<PAGE>
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) March 26, 1997
---------------------------
Armor Holdings, Inc.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-18863 59-3392443
- -----------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
13386 International Parkway, Jacksonville, Florida 32218
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (904) 741-5400
---------------------------
- -----------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIITS
In connection with the combination of Armor Holdings, Inc. (the "Company")
with DSL Group Limited ("DSL") (such transaction, the "DSL Transaction"), the
Company's Current Report on Form 8-K, filed on April 22 1997, is hereby
amended to include the following financial statements and pro forma financial
information, which were previously omitted from such Current Report on Form
8-K.
(a) Financial Statements of Business Acquired.
The following financial statements for DSL and DSL Holdings Limited ("DSL
Holdings"), the predecessor of DSL (the "Predecessor"), are submitted herewith:
<TABLE>
<CAPTION>
PAGE OF FORM 8-K/A-1
--------------------
<S> <C>
Independent Auditors' Report ...................................................... 3
Consolidated profit and loss account--for the period ended 31 December 1996 ....... 4
Consolidated balance sheet--for the period ended 31 December 1996 ................. 5
Consolidated cash flow statement--for the period ended 31 December 1996 ........... 6
Consolidated statement of total recognised gains and losses--for the period ended
31 December 1996 ............................................................... 7
Reconciliation of movements in shareholders' funds--for the period ended
31 December 1996 ............................................................... 7
Notes to financial statements ..................................................... 8
Independent Auditors' Report ...................................................... 23
Consolidated profit and loss accounts--31 March 1996 and 1995 ..................... 24
Consolidated balance sheets--31 March 1996 and 1995 ............................... 25
Consolidated cash flow statements--31 March 1996 and 1995 ......................... 26
Consolidated statements of total recognised gains and losses--31 March 1996
and 1995 ......................................................................... 27
Reconciliations of movements in shareholders' funds--31 March 1996 and 1995 ...... 27
Notes to financial statements ..................................................... 28
</TABLE>
The following unaudited interim financial information for DSL and its
Predecessor are submitted herewith:
<TABLE>
<CAPTION>
PAGE OF FORM 8-K/A-1
--------------------
<S> <C>
Unaudited consolidated profit and loss account--31 March 1997 and 1996 41
Unaudited consolidated balance sheet--31 March 1997 .................... 42
Unaudited consolidated cash flow statement--31 March 1997 and 1996 .... 43
Notes to unaudited interim financial statements ........................ 44
</TABLE>
2
<PAGE>
DSL GROUP LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 1996
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF DSL GROUP LIMITED
We have audited the accompanying consolidated balance sheet of DSL Group
Limited and subsidiaries at 31 December 1996 and the related consolidated
profit and loss account, consolidated statement of total recognised gains and
losses, reconciliation of movements in shareholders' funds and consolidated
cash flow statement for the period from 3 June 1996 (date of incorporation)
to 31 December 1996. These consolidated financial statements are the
responsibility of the management of DSL Group Limited. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United Kingdom and in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audit provides 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 DSL Group
Limited and subsidiaries at 31 December 1996 and the results of their
operations and their cash flows for the period from 3 June 1996 to 31
December 1996, in conformity with generally accepted accounting principles in
the United Kingdom.
Accounting principles generally accepted in the United Kingdom vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Application of accounting principles generally
accepted in the United States would have affected profit attributable to
shareholders for the period from 3 June 1996 to 31 December 1996 and
shareholders' funds at 31 December 1996, to the extent summarised in Note 24
to the consolidated financial statements.
KPMG
Chartered Accountants
Registered Auditors
London, England
15 April 1997
3
<PAGE>
DSL GROUP LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the period ended 31 December 1996
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
POUNDS
NOTE STERLING 000
------ ----------------
<S> <C> <C>
TURNOVER .................................................... 2 7,968
Cost of sales ............................................... (6,330)
----------------
GROSS PROFIT ................................................ 1,638
Administrative expenses (includes exchange gain of pounds
sterling 326,000) .......................................... (1,133)
----------------
OPERATING PROFIT ............................................ 505
Income from interests in associated undertakings ........... 197
Other interest receivable and similar income ................ 31
Interest payable and similar charges ........................ 6 (192)
----------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION ............... 3 541
Tax on profit on ordinary activities ........................ 7 (451)
----------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION ................ 90
Equity minority interests ................................... 16 (3)
----------------
PROFIT ATTRIBUTABLE TO SHAREHOLDERS ......................... 87
Dividends--non-equity ....................................... 8 (147)
----------------
RETAINED LOSS FOR THE FINANCIAL PERIOD ...................... 15 (60)
================
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
POUNDS
STERLING 000
----------------
<S> <C>
RETAINED LOSS FOR THE FINANCIAL PERIOD
The company ................................................. 20
Subsidiary undertakings ..................................... (226)
Associated undertakings ..................................... 146
----------------
(60)
================
</TABLE>
All results for the period are attributable to acquisitions in continuing
activities.
4
<PAGE>
DSL GROUP LIMITED
CONSOLIDATED BALANCE SHEET
at 31 December 1996
<TABLE>
<CAPTION>
31 DECEMBER 1996
-------------------
POUNDS POUNDS
STERLING STERLING
NOTE 000 000
---- --------- ---------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets ........................................ 9 906
Investments ............................................ 10 746
---------
1,652
CURRENT ASSETS
Debtors ................................................ 11 4,181
Cash at bank and in hand ............................... 578
---------
4,759
CREDITORS: amounts falling due within one year ........ 12 (4,305)
---------
NET CURRENT ASSETS ..................................... 454
---------
TOTAL ASSETS LESS CURRENT LIABILITIES .................. 2,106
CREDITORS: amounts falling due after more than one year
13 (3,330)
---------
NET LIABILITIES ........................................ (1,224)
=========
CAPITAL AND RESERVES
Called up share capital ................................ 14 182
Share premium account .................................. 15 4,656
Profit and loss account ................................ 15 (6,080)
---------
EQUITY AND NON-EQUITY SHAREHOLDERS' FUNDS .............. (1,242)
Equity minority interests .............................. 16 18
---------
(1,224)
=========
</TABLE>
5
<PAGE>
DSL GROUP LIMITED
CONSOLIDATED CASH FLOW STATEMENT
for the period ended 31 December 1996
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER 1996
-------------------
POUNDS POUNDS
STERLING STERLING
NOTE 000 000
------ --------- ---------
<S> <C> <C> <C>
NET CASH OUTFLOW FROM OPERATING ACTIVITIES ................. 21 (57)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received ......................................... 31
Interest paid ............................................. (167)
Dividends received from associated undertakings .......... 197
---------
NET CASH INFLOW FROM RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE ................................................ 61
TAXATION
UK tax refunded ........................................... 43
Overseas tax paid ......................................... (34)
---------
NET TAX REFUNDED ........................................... 9
INVESTING ACTIVITIES
Purchase of tangible fixed assets ......................... (415)
Purchase of subsidiary undertaking (net of cash and cash
equivalents acquired) .................................... (8,775)
---------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES ................. (9,190)
---------
NET CASH OUTFLOW BEFORE FINANCING .......................... (9,177)
=========
FINANCING
Issue of ordinary share capital ........................... (4,838)
New loans ................................................. (4,394)
---------
NET CASH INFLOW FROM FINANCING ............................. (9,232)
INCREASE IN CASH AND CASH EQUIVALENTS ...................... 22 55
---------
(9,177)
=========
</TABLE>
6
<PAGE>
DSL GROUP LIMITED
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the period ended 31 December 1996
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
POUNDS
STERLING 000
----------------
<S> <C>
LOSS FOR THE FINANCIAL PERIOD .... (60)
Exchange adjustments .............. (167)
----------------
TOTAL GAINS AND LOSSES RECOGNISED (227)
================
</TABLE>
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the period ended 31 December 1996
<TABLE>
<CAPTION>
POUNDS
STERLING 000
------------
<S> <C>
PROFIT ATTRIBUTABLE TO SHAREHOLDERS
87
Dividends ........................... (147)
---------
(60)
Exchange adjustments ................ (167)
Share capital issued ................ 4,838
Goodwill written off ................ (5,853)
---------
DECREASE IN SHAREHOLDERS' FUNDS .... (1,242)
Opening shareholders' funds ......... --
---------
CLOSING SHAREHOLDERS' FUNDS ......... (1,242)
=========
</TABLE>
7
<PAGE>
DSL GROUP LIMITED
NOTES
(forming part of the 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 group's
financial statements.
BASIS OF PREPARATION
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost accounting rules.
BASIS OF CONSOLIDATION
The group's financial statements consolidate the results of DSL Group
Limited and all its subsidiary undertakings with effect from the date of
acquisition on 31 July 1996 until 31 December 1996. In respect of associated
undertakings, the group includes its share of post acquisition profits and
losses in the consolidated profit and loss account and its share of post
acquisition retained profits or accumulated deficits in the consolidated
balance sheet.
The consolidated financial statements are based on the reported results of
subsidiary undertakings and associated undertakings, which are based on the
financial statements of these companies whose period ends are coterminous
with or end three months before those of the parent company, and on
management accounts where appropriate for the period from 1 October to 31
December 1996.
The acquisition method of accounting has been adopted. Under this method,
the results of subsidiary and associated undertakings acquired or disposed of
in the period are included in the consolidated profit and loss account from
the date of acquisition or up to the date of disposal. Goodwill arising on
consolidation (representing the excess of the fair value of the consideration
given over the fair value of the separable net assets acquired) is written
off against reserves on acquisition.
FIXED ASSETS AND DEPRECIATION
Depreciation is provided by the group to write off the cost less the
estimated residual value of tangible fixed assets by equal instalments over
their estimated useful economic lives as follows:
<TABLE>
<CAPTION>
<S> <C>
Freehold land and buildings -- not depreciated
Short leasehold land and buildings -- term of lease
Plant and machinery -- 20%-25% per annum
Fixtures and fittings -- 20% per annum
</TABLE>
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains or losses on translation are
included in the profit and loss account.
For consolidation purposes, the assets and liabilities of overseas
subsidiary undertakings and associated undertakings are translated at the
closing exchange rates and the profit and loss accounts are translated at the
average exchange rates. Exchange differences arising on these translations
are taken to reserves.
Subsidiaries operating in hyper-inflationary economies adjust the local
currency financial statements to reflect current price levels before
translation.
