICAL COST PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION... 456,743 242,771 439,466
======= ======= =======
HISTORICAL COST PROFIT FOR THE YEAR RETAINED AFTER TAXATION,
EXTRAORDINARY ITEMS AND DIVIDENDS............................. 321,900 178,344 327,562
======= ======= =======
</TABLE>
2
<PAGE> 9
S.G.S. HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEET AS AT 31ST DECEMBER
<TABLE>
<CAPTION>
NOTES 1995 1994
----- ----------- -----------
L L
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets............................................ 9 1,474,278 1,621,754
CURRENT ASSETS
Stocks..................................................... 10 276,435 256,107
Debtors.................................................... 11 1,545,585 756,726
Cash at bank and in hand................................... 520,504 291,263
----------- -----------
2,342,524 1,304,096
----------- -----------
CREDITORS: amounts falling due within one year............. 12 (1,765,274) (1,029,752)
----------- -----------
NET CURRENT ASSETS......................................... 577,250 274,344
----------- -----------
TOTAL ASSETS LESS CURRENT LIABILITIES...................... 2,051,528 1,896,098
CREDITORS: amounts falling due after more than one year.... 13 (625,800) (790,815)
PROVISION FOR LIABILITIES AND CHARGES...................... 14 (105,293) (87,133)
----------- -----------
L 1,320,435 L 1,018,150
=========== ===========
CAPITAL AND RESERVES
Called up share capital.................................... 15 252,280 252,280
Revaluation reserve........................................ 16 37,664 57,279
Profit and loss account.................................... 17 1,030,491 708,591
----------- -----------
EQUITY SHAREHOLDERS' FUNDS................................. L 1,320,435 L 1,018,150
=========== ===========
</TABLE>
A summary of the significant adjustments to equity shareholders' funds
which would be required if U.S. GAAP had been applied instead of U.K. GAAP is
set forth in note 23 of the notes to the financial statements.
3
<PAGE> 10
S.G.S. HOLDINGS LIMITED
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE THREE YEARS ENDED 31ST DECEMBER 1995
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- -------------------- --------------------
L L L L L L
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Operating Profit.................................. 513,596 296,442 523,469
Depreciation...................................... 181,466 178,603 156,596
Loss/(Profit) on sale of Fixed Assets............. (2,285) -- 233
Change in Provision for Liabilities............... -- -- --
(Increase) Decrease in Stock...................... (20,328) (24,471) 40,116
Increase in Debtors............................... (782,953) (263,757) (204,154)
Increase/(Decrease) in creditors.................. 504,095 (167,104) 428,236
-------- -------- --------
393,591 19,713 944,496
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest Received................................. 845 827 1,217
Interest Paid..................................... (37,493) (30,697) (79,362)
Dividends Paid.................................... -- -- --
Interest Element of Finance Lease and Hire
Purchase Rentals................................ (37,769) (74,417) (42,208) (72,078) (56,567) (134,712)
-------- -------- -------
TAXATION
Received.......................................... -- -- --
Paid.............................................. (65,929) (65,929) (25,764) (25,764) -- --
-------- -------- -------
INVESTING ACTIVITIES
Sale of Fixed Assets.............................. 9,750 -- --
Purchase of Fixed Assets.......................... (32,655) (22,905) (54,505) (54,505) (70,727) (70,727)
-------- -------- -------- -------- ------- --------
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING.......... 230,340 (132,634) 739,057
FINANCING
New Unsecured Loans............................... -- -- --
Repayments of Accounts Borrowed................... (10,062) (10,063) (50,063)
Capital Element of Finance Lease and Hire Purchase
Rentals......................................... (155,550) (165,612) (123,703) (133,766) (95,451) (145,514)
-------- -------- -------
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS.... 64,728 (266,400) 593,543
======== ======== ========
</TABLE>
A summary of the cash flow presented under U.S. GAAP is set forth in note 23 of
the notes to the financial statements
4
<PAGE> 11
S.G.S. HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE THREE YEARS ENDED 31ST DECEMBER 1995
<TABLE>
<CAPTION>
CHANGES IN CASH AND CASH CHANGE CHANGE CHANGE
EQUIVALENTS 1995 1994 IN YEAR 1994 1993 IN YEAR 1993 1992 IN YEAR
- ----------------------------------- -------- -------- -------- -------- ------- -------- ------- -------- -------
L L L L L L L L L
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash at Bank and in Hand........... 520,504 291,263 229,241 291,263 455,428 (164,165) 455,428 170,699 284,729
Bank Overdrafts.................... (266,748) (102,235) (164,513) (102,235) -- (102,235) -- (308,814) 308,814
-------- -------- -------- ------- -------- ------- -------- -------- -------
253,756 189,028 64,728 189,028 455,428 (266,400) 455,428 (138,115) 593,543
======== ======== ======== ======= ======== ======= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
FINANCE FINANCE FINANCE
LEASE LEASE LEASE
AND HIRE AND HIRE AND HIRE
ANALYSIS OF CHANGES IN SHARE PURCHASE SHARE PURCHASE SHARE PURCHASE
FINANCING DURING THE YEAR CAPITAL OBLIGATIONS LOANS CAPITAL OBLIGATIONS LOANS CAPITAL OBLIGATIONS LOANS
- ----------------------------- ------- ----------- ------- ------- ----------- ------- ------- ----------- -------
L L L L L L L L L
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As at 1st January............ 252,280 590,398 358,609 252,280 661,296 368,672 252,280 756,747 418,735
Cash (Outflows)/Inflows from
Financing.................. -- (155,550) (10,062) -- (123,703) (10,063) -- (95,451) (50,063)
Inception of Finance Lease
Contracts.................. -- 8,800 -- -- 52,805 -- -- -- --
------- -------- ------- ------- -------- ------- ------- ------- -------
Balance as at 31st
December................... 252,280 443,648 348,547 252,280 590,398 358,609 252,280 661,296 368,672
======= ======== ======= ======= ======== ======= ======= ======= =======
</TABLE>
5
<PAGE> 12
S.G.S. HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED 31ST DECEMBER 1995
1. BASIS OF PREPARATION
These financial statements comprise a consolidation of the financial
statements of S.G.S. Holdings Limited (the "Company") and its wholly-owned
subsidiary SGS Geosystems Limited ("SGS"). The Company, together with SGS, has
been acquired by G.S.E. (UK) Limited pursuant to an agreement dated 30th April
1996 with effect from 1st May 1996.
