EXHIBIT 10.197
RING PLC
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Ring PLC
We have audited the accompanying consolidated balance sheets as at 30 June 2000
and 30 June 1999 and the related consolidated profit and loss accounts,
statements of total recognised gains and losses, reconciliation of movements in
shareholders' funds and cash flow statements for each of the years in the three
year period ended 30 June 2000 appearing in Exhibit EX-10.197. These
consolidated financial statements are the responsibility of the management of
Ring PLC. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United Kingdom which are substantially equivalent to the standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated 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 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 consolidated financial position of Ring
PLC at 30 June 2000 and 30 June 1999 and the consolidated results of its
operations, total recognised gains and losses, changes in shareholders' funds
and cash flows for each of the years in the three year period ended 30 June 2000
in conformity with generally accepted accounting principles in the United
Kingdom.
Generally accepted accounting principles in the United Kingdom vary in certain
significant respects from generally accepted accounting principles in the United
States of America. Application of generally accepted accounting principles in
the United States of America would have affected the results of operations and
cash flows for each of the years in the two year period ended 30 June 2000 and
shareholders' funds as of 30 June 1999 and 30 June 2000 to the extent summarised
in note 28 to the consolidated financial statements.
/s/ KPMG Audit Plc
Chartered Accountants
Registered Auditor
18 September 2000
Leeds, England
<PAGE>
RING PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEARS ENDED 30 JUNE
<TABLE>
<CAPTION>
Continuing Discontinued
operations operations 2000 1999 1998
/pound /pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/ sterling/
'000 '000 Note '000 '000 '000
<S> <C> <C> <C> <C> <C> <C>
TURNOVER 76,686 1,816 2 78,502 74,612 77,857
Cost of sales (50,965) (1,218) 3 (52,183) (52,182) (53,452)
----------------------- ----------------------------------
GROSS PROFIT 25,721 598 26,319 22,430 24,405
Operating costs (23,449) (596) 3 (24,045) (18,963) (21,355)
----------------------- ----------------------------------
OPERATING PROFIT 2,272 2 2,274 3,467 3,050
----------------------- ----------------------------------
EXCEPTIONAL ITEMS 4 (986) (20) (18,159)
----------------------------------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES
BEFORE INTEREST 1,288 3,447 (15,109)
Interest receivable 7 9 40 4
Interest payable 7 (254) (265) (757)
----------------------------------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES
BEFORE TAXATION 1,043 3,222 (15,862)
Tax on profit/(loss) on ordinary activities 8 (881) (1,037) (438)
----------------------------------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES
AFTER TAXATION 162 2,185 (16,300)
Minority interest - - (12)
----------------------------------
PROFIT/(LOSS) FOR THE FINANCIAL YEAR 162 2,185 (16,312)
Dividends - non-equity shares 9 (511) (543) (509)
Dividends - equity shares 9 - (696) (634)
----------------------------------
(ACCUMULATED DEFICIT)/RETAINED PROFIT
FOR THE FINANCIAL YEAR (349) 946 (17,455)
----------------------------------
</TABLE>
There is no material difference between the reported profits and the historical
cost profits for these years.
<PAGE>
RING PLC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
30 June 30 June
2000 1999
/pound /pound
sterling/ sterling/
Note '000 '000
<S> <C> <C> <C>
FIXED ASSETS
Intangible assets 10 2,142 2,258
Tangible assets 11 3,361 3,225
Investments 12 305 299
--------- ---------
5,808 5,782
--------- ---------
CURRENT ASSETS
Stocks 13 12,949 11,838
Debtors: amounts falling due within one year 14 15,462 14,965
amounts falling due after more than one year 14 113 140
Cash at bank and in hand 311 2,338
--------- ---------
28,835 29,281
Creditors: amounts falling due within one year 15 (22,082) (21,769)
--------- ---------
NET CURRENT ASSETS 6,753 7,512
--------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES 12,561 13,294
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 16 (413) (546)
MINORITY INTERESTS - NON-EQUITY SHARES 18 (99) (743)
--------- ---------
NET ASSETS 12,049 12,005
--------- ---------
CAPITAL AND RESERVES
Called-up share capital - equity shares 19 19,823 19,823
- non-equity shares 19 2,386 2,386
--------- ---------
22,209 22,209
Share premium account 20 10,405 10,405
Other reserves 20 1,050 1,050
Profit and loss account 20 (21,615) (21,659)
--------- ---------
TOTAL SHAREHOLDERS' FUNDS 12,049 12,005
--------- ---------
</TABLE>
<PAGE>
RING PLC
OTHER PRIMARY STATEMENTS
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
Profit/(loss) for the financial year 162 2,185 (16,312)
Exchange differences - overseas subsidiaries -- -- (6)
-------------------------------
Total recognised gains and losses relating
to the financial year 162 2,185 (16,318)
-------------------------------
</TABLE>
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
Profit/(loss) for the financial year 162 2,185 (16,312)
Dividends (511) (1,239) (1,143)
-------------------------------
(349) 946 (17,455)
Goodwill reinstated on disposals 393 -- 23,514
Other recognised gains and losses -- -- (6)
-------------------------------
Net increase in shareholders' funds 44 946 6,053
Opening shareholders' funds 12,005 11,059 5,006
-------------------------------
Closing shareholders' funds 12,049 12,005 11,059
-------------------------------
Attributable to:
Equity share interests 9,663 9,619 8,673
Non-equity share interests 2,386 2,386 2,386
-------------------------------
12,049 12,005 11,059
-------------------------------
</TABLE>
<PAGE>
RING PLC
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEARS ENDED 30 JUNE
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
Cash flow from operating activities (note 22) 840 3,858 4,403
Returns on investments and servicing of finance (note 23) (780) (742) (1,522)
Taxation (419) (663) (909)
Capital expenditure and financial investment (note 23) (676) (441) 78
Acquisitions and disposals (note 23) 618 (1,647) 13,433
Equity dividends paid (696) (634) --
-----------------------------
CASH (OUTFLOW)/INFLOW BEFORE FINANCING (1,113) (269) 15,483
Financing (Note 23)
Repayment of debt (716) (1,741) (6,603)
Redemption of preference shares in subsidiary undertakings (644) -- --
-----------------------------
(DECREASE)/INCREASE IN CASH IN THE YEAR (2,473) (2,010) 8,880
-----------------------------
</TABLE>
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT)/FUNDS:
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
(Decrease)/increase in cash in the year (2,473) (2,010) 8,880
Cash outflow from decrease in debt and lease financing 716 1,741 6,603
-----------------------------
Change in net debt resulting from cash flows (1,757) (269) 15,483
Loans and finance leases acquired with subsidiary undertakings -- (4) --
Loans and finance leases transferred on sale of subsidiary undertakings -- -- 235
New finance leases (477) (880) (506)
Translation difference -- -- (2)
-----------------------------
Movement in net debt in the year (2,234) (1,153) 15,210
Net funds/(debt) at 1 July 1,084 2,237 (12,973)
-----------------------------
Net (debt)/funds at 30 June (1,150) 1,084 2,237
-----------------------------
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
NET (DEBT)/FUNDS IS COMPRISED OF:
Bank overdraft and short term loans net of cash at bank (205) 2,268 4,278
Other secured bank loans -- (142) (1,371)
Other loans -- (4) (8)
Obligations under finance leases (945) (1,038) (662)
-----------------------------
Net (debt)/funds at 30 June (1,150) 1,084 2,237
-----------------------------
</TABLE>
<PAGE>
RING PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the financial statements,
except for the adoption of new financial reporting standards introduced in the
year. The effect of these are disclosed where relevant.
