<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
COMMISSION FILE NUMBER 0-19152
AUTOMATED SECURITY (HOLDINGS) PLC
ENGLAND AND WALES
(JURISDICTION OF INCORPORATION OF ORGANIZATION)
THE CLOCK HOUSE, THE CAMPUS, SPRING WAY HEMEL HEMPSTEAD,
HERTFORDSHIRE HP2 7TL ENGLAND
(ADDRESS OF PRINCIPAL OFFICES)
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F /x/ Form 40-F / /
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes / / No /x/
(If 'Yes' is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- .)
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<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, thereunto duly authorized.
Automated Security (Holdings) PLC
By: /s/ PETER BERTRAM
-----------------------------
Peter Bertram
Chief Financial Officer
Date of signing: July 23, 1996
<PAGE>
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt about the contents of this document, you should consult an independent
financial adviser authorised under the Financial Services Act 1986.
If you no longer hold any shares in ASH, please send this document, together
with the accompanying forms of proxy, to the purchaser or transferee, or to the
stockbroker, bank or other agent through or to whom the sale or transfer was
effected, for transmission to the purchaser or transferee.
For the purposes of the Proposals, Charterhouse Bank Limited and Smith Barney
Inc., who are regulated by the Security and Futures Authority Limited, are
acting exclusively for ASH. Charterhouse Bank Limited and Smith Barney Inc. are
not acting for any other person and will not be responsible to any other person
for providing protections afforded to customers of Charterhouse Bank Limited or
Smith Barney Inc. or advising them on this transaction.
Application will be made for the Consideration Common Shares to be listed for
trading on the New York Stock Exchange. Application will also be made to the
London Stock Exchange for the Consideration Common Shares to be admitted to the
Official List.
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Scheme of Arrangement
(under Section 425 of the Companies Act 1985)
Recommended proposals to enable ordinary and preference shareholders
(including holders of ADRs) in
AUTOMATED SECURITY (HOLDINGS) PLC
to exchange their shares for common shares in
ADT LIMITED
and
Unaudited interim results of the ASH Group for the six months ended
31 May 1996
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Your attention is drawn to the letter from the Chairman of ASH set out on pages
6 to 9 of this document recommending that you vote in favour of the Proposals.
Notice of the meetings of the holders of the three classes of shares of ASH
convened by Order of the Court to be held at The Brewery, Chiswell Street,
London EC1Y 4SD on 22 August 1996 is set out at the end of this document.
The action you are recommended to take is set out on page 9 of this document.
Whether or not you intend to be present at the meetings convened by the above
mentioned notices, the relevant forms of proxy should be completed and returned
in accordance with the instructions thereon, so as to be received not less than
48 hours before the respective times appointed for the meetings. The forms of
proxy will be valid if handed to the Chairman of the relevant meeting at that
meeting.
<PAGE>
CONTENTS
Page
DEFINITIONS 3
EXPECTED SUMMARY TIMETABLE 5
LETTER FROM THE CHAIRMAN OF ASH 6
EXPLANATORY STATEMENT 10
1. Introduction 10
2. Summary of the Scheme 10
3. Financial effects of the Scheme 11
4. Taxation 12
5. ADT's intentions 15
6. Information on the ASH Group 15
7. Information on the ADT Group 15
8. Proposed amalgamation of ADT with Republic 16
9. Directors' interests 16
10. Conditions and operation of the Scheme 16
11. Effect of the Proposals on the ASH Share Option Schemes and the 17
Convertible Capital Bonds
12. Cancellation of listings 17
13. ADT Common Shares 17
14. Exemption of Consideration Common Shares from registration 17
under the US Securities Act of 1933
15. US regulatory matters 18
16. Voting on the Proposals 18
17. Dissenter rights 19
18. Action to be taken 20
19. ADT consent 20
20. Further information 20
21. Recommendation 20
APPENDICES TO THE EXPLANATORY STATEMENT
I Conditions and operation of the Scheme 21
II Financial information on the ASH Group 24
III Unaudited interim results of the ASH Group for the six months 44
ended 31 May 1996
IV Financial information on the ADT Group 52
V ADT Common Shares 86
VI Additional information on the ADT/Republic Merger and on 89
Republic
VII Additional information 90
SCHEME OF ARRANGEMENT 99
NOTICE OF COURT MEETINGS 103
2
<PAGE>
DEFINITIONS
The following definitions apply throughout this document, except in the
text of the Scheme, unless the context requires otherwise:
"Act" Companies Act 1985
"ADRs" or "ASH ADRs" American Depositary Receipts representing ADSs
"ADR Holders" holders of ADRs
"ADSs" American Depositary Shares, each representing
two Ordinary Shares
"ADT" ADT Limited
"ADT Common Shares" or common shares of US$0.10 each in the capital
"Common Shares" of ADT
"ADT Group" ADT and its subsidiary undertakings
"ADT/Republic Merger" the proposed amalgamation of ADT with a
subsidiary of Republic as described in
paragraph 1 of Appendix VI
"ASH" or the "Company" Automated Security (Holdings) PLC
"ASH Group" or the "Group" ASH and its subsidiary undertakings
"ASH Share Option Schemes" Automated Security Share Option Scheme, ASH
ESOP Executive Share Option Scheme, Automated
Security Sharesave Scheme (1993) and the
Automated Security Executive Share Option
Scheme (1993)
"Bermudian Act" Companies Act 1981 (as amended) of Bermuda
"Board" or the "ASH Board" board of directors of ASH
"Bondholders" holders of Convertible Capital Bonds'
"Business Day" a day (excluding Saturdays and public holidays)