8
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
LEASES
Where the group enters into a lease which entails taking substantially all
the risks and rewards of ownership of an asset, the lease is treated as a
'finance lease'. The asset is recorded in the balance sheet as a tangible
fixed asset and is depreciated over its estimated useful life or the term of
the lease, whichever is shorter. Future instalments under such leases, net of
finance charges, are included within creditors. Rentals payable are
apportioned between the finance element, which is charged to the profit and
loss account, and the capital element which reduces the outstanding
obligation for future instalments.
All other leases are accounted for as 'operating leases' and the rental
charges are charged to the profit and loss account on a straight line basis
over the life of the lease.
PENSIONS
The group operates a defined contribution pension scheme. The assets of
the scheme are held separately from those of the group in an independently
administered fund. The amount charged against profits represents the
contributions payable to the scheme in respect of the accounting period.
TURNOVER
Turnover represents the amounts (excluding value added tax) derived from
the provision of goods and services to third party customers during the
period.
TAXATION
The charge for taxation is based upon the profit for the period and takes
into account deferred taxation on timing differences. Provision is made for
deferred taxation if there is reasonable evidence that such tax will be
payable in the foreseeable future.
2. SEGMENTAL INFORMATION
The table below sets out information on turnover for each of the group's
geographic areas of operation.
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
----------------
POUNDS
STERLING 000
<S> <C>
United Kingdom 299
Rest of Europe 197
Asia ........... 43
Africa ......... 4,877
Americas ....... 2,358
Middle East ... 194
----------------
7,968
================
</TABLE>
In the opinion of the directors there is one class of business.
9
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
3. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
----------------
POUNDS
STERLING 000
<S> <C>
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION IS STATED
AFTER CHARGING
Auditors' remuneration:
Audit............................................................... 105
Other services...................................................... 32
Depreciation of fixed assets:
Owned............................................................... 67
Leased.............................................................. 22
Hire of plant and machinery--rentals payable under operating leases 42
Hire of other assets--rentals payable under operating leases ....... 83
================
AFTER CREDITING
Exchange gains ...................................................... 326
================
</TABLE>
The total amount charged to revenue for the hire of plant and machinery
amounted to pounds sterling 72,000. For the period ended 31 December 1996 this
comprises rentals payable under operating leases and depreciation on plant
and machinery held under finance leases together with the related finance
charges.
4. REMUNERATION OF DIRECTORS AND DIRECTORS' INTERESTS
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
----------------
POUNDS
STERLING 000
<S> <C>
Directors' emoluments ........... 112
Amounts paid to third parties in
respect of directors' services 77
----------------
189
================
</TABLE>
Benefits in kind include employers' pension contributions and health
insurance.
The emoluments, excluding pension contributions, of the chairman were:
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
----------------
POUNDS STERLING
<S> <C>
AGA Morrison from 31 July to 1 December
1996........................................ 38,808
C Mackay from 1 to 31 December 1996.......... 1,667
</TABLE>
The emoluments, excluding pension contributions, of the highest paid
director were pounds sterling 48,510.
10
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
The emoluments, excluding pension contributions, of the directors
(including the chairman and highest paid director) were within the following
ranges:
<TABLE>
<CAPTION>
NUMBER OF DIRECTORS
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
-------------------
<S> <C>
pounds sterling 0 -- pounds sterling 5,000 ........ 4
pounds sterling 15,001 -- pounds sterling 20,000 ........ 2
pounds sterling 40,001 -- pounds sterling 45,000 ........ 1
pounds sterling 45,001 -- pounds sterling 50,000 ........ 2
---
</TABLE>
SHARES
The interests of the directors of DSL Group Limited in office as at 31
December 1996 (including family interests) in the shares of group companies
are as follows:
<TABLE>
<CAPTION>
INTEREST INTEREST AT
CLASS OF AT END OF BEGINNING
COMPANY SHARE PERIOD OF PERIOD
--------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
AGA Morrison .. DSL Group pounds 16,551 --
Limited sterling 1
ordinary
"A" shares
AGA Morrison .. DSL Group pounds 6,207 --
Limited sterling 1
ordinary
"B" shares
AGA Morrison .. DSL Holdings pounds -- 1
Limited sterling 1
ordinary
shares
AGA Morrison .. Defence Systems pounds 1 1
International sterling 1
Limited ordinary
shares
AGA Morrison .. Defence Systems pounds 1 --
Limited sterling 1
ordinary
shares
AGA Morrison .. Defence Systems P$1,000 1,900* 1,900*
Colombia SA ordinary
shares
RN Bethell ..... DSL Group pounds 11,034 --
Limited sterling 1
ordinary
"A" shares
RN Bethell ..... Defence Systems P$1,000 1,900* 1,900*
Colombia SA ordinary
shares
</TABLE>
- ------------
* this represents 1% of the company's total share capital denominated in
Colombian pesos and is held in trust on behalf of DSL Holdings Limited.
SHARE OPTIONS
According to the register of directors' interests, no rights to subscribe
for shares in group companies were held by or granted to any of the directors
or their immediate families, or exercised by them, during the financial
period except as indicated below.
To acquire pounds sterling 1 ordinary shares in DSL Holdings Limited:
At 3 June 1996 AGA Morrison had an option to purchase 73,332 pounds
sterling 1 ordinary shares in DSL Holdings Limited. This option was exercised
on 31 July 1996.
11
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
At 3 June 1996 RN Bethell held an option to acquire 25,000 pounds
sterling 1 ordinary shares in DSL Holdings Limited from Hambro Group
Investments Limited. This option was exercised on 31 July 1996.
OTHER INTERESTS
At the end of the period AGA Morrison had an amount outstanding to a
subsidiary company of pounds sterling 1,127, which was repaid subsequent to
the period end.
5. STAFF NUMBERS AND COSTS
The average number of persons employed by the group (including directors)
during the period, analysed by category, was as follows:
<TABLE>
<CAPTION>
NUMBER OF EMPLOYEES
PERIOD FROM
INCORPORATION TO
31 DECEMBER 1996
-------------------
<S> <C>
Security services ............. 2,128
Management and administration 65
Operatives .................... 27
-------------------
2,220
===================
</TABLE>
The aggregate payroll costs of these persons were as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
----------------
POUNDS
STERLING 000
<S> <C>
Wages and salaries ................ 3,394
Social security costs ............. 211
Other pension costs (see note 20) 73
----------------
3,678
================
</TABLE>
6. INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
----------------
POUNDS
STERLING 000
<S> <C>
On bank loans, overdrafts and other loans wholly repayable within
five years .......................................................... 184
Finance charges payable in respect of finance leases and hire
purchase contracts .................................................. 8
----------------
192
================
</TABLE>
12
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
7. TAXATION
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
----------------
POUNDS
STERLING 000
<S> <C>
UK corporation tax ............................. 39
Overseas taxation .............................. 361
Tax attributable to the share of profits of the
associated undertakings ....................... 51
----------------
451
================
</TABLE>
No deferred tax provision has been made for the UK corporation tax which
would become payable if further dividends were declared by associated
companies from accumulated reserves.
No deferred tax is provided in respect of the accumulated reserves of
overseas subsidiary companies as there is no current intention to remit
profits to the UK.
8. DIVIDENDS
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
----------------
POUNDS
STERLING 000
<S> <C>
Proposed dividend on 8% preference shares 147
================
</TABLE>
Preference dividends are payable on 31 January and 31 July each year, the
first payment falling due on 31 July 1997.
13
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
9. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FIXTURES
LAND AND PLANT AND AND
BUILDINGS MACHINERY FITTINGS TOTAL
----------- ----------- ---------- --------
POUNDS POUNDS POUNDS POUNDS
STERLING STERLING STERLING STERLING
000 000 000 000
<S> <C> <C> <C> <C>
COST
At incorporation............ -- -- -- --
Acquisition of DSL
Holdings................... 69 855 473 1,397
Currency translation........ -- (23) (8) (31)
Additions................... -- 321 94 415
Disposals................... -- (135) (31) (166)
----------- ----------- ---------- -------
At 31 December 1996......... 69 1,018 528 1,615
----------- ----------- ---------- -------
DEPRECIATION
At incorporation............ -- -- -- --
Acquisition of DSL
Holdings................... (46) (458) (283) (787)
Currency translation........ -- 13 4 17
Charge for period........... (3) (72) (14) (89)
On disposals................ -- 119 31 150
----------- ----------- ---------- -------
At 31 December 1996......... (49) (398) (262) (709)
----------- ----------- ---------- -------
NET BOOK VALUE
AT 31 DECEMBER 1996 ........ 20 620 266 906
=========== =========== ========== =======
</TABLE>
ANALYSIS OF NET BOOK VALUE OF LAND AND BUILDINGS
<TABLE>
<CAPTION>
31 DECEMBER
1996
-------------
POUNDS
STERLING 000
<S> <C>
Freehold................................ 13
Short leasehold......................... 7
-------------
20
=============
</TABLE>
Included in the total net book value of plant and machinery is pounds
sterling 244,463 in respect of assets held under finance leases and similar
hire purchase contracts. Depreciation for the period on these assets was
pounds sterling 22,490.
14
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
10. FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
TOTAL
GORANDEL JARDINE SECURICOR GROUP INTERESTS
TRADING GURKHA SERVICES IN ASSOCIATED
LIMITED LIMITED UNDERTAKINGS
---------- ----------------- ---------------
POUNDS POUNDS POUNDS
STERLING 000 STERLING 000 STERLING 000
<S> <C> <C> <C>
At beginning of period ....... -- -- --
Acquired during the period .. 702 154 856
Retained profits less losses 36 110 146
Movement on exchange.......... (59) -- (59)
Less: Dividends received .... -- (197) (197)
---------- ----------------- ---------------
At end of period ............. 679 67 746
========== ================= ===============
</TABLE>
Gorandel Trading Limited and Jardine Securicor Gurkha Services Limited are
both associated undertakings of DSL Group Limited and therefore can be
considered to be related parties under Financial Reporting Standard 8.
Certain expenses are borne by a group company and recharged to Gorandel
Trading Limited and the balance receivable by the group as at 31 December
1996 was pounds sterling 247,860. A loan was payable by the group to Gorandel
Trading Limited of pounds sterling 479,130.