ACCOUNTING CONVENTION
The accounts are prepared under the historical cost convention and in accordance
with applicable accounting standards. These financial statements are prepared in
accordance with generally accepted accounting principles (GAAP) in the United
Kingdom (UK). A summary of the differences between UK GAAP and US GAAP, as
applicable to Ring plc is set out in Note [ ].
BASIS OF CONSOLIDATION
The consolidated accounts incorporate the accounts of Ring plc (the Company) and
each of its subsidiary undertakings for the year ended 30 June. The results of
subsidiary undertakings acquired or disposed of during the year, and requiring
to be acquisition accounted, are included in the consolidated profit and loss
account from or up to the effective date of acquisition or disposal.
TURNOVER
Turnover comprises the invoiced value of goods and services supplied by the
Group, net of VAT and intra-group transactions.
LEASED ASSETS
Assets held under leasing arrangements that give rights approximating to
ownership are capitalised as finance leases. The amount capitalised is the
present value of the minimum payments payable during the term of each lease. The
corresponding leasing commitments are included in creditors. The interest
element of the rental obligations is charged to the profit and loss account
using the annuity method.
Rentals in respect of all other leases are charged to the profit and loss
account on a straight line basis over the lease term.
DEPRECIATION
Freehold and long leasehold land is not depreciated. Depreciation on other
assets is calculated to write off the cost on a straight line basis over the
estimated useful lives, at the following rates:
Freehold buildings - 50 years
Short leasehold property - over period of lease
Plant and equipment - 3 - 5 years
Motor vehicles - 4 - 5 years
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets.
STOCKS
Stocks are valued at the lower of cost, on a first in first out basis, and net
realisable value after making due allowance for any obsolete or slow moving
items. In the case of finished goods, cost comprises direct materials, direct
labour and an appropriate proportion of production overheads.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
DEFERRED TAXATION
Provision is made for deferred taxation, using the liability method, on all
timing differences to the extent that it is probable that the liability or asset
will crystallise.
PENSION BENEFITS
Pension benefits are funded over the employees' periods of service.
Contributions to certain personal pension policies are charged to the profit and
loss account as incurred.
GOODWILL
Following the issuance of FRS 10 "Goodwill and Intangible Assets" goodwill
arising on acquisitions during the year ended 30 June 1999 and thereafter, being
the excess of the fair value of the purchase consideration over the fair value
of the net assets at the time of the purchase of business, is capitalised and
amortised over a maximum estimated useful life of 20 years on a straight line
basis. Goodwill written off in prior years will not be re-stated except in the
event of a business with related goodwill being sold, where goodwill is written
back in calculating the profit or loss on disposal. In the event of a business
being sold when goodwill has been capitalised the associated goodwill is written
off in the profit and loss account. The directors consider annually whether a
provision against the value of goodwill on an individual investment basis is
required.
FOREIGN CURRENCY TRANSLATION
Transactions denominated in foreign currency are translated into sterling at
either the rate of exchange ruling on the date of the transaction or at the
exchange rate of a forward foreign currency contract taken out to cover
that transaction. On consolidation, foreign currency values in the profit and
loss accounts of overseas subsidiaries are translated into sterling at the
average rate of exchange ruling throughout the year. Foreign currency values in
the balance sheets of overseas subsidiary companies are translated at the rates
of exchange ruling at the balance sheet date. The difference between the average
rate and closing rate for the profit and loss account is taken to reserves.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
2 SEGMENTAL ANALYSIS
An analysis of turnover and operating profit (net of allocation of head office
costs) by segment and by geographical location is:
<TABLE>
<CAPTION>
2000 1999 1998
Operating Operating Operating
Turnover profit Turnover profit Turnover profit
/pound /pound /pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000 '000 '000
Continuing operations
<S> <C> <C> <C> <C> <C> <C>
Distribution 76,686 2,272 70,387 3,630 64,895 3,321
---------------------------------------------------------------
Discontinued operations
Engineering -- -- -- -- 8,119 259
Distribution 1,816 2 4,225 (163) 4,248 5
Other -- -- -- -- 595 (535)
---------------------------------------------------------------
1,816 2 4,225 (163) 77,857 (271)
---------------------------------------------------------------
Total 78,502 2,274 74,612 3,467 77,857 3,050
---------------------------------------------------------------
Geographical location by origin
United Kingdom 78,502 2,274 74,612 3,467 75,676 3,201
Rest of Europe -- -- -- -- 418 (148)
North America -- -- -- -- 1,173 (30)
Rest of World -- -- -- -- 590 27
---------------------------------------------------------------
78,502 2,274 74,612 3,467 77,857 3,050
---------------------------------------------------------------
Tumover by destination
United Kingdom 75,102 71,259 72,189
Rest of Europe 2,550 2,365 2,834
Far and Middle East 214 105 288
North America 327 458 1,621
Rest of World 309 425 925
------- ------- ------
78,502 74,612 77,857
------- ------- ------
</TABLE>
In the opinion of the directors, there was only one segment of trade at 30 June
2000, 30 June 1999 and 30 June 1998 and that all the net assets were utilised in
that trade.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
3 COST OF SALES AND OPERATING COSTS
<TABLE>
<CAPTION>
2000 1999 1998
Continuing Discontinued Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total operations operations Total
/pound /pound /pound /pound /pound /pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/ sterling/ sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000 '000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cost of sales 50,965 1,218 52,183 49,168 3,014 52,182 45,782 7,670 53,452
-------------------------------------------------------------------------------------------------------
Operating costs:
Distribution costs 8,625 149 8,774 6,363 371 6,734 5,441 1,294 6,735
Selling & marketing costs 9,610 217 9,827 6,071 661 6,732 5,144 1,549 6,693
Administrative costs 4,633 230 4,863 4,985 447 5,432 5,207 2,410 7,617
Amortisation of goodwill 116 -- 116 65 -- 65 -- -- --
-------------------------------------------------------------------------------------------------------
22,984 596 23,580 17,484 1,479 18,963 15,792 5,253 21,045
Exceptional costs 465 -- 465 -- -- -- -- 310 310
-------------------------------------------------------------------------------------------------------
23,449 596 24,045 17,484 1,479 18,963 15,792 5,563 21,355
-------------------------------------------------------------------------------------------------------
</TABLE>
The exceptional costs in the year ended 30 June 2000 relate to professional
costs incurred by the Company during the acquisition by Catalina Lighting, Inc.