on which banks are open for business in London
"Convertible Capital Bonds" 9 1/2 per cent. Convertible Capital Bonds due
2006 of ASH Capital Finance (Jersey) Limited
"Charterhouse" Charterhouse Bank Limited
"City Code" City Code on Takeovers and Mergers
"Consideration Common Shares" ADT Common Shares to be issued as consideration
under the Scheme
"Court" High Court of Justice in England and Wales
"Court Meetings" Ordinary Court Meeting, 5% Preference Court
Meeting and 6% Preference Court Meeting
"Directors" directors of ASH
"Effective Date" date on which the Scheme becomes effective in
accordance with its terms
"Explanatory Statement" explanatory statement made by ASH relating to
the Scheme in compliance with Section 426 of the
Act, as set out in this document
"London Stock Exchange" London Stock Exchange Limited
"NASDAQ" Nasdaq Stock Market
"NYSE" New York Stock Exchange
"Ordinary Court Meeting" meeting of Ordinary Shareholders to be held on
22 August 1996 convened by order of the Court,
notice of which is set out in this document
3
<PAGE>
"Ordinary Shares" or "ASH ordinary shares of 10 p each in the capital
Ordinary Shares" of ASH
"Ordinary Shareholders" or holders of Ordinary Shares
"ASH Ordinary Shareholders"
"5% Preference Court Meeting" meeting of the 5% Preference Shareholders to be
held on 22 August 1996, convened by Order of the
Court, notice of which is set out in this
document
"6% Preference Court Meeting" meeting of the 6% Preference Shareholders to be
held on 22 August 1996, convened by Order of the
Court, notice of which is set out in this
document
"5% Preference Shares" 5 per cent. convertible cumulative redeemable
preference shares of 1 pound each in the capital
of ASH
"6% Preference Shares" 6 per cent. convertible cumulative redeemable
preference shares of 1 pound each in the capital
of ASH
"5% Preference Shareholders" holders of 5% Preference Shares
"6% Preference Shareholders" holders of 6% Preference Shares
"Preference Shares" or "ASH 5% Preference Shares and 6% Preference Shares
Preference Shares"
"Proposals" proposals set out in this document including the
acquisition by ADT of the whole of the issued
capital of ASH, as described in the Explanatory
Statement, but excluding the ADT/Republic Merger
"Record Date" Business Day immediately preceding the Effective
Date
"Republic" Republic Industries, Inc.
"Republic Common Shares" common shares of US$0.01 each in the capital of
Republic
"Resolution" resolution to be proposed at the Court Meetings
"Scheme" or "Scheme of the proposed scheme of arrangement under Section
"Arrangement" 425 of the Act as set out in this document, with
any modification, addition or condition approved
or imposed by the Court
"Scheme Ordinary Shares" such of the Ordinary Shares as are in issue on
the date hereof together with such Ordinary
Shares (a) as shall be in issue at the close of
business on the Business Day prior to the date
of the Ordinary Court Meeting and (b) if any, as
shall be issued thereafter and before the close
of business on the Record Date in respect of
which the allottees thereof have agreed to be
bound by this Scheme
"Scheme Ordinary Shareholders" holders of Scheme Ordinary Shares
"Scheme Shares" Scheme Ordinary Shares and Preference Shares
"Scheme Shareholders" holders of the Scheme Shares
"Shareholders" or "ASH holders of the Ordinary Shares, the 5%
Shareholders" Preference Shares and the 6% Preference Shares
"Smith Barney" Smith Barney Inc.
Basis of presentation of financial information
In this document financial information on ASH has been presented, save where
expressly indicated, in accordance with UK Generally Accepted Accounting
Principles ("UK GAAP"). Financial information on ADT has been prepared
exclusively in accordance with US Generally Accepted Accounting Principles ("US
GAAP"). All references to $ are to US$.
4
<PAGE>
EXPECTED SUMMARY TIMETABLE
Event Time and date
Date of posting of this document 22 July 1996
Latest time and date for receipt of RED forms of
proxy for the Ordinary Court Meeting+ 11.00 am on 20 August 1996
Latest time and date for receipt of YELLOW forms
of proxy for the 5% Preference Court
Meeting+ 11.10 am on 20 August 1996
Latest time and date for receipt of GREEN forms
of proxy for the 6% Preference Court
Meeting+ 11.20 am on 20 August 1996
Ordinary Court Meeting 11.00 am on 22 August 1996
5% Preference Court Meeting 11.10 am* on 22 August 1996
6% Preference Court Meeting 11.20 am* on 22 August 1996
Court hearing of the petition to sanction the
Scheme 4 September 1996
Record Date for the Scheme 4 September 1996
Effective Date for the Scheme 5 September 1996
Dealings in Consideration Common Shares to
commence on the New York Stock Exchange (9.30 am
New York time) and on the London Stock Exchange
(2.30 pm London time) 6 September 1996
Despatch of certificates for Consideration
Common Shares and cheques for fractional
entitlements by 26 September 1996
Unless otherwise indicated, all references to times are to London times.
+ forms of proxy will be valid if the relevant form of proxy is handed to the
Chairman of the relevant Court Meeting at that meeting.
* or as soon thereafter as the immediately preceding meeting has concluded or
been adjourned.
5
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC
(Registered in England No 321639)
Registered office:
The Clock House
The Campus
Hemel Hempstead
Herts HP2 7TL
22 July 1996
To all Shareholders and, for information only, Bondholders,
holders of options under the ASH Share Option Schemes and the
holder of warrants over Ordinary Shares
Dear Shareholders
Proposed Scheme of Arrangement
1. Introduction
On 19 June 1996 it was announced that agreement had been
reached between your Board and ADT under which proposals
would be put to ASH Shareholders to agree a takeover of ASH by
ADT.