These financial statements do not comprise the Company's "statutory
accounts" within the meaning of section 240 of the Companies Act 1985 of Great
Britain. Statutory accounts of the Company for each of the three years in the
period ended December 31, 1995, on which the auditors have given unqualified
audit reports, have been, or will be, delivered to the Registrar of Companies in
England and Wales.
2. ACCOUNTING POLICIES
2.1 ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention
modified to include the revaluation of plant and machinery.
2.2 TURNOVER
Turnover represents the invoiced value of sales, net of Value Added Tax.
2.3 RESEARCH AND DEVELOPMENT
Research expenditure is written off to the profit and loss account in the
year in which it is incurred.
2.4 TANGIBLE FIXED ASSETS AND DEPRECIATION
Tangible fixed assets are stated at cost or valuation less depreciation.
Depreciation is provided at rates calculated to write off the cost or valuation
less estimated residual value of each asset over its expected useful life, as
follows:
<TABLE>
<S> <C> <C>
Plant and machinery -- 8.52% - 15% p.a. Straight line
Fixtures, fittings and
equipment -- 20% - 33% p.a. Straight line
Motor vehicles -- 33% p.a. Straight line
</TABLE>
Freehold and long leasehold land and buildings are not depreciated because,
in the opinion of the directors, any such depreciation required would be
immaterial.
2.5 PENSIONS
The pension costs charged in the financial statements represent the
recharged contributions in respect of the company's staff paid by the parent
company into its schemes.
2.6 STOCK
Stock is valued at the lower of cost and net realisable value.
2.7 LEASING AND HIRE PURCHASE COMMITMENTS
Assets obtained under hire purchase contracts and finance leases are
capitalised as tangible assets and depreciated over the shorter of the lease
term and their useful lives. Obligations under such agreements are included in
creditors net of the finance charge allocated to future periods. The finance
element of the rental
6
<PAGE> 13
S.G.S. HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
payment is charged to the profit and loss account so as to produce a constant
periodic rate of charge on the net obligation outstanding in each period.
Rentals payable under operating leases are charged against income on a
straight line basis over the lease term.
2.8 DEFERRED TAXATION
Provision is made for deferred taxation using the liability method to take
account of timing differences between the incidence of income and expenditure
for taxation and accounting purposes except to the extent that the directors
consider that a liability to taxation is unlikely to crystallise.
2.9 FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities denominated in foreign currencies are
translated into sterling at the rates of exchange ruling at the accounting date.
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. All differences are taken to profit and loss account.
3. TURNOVER
The total turnover of the Group for the period has been derived from its
principal activity wholly undertaken in the U.K.
<TABLE>
<CAPTION>
TURNOVER
--------------------------------------
1995 1994 1993
---------- ---------- ----------
L L L
<S> <C> <C> <C>
Geographical market
United Kingdom.................................. 1,395,618 1,176,921 1,257,018
European Union.................................. 4,648,573 1,969,242 1,406,678
Rest of Europe.................................. 471,271 806,905 1,210,340
Africa.......................................... 112,058 -- --
Rest of the World............................... 11,850 119,867 100,664
---------- ---------- ----------
L6,639,370 L4,072,935 L3,974,700
========== ========== ==========
</TABLE>
4. OPERATING PROFIT
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
L L L
<S> <C> <C> <C>
Operating profit is stated after charging:
Depreciation of tangible assets.................... 181,466 178,603 156,596
Hire of plant and machinery........................ -- 478 750
Profit on foreign currencies....................... (7,863) (20,648) --
Operating lease rentals -- Land and buildings...... 40,075 41,608 20,723
Auditor's remuneration............................. 9,025 7,250 7,000
======== ======== ========
</TABLE>
5. OTHER INTEREST RECEIVABLE AND SIMILAR INCOME
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
L L L
<S> <C> <C> <C>
Bank interest receivable........................... 845 827 1,217
======== ======== ========
</TABLE>
7
<PAGE> 14
S.G.S. HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
6. INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
L L L
On bank loans and overdrafts....................... 25,143 20,707 27,579
On loans repayable after 5 years................... 15,624 12,466 21,715
Lease finance charges and hire purchase interest... 36,500 40,940 55,541
On overdue tax..................................... 46 -- --
------- ------- -------
L 77,313 L 74,113 L104,835
======= ======= =======
</TABLE>
7. TAXATION
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
L L L
<S> <C> <C> <C>
U.K. Current year taxation
U.K. Corporation tax at 33% (1994 - 33%), (1993 -
33%).............................................. 93,099 54,232 25,803
Transfer to deferred taxation....................... 18,160 1,032 86,101
-------- ------- --------
111,259 55,264 111,904
Prior years -- U.K. Corporation tax................. (41) 9,163 --
-------- ------- --------
L111,218 L64,427 L111,904
======== ======= ========
</TABLE>
If provision were to be made for deferred tax on the basis of the full
potential liability, the tax charge for the year would increase by L19,536
(1994 - L15,629, 1993 - L11,772).