The exceptional costs in the year ended 30 June 1998 were redundancy costs
connected with the disposal of the non-distribution businesses.
Operating costs are stated after charging/(crediting):
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
Hire of plant, equipment and vehicles under operating leases 473 352 472
Leasehold property rents (net of rents received) 690 471 528
Auditors' remuneration 60 60 52
Other fees paid to KPMG Audit Plc and its associates 64 44 10
Profit on the disposal of tangible fixed assets (26) (70) --
Depreciation 1,006 1,040 1,376
</TABLE>
4 EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
Loss on sale of discontinued activities (note 21) (366) -- (18,159)
Additional consideration from the sale of the Engineering -- -- --
Division following the release of the warranty retention -- 500 --
Additional pension liabilities relating to the sale of the
Engineering Division (note 25) (620) (520) --
-------------------------------
(986) (20) (18,159)
-------------------------------
</TABLE>
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
5 STAFF COSTS AND NUMBERS
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
Wages 7,992 7,889 10,296
Social security costs 714 686 904
Other pension costs 225 187 369
------------------------------
8,931 8,762 11,569
------------------------------
</TABLE>
The average number of persons employed by the Group during the year, including
directors, was as follows:
<TABLE>
<CAPTION>
Number Number Number
<S> <C> <C> <C>
Selling and marketing 170 156 149
Distribution and production 229 243 403
Administration 94 101 163
-------------------------------
493 500 715
-------------------------------
</TABLE>
6 EMOLUMENTS OF DIRECTORS
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
Emoluments 351 389 351
Contributions to money purchase schemes 26 23 20
------------------------------
377 412 371
------------------------------
</TABLE>
Directors' emoluments excluding pension contributions were:
a) Year ended 30 June 2000
<TABLE>
<CAPTION>
Basic salary
and fees Annual bonus Benefits Total 2000
/pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000
<S> <C> <C> <C> <C>
Executive Directors
JM Hall 155 -- 13 168
AF Welham 100 -- 12 112
Non-Executive Directors
K Jackson 35 -- -- 35
BP Doe 18 -- -- 18
RG Hardie 18 -- -- 18
---------------------------------------------------------
Total 326 -- 25 351
---------------------------------------------------------
</TABLE>
<PAGE>
RING PLC
b) Year ended 30 June 1999
<TABLE>
<CAPTION>
Basic salary
and fees Annual bonus Benefits Total 1999
/pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000
<S> <C> <C> <C> <C>
Executive Directors
JM Hall 140 42 14 196
AF Welham 91 29 12 132
Non-Executive Directors
K Jackson 27 -- -- 27
BP Doe 17 -- -- 17
RG Hardie 17 -- -- 17
---------------------------------------------------------
Total 292 71 26 389
---------------------------------------------------------
</TABLE>
c) Year ended 30 June 1998
<TABLE>
<CAPTION>
Basic salary
and fees Annual bonus Benefits Total 1998
/pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000
<S> <C> <C> <C> <C>
Executive Directors
JM Hall 124 -- 13 137
AF Welham (appointed 22 October 1997) 59 -- 8 67
RE Richardson (resigned 21 August 1997) 18 -- 2 20
MA Fawcett (resigned 22 October 1997) 26 -- 11 37
DW Hammond (resigned 22 October 1997) 36 -- -- 36
Non-Executive Directors
K Jackson (appointed 10 November 1997) 17 -- -- 17
BP Doe (appointed 2 February 1998) 7 -- -- 7
RG Hardie (appointed 2 February 1998) 7 -- -- 7
WA McClue (resigned 30 January 1998) 12 -- 1 13
RJJ Wickham (resigned 30 January 1998) 10 -- -- 10
---------------------------------------------------------
Total 316 -- 35 351
---------------------------------------------------------
</TABLE>
In addition to the emoluments shown above, consequent upon the termination of
their employment by the Company, three of the directors who resigned received
the following payments by way of compensation for breach of contract for the
year ended 30 June 1998:
Mr RE Richardson - /pound sterling/356,500 together with an additional pension
contribution of /pound sterling/49,680
Mr WA McClue - /pound sterling/17,500
Mr RJJ Wickham - /pound sterling/4,375
Under the terms of their consultancy agreements with the Company, former
directors, Messrs. C E Davies and P A C Fox received payments during the period
of /pound sterling/31,000 and /pound sterling/41,123 respectively. Their
agreements terminated in November 1997.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
Directors' pension information
Retirement benefits are provided under money purchase schemes, on an individual
basis.