The companies which are material to the results of DSL Group Limited are
as follows:
<TABLE>
<CAPTION>
PRINCIPAL % SHARES COUNTRY OF
SUBSIDIARY UNDERTAKINGS ACTIVITY HELD INCORPORATION
--------------------- ------------ -------------------
<S> <C> <C> <C>
DSL Holdings Limited* ......................... Holding Company 100% UK(1)
Defence Systems International Limited ........ Security Services 100% UK(1)
Defence Systems Limited ....................... Security Services 100% UK(1)
Asset Recovery
Brooksight Limited ............................ Services 100% UK(1)
US Defense Systems Inc ........................ Security Services 100% USA
DSL Security (Asia) Private Limited ........... Security Services 100% Singapore
Defence Systems Colombia SA** ................. Security Services 97.5% Colombia
DSL (Overseas) Limited ........................ Holding Company 100% Cyprus
Defence Systems (Jersey) Limited .............. Security Services 100% UK
ASSOCIATED UNDERTAKINGS
Gorandel Trading Limited ...................... Security Services 50% Cyprus
Jardine Securicor Gurkha Services Limited .... Security Services 20% Hong Kong
</TABLE>
- ------------
(1) Registered in England and Wales.
* Owned directly by DSL Group Limited.
** 94.5% of the shares held are owned directly by DSL Holdings Limited and
3% are held in trust on its behalf.
15
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
11. DEBTORS
<TABLE>
<CAPTION>
31 DECEMBER
1996
-------------
POUNDS
STERLING 000
<S> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade debtors .................................... 2,680
ACT recoverable .................................. 37
Amounts recoverable from associated undertakings 248
Amounts receivable in respect of group relief ... 97
Other debtors .................................... 816
Prepayments and accrued income ................... 303
-------------
4,181
=============
</TABLE>
12. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
31 DECEMBER
1996
-------------
POUNDS
STERLING 000
<S> <C>
Bank loan .................................................... 805
Bank overdrafts .............................................. 347
Amounts payable in respect of finance leases ................. 108
Deferred consideration for acquisition of DSL Holdings
Limited...................................................... 400
Trade creditors .............................................. 465
Amounts owed to associated undertakings ...................... 479
Dividends payable............................................. 147
Other creditors including taxation and social security:
Corporation tax ............................................. 79
ACT payable ................................................. 37
Other taxes and social security ............................. 70
Other creditors ............................................. 1,009
Accruals and deferred income ................................. 359
-------------
4,305
=============
</TABLE>
The bank loan is secured by fixed and floating charges over the assets of
DSL Group Limited.
13. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
31 DECEMBER
1996
-------------
POUNDS
STERLING 000
<S> <C>
Bank loan (denominated in US$) ............... 3,222
Amounts payable in respect of finance leases 108
-------------
3,330
=============
</TABLE>
The bank loan is secured by fixed and floating charges over the assets of
DSL Group Limited.
16
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
14. CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1996
--------------------
POUNDS
STERLING
NO. 000
----------- --------
<S> <C> <C>
AUTHORIZED
Preference shares
Preference shares of pounds
sterling 0.01 each .................. 4,400,000 44
======
Ordinary shares
Ordinary shares of pounds sterling 1
each "A"...................... 27,585 28
Ordinary shares of pounds sterling 1
each "B"...................... 6,207 6
Ordinary shares of pounds sterling 1
each "C"...................... 4,137 4
----------- ------
37,929 38
=========== ======
Preferred ordinary shares
Preferred ordinary shares of pounds
sterling 1 each ..................... 100,000 100
------
182
======
ALLOTTED, CALLED UP AND FULLY PAID
Preference shares
Preference shares of pounds
sterling 0.01 each .................. 4,400,000 44
======
Ordinary shares
Ordinary shares of pounds sterling 1
each "A"............................. 27,585 28
Ordinary shares of pounds sterling 1
each "B"............................. 6,207 6
Ordinary shares of pounds sterling 1
each "C"............................. 4,137 4
----------- ------
37,929 38
=========== ======
Preferred ordinary shares
Preferred ordinary shares of pounds
sterling 1 each ..................... 100,000 100
------
182
======
</TABLE>
The shares were allotted on 31 July 1996 for pounds sterling 4,838,000 and
an amount of pounds sterling 4,656,000 was transferred to the share premium
account. The proceeds from the allotment were used primarily to acquire
shares in DSL Holdings Limited.
SUMMARY OF RIGHTS OF PREFERENCE SHARES
Dividends
The preference shares are eligible for dividends at a rate of 8% per annum
of the issue price of the shares, payable in two equal instalments on 31
January and 31 July each year, commencing on 31 July 1997.
Priority on winding up
The preference shareholders have priority over the ordinary shareholders
on the winding up of the company and are entitled to receive the issue price
of the shares plus any accrued preference dividends. They have no entitlement
to any surplus following repayment of the share capital and accrued
dividends.
Voting rights
The preference shareholders are entitled to receive notice of general
meetings but are not entitled to attend or vote except in respect of certain
resolutions concerning the winding up of the company or the reduction of the
share capital or the variation of the rights of the shares.
17
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
15. SHARE PREMIUM AND RESERVES AND SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
SHARE PROFIT
PREMIUM AND LOSS
ACCOUNT ACCOUNT
--------- ----------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
At incorporation ................................... -- --
Arising on shares issued in period ................. 4,656 --
Retained loss for period ........................... -- (60)
Goodwill written off on acquisition of DSL Holdings
Limited............................................ -- (5,853)
Exchange adjustments ............................... -- (167)
--------- ----------
AT 31 DECEMBER 1996 ................................ 4,656 (6,080)
========= ==========
</TABLE>
Shareholders' funds
Of the total amount of shareholders' funds of the group of pounds
sterling (1,242,000) at 31 December 1996, an amount of pounds
sterling 4,400,000 is attributable to non-equity interests and an amount of
pounds sterling (5,642,000) is attributable to equity interests.
16. MINORITY INTERESTS
<TABLE>
<CAPTION>
POUNDS
STERLING 000
<S> <C>
At beginning of period ......... --
Acquired during the period .... 15
Retained profit for period .... 3
--------
At 31 December 1996 ............ 18
========
</TABLE>
17. CONTINGENT LIABILITIES
A cross composite guarantee has existed since 1 August 1996 between DSL
Holdings Limited, Defence Systems Limited, DSL Security (Asia) Private
Limited and Brooksight Limited.
18. COMMITMENTS
(i) There were no authorised or contracted capital commitments unprovided
for at 31 December 1996.
(ii) Annual commitments under non-cancellable operating leases are as
follows:
<TABLE>
<CAPTION>
31 DECEMBER
1996
-----------------------
LAND AND
BUILDINGS OTHER
------------- ---------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
Operating leases which expire:
Within one year ........................... -- 12
In the second to fifth years inclusive ... -- 30
Over five years ........................... 83 --
------------- ---------
83 42
============= =========
</TABLE>
18
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
19. GUARANTEES
There were liabilities of pounds sterling 103,000 under documentary credit
guarantees outstanding at 31 December 1996.
20. PENSION SCHEME
The group operates a defined contribution pension scheme. The assets of
the scheme are held separately from those of the group in an independently
administered fund. The pension charge for the period represents the
contributions payable by the group to the scheme and amounted to pounds
sterling 73,000.
21. RECONCILIATION OF OPERATING PROFIT TO NET CASH OUTFLOW FROM
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
PERIOD FROM
INCORPORATION TO
31 DECEMBER
1996
----------------
POUNDS
STERLING 000
<S> <C>
Operating profit ........................... 505
Depreciation charge ........................ 89
Loss on sale of tangible fixed assets ..... 16
Increase in debtors ........................ (692)
Increase in creditors ...................... 25
----------------
Net cash outflow from operating activities (57)
================
</TABLE>
22. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
CASH OVERDRAFT NET
------- ----------- ------
POUNDS POUNDS POUNDS
STERLING STERLING STERLING
000 000 000
<S> <C> <C> <C>
Balance at incorporation ...................... -- -- --
Net cash inflow before adjustments for foreign
exchange rate changes......................... 769 (714) 55
Effect of foreign exchange rate changes ...... (191) 367 176
------- ----------- ------
Balance at 31 December 1996 ................... 578 (347) 231
======= =========== ======
</TABLE>
19
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
23. ACQUISITION OF DSL HOLDINGS LIMITED
On 31 July 1996 100% of the share capital of DSL Holdings Limited was
acquired. The fair values of the assets acquired were deemed to be equal to
their book values.
<TABLE>
<CAPTION>
POUNDS
STERLING 000
------------
<S> <C>
NET ASSETS ACQUIRED
Tangible fixed assets ............................ 610
Investments in associated companies .............. 856
Debtors .......................................... 4,015
Bank loans and overdrafts ........................ (1,555)
Creditors ........................................ (2,144)
Minority shareholders' interests ................. (15)
---------
1,767
Goodwill ......................................... 5,853
---------
7,620
=========
Satisfied by
Cash consideration (including costs of pounds
sterling 668,000) ............................... 7,220
Deferred consideration (payable within one year) 400
---------
7,620
=========
</TABLE>
The consolidated profit and loss account includes the results of the
company and its subsidiaries and associates with effect from the date of
acquisition of DSL Holdings Limited on 31 July 1996.
The proforma consolidated results of DSL Group Limited (being the
consolidated results of DSL Holdings Limited from 1 April 1995 to 31 July
1996 and DSL Group Limited from 1 August to 31 December 1996) for the nine
month period ended 31 December 1996 and the twelve month period ended 31
March 1996 are summarised below:
<TABLE>
<CAPTION>
NINE MONTH
PERIOD ENDED YEAR ENDED
31 DECEMBER 31 MARCH
1996 1996
-------------- ------------
POUNDS POUNDS
STERLING 000 STERLING 000
<S> <C> <C>
Turnover ............................................. 14,817 20,579
============== ============
Operating profit (including exchange gain of pounds
sterling 326,000 (31 March 1996: pounds
sterling 56,000)).................................... 790 751
Income from interests in associated undertakings .... 526 744
Other interest receivable and similar income ........ 67 76
Interest payable and similar charges ................. (287) (276)
-------------- ------------
Profit on ordinary activities before taxation ....... 1,096 1,295
Tax on profit on ordinary activities ................. (758) (678)
-------------- ------------
Profit on ordinary activities after taxation ........ 338 617
Minority interests ................................... (5) (5)
-------------- ------------
Profit attributable to shareholders .................. 333 612
Dividends ............................................ (147) --
-------------- ------------
Retained profit for the financial period ............. 186 612
============== ============
</TABLE>
20
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
24. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED
STATES OF AMERICA GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The group's consolidated financial statements are prepared in conformity
with generally accepted accounting principles applicable in the United
Kingdom (UK GAAP), which differ in certain significant respects from those
applicable in the United States of America (US GAAP). These differences,
together with the approximate effects of the adjustments on profit
attributable to shareholders and shareholders' funds, relate principally to
the items set out below:
(a) Goodwill
Under UK GAAP, goodwill arising from acquisitions is written off against
shareholders' funds. Under US GAAP, goodwill is capitalised and amortised
over its estimated useful life. For the purpose of calculating the
amortisation of goodwill a life of 20 years has been assumed.