8. DIVIDENDS
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
L L L
<S> <C> <C> <C>
Ordinary final proposed........................................... 23,625 -- --
====== ====== ======
</TABLE>
9. TANGIBLE ASSETS
<TABLE>
<CAPTION>
FIXTURES,
LAND AND PLANT AND FITTINGS, MOTOR
BUILDINGS MACHINERY EQUIPMENT VEHICLES TOTAL
--------- ---------- --------- -------- ----------
L L L L L
<S> <C> <C> <C> <C> <C>
Cost or valuation
At 1st January 1993..................... 302,000 1,620,661 1,318 10,090 1,934,069
Additions............................... -- 41,911 28,817 -- 70,728
Disposals............................... -- -- (699) -- (699)
-------- ---------- ------- ------- ----------
At 31st December 1993................... 302,000 1,662,572 29,436 10,090 2,004,098
-------- ---------- ------- ------- ----------
Depreciation
At 1st January 1993..................... -- 150,825 734 3,362 154,921
On disposals............................ -- -- (466) -- (466)
Charge for year......................... -- 145,728 7,508 3,360 156,596
-------- ---------- ------- ------- ----------
At 31st December 1993................... -- 296,553 7,776 6,722 311,051
-------- ---------- ------- ------- ----------
Net book values
At 31st December 1993................... L 302,000 L1,366,019 L21,660 L 3,368 L1,693,047
======== ========== ======= ======= ==========
</TABLE>
8
<PAGE> 15
S.G.S. HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FIXTURES,
LAND AND PLANT AND FITTINGS, MOTOR
BUILDINGS MACHINERY EQUIPMENT VEHICLES TOTAL
--------- --------- --------- -------- ----------
L L L L L
<S> <C> <C> <C> <C> <C>
Cost or valuation
At 1st January 1994..................... 302,000 1,662,572 29,436 10,090 2,004,098
Additions............................... -- 62,903 13,242 31,165 107,310
-------- ---------- ------- ------- ----------
At 31st December 1994................... 302,000 1,725,475 42,678 41,255 2,111,408
-------- ---------- ------- ------- ----------
Depreciation
At 1st January 1994..................... -- 296,553 7,776 6,722 311,051
Charge for year......................... -- 153,648 11,287 13,668 178,603
-------- ---------- ------- ------- ----------
At 31st December 1994................... -- 450,201 19,063 20,390 489,654
-------- ---------- ------- ------- ----------
Net book values
At 31st December 1994................... L 302,000 L1,275,274 L23,615 L 20,865 L1,621,754
======== ========== ======= ======= ==========
Cost or valuation
At 1st January 1995..................... 302,000 1,725,475 42,678 41,255 2,111,408
Additions............................... -- 14,401 9,189 17,865 41,455
Disposals............................... -- -- -- (11,165) (11,165)
-------- ---------- ------- ------- ----------
At 31st December 1995................... 302,000 1,739,876 51,867 47,955 2,141,698
-------- ---------- ------- ------- ----------
Depreciation
At 1st January 1995..................... -- 450,201 19,063 20,390 489,654
On disposals............................ -- -- -- (3,700) (3,700)
Charge for year......................... -- 155,793 13,139 12,534 181,466
-------- ---------- ------- ------- ----------
At 31st December 1995................... -- 605,994 32,202 29,224 667,420
-------- ---------- ------- ------- ----------
Net book values
At 31st December 1995................... 302,000 1,133,882 19,665 18,731 1,474,278
======== ========== ======= ======= ==========
</TABLE>
Included above are assets held under finance leases or hire purchase
contracts as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
NET BOOK DEPRECIATION NET BOOK DEPRECIATION
VALUE CHARGE VALUE CHARGE
-------- ------------ -------- ------------
L L L L
<S> <C> <C> <C> <C>
Plant and machinery............................. 689,324 92,140 781,464 92,139
Motor vehicles.................................. 14,041 10,224 20,865 10,300
-------- -------- -------- --------
L703,365 L102,364 L802,329 L102,439
======== ======== ======== ========
</TABLE>
The net book value of land and buildings comprises:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
L L L
<S> <C> <C> <C>
Freehold..................................................... 296,000 296,000 296,000
Long Leasehold............................................... 6,000 6,000 6,000
-------- -------- --------
L302,000 L302,000 L302,000
======== ======== ========
</TABLE>
9
<PAGE> 16
S.G.S. HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
The amount shown as cost or valuation of plant and machinery comprises:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
L L L
<S> <C> <C> <C>
Cost..................................................... 139,876 125,475 62,572
Valuation in 1991........................................ 1,600,000 1,600,000 1,600,000
---------- ---------- ----------
L1,739,876 L1,725,475 L1,662,572
========== ========== ==========
</TABLE>
Plant and machinery would have been included on an historical cost basis
at:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
L L L
<S> <C> <C> <C>
Cost................................................... 1,524,119 1,509,717 1,446,814
Depreciation........................................... (527,405) (391,228) (255,689)
---------- ---------- ----------
Net book value......................................... L 996,714 L1,118,489 L1,191,125
========== ========== ==========
</TABLE>
10. STOCKS
<TABLE>
<CAPTION>
1995 1994
-------- --------
L L
<S> <C> <C>
Raw materials and consumables.......................................... 176,936 197,752
Finished goods and goods for resale.................................... 99,499 58,355
-------- --------
L276,435 L256,107
======== ========
</TABLE>
11. DEBTORS
<TABLE>
<CAPTION>
1995 1994
---------- --------
L L
<S> <C> <C>
Trade debtors........................................................ 1,460,986 683,349
Other debtors........................................................ 46,292 53,000
Prepayments and accrued income....................................... 38,307 20,377
---------- --------
L1,545,585 L756,726
========== ========
</TABLE>
12. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
L L
<S> <C> <C>
Bank loans and overdrafts........................................... 276,811 112,298
Net obligations under finance lease and hire purchase contracts..... 156,332 148,129
Trade creditors..................................................... 1,040,132 602,964