Contributions paid
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
JM Hall 16 14 12
AF Welham 10 9 6
RE Richardson -- -- 2
------------------------------------
26 23 20
------------------------------------
7 INTEREST RECEIVABLE, PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
Interest receivable
On cash deposits 9 40 4
-------------------------------
Interest payable and similar charges
Bank loans and overdrafts and other loans repayable within 5 years 129 171 684
Other loans 1 17 5
Finance lease charges 75 77 63
Other 49 -- 5
-------------------------------
254 265 757
-------------------------------
</TABLE>
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
8 TAXATION
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
The charge based on the profit/(loss) for the year comprises:
Current year
Corporation tax at 30% (1999: 30.75%, 1998: 31%) 831 1,162 530
Overseas tax -- -- (42)
Deferred tax 115 (118) 49
------------------------------------
946 1,044 537
Adjustments relating to prior years (65) (7) (99)
------------------------------------
881 1,037 438
------------------------------------
</TABLE>
9 DIVIDENDS
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
Preference - non-equity shares 511 543 509
Ordinary - equity shares - Interim dividend 0.6p per share -- 232 --
- Final dividend proposed 1.2p per share (1998: 1.6p) -- 464 634
------------------------------------
511 1,239 1,143
------------------------------------
</TABLE>
At 30 June 1999 dividends on shares held by the Ring Employee Share Ownership
Plan (ESOP) trust were waived except for 0.01p per share. At 30 June 1999 the
trustees of the ESOP held 987,180 ordinary shares.
10 INTANGIBLE FIXED ASSETS
30 June 30 June
2000 1999
/pound /pound
sterling/ sterling/
'000 '000
Cost
At 1 July 2,323 --
Additions (note 21) -- 2,323
----- -----
At 30 June 2,323 2,323
----- -----
Amortisation
At 1 July 65 --
Charge for year 116 65
----- -----
At 30 June 181 65
----- -----
Net book amounts
At 30 June 2,142 2,258
----- -----
Intangible fixed assets comprises goodwill relating to the acquisitions of P H
Products Limited and Arctic Products Limited.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
11 TANGIBLE FIXED ASSETS
a) YEAR ENDED 30 JUNE 2000
<TABLE>
<CAPTION>
Freehold Long Short Plant,
land and leasehold leasehold equipment
buildings property property and vehicles Total
/pound /pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C>
Cost
At 1 July 1999 536 774 150 8,142 9,602
Additions -- -- -- 1,443 1,443
Disposals (193) -- -- (3,152) (3,345)
Disposal of subsidiary undertaking -- -- -- (539) (539)
------------------------------------------------------
At 30 June 2000 343 774 150 5,894 7,161
------------------------------------------------------
Depreciation
At 1 July 1999 67 185 149 5,976 6,377
Charge for year 2 18 1 985 1,006
Disposals (43) -- -- (3,038) (3,081)
Disposal of subsidiary undertaking -- -- -- (502) (502)
------------------------------------------------------
At 30 June 2000 26 203 150 3,421 3,800
------------------------------------------------------
Net book amounts
At 30 June 2000 317 571 -- 2,473 3,361
------------------------------------------------------
At 1 July 1999 469 589 1 2,166 3,225
------------------------------------------------------
</TABLE>
b) YEAR ENDED 30 JUNE 1999
<TABLE>
<CAPTION>
Freehold Long Short Plant,
land and leasehold leasehold equipment
buildings property property and vehicles Total
/pound /pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C>
Cost
At 1 July 1998 599 774 150 7,354 8,877
Additions -- -- -- 1,316 1,316
Acquisition of subsidiary undertakings -- -- -- 86 86
Disposals (63) -- -- (614) (677)
-----------------------------------------------------
At 30 June 1999 536 774 150 8,142 9,602
-----------------------------------------------------
Depreciation
At 1 July 1998 92 163 149 5,446 5,850
Charge for year 2 22 -- 1,016 1,040
Disposals (27) -- -- (486) (513)
-----------------------------------------------------
At 30 June 1999 67 185 149 5,976 6,377
-----------------------------------------------------
Net book amounts
At 30 June 1999 469 589 1 2,166 3,225
-----------------------------------------------------
At 1 July 1998 507 611 1 1,908 3,027
-----------------------------------------------------
</TABLE>
The net book amounts of plant, equipment and vehicles includes /pound
sterling/1,040,000 (1999: /pound sterling/1,095,000) in respect of leased
assets.
Included in freehold land and buildings at 30 June 2000 is land with a net book
value of /pound sterling/295,000 (1999: /pound sterling/295,000) which is not
depreciated.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
12 FIXED ASSET INVESTMENTS
30 June 30 June
2000 1999
/pound /pound
sterling/ sterling/
'000 '000
Investment in own shares 305 299
---------------------
The Ring Employee Share Ownership Plan (ESOP) trust was established in 1995 to
hedge the future obligations of the Group in respect of shares awarded under
share option schemes. At 30 June 2000 they held 986,680 (1999: 987,180) ordinary
shares with a market value at that date of /pound sterling/493,000 (1999: /pound
sterling/331,000). At 30 June 1999 dividends on shares held by the ESOP were
waived except for 0.01p per ordinary share.
As required by UITF Abstract 13 (Accounting for ESOP Trusts) the assets and
liabilities of the ESOP have been recognised as the assets and liabilities of
the sponsoring company. The administration costs of the ESOP trust are charged
to the profit and loss account of the Group as they accrue.
Where appropriate provision has been made against the cost of the shares held in
the Company's ESOP scheme reflecting the diminution in the value of the shares
held.