(b) Deferred taxation
UK GAAP requires that no provision for deferred taxation should be made if
there is reasonable evidence that such taxation will not be payable in the
foreseeable future. Under US GAAP, deferred taxation is recognised under the
full liability method which permits deferred tax assets to be recognised if
their realisation is considered more likely than not.
(c) Cash flows
The principal difference between UK GAAP and US GAAP is in respect of
classification. Under UK GAAP, the group presents its cash flows for
operating activities, returns on investments and servicing of finance,
taxation, investing activities, and financing activities. US GAAP requires
only three categories of cash flow activities which are operating, investing
and financing. Cash flows arising from taxation and returns on investments
and servicing of finance under UK GAAP would, with the exception of dividends
paid, be included as operating activities under US GAAP; dividend payments
would be included as a financing activity under US GAAP. In addition, under
UK GAAP, cash and cash equivalents include short term borrowings which under
US GAAP would be presented as financing activities.
Approximate effect on profit attributable to shareholders of differences
between UK and US GAAP:
<TABLE>
<CAPTION>
PROFORMA
PERIOD FROM NINE MONTH
INCORPORATION TO PERIOD ENDED
31 DECEMBER 31 DECEMBER
1996 1996
---------------- --------------
POUNDS POUNDS
STERLING 000 STERLING 000
<S> <C> <C>
Profit attributable to shareholders in conformity with
UK GAAP .............................................. 87 333
Adjustments:
Goodwill amortisation ................................ (123) (154)
Deferred taxation .................................... 68 137
---------------- --------------
Profit attributable to shareholders in conformity with
US GAAP .............................................. 32 316
================ ==============
</TABLE>
21
<PAGE>
DSL GROUP LIMITED
NOTES (CONTINUED)
Approximate cumulative effect on shareholders' funds of differences
between UK and US GAAP:
<TABLE>
<CAPTION>
31 DECEMBER
1996
-------------
POUNDS
STERLING 000
<S> <C>
Shareholders' funds in conformity with UK GAAP (1,242)
Adjustments:
Goodwill ...................................... 5,796
Deferred taxation ............................. 2
-------------
Shareholders' funds in conformity with US GAAP 4,556
=============
</TABLE>
22
<PAGE>
DSL HOLDINGS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
31 MARCH 1996 AND 1995
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF DSL HOLDINGS LIMITED
We have audited the accompanying consolidated balance sheets of DSL
Holdings Limited and subsidiaries as of 31 March 1996 and 1995, and the
related consolidated profit and loss accounts, consolidated statements of
total recognised gains and losses, reconciliations of movements in
shareholders' funds and consolidated cash flow statements for the years then
ended. These consolidated financial statements are the responsibility of the
management of DSL Holdings Limited. 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 and in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 financial position of DSL
Holdings Limited and subsidiaries at 31 March 1996 and 1995, and the results
of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles in the United
Kingdom.
Accounting principles generally accepted in the United Kingdom vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Application of accounting principles generally
accepted in the United States would have affected profit attributable to
shareholders for each of the years in the two year period ended 31 March 1996
and shareholders' funds as of 31 March 1996 and 1995, to the extent
summarised in Note 24 to the consolidated financial statements.
KPMG
Chartered Accountants
Registered Auditors
London, England
29 July 1996
23
<PAGE>
DSL HOLDINGS LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE YEARS ENDED 31 MARCH 1996 AND 1995
<TABLE>
<CAPTION>
NOTE 1996 1995
------ ---------- ----------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C> <C>
TURNOVER ............................................... 3 20,579 18,379
Cost of sales .......................................... (14,606) (14,233)
---------- ----------
GROSS PROFIT ........................................... 5,973 4,146
Administrative expenses (includes exchange gain of
pounds sterling 55,673 (1995: loss of pounds
sterling 184,000))..................................... 2 (5,222) (3,454)
---------- ----------
OPERATING PROFIT ....................................... 751 692
Income from interests in associated undertakings ...... 744 360
Other interest receivable and similar income .......... 76 24
Interest payable and similar charges ................... 7 (276) (258)
---------- ----------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION .......... 4 1,295 818
Tax on profit on ordinary activities ................... 8 (678) (367)
---------- ----------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION .......... 617 451
Equity minority interests .............................. 16 (5) (7)
---------- ----------
PROFIT ATTRIBUTABLE TO SHAREHOLDERS' AND RETAINED
PROFIT FOR THE FINANCIAL YEAR.......................... 15 612 444
========== ==========
1996 1995
---------- ----------
POUNDS POUNDS
STERLING STERLING
000 000
RETAINED PROFIT FOR THE FINANCIAL YEAR
The company ............................................ 46 (7)
Subsidiary undertakings ................................ (60) 165
Associated undertakings ................................ 626 286
---------- ----------
612 444
========== ==========
</TABLE>
All results for the year and the prior year are attributable to continuing
activities.
24
<PAGE>
DSL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
AT 31 MARCH 1996 AND 1995
<TABLE>
<CAPTION>
NOTE 1996 1995
------ ----------------- -----------------
POUNDS POUNDS POUNDS POUNDS
STERLING STERLING STERLING STERLING
000 000 000 000
<S> <C> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets .............................. 9 428 445
Investments .................................. 10 750 325
------- -------
1,178 770
CURRENT ASSETS
Stock ........................................ -- 11
Debtors ...................................... 11 3,776 4,171
Cash at bank and in hand ..................... 914 364
--------- ---------
4,690 4,546
CREDITORS: amounts falling due within one
year......................................... 12 (3,696) (3,667)
--------- ---------
NET CURRENT ASSETS ........................... 994 879
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES ........ 2,172 1,649
CREDITORS: amounts falling due after more
than one year................................ 13 (611) (813)
------- -------
NET ASSETS ................................... 1,561 836
======= =======
Represented by equity interests of:
CAPITAL AND RESERVES
Called up share capital ...................... 14 467 467
Share premium account ........................ 15 933 933
Profit and loss account ...................... 15 148 (572)
------- -------
EQUITY SHAREHOLDERS' FUNDS ................... 1,548 828
Equity minority interests .................... 16 13 8
------- -------
1,561 836
======= =======
</TABLE>
25
<PAGE>
DSL HOLDINGS LIMITED
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEARS ENDED 31 MARCH 1996 AND 1995
<TABLE>
<CAPTION>
NOTE 1996 1995
------ ---------------- -----------------
POUNDS POUNDS POUNDS POUNDS
STERLING STERLING STERLING STERLING
000 000 000 000
<S> <C> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES .......... 21 1,485 1,491
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Dividends received ................................. 200 --
Interest received .................................. 76 24
Interest paid ...................................... (266) (255)
Interest element of finance lease rental payments . -- (3)
------- ---------
NET CASH INFLOW/(OUTFLOW) FROM RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE ............... 10 (234)
TAXATION
Overseas tax paid by UK group companies ............ (93) (237)
Overseas tax paid by overseas subsidiaries ........ (349) (117)
------- ---------
TAX PAID ............................................ (442) (354)
INVESTING ACTIVITIES
Purchase of tangible fixed assets .................. (190) (313)
Purchase of subsidiary undertaking (net of cash
and cash equivalents acquired)..................... -- (34)
Sale of tangible fixed assets ...................... -- 46
------- ---------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES ......... (190) (301)
------- -------
NET CASH INFLOW BEFORE FINANCING .................... 863 602
======= =======
FINANCING
Capital element of finance lease rental payments .. -- (16)
Loan repaid to parent company ...................... (157) (1,028)
New secured loan from parent company ............... -- 960
------- ---------
NET CASH OUTFLOW FROM FINANCING ..................... (157) (84)
INCREASE IN CASH AND CASH EQUIVALENTS ............... 22 (706) (518)
------- -------
(863) (602)
======= =======
</TABLE>
26
<PAGE>
DSL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEARS ENDED 31 MARCH 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------ ------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
PROFIT FOR THE FINANCIAL YEAR ..... 612 444
Exchange adjustments ............... 57 (16)
Gain on disposal of Brooksight Pty 11 --
------ ------
TOTAL GAINS AND LOSSES RECOGNIZED . 680 428
====== ======
</TABLE>
RECONCILIATIONS OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEARS ENDED 31 MARCH 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------- ------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
PROFIT FOR THE FINANCIAL YEAR ...... 612 444
Exchange adjustments ................ 57 (16)
Goodwill written back ............... 40 44
Gain on disposal of Brooksight Pty . 11 --
------- ------
NET ADDITION TO SHAREHOLDERS' FUNDS 720 472
Opening shareholders' funds ......... 828 356
------- ------
CLOSING SHAREHOLDERS' FUNDS ......... 1,548 828
======= ======
</TABLE>
27
<PAGE>
DSL HOLDINGS LIMITED
NOTES
(forming part of the 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 group's
financial statements.
BASIS OF PREPARATION
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost accounting rules.
BASIS OF CONSOLIDATION
The group's financial statements consolidate the results of DSL Holdings
Limited and all its subsidiary undertakings. In respect of associated
undertakings, the group includes its share of post acquisition profits and
losses in the consolidated profit and loss account and its share of post
acquisition retained profits or accumulated deficits in the consolidated
balance sheet.
The consolidated financial statements are based on the reported results of
subsidiary undertakings and associated undertakings, which are based on the
financial statements of these companies whose year ends are coterminous with
or end either three or six months before those of the parent company, and on
management accounts where appropriate for the period from 1 October to 31
March 1996.
For the year ended 31 March 1995 the results of the associate Jardine
Securicor Gurkha Services Limited were consolidated for the 26 month period
ended 31 March 1995. The first 14 months of results were immaterial to the
results of the group. In addition the results of the subsidiary Defence
Systems Colombia SA were consolidated for the 15 months ended 31 March 1995.
The first 3 months of results were immaterial to the results of the group.