Under the Proposals, ADT is offering ADT Common Shares with
an aggregate value of approximately 89 million pounds as at 19 July 1996
(the latest practicable date prior to the printing of this document),
representing a premium of approximately 34 per cent. over the
aggregate market value of ASH Ordinary Shares (including ADRs)
and ASH Preference Shares as at 18 June 1996 (the date
immediately prior to announcing the Proposals).
The Scheme will only become effective in relation to any particular
class of share if the Resolution is passed at the relevant Court
Meeting, the other conditions referred to in paragraph 10 of the
Explanatory Statement are satisfied or waived and the Court
sanctions the Scheme. The purpose of this letter is to explain why
your Board unanimously recommends that you support the
Proposals.
2. Background to and reasons for the Proposals
For some time, the ASH Group has been burdened by a high level
of debt. As at 31 May 1996, the date to which the Group's latest
unaudited interim statement has been prepared, the Group had net
borrowings of approximately 160 million pounds and net assets
(including the Preference Shares) of 28.5 million pounds, representing a
ratio of approximately 5.6 times net debt to net assets.
In 1994, your Board instigated a successful programme to refocus
ASH's management and to sell ASH's peripheral businesses.
However, the Board recognised from the outset that this course of
action would not, in itself, be sufficient to overcome the significant
financial constraints on the ASH Group.
Your Board and its advisers have spent much effort examining
ways to address these constraints and they concluded that this
potentially could be achieved by securing a significant injection of
new equity, by selling certain significant businesses or by
recommending an offer for the Company.
The Board decided to seek an extension of ASH's facilities and in
December 1995 new financing agreements were entered into
providing facilities lasting until January 1998. However, it is
a term
6
<PAGE>
of these facilities that if ASH fails to achieve an agreed debt
reduction target by 30 September 1996 it will be liable to pay
additional fees to its lenders which vary on a steeply escalating
scale depending upon the subsequent date of such reduction.
Having considered the alternatives available to the Group, the
Board decided to seek offers for ASH's US businesses, which
comprise API Security, Inc., Sonitrol Corporation and Sonitrol
Management Corporation. This was intended to allow ASH to
meet its debt reduction target and enable management to
concentrate on developing the Group's position within the UK
security market. Accordingly, the Board engaged Smith Barney to
commence the confidential marketing of ASH's US businesses.
The indicative levels of proceeds arising from this process were
disappointing and would have been insufficient to redress the
obvious shortcomings of the balance sheet. Moreover, in
negotiating the disposals, potential purchasers were insisting upon
onerous conditions.
It was recognised that the US sale process would not preclude the
possibility of a third party making an offer for ASH and, during the
sale negotiations, the Board received an approach from ADT
expressing an interest in making an offer for ASH. This culminated
in the Proposals set out in this document. Based upon the closing
price of ADT Common Shares on 18 June 1996 (being the date
immediately prior to the announcement of the Proposals) the
Proposals then attributed a value of 84.9 million pounds in aggregate to
the ASH Ordinary Shares (including ADRs) and ASH Preference
Shares.
It is the view of the Board and its advisers that the Proposals are
considerably more attractive than any available alternative route
and offer ASH Shareholders the opportunity to continue to
participate in a major electronic security services business.
3. Proposed amalgamation of ADT with Republic
On 1 July 1996, it was announced that ADT had reached
agreement, subject to certain conditions, to amalgamate with
Republic, a Delaware corporation. Republic is a diversified
company operating in the electronic security service, solid waste
and out-of-home media industries in North America and is
expanding into the automotive industry. If the ADT/Republic
Merger becomes effective, ADT will become a wholly-owned
subsidiary of Republic and shareholders of ADT will receive
Republic Common Shares in exchange for ADT Common Shares
then held by them.
It is expected that notice of the general meeting of ADT to be
convened to consider the ADT/Republic Merger will be
despatched after the Scheme becomes effective. Accordingly, if the
Scheme becomes effective, ASH Shareholders will by then have
become shareholders in ADT and, if they have chosen to remain
so, will be able to vote at that meeting and participate in the
ADT/Republic Merger if it takes effect. All such shareholders will
receive copies of any documents sent to shareholders in ADT in
connection with the ADT/Republic Merger.
If the Scheme becomes effective, ASH Shareholders will, in
aggregate, hold approximately 5 per cent. of the voting capital of
ADT. Those that retain their shareholding in ADT should base
their decision regarding the ADT/Republic Merger solely on any
documents provided to them by ADT or Republic in connection
with the merger and on other information and advice then available
to them. The recommendation in paragraph 7 of this letter and in
paragraphs 1 and 21 of the Explanatory Statement is given solely
in respect of the Proposals and not in relation to the ADT/Republic
Merger.
The Scheme is not conditional upon the outcome of the
ADT/Republic Merger, nor is such merger conditional upon the
Scheme becoming effective. The ADT/Republic Merger is subject
to a number of conditions, including regulatory approvals, the
approval of both ADT's and Republic's shareholders and the
receipt by ADT of an investment bank's fairness opinion.
Further information on the ADT/Republic Merger and on Republic
is set out in Appendix VI.