Corporation tax..................................................... 96,469 63,434
Other taxes and social security costs............................... 14,337 6,885
Accruals and deferred income........................................ 157,568 96,042
Proposed dividend................................................... 23,625 --
---------- ----------
L1,765,274 L1,029,752
========== ==========
</TABLE>
10
<PAGE> 17
S.G.S. HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
13. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1995 1994
-------- --------
L L
<S> <C> <C>
Loans.................................................................. 338,484 348,546
Net obligations under finance leases and hire purchase contracts....... 287,316 442,269
-------- --------
L625,800 L790,815
======== ========
Loans
Not wholly repayable within five years by instalments
Bank loans........................................................... 168,547 178,609
Not wholly repayable within five years other than by instalments
Other creditors...................................................... 180,000 180,000
Included in current liabilities........................................ (10,063) (10,063)
-------- --------
L338,484 L348,546
======== ========
Instalments not due within five years.................................. L298,232 L308,294
======== ========
</TABLE>
Bank loans and overdrafts, amounting to L435,295, are secured by fixed
charges over the Subsidiary Company's freehold property and book debts and by a
floating charge over all its assets and undertaking.
<TABLE>
<CAPTION>
1995 1994
--------- ---------
L L
<S> <C> <C>
Net obligations under finance leases and hire purchase contracts
Repayable within one year............................................ 194,695 202,522
Repayable between one and five years................................. 314,695 507,681
--------- ---------
509,390 710,203
Finance charges and interest allocated to future accounting
periods............................................................ (65,742) (119,805)
--------- ---------
443,648 590,398
Included in current liabilities...................................... (156,332) (148,129)
--------- ---------
L 287,316 L 442,269
========= =========
</TABLE>
Bank loans amounting to L168,547, are repayable in equal quarterly
instalments up to September 2012. The interest rate is variable and is currently
8.5%. Other creditors amounting to L180,000 comprises loans repayable on demand
after existing bank facilities have been repaid. The interest rate is variable
and is currently 9%.
14. PROVISIONS FOR LIABILITIES AND CHARGES
Deferred tax is provided at 33% (1994 -- 33%) analysed over the following
timing differences.
<TABLE>
<CAPTION>
NOT PROVIDED PROVIDED
---------------- -----------------
1995 1994 1995 1994
------ ------ ------- ------
L L L L
<S> <C> <C> <C> <C>
Accelerated capital allowances............................ 19,536 15,629 73,609 72,508
Other timing differences.................................. -- -- 31,684 14,625
------ ------ ------- ------
19,536 15,629 105,293 87,133
====== ====== ======= ======
</TABLE>
The revaluation of properties does not constitute a timing difference and
the potential amount of deferred tax on this has therefore not been quantified.
11
<PAGE> 18
S.G.S. HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Movements on the provision for deferred taxation are:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
L L L
<S> <C> <C> <C>
At 1st January................................................. 87,133 86,101 --
Transferred from profit and loss account....................... 18,160 1,032 86,101
-------- ------- -------
At 31st December............................................... L105,293 L87,133 L86,101
======== ======= =======
</TABLE>
15. SHARE CAPITAL
<TABLE>
<CAPTION>
1995 1994
-------- --------
L L
<S> <C> <C>
Authorized
300,000 Ordinary shares of L1 each..................................... 300,000 300,000
5,600 "B" shares of 5p each............................................ 280 280
------- -------
L300,280 L300,280
======= =======
Allotted, called up and fully paid
252,000 Ordinary shares of L1 each..................................... 252,000 252,000
5,600 "B" shares of 5p each............................................ 280 280
------- -------
L252,280 L252,280
======= =======
</TABLE>
16. REVALUATION RESERVE
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
L L L
<S> <C> <C> <C>
Balance brought forward at 1st January..................... 57,279 76,894 96,509
Depreciation written back.................................. (19,615) (19,615) (19,615)
-------- -------- --------
Balance carried forward at 31st December................... L 37,664 L 57,279 L 76,894
======== ======== ========
</TABLE>
17. PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- --------
L L L
<S> <C> <C> <C>
Retained profits at 1st January........................... 708,591 530,247 202,685
Retained profit for the year.............................. 302,285 158,729 307,947
Transfer from reserves.................................... 19,615 19,615 19,615
---------- -------- --------
Retained profits at 31st December......................... L1,030,491 L708,591 L530,247
========== ======== ========
</TABLE>
18. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- --------
L L L
<S> <C> <C> <C>
Profit for the financial year........................... 325,910 158,729 307,947
Dividends............................................... (23,625) -- --
---------- ---------- --------
Net addition to shareholders' funds..................... 302,285 158,729 307,947
Opening shareholders' funds............................. 1,018,150 859,421 551,474
---------- ---------- --------
Closing shareholders' funds............................. L1,320,435 L1,018,150 L859,421
========== ========== ========
</TABLE>
12
<PAGE> 19
S.G.S. HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
19. FINANCIAL COMMITMENTS
At 31st December 1995 the Group had annual commitments under
non-cancellable operating leases as follows:
<TABLE>
<CAPTION>
LAND AND BUILDINGS
-------------------
1995 1994
------- -------
L L
<S> <C> <C>
Expiry date:
Between two and five years............................................. 50,400 39,900