13 STOCKS
30 June 30 June
2000 1999
/pound /pound
sterling/ sterling/
'000 '000
Raw materials and consumables 464 507
Finished goods 12,485 11,331
-------------------
12,949 11,838
-------------------
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
14 DEBTORS
<TABLE>
<CAPTION>
30 June 30 June
2000 1999
/pound /pound
sterling/ sterling/
'000 '000
<S> <C> <C>
Amounts falling due within one year:
Trade debtors 14,930 13,832
Other debtors 248 219
Prepayments and accrued income 181 247
Corporation tax and ACT recoverable -- 486
Deferred taxation (note 17) -- 115
Deferred consideration for sale of operations
of subsidiary undertakings 103 66
--------------------
15,462 14,965
Amounts falling due after more than one year:
Deferred consideration for sale of operations of
subsidiary undertakings 113 140
--------------------
15,575 15,105
--------------------
</TABLE>
15 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
30 June 30 June
2000 1999
/pound /pound
sterling/ sterling/
'000 '000
<S> <C> <C>
Bank overdrafts and short term bank loans (secured) 516 70
Other secured bank loans -- 142
Other loans -- 4
Deferred consideration for acquisition of subsidiaries (note 21) 75 303
Trade creditors 11,506 11,554
Other taxation and social security 1,010 970
Other creditors and accruals 6,922 5,879
Obligations under finance leases 532 492
Corporation tax and ACT payable 1,290 1,428
Proposed equity dividends -- 696
Non-equity dividends 231 231
----------------------
22,082 21,769
----------------------
</TABLE>
/pound sterling/nil (1999: /pound sterling/142,000) of the secured bank loans
are secured by charges over the borrowing subsidiary companies' assets, the
remainder being secured on assets of the Group.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
16 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
30 June 30 June
2000 1999
/pound /pound
sterling/ sterling/
'000 '000
Obligations under finance leases 413 546
--------- ---------
The total borrowings of the Group (including finance leases) are repayable as
follows:
Bank loans Finance leases and
and overdrafts other borrowings
2000 1999 2000 1999
/pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000
Within one year 516 212 532 496
Between one and two years -- -- 320 369
Between two and five years -- -- 93 177
----------------------------------------------
516 212 945 1,042
----------------------------------------------
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
17 DEFERRED TAXATION
Movements in deferred taxation assets during the year are as follows:
<TABLE>
<CAPTION>
2000 1999
/pound /pound
sterling/ sterling/
'000 '000
<S> <C> <C>
At 1 July 115 --
(Charged)/credited during the year (115) 118
Acquired on purchase of a subsidiary undertaking (note 21) -- (3)
-----------------------
At 30 June -- 115
-----------------------
</TABLE>
Deferred taxation assets recognised in the accounts and the amounts not
recognised, calculated at the rate of 30% (1999: 30%), are as follows:
<TABLE>
<CAPTION>
Recognised Not recognised
2000 1999 2000 1999
/pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000
<S> <C> <C> <C> <C>
Capital allowances -- -- 142 136
Other timing differences -- 115 468 272
Losses carried forward -- -- 61 50
-----------------------------------------------
-- 115 671 458
------------------------------------------------
</TABLE>
18 MINORITY INTERESTS
This represents the external ownership of portions of the issued preference
shares of various subsidiary companies. The movement during the year was:
<TABLE>
<CAPTION>
2000 1999
Marshall's Newton Marshall's Newton
Universal Mill Total Universal Mill Total
/pound /pound /pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C> <C>
At 1 July 644 99 743 644 99 743
Redeemed during the year (644) -- (644) -- -- --
-------------------------------------------------------------------------
At 30 June -- 99 99 644 99 743
--------------------------------------------------------------------------
</TABLE>
19 CALLED-UP SHARE CAPITAL
The authorised and allotted share capital at 30 June 2000 and 1999 was:
<TABLE>
<CAPTION>
Allotted, called-up
Authorised and fully paid
2000 1999 2000 1999
/pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000
<S> <C> <C> <C> <C>
Equity shares
Ordinary shares of 50p each 28,250 28,250 19,823 19,823
------------------------------------------
Non-equity shares
19.2% convertible preference shares of 25p each 5,000 5,000 2,373 2,373
3.5% cumulative preference shares of 62.5p each 13 13 13 13
------------------------------------------
5,013 5,013 2,386 2,386
------------------------------------------
Total 33,263 33,263 22,209 22,209
------------------------------------------
</TABLE>
The holders of the convertible preference shares of 25p each are entitled to
receive in priority to the equity shareholders a fixed cumulative dividend of
19.2% per annum until 1 January 2004. From 1 January 1996, the shares can be
converted into fully paid equity shares on the basis of two ordinary 50p shares
for every five 25p preference shares. Any outstanding preference shares at 1
January 2004 shall automatically convert into fully paid ordinary shares on the
same basis. The holders of the preference shares are not entitled to vote at
general meetings so long as dividends are not greater than six months in
arrears. On a winding-up, the assets available for distribution shall be applied
to repaying the preference shareholders, in priority to the equity shareholders,
at a rate of /pound sterling/1 per fully paid share and arrears of dividends
due.
The holders of the cumulative preference shares of 62.5p each are entitled to
receive, with equal priority to the convertible preference shareholders, a fixed
dividend of 3.5% per annum. Voting rights and entitlement to assets on a
winding-up are identical to those held by the holders of the convertible
preference shares.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
20 RESERVES
<TABLE>
<CAPTION>
2000 1999
Share Other non- Profit and Share Other non- Profit and
premium distributable loss account premium distributable loss account
/pound /pound /pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C> <C>
Group
At 1 July 10,405 1,050 (21,659) 10,405 1,050 (22,605)
Goodwill reinstated on disposals -- -- 393 -- -- --
(Accumulated deficit)/retained
profit for the financial year -- -- (349) -- -- 946
-------------------------------- --------------------------------
At 30 June 10,405 1,050 (21,615) 10,405 1,050 (21,659)
-------------------------------- --------------------------------
</TABLE>
The cumulative amount of goodwill written off directly against reserves in
relation to acquisitions, net of goodwill relating to businesses disposed of, is
/pound sterling/25,506,000 (1999: /pound sterling/25,899,000).
21 ACQUISITIONS AND DISPOSALS
a) Year ended 30 June 2000
Acquisitions
During the year the Group, in accordance with the terms of the purchase
agreement, made a deferred consideration payment of /pound sterling/228,000 in
respect of the acquisition of Arctic Products Limited in April 1999. The amount
was fully provided for in the accounts for the year ended 30 June 1999.
Disposals
On 29 November 1999 the Group disposed of M&F Components Limited.