7
<PAGE>
4. Summary of the effect of the Proposals on ASH Shareholders and other parties
If the Scheme becomes effective, Shareholders and ADR Holders
will receive new ADT Common Shares in consideration for the
transfer of all their Ordinary Shares, ADRs and Preference Shares
to ADT. Set out in the table below is the increase in capital value
for ASH Shareholders and ADR Holders based upon the ADT
Common Share price on 18 June 1996 (the date immediately prior
to the announcement of the Proposals and before the
announcement of the ADT/Republic Merger). The Board notes
that the price of ADT Common Shares rose following the
announcement of the proposed ADT/Republic Merger on 1 July
1996 but has since fallen back. At 19 July 1996 the ADT Common
Share price remained at a discount to the value implied by the
terms of such merger. The Board considers that the future price of
an ADT Common Share is likely to be sensitive to movements in
the price of Republic Common Shares and to the likely outcome of
the ADT/Republic Merger. Also set out in the table below is the
increase in the capital value based on the ADT Common Share
price on 19 July 1996 (the latest practicable date prior to the
printing of this document and after the announcement of the
ADT/Republic Merger).
<TABLE>
<CAPTION>
Per Per 5% Per 6%
Ordinary Preference Preference Per
Share Share Share ADR
<S> <C> <C> <C> <C>
Value of Proposals based on the ADT
Common Share price as at 18 June
1996 39.3p 77.8p 77.8p $1.215
Premium to ASH prices on 18 June
1996 26.9% 29.7% 29.7% 29.6%
Value of Proposals based on the ADT
Common Share price as at 19 July
1996 41.1p 81.3p 81.3p $1.272
Premium to ASH prices on 18 June
1996 32.6% 35.5% 35.5% 35.7%
</TABLE>
An explanation of the values and premia shown above together with a
detailed analysis of the effect of the Proposals on the capital value
and income of ASH Shareholders is set out in paragraph 3 of the
Explanatory Statement. This includes an analysis of premia based on
the prices of Scheme Shares and ADRs on 23 August 1995 (the day
immediately prior to ASH announcing that it was in third-party talks
regarding ways in which the complexities of its balance sheet could be
resolved).
Application will be made for the ADT Common Shares to be
issued as consideration to be listed on both the NYSE and the
London Stock Exchange. Cash will be paid in respect of fractional
entitlements.
Options outstanding under the ASH Share Option Schemes are
exercisable at prices which are considerably above the current
market value of an Ordinary Share. It is therefore intended (subject
to obtaining the necessary consents and/or approvals) to amend
the rules of the ASH Share Option Schemes so that, subject to the
Court sanctioning the Scheme, outstanding options will cease to
be exercisable on or after the Business Day prior to the date of the
Ordinary Court Meeting.
The Convertible Capital Bonds will remain outstanding but will
benefit from enhanced terms reflecting the Proposals.
The holder of the 8.28 per cent. Senior Notes of ASH who holds
warrants to subscribe for 3.7 million Ordinary Shares at 300p per
Ordinary Share has agreed to cancel these rights subject to the
prepayment of such notes.
5. ADT and its intentions for ASH and ASH employees
ADT is the holding company of a group which is engaged in two
service businesses, electronic security services in North America
and Europe and vehicle redistribution and related services in the
US. It is the largest provider of electronic security services in
North America, providing continuous monitoring of commercial
and residential security systems to more than 1.3 million
8
<PAGE>
customers in North America and Europe. For the year ended 31 December
1995, ADT reported net income before non-recurring charges of $120
million on net sales of $1,525 million. As at 31 March 1996,
consolidated shareholders' equity amounted to $792 million.
Upon the Scheme becoming effective, it is ADT's intention to
integrate its existing security services business in the UK with that
of ASH and to incorporate ASH's US business into ADT's existing
operational structure in order to realise the available cost savings
and synergies, both in respect of customer acquisition and service.
ADT has confirmed that the contractual and statutory rights of
employees of the ASH Group (including their pension rights) will
be fully safeguarded.
6. Further information
I draw your attention to the Explanatory Statement and its
Appendices which contain further important information relating
to the Proposals.
7. Recommendation and action to be taken
The Board of ASH, which has been so advised by the Company's
financial advisers, Charterhouse and Smith Barney, considers the
terms of the Proposals to be fair and reasonable and in the best
interests of the Shareholders as a whole. In providing advice to the
Board, Charterhouse and Smith Barney have taken into account
the Board's commercial assessment of the Proposals. Accordingly,
the Board unanimously recommends that you vote in favour of the
Proposals, as the Board members intend to do in respect of their
own beneficial holdings.
The Board urges you to exercise your right to vote by completing
and posting the relevant form of proxy, in accordance with the
instructions printed thereon, as set out below:
Ordinary Shareholders Complete the RED form of proxy for the
Ordinary Court Meeting
5% Preference
Shareholders Complete the YELLOW form of proxy for the 5%
Preference Court Meeting
6% Preference
Shareholders Complete the GREEN form of proxy for the 6%
Preference Court Meeting
ADR Holders The Bank of New York (agent bank for the ADRs)
is writing separately to ADR Holders in order
to explain how they can exercise their right
to vote. Such holders have the right to become
registered Ordinary Shareholders by converting
their ADRs into Ordinary Shares in order to
permit them to attend the Ordinary Court
Meeting should they choose to do so.
Yours faithfully
/s/ Lane of Horsell
Lord Lane of Horsell
Chairman
9
<PAGE>
EXPLANATORY STATEMENT
(in compliance with Section 426 of the Companies Act 1985)
Automated Security (Holdings) PLC
Registered Office:
The Clock House
The Campus
Hemel Hempstead
Herts HP2 7TL
Registered in England no. 321639
22 July 1996
To all Shareholders and, for information only, Bondholders,
holders of options under the ASH Share Option Schemes and the
holder of warrants over Ordinary Shares
Dear Shareholders
Proposed Scheme of Arrangement
1. Introduction
It was announced on 19 June 1996 that terms had been agreed for
the Proposals to be effected by means of a Scheme of
Arrangement under Section 425 of the Act. This letter and the
appendices to it provide an explanation of the Scheme, a copy of
which is set out on pages 99 to 102 of this document, and
information on the ADT Group and the ASH Group.