Unless otherwise stated, the acquisition method of accounting has been
adopted. Under this method, the results of subsidiary and associated
undertakings acquired or disposed of in the year are included in the
consolidated profit and loss account from the date of acquisition or up to
the date of disposal. Goodwill arising on consolidation (representing the
excess of the fair value of the consideration given over the fair value of
the separable net assets acquired) is written off against reserves on
acquisition. Any excess of the aggregate of the fair value of the separable
net assets acquired over the fair value of the consideration given (negative
goodwill) is credited direct to reserves.
FIXED ASSETS AND DEPRECIATION
Depreciation is provided by the group to write off the cost less the
estimated residual value of tangible fixed assets by equal instalments over
their estimated useful economic lives as follows:
<TABLE>
<CAPTION>
<S> <C>
Freehold land and buildings -- not depreciated
Short leasehold land and buildings -- term of lease
Plant and machinery -- 20%-25% per annum
Fixtures and fittings -- 20% per annum
</TABLE>
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains or losses on translation are
included in the profit and loss account.
28
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
For consolidation purposes, the assets and liabilities of overseas
subsidiary undertakings and associated undertakings are translated at the
closing exchange rates and the profit and loss accounts are translated at the
average exchange rates. Exchange differences arising on these translations
are taken to reserves.
Subsidiaries operating in hyper-inflationary economies adjust the local
currency statements to reflect current price levels before translation.
LEASES
Where the group enters into a lease which entails taking substantially all
the risks and rewards of ownership of an asset, the lease is treated as a
'finance lease'. The asset is recorded in the balance sheet as a tangible
fixed asset and is depreciated over its estimated useful life or the term of
the lease, whichever is shorter. Future instalments under such leases, net of
finance charges, are included within creditors. Rentals payable are
apportioned between the finance element, which is charged to the profit and
loss account, and the capital element which reduces the outstanding
obligation for future instalments.
All other leases are accounted for as 'operating leases' and the rental
charges are charged to the profit and loss account on a straight line basis
over the life of the lease.
PENSIONS
The group operates a defined contribution pension scheme. The assets of
the scheme are held separately from those of the group in an independently
administered fund. The amount charged against profits represents the
contributions payable to the scheme in respect of the accounting period.
TURNOVER
Turnover represents the amounts (excluding value added tax) derived from
the provision of goods and services to third party customers during the year.
STOCK
Consumable stock is stated at the lower of cost or net realisable value.
TAXATION
The charge for taxation is based upon the profit for the year and takes
into account deferred taxation on timing differences. Provision is made for
deferred taxation if there is reasonable evidence that such tax will be
payable in the foreseeable future.
2 RECLASSIFICATION OF EXPENSES
Expenses have been reclassified such that administrative expenses contains
the total administration expenses for the whole group.
29
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
3 SEGMENTAL INFORMATION
The table below sets out information on turnover for each of the group's
geographic areas of operation.
<TABLE>
<CAPTION>
1996 1995
-------- -------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
United Kingdom 1,097 1,086
Rest of Europe 6,665 8,264
Asia ........... 331 102
Australasia ... -- 199
Africa ......... 9,461 6,259
Americas ....... 2,497 1,969
Middle East ... 528 500
-------- -------
20,579 18,379
======== =======
</TABLE>
In the opinion of the directors there is one class of business.
4 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
1996 1995
-------- --------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION IS STATED
AFTER CHARGING
Auditors' remuneration:
Audit........................................................... 69 45
Other services.................................................. 29 45
Depreciation of fixed assets:
Owned .......................................................... 263 210
Leased ......................................................... -- 2
Exchange losses ................................................. -- 184
Hire of plant and machinery--rentals payable under operating
leases.......................................................... 122 118
Hire of other assets--operating leases .......................... 368 324
Exceptional costs--costs incurred in connection with the
termination of employment of directors of subsidiary companies 325 --
-------- --------
AFTER CREDITING
Exchange gains................................................... 56 --
-------- --------
</TABLE>
The total amount charged to revenue for the hire of plant and machinery
amounted to pounds sterling 122,297 (1995: pounds sterling 123,295). For the
year ended 31 March 1995 this comprises rentals payable under operating
leases and depreciation on plant and machinery held under finance leases
together with the related finance charges but for the year ended 31 March
1996 it comprises rentals payable under operating leases only.
During the year pounds sterling 325,116 was incurred in connection with the
termination of the contracts of employment of four directors of Defence
Systems Limited, one of whom was also a director of US Defense Systems Inc.
30
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
5 REMUNERATION OF DIRECTORS AND DIRECTORS' INTERESTS
<TABLE>
<CAPTION>
1996 1995
------ ------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
Directors' emoluments ......................................... 272 224
Amounts paid to third parties in respect of directors'
services...................................................... 26 22
------ ------
298 246
====== ======
</TABLE>
Benefits in kind include employers' pension contributions, health
insurance, personal tax advice costs and car benefits.
The emoluments, excluding pension contributions, of the chairman were:
<TABLE>
<CAPTION>
1996 1995
-------- -------
POUNDS POUNDS
STERLING STERLING
<S> <C> <C> <C>
DG Lewis: from 1 April 1994--3 June 1994 .. -- 1,818
JM May: from 6 July 1994--31 March 1996 . 10,000 8,182
</TABLE>
Amounts for the services of DG Lewis and JM May are payable to a third
party.
The emoluments, excluding pension contributions, of the highest paid
director were pounds sterling 142,456 (1995: pounds sterling 111,332).
The emoluments, excluding pension contributions, of the directors
(including the chairman and highest paid director) were within the following
ranges:
<TABLE>
<CAPTION>
NUMBER OF
DIRECTORS
-----------------
1996 1995
-------- --------
<S> <C> <C>
pounds sterling 0 -- pounds sterling 5,000 ........ -- 1
pounds sterling 5,001 -- pounds sterling 10,000 ........ 1 1
pounds sterling 10,001 -- pounds sterling 15,000 ........ -- 1
pounds sterling 15,001 -- pounds sterling 20,000 ........ 1 --
pounds sterling 80,001 -- pounds sterling 85,000 ........ -- 1
pounds sterling 110,001 -- pounds sterling 115,000 ........ 1 1
pounds sterling 140,001 -- pounds sterling 145,000 ........ 1 --
----- -----
</TABLE>
31
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
SHARES
The interests of the directors of DSL Holdings Limited in office as at 31
March 1996 (including family interests) in the shares of group companies are
as follows:
<TABLE>
<CAPTION>
INTEREST INTEREST AT
AT END BEGINNING OF
COMPANY CLASS OF SHARE OF YEAR YEAR
--------------------------- ----------------------- ---------- --------------
<S> <C> <C> <C> <C>
AGA Morrison DSL Holdings Limited pounds sterling 1 1 1
ordinary shares
AGA Morrison Defence Systems Colombia SA P$1,000 ordinary shares 1,900* 1,900*
RN Bethell Defence Systems Colombia SA P$1,000 ordinary shares 1,900* 1,900*
JM May Hambros PLC 20p ordinary shares 3,589 3,555
JM May Hambro Countrywide PLC 5p ordinary shares 77,858 77,858
JR Hustler Hambros PLC 20p ordinary shares 1,000 1,000
JR Hustler Hambros PLC pounds sterling 1 2,000 2,000
7.5% Cumulative
Redeemable Preference
shares
JR Hustler Hambro Insurance pounds sterling 1 2,000 2,000
Services PLC ordinary
shares
</TABLE>
- ------------
* this represents 1% of the company's total share capital denominated in
Colombian pesos and is held in trust on behalf of DSL Holdings Limited.
SHARE OPTIONS
According to the register of directors' interests, no rights to subscribe
for shares in group companies were held by or granted to any of the directors
or their immediate families, or exercised by them, except as indicated below.
(i) To subscribe for 20p ordinary shares of Hambros PLC:
HAMBROS SENIOR EXECUTIVE SHARE OPTION SCHEME 1984
Options exercisable at prices between 298p and 333p per share between 1990
and 2004.
<TABLE>
<CAPTION>
AT 1 APRIL 1995 GRANTED DURING THE YEAR AT 31 MARCH 1996
--------------- ----------------------- ----------------
<S> <C> <C> <C>
JM MAY 95,000 -- 95,000
</TABLE>
HAMBROS BANK "SAVE AS YOU EARN" SHARE OPTION SCHEME 1983
Options exercisable at 226p per share between 2001 and 2002.
<TABLE>
<CAPTION>
AT 1 APRIL 1995 GRANTED DURING THE YEAR AT 31 MARCH 1996
--------------- ----------------------- ----------------
<S> <C> <C> <C>
JM MAY 8,628 -- 8,628
</TABLE>
(ii) To acquire pounds sterling 1 ordinary shares in DSL Holdings Limited:
At 1 April 1994 AGA Morrison had an option to purchase 73,332 pounds
sterling 1 ordinary shares in DSL Holdings Limited, exercisable on or before 4
June 1996 from Hambro Group Investments Limited at a minimum acquisition
price of pounds sterling 3.86 per share.
This option has been extended such that it was still exercisable at the
date of signing these financial statements.
32
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
On 3 April 1995 RN Bethell was granted an option to acquire 25,000 pounds
sterling 1 ordinary shares in DSL Holdings Limited from Hambro Group
Investments Limited exercisable between April 1998 and 2005 at an acquisition
price of pounds sterling 4.50 per share.
OTHER INTERESTS
At the end of the year AGA Morrison had an amount outstanding to a
subsidiary company of pounds sterling 7,732 (1995: pounds sterling 2,332).
6 STAFF NUMBERS AND COSTS
The average number of persons employed by the group (including directors)
during the year, analysed by category, was as follows:
<TABLE>
<CAPTION>
NUMBER OF
EMPLOYEES
---------------
1996 1995
------- -------
<S> <C> <C>
Security services ............. 1,159 1,004
Professional and logistics ... 437 480
Management and administration 63 48
Operatives .................... 26 22
------- -------
1,685 1,554
======= =======
</TABLE>
The aggregate payroll costs of these persons were as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
Wages and salaries ................ 11,805 11,381
Social security costs ............. 164 177
Other pension costs (see note 20) 165 97
-------- --------
12,134 11,655
======== ========
</TABLE>
7 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1996 1995
------ ------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
On bank loans, overdrafts and other loans wholly repayable
within five years........................................... 276 255
Finance charges payable in respect of finance leases and
hire purchase contracts..................................... -- 3
------ ------
276 258
====== ======
</TABLE>
33
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
8 TAXATION
<TABLE>
<CAPTION>
1996 1995
------ ------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
UK corporation (tax loss)/tax at 33% (1995: 33%) on the
profit for the year on ordinary activities................... (55) 112
UK corporation (tax loss)/tax--prior year .................... (13) 8
Overseas taxation--current year .............................. 544 173
Overseas taxation--prior year ................................ 162 --
Tax attributable to the share of profits of the associated
undertakings--current year................................... 119 67
Tax attributable to the share of profits of the associated
undertakings--prior year..................................... -- 7
Double taxation relief ....................................... (79) --
------ ------
678 367
====== ======
</TABLE>
UK corporation tax losses are surrendered to other UK group companies.