------- -------
L50,400 L39,900
======= =======
</TABLE>
20. CAPITAL COMMITMENTS
<TABLE>
<CAPTION>
1995 1994
------- -------
L L
<S> <C> <C>
Details of capital commitments at the accounting date are as follows:
Contracted for but not provided in the financial statements.............. 13,219 --
Authorized but not contracted for........................................ 14,950 --
-------- --------
-- --
L28,169 L --
======== ========
</TABLE>
21. DIRECTORS
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
L L L
<S> <C> <C> <C>
Remuneration
Emoluments................................................... 83,201 49,131 45,528
Ex gratia payment to Director................................ 30,000 -- --
---------- --------- ----------
L113,201 L49,131 L45,528
========== ========= ==========
Emoluments disclosed above
(excluding pension contributions) include amounts paid to:
The highest-paid director.................................... L 76,903 L43,098 L39,374
========== ========== ==========
Other directors' emoluments (excluding pension contributions)
were in the following ranges: Number Number Number
LNil -- L5,000............................................... 2 3 3
========== ========== ==========
</TABLE>
22. EMPLOYEES
Number of employees
The average weekly number of employees (including directors) during the
year was:
<TABLE>
<CAPTION>
1995 1994 1993
NUMBER NUMBER NUMBER
------ ------ ------
<S> <C> <C> <C>
Production......................................................... 15 14 12
Distribution....................................................... 1 2 2
Administration..................................................... 9 5 3
-- -- --
25 21 17
== == ==
</TABLE>
13
<PAGE> 20
S.G.S. HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Employment costs
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
L L L
<S> <C> <C> <C>
Wages and salaries........................................... 418,722 291,238 241,688
Social security costs........................................ 37,638 28,474 23,544
Other pension costs.......................................... 11,631 9,444 6,154
-------- -------- --------
L467,991 L329,156 L271,386
======== ======== ========
</TABLE>
23. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
IN THE UNITED KINGDOM AND THE UNITED STATES.
The financial statements are prepared under accounting principles generally
accepted in the United Kingdom ("U.K. GAAP") which differ in certain respects
from United States generally accepted principles ("U.S. GAAP"). Differences
estimated to have a significant effect on consolidated net income and
shareholders' equity are set out below.
(a) Revaluation of plant and machinery
Certain of SGS's plant and machinery was revalued in 1991 on the basis of
its value to the business and is included in these financial statements at that
valuation less subsequent depreciation. Under U.S. GAAP, such revaluations would
not be reflected in the financial statements. Plant and machinery would be
included at its historical cost under U.S. GAAP with depreciation computed on
such cost.
(b) Deferred taxation
Provision is made for deferred taxation using the liability method on all
material timing differences to the extent that it is probable that the
liabilities will crystallize in the foreseeable future. Under U.S. GAAP, as set
out in Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes", deferred taxation is generally provided on a full liability basis
on all temporary differences.
(c) Dividends
Under U.K. GAAP, dividends are recorded in the financial statements for the
period to which the dividend relates. Under U.S. GAAP, the liability for
dividends is recorded in financial statements when declared. The proposed final
dividend and the related advance corporation tax for 1995, would not, therefore,
be included in the financial statements if prepared in accordance with U.S.
GAAP.
The following is a summary of the effect of the above differences on profit
on ordinary activities after taxation (net income) and equity shareholders'
funds:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
L L L
<S> <C> <C> <C>
Net Income
Profit on ordinary activities after taxation as reported... 302,285 158,729 307,947
Adjustments
Depreciation adjustment as a result of revaluation......... 19,615 19,615 19,615
Deferred taxation.......................................... (3,907) (3,907) (10,340)
---------- ---------- ----------
Net Income as adjusted to accord with US GAAP.............. L317,993 L174,437 L317,222
========== ========== ==========
</TABLE>
14
<PAGE> 21
S.G.S. HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Shareholders' Equity
<TABLE>
<CAPTION>
1995 1994
---------- ----------
L L
<S> <C> <C>
Equity shareholders' funds as reported.............................. 1,320,435 1,018,150
Revaluation......................................................... (215,758) (215,758)
Depreciation adjustment as a result of revaluation.................. 80,094 60,479
Deferred taxation................................................... (13,630) (15,629)
Dividends........................................................... 23,625 --
Advance Corporation Tax............................................. (5,906) --
---------- ----------
Equity shareholders' funds as adjusted.............................. L1,188,860 L 847,242
========== ==========
</TABLE>
Consolidated cash flow statement
The consolidated statements of cash flows prepared in accordance with U.K.
GAAP present substantially the same information as that required under U.S.
GAAP. U.K. GAAP and U.S. GAAP differ, however, with regard to classification of
items within the statements and as regards the definition of cash and cash
equivalents.
Under U.S. GAAP, cash and cash equivalents would not include bank
overdrafts and borrowings with initial maturities of less than three months.
Under U.K. GAAP, cash flows are presented separately for operating activities,
servicing of finance and returns on investments, taxation, investing activities
and financing activities. U.S. GAAP, however, requires only three categories of
cash flow activity to be reported: operating, investing and financing. Cash
flows from taxation and servicing of finance and returns on investments shown
under U.K. GAAP would be included as operating activities under U.S. GAAP.