The Scheme is subject to the conditions set out in paragraph 10
below and in Appendix I.
Your attention is drawn to the letter from the Chairman of the
ASH Board set out on pages 6 to 9 which forms part of this
Explanatory Statement and which states that the ASH Board,
which has been so advised by Charterhouse and Smith Barney, the
Company's financial advisers, considers the terms of the Proposals
to be fair and reasonable and in the best interests of the
Shareholders as a whole. In providing advice to the Board,
Charterhouse and Smith Barney have taken into account the
Board's commercial assessment of the Proposals.
2. Summary of the Scheme
The Proposals are to be implemented by way of a scheme of
arrangement. The Scheme will only become effective in relation to
any particular class of share if the Resolution is passed at the
relevant Court Meeting, the other conditions referred to in
paragraph 10 below are satisified or waived and the Court
sanctions the Scheme. In accordance with the Scheme, it is
proposed that the Scheme Shares together with any accumulated
rights, including any rights to dividend, will be transferred to ADT
and that ADT will allot and issue ADT Common Shares to
Scheme Shareholders on the following basis:
for every 92 ASH Ordinary Shares 3 ADT Common Shares
(equivalent to: for every 46 ASH ADRs 3 ADT Common Shares)
for every 31 ASH 5% Preference Shares 2 ADT Common Shares
for every 31 ASH 6% Preference Shares 2 ADT Common Shares
No fractions of ADT Common Shares will be issued to ASH
Shareholders who will instead receive cash from ADT in respect of
their fractional entitlements. The value of such fractional
entitlements shall be determined by reference to the closing price
of an ADT Common Share on
10
<PAGE>
the NYSE on the Effective Date. ASH Shareholders with registered
addresses in the UK will receive cheques denominated in sterling with
such sterling amounts calculated by reference to the spot exchange
rate between the US dollar and sterling (as quoted by the Bank of
England) at the close of business on the Effective Date. All other
shareholders will receive cheques denominated in US dollars.
The Consideration Common Shares will be credited as fully paid
and will rank pari passu with ADT Common Shares for all
dividends or other distributions declared, made or paid after the
Effective Date by ADT and in all other respects. Approximately
seven million ADT Common Shares will be issued as a result of
the Scheme, representing approximately 5 per cent. of the enlarged
issued common share capital of ADT.
3. Financial effects of the Scheme
3.1 Effect on capital value
Set out below are two tables which demonstrate the changes in
capital value for a holder of each class of the Scheme Shares and
the ADRs under the Proposals. The first table sets out the increase
or decrease in capital value based upon the price of an ADT
Common Share on 18 June 1996, the date immediately prior to the
announcement of the Proposals and before the announcement of
the ADT/Republic Merger. Following the announcement of the
ADT/Republic Merger on 1 July 1996, the price of ADT Common
Shares rose but has since fallen back. At 19 July 1996 the ADT
Common Share price remained at a discount to the value implied
by the terms of such merger. The Board considers that the future
price of an ADT Common Share is likely to be sensitive to
movements in the price of Republic Common Shares and to the
likely outcome of the ADT/Republic Merger. The second table
sets out the increase in capital value based upon the price of an
ADT Common Share on 19 July 1996, being the latest practicable
date prior to the printing of this document and after the
announcement of the ADT/Republic Merger.
Based on the ADT Common Share price on 18 June 1996 (1):
<TABLE>
<CAPTION>
Per Per 5% Per 6%
Ordinary Preference Preference Per
Share Share Share ADR
<S> <C> <C> <C> <C>
Value of Proposals (2) 39.3p 77.8p 77.8p $1.215
Market value on 23 August 1995 (3) 44p 39p 36.25p $1.375
Increase/(decrease) in capital value over
market values on 23 August 1995 (10.6)% 99.6% 114.7% (11.7)%
Market value on 18 June 1996 (4) 31p 60p 60p $0.9375
Increase in capital value over market
values on 18 June 1996 26.9% 29.7% 29.7% 29.6%
</TABLE>
Notes:
1. The closing price of one ADT Common Share on the NYSE on 18 June 1996 was
$18.625 which, converted into sterling at an exchange rate of US$1.5438 per
1 pound, being the spot exchange rate ruling at the close of business on
that day, was 12.06 pounds.
2. This is the product of the closing price of one ADT Common Share and the
ratio of ADT Common Shares to be issued for shares of each class of the
Scheme Shares and represents the value of the Proposals for one of each class
of Scheme Share (or one ADR).
3. This is the middle market price of one share of each class of the Scheme
Shares at the close of business on the London Stock Exchange on 23 August
1995 (being the day immediately prior to ASH announcing that it was engaged
in third party talks regarding ways in which the complexities of its balance
sheet could be resolved) or, in the case of the ADRs, the closing price on
the NYSE on that date.
4. This is the middle market price of one share of each class of the Scheme
Shares at the close of business on the London Stock Exchange on 18 June 1996,
(being the day immediately prior to ASH announcing the Proposals) or, in the
case of the ADRs, the closing price on the NYSE on that date.