No deferred tax provision has been made for the UK corporation tax which
would become payable if further dividends were declared by associated
companies from accumulated reserves.
No deferred tax is provided in respect of the accumulated reserves of
overseas subsidiary companies as there is no current intention to remit
profits to the UK.
34
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
9 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FIXTURES
LAND AND PLANT AND AND
BUILDINGS MACHINERY FITTINGS TOTAL
----------- ----------- ---------- -------
POUNDS POUNDS POUNDS POUNDS
STERLING STERLING STERLING STERLING
000 000 000 000
<S> <C> <C> <C> <C>
COST
At 1 April 1994...... 87 334 272 693
Currency
translation......... -- (21) (4) (25)
Additions............ 17 270 79 366
Disposals............ -- (48) (15) (63)
Reclassification .... (34) 34 -- --
----------- ----------- ---------- -------
At 31 March 1995 .... 70 569 332 971
Currency
translation......... -- (8) 3 (5)
Additions............ -- 189 57 246
Disposals............ -- (71) (11) (82)
----------- ----------- ---------- -------
At 31 March 1996 .... 70 679 381 1,130
----------- ----------- ---------- -------
DEPRECIATION
At 1 April 1994...... 50 149 146 345
Currency
translation......... -- (5) (9) (14)
Charge for year...... 8 151 53 212
On disposals......... -- (11) (6) (17)
Reclassification .... (14) 14 -- --
----------- ----------- ---------- -------
At 31 March 1995 .... 44 298 184 526
Currency
translation......... -- (8) 3 (5)
Charge for year...... 3 187 73 263
On disposals......... -- (71) (11) (82)
----------- ----------- ---------- -------
At 31 March 1996 .... 47 406 249 702
----------- ----------- ---------- -------
NET BOOK VALUE
At 31 March 1996 ... 23 273 132 428
=========== =========== ========== =======
At 31 March 1995 .... 26 271 148 445
=========== =========== ========== =======
</TABLE>
35
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
Analysis of net book value of land and buildings
<TABLE>
<CAPTION>
1996 1995
------ ------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
Freehold ....... 13 13
Short leasehold 10 13
------ ------
23 26
====== ======
</TABLE>
Included in the total net book value of plant and machinery is pounds
sterling nil (1995: pounds sterling nil) in respect of assets held under
finance leases and similar hire purchase contracts. Depreciation for the year
on these assets was pounds sterling nil (1995: pounds sterling 2,295).
10 FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
TOTAL
GORANDEL JARDINE SECURICOR GROUP INTERESTS
TRADING GURKHA SERVICES IN ASSOCIATED
LIMITED LIMITED UNDERTAKINGS
---------- ----------------- ---------------
POUNDS POUNDS POUNDS
STERLING 000 STERLING 000 STERLING 000
<S> <C> <C> <C>
At 1 April 1994 .............. 39 -- 39
Retained profits less losses 207 79 286
---------- ----------------- ---------------
At 31 March 1995.............. 246 79 325
Retained profits less losses . 319 306 625
Less: Dividends received .... -- (200) (200)
---------- ----------------- ---------------
At 31 March 1996 ............. 565 185 750
========== ================= ===============
</TABLE>
The companies which are material to the results of DSL Holdings Limited
are as follows:
<TABLE>
<CAPTION>
PRINCIPAL % SHARES COUNTRY OF
ACTIVITY HELD INCORPORATION
--------------------------- ------------ -------------
<S> <C> <C> <C>
SUBSIDIARY UNDERTAKINGS
Defence Systems International Limited* ....Security Services 100% UK(1)
Defence Systems Limited ....................Security Services 100% UK(1)
Brooksight Limited* ........................Asset Recovery Services 100% UK(1)
US Defense Systems Inc* ....................Security Services 100% USA
DSL Security (Asia) Private Limited .......Security Services 100% Singapore
Defence Systems Colombia SA** ..............Security Services 97.5% Colombia
DSL (Overseas) Limited .....................Holding Company 100% Cyprus
Defence Systems (Jersey) Limited ...........Security Services 100% UK
ASSOCIATED UNDERTAKINGS
Gorandel Trading Limited ...................Security Services 50% Cyprus
Jardine Securicor Gurkha Services Limited .Security Services 20% Hong Kong
</TABLE>
- ------------
(1) Registered in England and Wales.
* Owned directly by DSL Holdings Limited.
** 94.5% of the shares held are owned directly by DSL Holdings Limited and
3% are held in trust on its behalf.
36
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
11 DEBTORS
<TABLE>
<CAPTION>
1996 1995
------- -------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade debtors ...................... 3,018 3,140
Group relief recoverable ........... 105 258
Other debtors ...................... 418 564
Prepayments and accrued income .... 235 209
------- -------
3,776 4,171
======= =======
</TABLE>
12 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1996 1995
------- -------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
Bank loans and overdrafts (see note 22).................. 973 1,196
Trade creditors ......................................... 206 782
Amounts owed to parent and fellow subsidiary
undertakings............................................ 268 160
Other creditors including taxation and social security:
Corporation tax ........................................ -- 38
Other taxes and social security ........................ 6 74
Other creditors ........................................ 1,827 816
Accruals and deferred income ............................ 416 601
------- -------
3,696 3,667
======= =======
</TABLE>
13 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1996 1995
------ ------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
Amounts owed to parent undertaking
(repayable within 2-4 years) ..... 611 813
====== ======
</TABLE>
All amounts are repayable by instalments within four years.
14 CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
POUNDS POUNDS
STERLING STERLING
NO. 000 NO. 000
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
AUTHORISED
Ordinary shares of pounds
sterling 1 each .................. 1,000,000 1,000 1,000,000 1,000
=========== ======= =========== =======
ALLOTTED, CALLED UP AND FULLY PAID
Ordinary shares of pounds
sterling 1 each .................. 466,668 467 466,668 467
=========== ======= =========== =======
</TABLE>
37
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
15 SHARE PREMIUM AND RESERVES
<TABLE>
<CAPTION>
SHARE PROFIT
PREMIUM AND LOSS
ACCOUNT ACCOUNT
--------- ----------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
At 1 April 1994 ........................ 933 (1,044)
Retained profit for year ............... -- 444
Goodwill written back .................. -- 44
Exchange adjustments ................... -- (16)
--------- ----------
At 31 March 1995 ....................... 933 (572)
Retained profit for year ............... -- 612
Gain on the disposal of Brooksight Pty -- 11
Goodwill written back .................. -- 40
Exchange adjustments ................... -- 57
--------- ----------
At 31 March 1996 ....................... 933 148
========= ==========
</TABLE>
The cumulative amount of goodwill resulting from acquisitions in the
current year and earlier financial years which has been written off is pounds
sterling 1,833,000 (1995: pounds sterling 1,873,000).
16 MINORITY INTERESTS
<TABLE>
<CAPTION>
1996 1995
-------- --------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
At beginning of year ......... 8 1
Retained profit for year .... 5 7
-------- --------
At end of year ............... 13 8
======== ========
</TABLE>
17 CONTINGENT LIABILITIES
A cross composite guarantee has existed since 16 February 1995 between DSL
Holdings Limited, Defence Systems Limited, DSL Security (Asia) Private
Limited and Brooksight Limited.
18 COMMITMENTS
(i) There were no authorised or contracted capital commitments unprovided
for at 31 March 1996 (1995: pounds sterling nil).
(ii) Annual commitments under non-cancellable operating leases are as
follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER
------------- --------- ------------- ---------
POUNDS POUNDS POUNDS POUNDS
STERLING STERLING STERLING STERLING
000 000 000 000
<S> <C> <C> <C> <C>
Operating leases which expire:
Within one year .......................... -- 45 25 8
In the second to fifth years inclusive ... -- 41 -- 80
Over five years .......................... 154 -- 150 --
------------- --------- ------------- ---------
154 86 175 88
============= ========= ============= =========
</TABLE>
38
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
19 GUARANTEES
There were liabilities of pounds sterling 67,242 under documentary credit
guarantees outstanding at 31 March 1996.
20 PENSION SCHEME
The group operates a defined contribution pension scheme. The assets of
the scheme are held separately from those of the group in an independently
administered fund. The pension charge for the period represents the
contributions payable by the group to the scheme and amounted to pounds
sterling 164,509 (1995: pounds sterling 96,636).
21 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1996 1995
------- ------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
Operating profit .......................... 751 692
Depreciation charge ....................... 263 212
Decrease in stock ......................... 11 27
Decrease in debtors ....................... 332 128
Increase in creditors ..................... 141 446
Write back of goodwill .................... -- 44
Effect of exchange rates .................. (13) (58)
------- ------
Net cash inflow from operating activities 1,485 1,491
======= ======
</TABLE>
22 ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
CASH OVERDRAFT NET
------ ----------- ---------
POUNDS POUNDS POUNDS
STERLING STERLING STERLING
000 000 000
<S> <C> <C> <C>
Balance at 1 April 1994 ......................... 461 (1,800) (1,339)
Net cash (outflow)/inflow before adjustments for
foreign exchange rate changes................... (62) 580 518
Effect of foreign exchange rate changes ........ (35) 24 (11)
------ ----------- ---------
Balance at 1 April 1995 ......................... 364 (1,196) (832)
Net cash inflow before adjustments for
foreign exchange rate changes................... 323 383 706
Effect of foreign exchange rate changes ........ 227 (160) 67
------ ----------- ---------
Balance at 31 March 1996 ........................ 914 (973) (59)
====== =========== =========
</TABLE>
23 ULTIMATE PARENT COMPANY AND PARENT UNDERTAKING OF LARGER GROUP
The company is an indirect subsidiary undertaking of Hambros PLC which is
the ultimate parent company, registered in England and Wales.