The categories of cash flow activity under U.S. GAAP can be summarized as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- --------- ---------
L L L
<S> <C> <C> <C>
Cash inflows/(outflows) from operating activities........ 253,245 (78,129) 809,784
Cash inflows/(outflows) on investing activities.......... (22,905) (54,505) (70,727)
Cash inflows/(outflows) from financing activities........ (1,099) (31,531) (454,328)
-------- --------- ---------
Increase/(decrease) in cash and cash equivalents......... 229,241 (164,165) 284,729
Cash and cash equivalents at 1st January................. 291,263 455,428 170,699
-------- --------- ---------
Cash and cash equivalents at 31st December............... L520,504 L 291,263 L 455,428
======== ========= =========
</TABLE>
15
<PAGE> 22
S.G.S. HOLDINGS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995
(UNAUDITED)
16
<PAGE> 23
S.G.S. HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
---------------
1996 1995
----- -----
L L
<S> <C> <C>
Current assets
Cash and cash equivalents.................................................. 256 206
Accounts receivable, net................................................... 1,541 575
Contracts in progress...................................................... 0 8
Inventory.................................................................. 383 538
Deferred income taxes...................................................... 0 0
Prepaid expenses and other................................................. 16 34
----- -----
Total current assets............................................... 2,196 1,361
Property, plant & equipment, net............................................. 1,331 1,433
----- -----
3,527 2,794
===== =====
Current liabilities
Notes payable.............................................................. 10 417
Accounts payable and accrued liabilities................................... 1,058 600
Current portion of long-term debt.......................................... 165 150
Income taxes payable....................................................... 320 90
Deferred income taxes...................................................... 0 0
----- -----
Total current liabilities.......................................... 1,553 1,257
Long-term debt............................................................... 597 774
Stockholders' equity
Common stock............................................................... 252 252
Retained earnings.......................................................... 1,125 511
----- -----
Total stockholders' equity......................................... 1,377 763
----- -----
3,527 2,794
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE> 24
S.G.S. HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------
1996 1995
------ ------
L L
<S> <C> <C>
Sales...................................................................... 1,581 742
Cost of sales.............................................................. 1,054 765
----- ----
Gross profit............................................................... 527 (23)
Selling, general and administrative expenses............................... 222 111
----- ----
Operating income (loss).................................................... 305 (134)
Interest expense, net...................................................... 20 28
Foreign exchange (gain) loss............................................... 0 0
----- ----
Income (loss) before income taxes.......................................... 285 (162)
Provision (benefit) for income taxes....................................... 96 (55)
----- ----
Net income (loss).......................................................... 189 (107)
===== ====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE> 25
S.G.S. HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------
1996 1995
---- ----
L L
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................................... 189 (107)
Adjustments to reconcile net income (loss) to cash provided by (used
in) operating activities:
Depreciation........................................................ 47 44
Increase (decrease) in cash due to changes in assets and liabilities:
Accounts receivable, net............................................ (34) 161
Contracts in progress............................................... 0 (8)
Inventory........................................................... (107) (282)
Prepaid expenses and other, net..................................... 23 10
Accounts payable and accrued liabilities............................ (154) (107)
Income taxes payable................................................ 99 (76)
---- ----
Net cash provided by (used in) operating activities............... 63 (365)
Cash flows from investing activities:
Additions to property, plant and equipment............................. (40) (10)
---- ----
Net cash provided by (used in) investing activities............... (40) (10)
Cash flows from financing activities:
Retirement of long-term debt........................................... (287) 290
---- ----
Net cash provided by (used in) financing activities............... (287) 290
---- ----
Net increase (decrease) in cash.......................................... (264) (85)
Cash and cash equivalents at beginning of period......................... 520 291
---- ----
Cash and cash equivalents at end of period............................... 256 206
==== ====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE> 26
S.G.S. HOLDINGS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments considered necessary for fair
presentation have been included. Operating results for the three months ended
March 31, 1996, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996.
20
<PAGE> 27
PRO FORMA FINANCIAL STATEMENTS
OF
GUNDLE/SLT ENVIRONMENTAL, INC.
(UNAUDITED)
21
<PAGE> 28
GUNDLE/SLT ENVIRONMENTAL, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------
S.G.S.