Details of the net tangible assets disposed of are:
/pound /pound
sterling/ sterling/
'000 '000
Consideration (net of costs) 65
Fixed assets 37
Stocks 689
Debtors 1,121
Creditors (969)
Overdraft (839)
Corporation Tax (1)
------
38
------
Profit on disposal before goodwill reinstated 27
Goodwill reinstated (393)
------
Loss on disposal (note 4) (366)
------
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
b) Year ended 30 June 1999
Acquisitions
On 7 August 1998 the Group acquired the entire issued share capital of P H
Products Ltd for /pound sterling/1.4m. On 22 April 1999 the Group acquired the
entire issued share capital of Arctic Products Ltd for /pound sterling/1.1m with
a deferred consideration of up to /pound sterling/227,500 dependant upon the
profit before tax for the year ended 30 September 1999. The directors believe
that it is likely that the deferred consideration will be payable and that has
been assumed in the calculation of total consideration payable below.
Book value
at acquisition
/pound
sterling/
'000
Net assets acquired:
Tangible fixed assets 86
Stocks 170
Debtors 378
Cash at bank and in hand 212
Taxation (71)
Creditors (382)
Obligations under finance leases (4)
Deferred taxation (3)
------
386
Goodwill 2,323
------
Total consideration (including expenses incurred) 2,709
------
The consideration was satisfied as follows: /pound
sterling/
'000
Cash consideration 2,406
Warranty retention 75
Deferred consideration 228
------
2,709
------
In the opinion of the directors there is no material difference between the book
values of the net assets acquired and their fair values.
c) Year ended 30 June 1998
Acquisitions
During the year the Group, in accordance with the terms of the respective
purchase agreements, made deferred consideration payments in respect of these
prior years acquisitions:
/pound
sterling/
'000
Lighten Point Corporation Europe Ltd 2,000
Grove Products (Caravan Accessories) Ltd 350
-------
2,350
-------
These amounts had been fully provided for in the accounts for the year ended
30 June 1997.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
Disposals
On 10 November 1997 the Group disposed of its Engineering Division to Broomco,
a newly formed company, which is a subsidiary of IMI, an investment company. The
consideration of /pound sterling/17.7m was adjusted in accordance with the
disposal agreement for the division's net taxation liability (/pound
sterling/0.3m) and net bank loans and overdrafts (/pound sterling/0.8m) which
were assumed by the purchaser.
On 11 November 1997 Ptarmigan (Porth) Ltd (formerly known as Gainsborough
(Porth) Ltd) sold its business to Gainsborough Decorations Ltd for a
consideration of /pound sterling/1.
On 21 May 1998 the entire share capital of Mary Ford Publications Ltd was sold
for a consideration of /pound sterling/60,000 to Michael O'Mara Holdings Ltd.
On 26 June 1998 the entire share capital of Ptarmigan Hotels Ltd was sold to
Tradeway Consultants Ltd. The consideration of /pound sterling/345,000 payable
on completion is subject to an adjustment in accordance with the terms of the
disposal agreement to eliminate net current assets or liabilities at the
completion date. A provision of /pound sterling/9,000 has been made in the
accounts for this adjustment.
Net tangible
assets
disposed of
/pound
sterling/
'000
Fixed assets 4,725
Stocks 5,870
Debtors 6,878
Creditors (including hire purchase liabilities) (6,525)
Corporation tax (324)
Deferred tax (32)
----------
10,592
Minority interest (104)
----------
10,488
Goodwill reinstated on disposal 23,514
----------
34,002
Loss on sale of Engineering Division (17,980)
Loss on sale of Gainsborough (Porth) Ltd business (59)
Loss on sale of Ptarmigan Hotels Ltd (112)
Loss on sale of Mary Ford Publications Ltd (8)
----------
(18,159)
----------
15,843
----------
Discharged by:
Cash received (net of expenses) 15,069
Other secured loans assumed by purchaser 154
Net overdrafts assumed by purchaser 620
----------
15,843
----------
Net cash flow from acquisitions and disposals
/pound
sterling/
'000
Cash received from current year disposals 15,689
Deferred consideration from prior year disposals 94
Deferred consideration relating to prior year acquisitions (2,350)
----------
13,433
----------
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
22 RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
Operating profit 2,274 3,467 3,050
Depreciation charges 1,006 1,040 1,376
Amortisation of goodwill 116 65 --
Provision to write down ESOP investment -- -- 31
Profit on disposal of fixed assets (26) (70) --
Provision against recovery of deferred consideration 50 -- --
Revaluation of investment in own shares (6) -- --
(Increase)/decrease in stocks (1,800) 133 (943)
Increase in debtors (2,126) (3,152) (713)
Increase in creditors 1,352 2,375 1,602
-------------------------------------
Net cash inflow from operating activities 840 3,858 4,403
-------------------------------------
</TABLE>
23 ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
<TABLE>
<CAPTION>
2000 1999 1998
/pound /pound /pound
sterling/ sterling/ sterling/
'000 '000 '000
<S> <C> <C> <C>
Returns on investments and servicing of finance
Interest received 9 43 4
Interest paid (203) (165) (952)
Preference dividends paid (511) (543) (511)
Interest element of finance lease rental payments (75) (77) (63)
-------------------------------------
Net cash outflow from returns on investments and servicing of finance (780) (742) (1,522)
-------------------------------------
Capital expenditure and financial investment
Purchase of tangible fixed assets, net of leasing finance (966) (436) (546)
Sale of tangible fixed assets 290 234 624
Purchase of investments -- (239) --
-------------------------------------
Net cash (outflow)/inflow from capital expenditure and financial investment (676) (441) 78
-------------------------------------
Acquisitions and disposals
Purchase of subsidiary undertakings -- (2,406) --
Net cash balances acquired with subsidiary undertakings (note 21) -- 212 --
Net cash balances transferred on sale of subsidiary undertakings (note 21) 839 -- 620
Sale of subsidiary undertakings and deferred consideration from prior year disposals 7 47 15,163
Release of warranty retention from prior year disposals (note 4) -- 500 --
Costs associated with acquisitions in prior years (228) -- (2,350)
-------------------------------------
Net cash inflow/(outflow) from acquisitions and disposals 618 (1,647) 13,433
-------------------------------------
Financing
Debt due within a year:
- repayment of loans (146) (713) (1,932)
Debt due beyond a year:
- repayment of loans -- (520) (4,111)
Capital element of finance lease rental payments (570) (508) (560)
Redemption of preference shares (note 18) (644) -- --
-------------------------------------
Net cash outflow from financing (1,360) (1,741) (6,603)
-------------------------------------
</TABLE>
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
24 FINANCIAL COMMITMENTS
Authorised future capital expenditure amounted to:
30 June 30 June
2000 1999
/pound /pound
sterling/ sterling/
'000 '000
Contracted 68 72
--------------------
The annual commitment under non-cancellable operating leases was as follows:
2000 1999
Plant, Plant,
Land and equipment Land and equipment
buildings and vehicles buildings and vehicles
/pound /pound /pound /pound
sterling/ sterling/ sterling/ sterling/
'000 '000 '000 '000
Leases expiring:
Within one year 11 119 -- 61
Within one to two years -- 1 36 109
Within two to five years 79 113 78 201
Thereafter 818 -- 685 --
--------------------- ---------------------
908 233 799 371
--------------------- ---------------------
25 PENSIONS
The Group operates a contracted out defined benefit pension scheme covering
certain current subsidiary companies of the Group and, until its disposal in
November 1997, a number of companies included in the Engineering Division.