11
<PAGE>
BASED ON THE ADT COMMON SHARE PRICE ON 19 JULY 1996 (1):
<TABLE>
<CAPTION>
Per Per
Per 5% 6%
Ordinary Preference Preference Per
Share Share Share ADR
<S> <C> <C> <C> <C>
Value of Proposals (2) 41.1p 81.3p 81.3p $1.272
Market value on 23 August 1995 (3) 44p 39p 36.25p $1.375
Increase/(decrease) in capital value over
market values on 23 August 1995 (6.6)% 108.5% 124.3% (7.5)%
Market value on 18 June 1996 (4) 31p 60p 60p $0.9375
Increase in capital value over market
values on 18 June 1996 32.6% 35.5% 35.5% 35.7%
</TABLE>
Notes:
1. The closing price of one ADT Common Share on the NYSE on 19 July 1996 was
$19.50 which, converted into sterling at an exchange rate of US$1.5474 per
1 pound, being the spot exchange rate ruling at the close of business on
that day, was 12.60 pounds.
2. This is the product of the closing price of one ADT Common Share and the
ratio of ADT Common Shares to be issued for shares of each class of the
Scheme Shares and represents the value of the Proposals for one of each class
of Scheme Share (or one ADR).
3. This is the middle market price of one of each class of the Scheme Shares at
the close of business on the London Stock Exchange on 23 August 1995, (being
the day immediately prior to ASH announcing that it was engaged in third
party talks regarding ways in which the complexities of its balance sheet
could be resolved) or, in the case of the ADRs, the closing price on the NYSE
on that date.
4. This is the middle market price of one share of each class of the Scheme
Shares at the close of business on the London Stock Exchange on 18 June 1996,
(being the day immediately prior to ASH announcing the Proposals) or, in the
case of the ADRs, the closing price on the NYSE on that date.
3.2 Effect on income
ADT has not declared any dividends on ADT Common Shares
since April 1991. ADT has no present intention to pay any
dividends on the Common Shares but will keep its dividend policy
under review in the light of prevailing circumstances.
Following an announcement on 22 December 1995, ASH has not
paid any dividends on its Preference Shares. In addition, no
dividends have been paid to holders of ADRs or Ordinary Shares
since 11 July 1994. The ASH Board does not expect any dividends
to be paid for the foreseeable future and notes that, in accordance
with its banking agreements, it has undertaken not to do so except
in certain limited circumstances.
Accordingly, the Proposals create no immediate change in income
for Scheme Shareholders.
4. Taxation
4.1 UK Taxation
The Directors have been advised that, under current legislation and
practice, the principal UK tax consequences of the Proposals for
Shareholders are as set out below.
Taxation of chargeable gains
For a Shareholder who does not hold either alone or together with
connected persons more than 5 per cent. of any class of share in
ASH, the transfer of the Scheme Shares and the issue of ADT
Common Shares to a Scheme Shareholder pursuant to the Scheme
will not be treated as a disposal by a Scheme Shareholder of his
existing Scheme Shares for the purposes of UK taxation of capital
gains. In each case ADT Common Shares should be treated as the
same assets as a Scheme Shareholder's existing Scheme Shares and
as having been acquired as and when those shares were acquired.
A subsequent disposal of ADT Common Shares may give rise to a
liability to UK taxation on capital gains.
In relation to a Shareholder holding either alone or together with
connected persons more than 5 per cent. of any class of share in
ASH, clearance has been obtained from the UK
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<PAGE>
Inland Revenue under Section 138 of the Taxation of Chargeable Gains
Act 1992 that the Board of the Inland Revenue is satisfied that the
Proposals will be implemented for bona fide commercial reasons and not
for tax avoidance purposes. Consequently, such a Shareholder will not
be treated as making a disposal of those shares for the purposes of UK
taxation of capital gains. A subsequent disposal of ADT Common Shares
may give rise to a liability to UK taxation of capital gains.
To the extent that a Shareholder receives cash in respect of any
fractional entitlement to Consideration Common Shares, he will be
treated as making a part disposal of an interest in his Scheme
Shares which may, depending on the circumstances, give rise to a
chargeable gain or an allowable loss for capital gains tax purposes.
Stamp duty and stamp duty reserve tax
No stamp duty or stamp duty reserve tax will be payable by any
Scheme Shareholder on the transfer of his Scheme Shares or on
the issue of Consideration Common Shares to Scheme
Shareholders.
The above summary of the UK taxation treatment is intended as a
general guide only and, in particular, does not consider the
position of any ASH Shareholder whose shares are held otherwise
than for investment purposes or who is not resident for tax
purposes in the UK. ASH Shareholders should consult their own
tax advisers if they have any questions as to the particular tax
consequences of the Proposals. In addition, the above summary
does not consider the position of any ASH Shareholder to whom
Consideration Common Shares are issued in relation to any
subsequent acquisition by such Shareholder of Republic Common
Shares as a result of the ADT/Republic Merger.
4.2 Bermudian Taxation
The Directors have been advised that, under current legislation and
practice, the principal Bermudian tax consequences of the
Proposals for Shareholders are as set out below.
Under current Bermudian law, no Bermudian withholding tax will
be imposed upon payment of dividends by ADT to its common
shareholders. Furthermore, ADT has received from the Minister of
Finance of Bermuda, under the Exempted Undertakings Tax
Protection Act 1966 (as amended) an undertaking that, in the
event of there being enacted in Bermuda any legislation imposing
any tax computed on profits or income including, inter alia, any
dividend or capital gains withholding tax, the imposition of such
tax shall not be applicable to ADT or any of its operations, nor to
its Common Shares or other obligations, until the year 2016. This
undertaking does not, however, prevent the application of
Bermudian taxes to persons ordinarily resident in Bermuda.
4.3 US Taxation
The Directors have been advised that, based in part on information
and representations provided by ADT, the material US federal
income tax consequences of the Proposals for an ASH Shareholder
or ADR Holder are as set out below.