GUNDLE/SLT HOLDINGS
ENVIRONMENTAL LIMITED ADJUSTMENTS PRO FORMA
------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents....................... $ 16,057 $ 808 $(5,447)(a) $ 11,418
Accounts receivable, net........................ 68,014 2,399 0 70,413
Contracts in progress........................... 10,601 0 0 10,601
Inventory....................................... 19,850 429 0 20,279
Deferred income taxes........................... 5,361 0 0 5,361
Prepaid expenses and other...................... 2,045 0 0 2,045
-------- ------ ------- --------
Total current assets.................... 121,928 3,636 (5,447) 120,117
Property, plant and equipment, net................ 43,940 2,078 0 46,018
Excess of purchase price over fair value of net
assets acquired, net............................ 27,916 0 2,757(a) 30,673
Deferred income taxes............................. 681 0 0 681
Other assets...................................... 1,556 0 0 1,556
-------- ------ ------- --------
$ 196,021 $5,714 $(2,690) $ 199,045
======== ====== ======= ========
Liabilities and stockholders' equity current
liabilities:
Notes payable................................... $ 0 $ 430 $ 0 $ 430
Accounts payable and accrued liabilities........ 34,254 1,960 (64)(c) 36,150
Advance billings on contracts in progress....... 634 0 0 634
Current portion of long-term debt............... 5,426 242 0 5,668
Income taxes payable............................ 206 150 (81)(d) 275
Deferred income taxes........................... 1,862 0 0 1,862
-------- ------ ------- --------
Total current liabilities............... 42,382 2,782 (145) 45,019
Long-term debt.................................... 50,147 972 (563)(a) 50,556
Deferred income taxes............................. 4,598 142 0 4,740
Other liabilities................................. 1,344 0 0 1,344
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000
shares authorized, no shares issued or
outstanding.................................. -- -- --
Common stock, $.01 par value, 30,000,000 shares
authorized, 17,695,677 shares issued and
outstanding.................................. 177 386 (386)(a) 177
Additional paid-in capital...................... 68,270 0 0 68,270
Retained earnings............................... 30,154 1,432 (1,596)(a) 29,990
Cumulative translation adjustment............... 3,216 0 0 3,216
-------- ------ ------- --------
101,817 1,818 (1,982) 101,653
Treasury stock at cost, 500,000 shares.......... (4,267) 0 0 (4,267)
-------- ------ ------- --------
Total stockholders' equity.............. 97,550 1,818 (1,982) 97,386
-------- ------ ------- --------
$ 196,021 $5,714 $(2,690) $ 199,045
======== ====== ======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
22
<PAGE> 29
GUNDLE/SLT ENVIRONMENTAL, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS EXCEPT EARNINGS PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------
S.G.S.
GUNDLE/SLT HOLDINGS
ENVIRONMENTAL LIMITED ADJUSTMENTS PRO FORMA
------------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Sales........................................... $ 248,063 $10,483 $ 258,546
Cost of sales................................... 198,750 8,003 206,753
------- ------- ------- -------
Gross profit.................................... 49,313 2,480 51,793
Selling, general and administrative expenses.... 29,408 1,639 31,047
Amortization of goodwill........................ 908 0 309(b) 1,217
Nonrecurring charges............................ 15,270 0 15,270
------- ------- ------- -------
Operating income (loss)......................... 3,727 841 (309) 4,259
Other expenses:
Interest expense, net......................... 5,350 121 (64)(c) 5,407
Foreign exchange (gain) loss.................. 120 0 120
Other (income) expense, net................... (447) 0 (447)
------- ------- ------- -------
Income (loss) before income taxes............... (1,296) 720 (245) (821)
Provision (benefit) for income taxes............ 935 181 (81)(d) 1,035
------- ------- ------- -------
Net income (loss)............................... $ (2,231) $ 539 $ (164) $ (1,856)
======= ======= ======= =======
Earnings (loss) per common share................ $ (.13) $ .03 $ (.01) $ (.11)
======= ======= ======= =======
Weighted average common shares outstanding...... 17,193 17,193 17,193 17,193
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
23
<PAGE> 30
GUNDLE/SLT ENVIRONMENTAL, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------
S.G.S.
GUNDLE/SLT HOLDINGS
ENVIRONMENTAL LIMITED ADJUSTMENTS PRO FORMA
------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents....................... $ 30,600 $ 392 $(5,447)(a) $ 25,545
Accounts receivable, net........................ 47,702 2,248 0 49,950
Contracts in progress........................... 7,027 110 0 7,137
Inventory....................................... 23,231 586 0 23,817
Deferred income taxes........................... 5,098 0 0 5,098
Prepaid expenses and other...................... 1,719 24 0 1,743
-------- ------ ------- --------
Total current assets.................... 115,377 3,360 (5,447) 113,290
Property, plant and equipment, net................ 42,393 2,036 0 44,429
Excess of purchase price over pair value of net
assets acquired, net............................ 27,629 0 2,707(a) 30,336
Deferred income taxes............................. 663 0 0 663
Other assets...................................... 1,304 0 0 1,304
-------- ------ ------- --------
$ 187,366 $5,396 $(2,740) $ 190,022
======== ====== ======= ========
Liabilities and stockholders' equity current
liabilities:
Accounts payable and accrued liabilities........ $ 27,190 $1,634 $ (20)(c) $ 28,804
Advance billings on contracts in progress....... 753 0 0 753
Current portion of long-term debt............... 5,460 252 0 5,712
Income taxes payable............................ 295 329 (17)(d) 607
Deferred income taxes........................... 1,772 0 0 1,772
-------- ------ ------- --------
Total current liabilities............... 35,470 2,215 (37) 37,648
Long-term debt.................................... 50,050 913 (563)(a) 50,400
Deferred income taxes............................. 4,507 161 0 4,668
Other liabilities................................. 1,331 0 0 1,331
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000
shares authorized, no shares issued or
outstanding.................................. -- -- --
Common stock, $.01 par value, 30,000,000 shares
authorized, 17,499,999 and 17,695,677 shares
issued and outstanding....................... 177 386 (386)(a) 177
Additional paid-in capital...................... 68,292 0 0 68,292
Retained earnings............................... 29,271 1,721 (1,754)(a) 29,238
Cumulative translation adjustment............... 2,535 0 0 2,535
-------- ------ ------- --------
100,275 2,107 (2,140) 100,242
Treasury stock at cost, 500,000 shares.......... (4,267) 0 0 (4,267)
-------- ------ ------- --------
Total stockholders' equity.............. 96,008 2,107 (2,140) 95,975
-------- ------ ------- --------
$ 187,366 $5,396 $(2,740) $ 190,022
======== ====== ======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
24
<PAGE> 31
GUNDLE/SLT ENVIRONMENTAL, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
(AMOUNTS IN THOUSANDS EXCEPT EARNINGS PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------
S.G.S.