The only group in which the results of the company are consolidated is
that headed by Hambros PLC. The consolidated financial statements of the
group are available to the public and may be obtained from Hambros PLC, 41
Tower Hill, London, EC3 4HA.
24 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED
STATES OF AMERICA GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The group's consolidated financial statements are prepared in conformity
with generally accepted accounting principles applicable in the United
Kingdom (UK GAAP), which differ in certain significant
39
<PAGE>
DSL HOLDINGS LIMITED
NOTES (CONTINUED)
respects from those applicable in the United States of America (US GAAP).
These differences, together with the approximate effects of the adjustments
on profit attributable to shareholders and shareholders' funds, relate
principally to the items set out below:
(a) Goodwill
Under UK GAAP, goodwill arising from acquisitions is written off against
shareholders' funds. Upon the subsequent disposal of a business, goodwill
previously written off is reinstated and considered in the calculation of the
gain or loss on disposal. Under US GAAP, goodwill is capitalised and
amortised over its estimated useful life. For the purpose of calculating the
amortisation of goodwill a life of 20 years has been assumed. Upon the
subsequent disposal of a business, unamortised goodwill is considered in the
calculation of the gain or loss on disposal.
(b) Deferred taxation
UK GAAP requires that no provision for deferred taxation should be made if
there is reasonable evidence that such taxation will not be payable in the
foreseeable future. Under US GAAP, deferred taxation is recognised under the
full liability method which permits deferred tax assets to be recognised if
their realisation is considered more likely than not.
(c) Cash flows
The principal difference between UK GAAP and US GAAP is in respect of
classification. Under UK GAAP, the group presents its cash flows for
operating activities, returns on investments and servicing of finance,
taxation, investing activities, and financing activities. US GAAP requires
only three categories of cash flow activities which are operating, investing
and financing. Cash flows arising from taxation and returns on investments
and servicing of finance under UK GAAP would be included as operating
activities under US GAAP. In addition, under UK GAAP, cash and cash
equivalents include short term borrowings which under US GAAP would be
presented as financing activities.
Approximate effect on profit attributable to shareholders of differences
between UK and US GAAP:
<TABLE>
<CAPTION>
1996 1995
------ ------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
Profit attributable to shareholders in conformity with
UK GAAP ................................................ 612 444
Adjustments:
Goodwill amortisation .................................. (82) (94)
Deferred taxation ...................................... (76) (38)
------ ------
Profit attributable to shareholders in conformity with
US GAAP................................................. 454 312
====== ======
</TABLE>
Approximate cumulative effect on shareholders' funds of differences
between UK and US GAAP:
<TABLE>
<CAPTION>
1996 1995
------- -------
POUNDS POUNDS
STERLING STERLING
000 000
<S> <C> <C>
Shareholders' funds in conformity with UK GAAP 1,548 828
Adjustments:
Goodwill ...................................... 1,302 1,424
Deferred taxation ............................. (135) (59)
------- -------
Shareholders' funds in conformity with US GAAP 2,715 2,193
======= =======
</TABLE>
40
<PAGE>
DSL GROUP LIMITED (and Predecessor)
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT--31 MARCH 1997 AND 1996
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
-----------------
MAR-97 MAR-96
POUNDS POUNDS
STERLING STERLING
000 000
-------- --------
<S> <C> <C>
Turnover........................................ 5,130 5,000
Cost of sales................................... 4,115 4,377
-------- --------
Gross profit.................................... 1,015 623
Administrative expenses......................... 702 447
-------- --------
Operating profit................................ 313 176
Income from interest in associated
undertakings................................... 168 166
Interest payable and similar charges, net ...... (67) (40)
-------- --------
Profit on ordinary activities before taxation .. 414 302
Tax on profit on ordinary activities............ 207 157
-------- --------
Profit on ordinary activities after taxation ... 207 145
Dividends--non-equity........................... 88 --
-------- --------
Retained income for the financial period ....... 119 145
======== ========
</TABLE>
41
<PAGE>
DSL GROUP LIMITED (and Predecessor)
UNAUDITED CONSOLIDATED BALANCE SHEET--31 MARCH 1997
<TABLE>
<CAPTION>
MAR-97
POUNDS
STERLING 000
------------
<S> <C>
Fixed assets ...........................................
Tangible assets........................................ 952
Investments............................................ 885
---------
1,837
Current assets .........................................
Debtors................................................ 4,864
Cash at bank and in hand............................... (7)
---------
4,857
Creditors: amounts falling due within one year ......... (3,116)
---------
Net current assets...................................... 1,741
Total assets less current liabilities................... 3,578
Creditors: amounts falling due after more than one
year................................................... (4,577)
---------
Net liabilities......................................... (999)
=========
Capital and reserves ...................................
Calling up share capital............................... 182
Share premium account.................................. 4,655
Profit and loss account................................ (5,856)
---------
Equity and non-equity shareholders' funds............... (1,018)
Equity minority interest............................... 20
---------
(999)
=========
</TABLE>
42
<PAGE>
DSL GROUP LIMITED (and Predecessor)
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT -31 MARCH 1997 AND 1996
<TABLE>
<CAPTION>
MAR-97 MAR-96
POUNDS POUNDS
STERLING STERLING
000 000
-------- --------
<S> <C> <C>
Net cash (outflow) inflow from operating activities................... (420) 686
Returns on investments and servicing of finance
Interest received.................................................... 20 21
Interest paid........................................................ (87) (61)
Dividends received from associated undertakings...................... 24 102
-------- --------
Net cash (outflow) inflow from returns on investments and servicing
of finance........................................................... (43) 62
Taxation
Overseas tax paid.................................................... -- (130)
-------- --------
Net tax paid.......................................................... -- (130)
Investing activities
(Purchase) sale of tangible fixed assets............................. (122) 16
-------- --------
Net cash outflow from investing activities............................ (122) 16
Financing............................................................. -- --
-------- --------
(Decrease) increase in cash and cash equivalents...................... (585) 634
======== ========
</TABLE>
43
<PAGE>
DSL GROUP LIMITED (and Predecessor)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED
STATES OF AMERICA GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. The group's
consolidated financial statements are prepared in conformity with generally
accepted accounting principles applicable in the United Kingdom (UK GAAP),
which differ in certain significant respects from those applicable in the
United States of America (US GAAP). These differences, together with the
approximate effects of the adjustments on profit attributable to shareholders
and shareholders' funds, relate principally to the items set out below:
(a) Goodwill
Under UK GAAP, goodwill arising from acquisitions is written off against
shareholders' funds. Under US GAAP, goodwill is capitalized and amortized
over its estimated useful life. For the purpose of calculating the
amortization of goodwill, a life of 25 years has been assumed.
(b) Cash flows
The principal difference between UK GAAP and US GAAP is in respect of
classification. Under UK GAAP, the group presents its cash flows for
operating activities, returns on investments and servicing of finance,
taxation, investing activities, and financing activities. US GAAP requires
only three categories of cash flow activities which are operating, investing
and financing. Cash flows arising from taxation and returns on investments
and servicing of finance under UK GAAP would, with the exception of dividends
paid, be included as operating activities under US GAAP; dividend payments
would be included as a financing activity under US GAAP. In addition, under
UK GAAP, cash and cash equivalents include short term borrowings which under
US GAAP would be presented as financing activities.
Approximate effect on profit attributable to shareholders of differences
between UK and US GAAP:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997
POUNDS STERLING 000
-------------------
<S> <C>
Profit attributable to shareholders in conformity with UK
GAAP......................................................... 207
Adjustments:
Goodwill..................................................... 95
------------------
Profit attributable to shareholders in conformity with US
GAAP......................................................... 112
==================
</TABLE>
Approximate cumulative effect on shareholders' funds of differences
between UK and US GAAP:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997
POUNDS STERLING 000
-------------------
<S> <C>
Shareholders' funds in conformity with UK GAAP................ (999)
Adjustments:
Goodwill..................................................... 5,697
------------------
Profit attributable to shareholders in conformity with US
GAAP......................................................... 4,698
==================
</TABLE>
44
<PAGE>
(b) Pro Forma Financial Information.
The following unaudited pro forma financial information gives effect to
the Company's combination with DSL which was completed on April 16, 1997. The
DSL Transaction was accounted for as a pooling of interests and accordingly,
all previously issued financial statements of the Company will be restated to
include DSL, since DSL's inception on June 3, 1996. On August 1, 1996, DSL
acquired the assets of DSL Holdings in a transaction accounted for as a
purchase. The unaudited pro forma financial statements are derived from the
historical financial statements of the Company, DSL, and DSL Holdings and
estimates and assumptions set forth in the notes to the unaudited pro forma
financial statements.
The unaudited pro forma balance sheet gives effect to the combination of
the Company with DSL and the acquisition of DSL Holdings by DSL as if such
transactions had occurred on March 29, 1997. Such unaudited pro forma balance
sheet is derived from the unaudited consolidated balance sheet of the Company
as of March 29, 1997 included in its Quarterly Report on Form 10-QSB for the
three months ended March 29, 1997 which is incorporated by reference, as well
as the unaudited balance sheet of DSL as of March 31, 1997 included herein.
The unaudited pro forma income statements present unaudited pro forma
results of operations for the year ended December 28, 1996 and the three
months ended March 29, 1997. For purposes of the unaudited pro forma income
statements, the combination of the Company with DSL and the acquisition of DSL
Holdings by DSL are included as if such transactions had occurred on January 1,
1996. The unaudited pro forma income statement for the year ended December 28,
1996 is derived from the audited income statement of the Company for the year
ended December 28, 1996 included in the Company's Annual Report on Form 10-KSB
for the year ended December 28, 1996, which is incorporated herein by
reference, the audited income statement of DSL for the period June 3, 1996
(inception) through December 31, 1996 included herein, and the unaudited
income statement of DSL Holdings for the period January 1, 1996 through
July 31, 1996. The unaudited pro forma income statement for the three months
ended March 29, 1997 is derived from the unaudited income statement of the
Company for the three months ended March 29, 1997 included in its Quarterly
Report on Form 10-QSB for the three months ended March 29, 1997 which is
incorporated herein by reference and the unaudited income statement of DSL
for the three months ended March 31, 1997 included herein.
These unaudited pro forma financial statements may not be indicative of
the results that actually would have occurred if the transaction referred to
above had been in effect on the dates indicated or the results that may be
obtained in the future.