The scheme is administered externally and the assets are held separately by
professional investment managers. The scheme is funded by contributions from
members at 5% of pensionable salary and by contributions from current
participating companies at rates recommended by the Actuary. The amount charged
to the profit and loss account during the year to 30 June 2000 was /pound
sterling/59,000 (1999: /pound sterling/82,000) (1998: /pound sterling/249,000).
The last completed triennial actuarial valuation of the scheme was carried out
as at 5 April 1997, prior to the disposal of the Engineering Division. The
actuarial valuation used the projected unit method, the principal assumptions on
a continuing prospective rights basis being an investment return of 9% per
annum, salary increases of 7.5% per annum and dividend growth of 4.25% per
annum. The valuation indicated that the market value of the assets as at the
valuation date represented 102% of the benefits that had accrued to members
after allowing for expected future salary increases.
On disposal of the Engineering Division in November 1997, the active members of
the relevant companies were transferred out of the pension fund at a transfer
value calculated in accordance with the sale and purchase agreement. As a result
of the disposal and the resultant transfer the scheme demography altered
considerably, the remaining number of active members amount to only 4% of the
total membership. Taking this into account a partial valuation of the scheme was
completed by the Actuary on the basis of assumptions more appropriate to the
scheme's current and likely future circumstances. The results, received during
the year, indicated that the scheme was underfunded. The Group therefore
provided for additional contributions and an amount of /pound sterling/520,000
(including expenses) was charged in the year to 30 June 1999 (note 4). The
investment strategy was also revised.
A further actuarial valuation is being carried out and indicates that the level
of under funding created as outlined above has increased. The Group is therefore
to make additional contributions to the scheme in respect of which /pound
sterling/620,000 has been charged in the financial statements for the year ended
30 June 2000.
The Group also operates a defined contribution scheme covering the remaining
subsidiary companies of the Group.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
26 CONTINGENT LIABILITIES
2000 1999
/pound /pound
sterling/ sterling/
'000 '000
Guarantee in favour of HM Customs & Excise
in respect of deferment of import duties and VAT 962 762
----- -----
27 POST BALANCE SHEET EVENT
Further to an Offer Document issued on behalf of Catalina International PLC
setting out terms to acquire the ordinary and convertible preference share
capital of the Company, dated 1 June 2000 (the "Offer"), on 5 July 2000 the
Offer was declared unconditional and the Company became a wholly owned
subsidiary of Catalina Lighting, Inc.
On 17 August 2000 the Company ceased to be listed on the London Stock Exchange.
A resolution was passed on the 22 August 2000 that the Company re-register as a
private limited company. The statutory notice period had not expired at the date
of this report and therefore the Company is still trading as Ring PLC.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
28 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP
The Group's consolidated financial statements are prepared in accordance with UK
GAAP, which differs in certain significant respects from US GAAP. These
differences, together with the approximate effects of the adjustments to the
loss/profit for the financial year and shareholders' equity, relate principally
to the items set out below.
(a) Goodwill and other intangible assets
Under UK GAAP, goodwill arising on acquisitions made after December 31
1997 has been capitalised as an intangible fixed asset and is being
amortised through the profit and loss account over its economic life.
Goodwill arising on acquisitions made prior to January 1 1998 was
eliminated against equity reserves. Under US GAAP, the excess of the fair
value of the consideration paid over the fair value of the net assets
acquired is first allocated to identifiable intangible assets with the
remaining amount assigned to goodwill. Identifiable intangible assets
which are immaterial and goodwill are capitalised and amortised over their
estimated useful lives. Amortization periods of no more than 20 years have
been applied in respect to goodwill arising on acquisition.
In the application of purchase accounting the fair value of certain assets
acquired and liabilities assumed is measured differences under UK GAAP
and US GAAP, resulting in a difference in the recorded amounts of these
assets, liabilities and resulting goodwill.
Under UK GAAP the profit and loss on disposal of a business acquired prior
to January 1 1998 is calculated after taking account of any goodwill
written off to equity reserves. Under US GAAP an adjustment to the UK GAAP
profit and loss is made in respect of goodwill previously amortised.
(b) ESOP shares
Under UK GAAP, ESOP shares are carried as fixed asset investments. Under
US GAAP, ESOP shares are presented as a reduction of equity shareholders'
funds.
(c) Ordinary dividends
Under UK GAAP, proposed dividends on ordinary shares, as recommended by
the directors, are deducted from shareholders' funds and shown as a
liability in the Group's balance sheet at the end of the year to which
they relate. Under US GAAP, such dividends are deducted from shareholders'
funds at the date of declaration of the dividend.