GUNDLE/SLT HOLDINGS
ENVIRONMENTAL LIMITED ADJUSTMENTS PRO FORMA
------------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Sales........................................... $27,107 $ 2,419 $29,526
Cost of sales................................... 20,817 1,613 22,430
------- ------- ------- -------
Gross profit.................................... 6,290 806 7,096
Selling, general and administrative expenses.... 6,828 340 7,168
Amortization of goodwill........................ 228 0 70(b) 298
Nonrecurring charges............................ 0 0 0
------- ------- ------- -------
Operating income (loss)......................... (766) 466 (70) (370)
Other expenses:
Interest expense, net......................... 980 31 (20)(c) 991
Foreign exchange (gain) loss.................. (121) 0 (121)
Other (income) expense, net................... (102) 0 (102)
------- ------- ------- -------
Income (loss) before income taxes............... (1,523) 435 (50) (1,138)
Provision (benefit) for income taxes............ (640) 146 (17)(d) (511)
------- ------- ------- -------
Net income (loss)............................... $ (883) $ 289 $ (33) $ (627)
======= ======= ======= =======
Earnings (loss) per common share................ $ (0.05) $ 0.02 $ (0.00) $ (0.04)
======= ======= ======= =======
Weighted average common shares outstanding...... 17,200 17,200 17,200 17,200
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
25
<PAGE> 32
GUNDLE/SLT ENVIRONMENTAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying pro forma condensed consolidated financial statements (the
"Pro Forma Financial Statements") are based on adjustments to the historical
consolidated financial statements of Gundle/SLT Environmental, Inc. ("GSE" or
the "Company") to give effect to the acquisition described in Note 3. The pro
forma consolidated balance sheets assume the acquisition was consummated on the
balance sheet dates. The pro forma consolidated statements of income assume the
acquisition was consummated as of the beginning of the periods presented. The
pro forma consolidated statements of income are not necessarily indicative of
results that would have occurred had the acquisition been consummated as of
January 1, 1995 or January 1, 1996 or that might be attained in the future.
Certain information normally included in the financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The pro forma financial statements should be read in conjunction
with the historical financial statements of GSE, the historical financial
statements of the acquired company and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in the Company's Annual
Report on Form 10-K.
The financial statements of S.G.S. included in these pro forma consolidated
financial statements were prepared in accordance with United States generally
accepted accounting principles (GAAP). A financial statement reconciliation of
the differences between U.S. and U.K. GAAP is included in Note 23 of the audited
financial statements of S.G.S. included in this Form 8-K. The S.G.S. balance
sheets and income statements included in these pro forma consolidated financial
statements were translated at the end of period and average foreign exchange
rates respectively.
(2) EARNINGS PER SHARE
Pro forma earnings per share were computed by dividing net income
applicable to common stock by the weighted average number of shares of common
stock and common stock equivalents outstanding during the period.
(3) ACQUISITION
On April 30, 1996, GSE (UK) Limited, a United Kingdom company, a
wholly-owned subsidiary of the Company, acquired all of the outstanding capital
stock (the "Stock") of S.G.S. Holdings Limited, a United Kingdom company
("S.G.S.") for cash consideration of $5,447,000 and the assumption of certain
obligations of S.G.S. in the amount of $600,000. S.G.S. manufactures synthetic
lining material and will continue to be utilized in this capacity by the
Company. The Stock was acquired from R.A. Young, J.R. Young and S.E. Mitchell
(collectively, the "Sellers"). The amount of the consideration was determined
through direct negotiation with the Sellers and was paid out of general working
capital of the Company.
The acquisition has been accounted for as a purchase and, accordingly, the
results of operations of S.G.S. have been included in the consolidated results
of operations of GSE from the date of acquisition.
(4) ADJUSTMENTS TO HISTORICAL FINANCIAL STATEMENTS
The following pro forma adjustments have been made to the historical
consolidated financial statements of GSE to give effect to the acquisition of
S.G.S. described in Note 3.
(a) To reflect the acquisition of S.G.S. including the (i) purchase price
allocated to goodwill and (ii) the repayment of long-term debt.
(b) To record the amortization of goodwill.
(c) To reduce interest expense related to the long-term debt retired in
conjunction with the acquisition.
(d) To reflect the change in income taxes related to the pro forma
adjustments.
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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23.1 Consent of Finn-Kelcey & Chapman, Chartered Accountants
<PAGE> 1
EXHIBIT 23.1
SGS HOLDINGS LIMITED
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 33-62947) of Gundle/SLT Environmental, Inc. and in the related
Prospectus and in the Registration Statements (Form S-8 No. 33-44306)
pertaining to the 1986 Stock Option Plan, (Form S-8 No. 33-44531) pertaining to
the 1991 Employee Stock Purchase Plan and the 1988 Nonqualified Stock Option
Plan For Non-Employee Directors of Gundle/SLT Environmental, Inc. and (Form S-8
No. 33-31759) pertaining to the Gundle/SLT Environmental, Inc. Amended and
Restated 1995 Incentive Stock Plan of our report dated 24th May 1996 with
respect to the consolidated financial statements of SGS Holdings Limited
included in the Current Report on Form 8-K of Gundle/SLT Environmental, Inc
filed with the Securities and Exchange Commission.
/s/ NOT LEGIBLE
Finn-Kelcey & Chapman 10th July 1996
Chartered Accountants Ashford, England