This discussion is based on the Internal Revenue Code of 1986 as
amended (the "IRC"), administrative pronouncements, judicial
decisions and existing and proposed US Treasury regulations in
effect as of the date hereof, all of which are subject to change at
any time, possibly with retroactive effect. This discussion assumes
that the Scheme Shares and ADRs are held as capital assets and
that the ADT Common Shares will be held as capital assets by the
ASH Shareholders and ADR Holders. In addition, this discussion
does not address all tax consequences that may be relevant to an
ASH Shareholder or ADR Holder in light of such holder's
particular circumstances, or to holders subject to special rules,
such as dealers in securities, financial institutions, insurance
companies, regulated investment companies, tax-exempt
organisations, holders who hold or dispose of Scheme Shares
(including ADRs) in connection with a conversion transaction (as
defined in Section 1258
13
<PAGE>
of the IRC), or holders of Scheme Shares (including ADRs) who are
citizens or residents of the US, or US corporations ("US Holders") who
will own directly, indirectly or constructively immediately after
consummation of the Scheme, 5 per cent. or more of the votes or value
of the stock of ADT.
On the basis set out below, the Scheme should be treated as a
tax-free reorganisation, and in general, no gain or loss should be
recognised, for US Federal income tax purposes, by US Holders as
a result of the Scheme becoming effective, except in the case of
cash received in lieu of fractional shares. No fractional ADT
Common Shares will be issued in the Scheme. A holder who
receives cash in lieu of a fractional ADT Common Share will be
treated as having received such fractional ADT Common Share
and having sold it to ADT. The holder generally will recognise a
capital gain or loss equal to the difference between the basis he
would have had for the fractional ADT Common Share and the
amount of cash received. Holders of Scheme Shares and ADRs
will have a tax basis in the ADT Common Shares received equal to
their adjusted, aggregate tax basis in the Scheme Shares and
ADRs, and will have a holding period in the ADT Common Shares
that will include the period during which the Scheme Shares or
ADRs were held.
Qualification of the Scheme being treated as a tax-free
reorganisation for US Federal income tax purposes depends on
compliance with certain technical requirements, including the
requirement that a continuity of proprietary interest be maintained
by the ASH Shareholders and ADR Holders. In order for this
requirement to be satisfied, the ASH Shareholders and ADR
Holders must not, pursuant to a plan or intention existing at or
prior to the Scheme, dispose of so much of either (a) their Scheme
Shares and ADRs in anticipation of the Scheme or (b) the ADT
Common Shares received pursuant to the Scheme, such that the
ASH Shareholders and ADR Holders, as a group, would no longer
have a significant equity interest in the ASH business through their
ownership of the ADT Common Shares received by them pursuant
to the Scheme. It is the position of the US Internal Revenue
Service that the continuity of interest requirement generally will be
considered to be satisfied if stockholders of the acquired
corporation receive, in the aggregate, (and have no plan to dispose
of) stock of the acquiring corporation equal in value to at least 50
per cent. of the value of all of the formerly outstanding stock of
the acquired corporation as of the effective date of the acquisition.
It is assumed for the purposes of this discussion that the ASH
Shareholders and ADR Holders will meet the continuity of interest
requirement.
If the Scheme does not qualify as a tax-free reorganisation, it will
be treated as a taxable exchange. In such event, each US Holder
will recognise gain or loss equal to the difference between such US
Holder's adjusted basis in the Scheme Shares or ADRs and the fair
market value of the ADT Common Shares received in exchange
therefor. Such gain or loss would be a long-term gain or loss if the
Scheme Shares or ADRs had been held for more than one year at
the date on which the Scheme becomes effective.
ASH believes that it is not currently, nor has it been, a "controlled
foreign corporation" as defined in Section 957 of the IRC.
However, if ASH is, or has been, a controlled foreign corporation,
due to recent transfers of its stock or otherwise, any US Holder
who owns or who has owned (under certain attribution rules) 10
per cent. or more of ASH voting stock at any time within the five
years preceding the Effective Date when ASH was a controlled
foreign corporation, would be liable for taxation on an ordinary
income tax basis, with respect to all or a portion of their realised
gain pursuant to Sections 367 and 1248 of the IRC.
This discussion does not describe the tax consequences for ASH
Shareholders and ADR Holders who are shareholders of ADT at
the time of the consummation of the ADT/Republic Merger. In
addition, assuming that the ADT/Republic Merger (i) is treated,
for US tax purposes, as a transaction that is independent of the
Scheme and/or (ii) is, as is currently contemplated, a tax-free
reorganisation pursuant to the IRC, then the
14
<PAGE>
consummation of the ADT/Republic Merger should not affect the tax
consequences of the Scheme as described above.
ASH Shareholders and ADR Holders should consult with their
own tax advisers as to the specific tax consequences of the
Scheme, including the applicability of US Federal, state and local
tax laws.
5. ADT's intentions
Upon the Scheme becoming effective, it is ADT's intention to
integrate its existing security services business in the UK with that
of ASH and to incorporate ASH's US businesses into ADT's
existing operational structure in order to realise the available cost
savings and synergies, both in respect of customer acquisition and
service.
ADT has confirmed that the contractual and statutory rights of
employees of the ASH Group (including their pension rights) will
be fully safeguarded.
6. Information on the ASH Group
ASH is the holding company of a group whose principal activities
are the installation, rental and service of monitored security alarms
to commercial and residential customers in the UK and the US.
These activities are carried out through a number of principal
subsidiaries.