(d) Pensions
Under UK GAAP the expected cost of pensions is charged to the Group's
profit and loss account so as to spread the cost of pensions over the
expected service lives of employees. Surpluses arising from the actuarial
valuation are similarly spread. Under US GAAP costs and surpluses are also
spread over the expected service lives but based on prescribed actuarial
assumptions, allocation of costs and valuation methods which differ from
those used for UK GAAP. Based upon the Group's actuarial valuation, the
pension liability recorded did not exceed the unrecognized prior service
cost. This deficit is reported as a reduction of other comprehensive
income, which is a component of shareholders' equity.
(e) Current assets and liabilities
Current assets and liabilities under UK GAAP include amounts which fall
due after more than one year. Under US GAAP such assets and liabilities
would be reclassified as non current assets.
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
(f) Deferred consideration
The Group recognises a liability for deferred and contingent consideration
on acquisitions expected to be payable in the future. Under US GAAP, such
consideration is only recognised when a liability actually arises.
(g) Deferred taxation
Under UK GAAP, deferred taxation is provided under the liability method,
unless there is reasonable certainty that such deferred taxation will not
become payable in the foreseeable future. Deferred tax assets are
recognised where recovery in the following year is certain. Under US GAAP,
deferred taxation is accounted for in accordance with SFAS 109 "Accounting
for Income Tax". Deferred taxation is recognised for all temporary
differences which result in taxable or tax deductible amounts in future
years, subject to a valuation allowance to reduce the deferred tax asset
if it is more likely than not that the related tax benefit will not be
realised. Deferred taxation also arises in relation to the tax effects of
certain other US GAAP adjustments.
(h) Share option schemes
For the Group's share option schemes, the difference of the option price
and the market price of the shares when the options are awarded is charged
to compensation cost over the period in respect of the performance
conditions apply. To the extent the award is adjusted by virtue of the
performance conditions being met or not, the compensation cost is adjusted
in line with this. Under US GAAP, the cost is calculated as the difference
between the option price and the market price at the end of each period in
respect of which performance conditions apply. Under the requirements of
APB Opinion No. 25, any compensation cost would be amortized over the
period from the date the options are granted to the date they are first
exercisable.
Save-as-you-earn (SAYE) schemes generally grant shares to employees at a
discount to fair value at the date of grant. No compensation cost is
recognized for such awards. Under US GAAP, this discount provided to
employees would be recorded as compensation cost over the vesting period.
The Group's SAYE options were granted at fair value at the date of grant
therefore no compensation cost was recorded.
Classification differences between UK and US GAAP
Statement of cash flows
Under UK GAAP, cash flows are presented for operating activities, returns on
investment and servicing of finance, taxation paid, capital expenditure,
acquisitions and disposals, dividends paid and financing activities. Under UK
GAAP, each includes cash in hand and cash on deposit, net of bank overdrafts.
Under US GAAP, cash flows are reported as operating, investing and financing
activities. Cash flows from taxation and returns on investment and servicing of
finance would, with the exception of ordinary dividends paid, be included as
operating activities. The payment of dividends would be included under financing
activities. Cash and cash equivalents would include cash and short-term
investments with original maturities of three months or less.
Exceptional items
Under UK GAAP, certain exceptional items identified in the Group's financial
statements would not be considered exceptional and would be treated as part of
income from continuing operations.
Discontinued operations
Under UK GAAP and US GAAP have different criteria for determining discontinued
operations. As a result, the operations of Engineering division, which are
discontinued for UK GAAP would qualify as continuing operations under US GAAP.
Disclosures
In general, the disclosure requirements for UK GAAP are not as extensive as
those required by US GAAP. Areas where US GAAP requires specific additional
disclosures include: significant customers and suppliers, related party
transactions, use of estimates, income taxes, business segment reporting,
pensions, financial instruments, fair values, earnings per share, commitments
and contingencies, comprehensive income and subsequent events.
<PAGE>
2000 1999
/pound /pound
Net profit sterling/ sterling/
for the year ended 30 June '000 '000
------------------------------------------------------------------------
Net profit for the financial year in
accordance with UK GAAP 162 2,185
US GAAP adjustments:
Amortisation of goodwill and other intangibles (2,449) (2,031)
Deferred taxation 101 172
Pension costs 341 335
Share option expense (37) (4)
------------------
Net (loss) profit for the financial year in
accordance with US GAAP (1,882) 657
------------------
2000 1999
/pound /pound
Shareholders' funds sterling/ sterling/
at 30 June '000 '000
------------------------------------------------------------------------
Shareholders' funds
in accordance with UK GAAP 12,049 12,005
US GAAP adjustments:
Goodwill and other intangibles 13,585 16,427
Deferred tax assets 736 635
Pension costs liabilities (416) (757)
Excess of minimum pension liability over
unrecognised prior service cost (793) (827)
Dividends 0 464
ESOP (305) (299)
------------------
Shareholders' funds in accordance with US GAAP 24,856 27,648
------------------
2000 1999
/pound /pound
Cash flow statement sterling/ sterling/
for the years ended 30 June '000 '000
------------------------------------------------------------------------
Net cash (outflow)/inflow from operating activities (359) 2,453
Net cash (outflow) from investing activities (58) (2,088)
Net cash (outflow) from financing activities (1,610) (2,425)
------------------
Net (decrease) in cash and cash equivalents per
US GAAP (2,027) (2,060)
Cash and cash equivalents at beginning of year 2,338 4,398
------------------
Cash and cash equivalents at end of year 311 2,338
------------------
<PAGE>
RING PLC
NOTES TO THE FINANCIAL STATEMENTS
Recent ASB and FASB pronouncements
In June 2000, the US Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 138 ("SFAS 138"), "Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of FASB
Statement No. 133." This statement incorporates the requirements of SFAS 133
which establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. This statement is effective for all fiscal quarters of all
fiscal years beginning after June 15, 2000. The Group is currently assessing any
impact on its financial statements.
In June 2000, the SEC staff issued Staff Accounting Bulletin (SAB) 101B, "Second
Amendment: Revenue Recognition in Financial Statements" which delays the
implementation date of SAB 101, "Revenue Recognition in Financial Statements",
for registrants to the fourth quarter of fiscal years that begin after December
15, 1999. SAB 101 addresses the timing and extent of recognition of revenue in
financial statements. The Group is currently assessing any impact on its
financial statements.