<TABLE>
<CAPTION>
PAGE OF FORM 8-K/A-1
--------------------
<S> <C>
Unaudited pro forma income statement for the three months ended
March 29, 1997.............................................................. 46
Unaudited pro forma income statement for the year ended December 28, 1996 ... 47
Unaudited pro forma balance sheet--March 29. 1997 ............................ 48
Notes to unaudited pro forma financial statements ............................ 49
</TABLE>
45
<PAGE>
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE THREE-MONTHS ENDED MARCH 29, 1997
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- ------------------------
AHI (A) DSL (A) COMBINED ADJUSTMENTS COMBINED
-------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES................................ $ 6,422 $8,328 $14,750 $14,750
COST AND EXPENSES:
Cost of sales ......................... 3,773 6,680 10,453 10,453
Operating expenses .................... 1,901 1,076 2,977 2,977
Depreciation and amortization ......... 127 64 191 95 (e) 286
Interest expense, net ................. (40) 109 69 199 (b) 268
Equity in earnings of unconsolidated
subsidiaries (income)................. (272) (272) (272)
-------- -------- ---------- ------------- ----------
OPERATING INCOME ....................... 661 671 1,332 (294) 1,038
INCOME TAXES ........................... 256 298 554 (82)(d) 472
PREFERENCE SHARE DIVIDENDS ............. 143 143 (143)(c) --
-------- -------- ---------- ------------- ----------
NET INCOME APPLICABLE TO COMMON
STOCKHOLDERS ........................... $ 405 $ 230 $ 635 $ (69) $ 566
======== ======== ========== ============= ==========
EARNINGS PER COMMON SHARE.............. $ 0.04 $ 0.04
======== ==========
WEIGHTED AVERAGE COMMON SHARES ....... 11,523 12,797
======== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Financial Information.
46
<PAGE>
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 28, 1996
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------- ------------------------
DSL DSL
AHI (A) GROUP (A) HOLDINGS(A) ADJUSTMENTS COMBINED
---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES ....................... $18,011 $12,956 $18,191 $49,158
COST AND EXPENSES:
Cost of sales ................. 10,879 10,293 15,175 36,347
Operating expenses ............ 5,088 1,812 2,107 9,007
Depreciation and amortization 366 188 304 368 (e) 1,226
Interest expense, net ......... 253 262 147 862 (b) 1,524
Equity in earnings of
unconsolidated subsidiaries .. (320) (768) (1,088)
---------- ---------- ----------- ------------- ----------
OPERATING INCOME ............... 1,425 721 1,226 (1,230) 2,142
NON-OPERATING INCOME (EXPENSE) 2 (5) 1 (2)
---------- ---------- ----------- ------------- ----------
INCOME BEFORE INCOME TAXES AND
PREFERENCE SHARE DIVIDENDS ... 1,427 716 1,227 (1,230) 2,140
INCOME TAXES.................... 592 623 603 (504)(d) 1,314
PREFERENCE SHARE DIVIDENDS ..... -- 239 -- (239)(c) --
---------- ---------- ----------- ------------- ----------
NET INCOME APPLICABLE TO COMMON
STOCKHOLDERS................... $ 835 $ (146) $ 624 $ (487) $ 826
========== ========== =========== ============= ==========
EARNINGS PER COMMON SHARE ...... $ 0.10 $ 0.09
========== ==========
WEIGHTED AVERAGE COMMON SHARES . 8,133 9,407
========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Financial Information.
47
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
March 29, 1997
(amounts in thousands)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------------- ------------------------
AHI (G) DSL (G) COMBINED ADJUSTMENTS COMBINED
---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................ $ 4,146 $ (11) $ 4,135 $ 77 (g) $ 4,212
Accounts receivable, net ................. 6,210 6,198 12,408 12,408
Inventories .............................. 4,897 -- 4,897 4,897
Prepaid expenses and other current
assets................................... 653 1,779 2,432 2,432
---------- ---------- ---------- ------------- ----------
Total current assets .................... 15,906 7,966 23,872 77 23,949
PROPERTY, PLANT AND EQUIPMENT, net ...... 5,115 1,561 6,676 6,676
INTANGIBLE ASSETS ........................ 7,501 9,343 16,844 16,844
INVESTMENT IN ASSOCIATED COMPANIES ...... 1,451 1,451 1,451
OTHER ASSETS ............................. 337 112 449 449
---------- ---------- ---------- ------------- ----------
TOTAL ASSETS ............................. $28,859 $20,433 $49,292 $ 77 $49,369
========== ========== ========== ============= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings ................... $ 357 $ -- $ 357 $ 357
Current portion of long-term debt ...... 251 1,118 1,369 1,369
Accounts payable, accrued expenses and
other .................................. 3,024 4,649 7,673 (1,257)(g) 6,416
---------- ---------- ---------- ------------- ----------
Total current liabilities .............. 3,632 5,767 9,399 (1,257) 8,142
MINORITY INTEREST ........................ -- 32 32 32
LONG-TERM DEBT and capitalized lease
obligations.............................. 95 6,850 6,945 8,550 (i) 15,495
---------- ---------- ---------- ------------- ----------
Total liabilities ...................... 3,727 12,649 16,376 7,293 23,669
PREFERENCE SHARES ........................ -- 7,216 7,216 (7,216)(j)
STOCKHOLDERS' EQUITY:
Common stock ............................. 106 13 119 119
Additional paid-in capital .............. 22,810 670 23,480 23,480
Foreign currency exchange translation .. -- (104) (104) (104)
Retained earnings ........................ 2,216 (11) 2,205 2,205
---------- ---------- ---------- ------------- ----------
Total stockholders' equity ............. 25,132 568 25,700 25,700
---------- ---------- ---------- ------------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $28,859 $20,433 $49,292 $ 77 $49,369
========== ========== ========== ============= ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Financial Information.
48
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(a) Historical results of operations include the following:
AHI - results of operations of Armor Holdings, Inc. for the three months
ended March 29, 1997 and for the fiscal year ended December 28, 1996
DSL - results of operations of DSL Group Limited for the three months ended
March 31, 1997 and
DSL Group Limited for the period June 3, 1996 (inception) to December 31, 1996.
DSL Holdings Limited (Predecessor) - results of operations for the period
January 1, 1996 to July 31, 1996
(b) Reflects the elimination of interest expense recorded by DSL on
historical debt and the additional interest expense for AHI's borrowing on
the Credit Facility.
(c) Reflects the elimination of preference share dividends.
(d) Adjustment to reflect the income tax effect of the pro forma adjustments.
(e) Reflects the UK to US GAAP adjustment of amortization of goodwill.
(f) Reflects the accounts for Armor Holdings, Inc. as of March 29, 1997 and
DSL Group Limited as of March 31, 1997.
(g) Reflects the following adjustments to cash:
<TABLE>
<CAPTION>
<S> <C>
Borrowing under existing Credit Facility.. $15,400
Repayment of DSL indebtedness:
N.M. Rothschild & Sons Limited .......... (6,850)
Other.................................... (872)
Payment for DSL preference share capital:
Principle ............................... (7,216)
Accrued interest ........................ (385)
---------
$ 77
=========
</TABLE>
(h) Reflects payment for DSL preference shares.
(i) Reflects the following adjustments to long-term debt;
<TABLE>
<CAPTION>
<S> <C>
Borrowings under the existing Credit Facility $15,400
Repayment of DSL indebtedness ................. (6,850)
---------
$ 8,550
=========
</TABLE>
49
<PAGE>
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------
<S> <C>
2.1* Share Acquisition Agreement, dated as of April 7,1997, between Bodycote, AHL and the
Company.
2.2* Agreement for the Sale and Purchase of the Whole of the Issued Share Capital of DSL Group
Limited, dated April 16, 1997, between the Company, AHL, NatWest Ventures Nominees Limited
and Others and Martin Brayshaw.
10.1* Tax Deed, dated April 7, 1997, between the Company and Bodycote.
10.2* Form of Escrow Agreement, dated April 16, 1997, between the Company, the Warrantors and
Ashurst Morris Crisp.
10.3* Form of Registration Rights Agreement, dated April 16, 1997, between the Company and the
Vendors.
10.4* Amended and Restated Loan Agreement dated March 26, 1997, between the Company and Barnett
Bank.
10.5* Renewal Promissory Note, dated March 26, 1997, made by Armor Holdings, Inc. in favor of
Barnett Bank.
10.6* Form of Amended and Restated Security Agreement, dated March 26, 1997, made by each of the
Company and the Subsidiaries in favor of Barnett Bank.
10.7* Pledge Agreement, dated March 26, 1997, made by the Company in favor of Barnett Bank.
10.8* Form of Collateral Assignment, dated March 26, 1997, made by each of Defense Technology
Corporation of America and NIK Public Safety, Inc. in favor of Barnett Bank.
10.9* Amendment to Acceptance Credit Agreement, dated March 26, 1997, between the Company and
Barnett Bank.
10.10* Consent with respect to Guaranty of Payment, dated as of March 26, 1997, of NIK Public
Safety, Inc., Armor Holdings Properties, Inc. and Defense Technology Corporation of
America.
10.11* Form of Guaranty of Payment, dated November 14, 1996.
23.1** Consent of KPMG
</TABLE>
* Previously filed as part of this Current Report on Form 8-K on
April 22, 1997.
** Filed herewith.
50
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARMOR HOLDINGS, INC.
/s/ Carol T. Burke
-----------------------------------
Carol T. Burke
Vice President - Finance
and Secretary
Dated: June 20, 1997
51
<PAGE>
The following Exhibit is filed herewith:
Exhibit Description
- ------- -----------
23.1 Consent of KPMG
<PAGE>
[KPMG LOGO]
The Board of Directors
DSL Group Limited:
We consent to the incorporation by reference in the registration statement
(No. 333-8533) on Form S-3 of Armor Holdings, Inc. of our report dated 15
April 1997, with respect to the consolidated balance sheet of DSL Group
Limited and subsidiaries as of 31 December 1996 and the related consolidated
profit and loss account and consolidated cash flow statement from the period
from 3 June 1996 to 31 December 1996, and of our report dated 29 July 1996,
with respect to the consolidated balance sheets of DSL Holdings Limited and
subsidiaries as of 31 March 1996 and 1995 and the related consolidated profit
and loss accounts and consolidated cash flow statements for each of the years
then ended, which reports appear in the Form 8-K/A-1 of Armor Holdings, Inc.
dated 20 June 1997.
KPMG
London, England
20 June 1997