Modern Security Systems Limited is a UK market leader in
security systems, catering primarily for the industrial and
commercial sector, although approximately 25 per cent. of its
systems are residential. Telecom Security Limited, acquired by
ASH from British Telecommunications PLC in 1993, is also a
significant supplier in the UK of security systems primarily to the
residential sector. API Security, Inc. is a leading intruder alarm,
central station monitoring, CCTV, access control and fire alarm
services business in southern California and is one of the largest
providers of central station alarm services in the US. Sonitrol
Corporation, which was acquired in 1992, is the franchisor of the
Sonitrol audio alarm verification system throughout North
America and the UK and has 170 franchises. Sonitrol Management
Corporation, which was also acquired in 1992, owns 17 franchises
in 8 states in the US.
In the financial period ended on 30 November 1995, ASH reported
consolidated losses before taxation of 7.4 million pounds (1994: losses of
11.8 million pounds) on turnover from continuing operations of 153.7
million pounds (1994: 154.3 million pounds). The consolidated losses before
taxation of 7.4 million pounds included a charge to the profit and loss
account in respect of disposals of discontinued operations of
approximately 5.7 million pounds, compensated for by a write back to
reserves in respect of goodwill written off of 8.8 million pounds. As at 30
November 1995, the Company's consolidated net assets on a
similar basis amounted to 32.5 million pounds.
On 15 July 1996, ASH announced its interim results for the six
months ended 31 May 1996. A copy of these results is set out in
Appendix III.
Further financial and other information on the ASH Group is set
out in Appendices II and VII.
7. Information on the ADT Group
The ADT Group is engaged in two service businesses; electronic
security services in North America and Europe, and vehicle
redistribution and related services in the US. ADT is incorporated
in Bermuda and ADT Common Shares (or American Depositary
Receipts representing them) have been listed on the NYSE since
December 1985 and on the London Stock Exchange since
December 1984.
The ADT Group is the single largest provider of electronic
security services in North America and a significant provider of
electronic security services in Europe, providing continuous
monitoring of commercial and residential security systems to over
1.3 million customers in North America and Europe. The ADT
Group is also the second largest provider of vehicle redistribution
services
15
<PAGE>
in the US providing a comprehensive range of such services to vehicle
dealers and owners and operators of vehicle fleets.
ADT's principal activities in the electronic security services
businesses are the electronic monitoring of its installed base of
security systems and installation of new, monitored security
systems to add to its installed base. Monitored systems may be
sold or, as is most often the case, ADT may retain ownership of
installed systems. ADT receives contractual recurring fees for
monitoring security systems through its electronic monitoring
centres and for maintenance of security systems installed at
customer premises and other related services.
ADT's vehicle redistribution business operates a network of large
modern auction centres which provide an organised wholesale
marketplace for the sale and purchase of used vehicles. Principal
sellers, or consignors, include new and used vehicle dealers,
vehicle manufacturers, fleet operators, leasing companies, financial
institutions and government agencies. Principal purchasers include
franchise and non-franchise vehicle dealers and distributors who
acquire vehicles to sell in the retail market.
For the year ended 31 December 1995, ADT reported net income
before non-recurring charges of US$120 million (1994: US$107
million) on net sales of US$1,525 million (1994: US$1,376
million). Approximately 72 per cent. of ADT's net sales in 1995
were derived from its electronic security services division.
For the quarter ended 31 March 1996, ADT reported net income
of US$31 million on net sales of US$354 million, after adding
back the charge of US$410 million resulting from the application
of Statement of Financial Accounting Standards Number 121. This
compared with US$27 million for the comparable period in 1995
on net sales of US$373 million. As at 31 March 1996, ADT's
consolidated shareholders' equity amounted to US$792 million.
Further financial and other information on the ADT Group is set
out in Appendices IV and VII.
8. Proposed amalgamation of ADT with Republic
Information on the ADT/Republic Merger is set out in paragraph 3
of the letter from the Chairman on pages 6 to 9 and in Appendix
VI.
It is expected that the proposed ADT/Republic Merger will be the
subject of a joint proxy statement from ADT and Republic to be
prepared and made available on a future date. That proxy
statement will contain material information relating to Republic
and to the proposed ADT/Republic Merger but is not available
currently and is not expected to be available until after the
Effective Date.
9. Directors' interests
The interests of the directors of ADT and ASH in the share capital
of ADT and ASH are set out in Appendix VII. The service
contracts of each of Peter Bertram and John Smith include
provisions for payment to be made to such director in the event of
his resignation following a change in control of ASH. Details of
their service contracts and that of the other executive director are
set out in paragraph 9 of Appendix VII. Save in this regard, the
effect of the Scheme on the interests of the Directors is no
different from the effect of the Scheme on the like interests of
other persons.
10. Conditions and operation of the Scheme
The Scheme will be implemented if the conditions referred to in
Appendix I are satisfied save to the extent that, in relation to
conditions 1(b) and (c), 2 and 7 to 17, such conditions are, or have
been, waived in whole or in part.
Subject to the above, it is expected that the Effective Date will be
on or about 5 September 1996 with dealings in the Consideration
Common Shares commencing in New York at 9.30 am New
16
<PAGE>
York time and in London at 2.30 pm London time on the following day
and that certificates for the Consideration Common Shares and cheques
for fractional entitlements will be despatched by 26 September 1996.
If the Scheme does not become effective on or before 31 October
1996, or such later date as ASH and ADT may agree and the
Court may permit, it will lapse.
11. Effect of the Proposals on the ASH Share Option Schemes and the
Convertible Capital Bonds
The rules of the ASH Share Option Schemes currently provide
that all options outstanding will remain exercisable for a period of
one month following the date on which option holders are notified
that the Court has sanctioned the Scheme and, if not then
exercised, will lapse. Options outstanding under the ASH Share
Option Schemes are exercisable at prices ranging from 128p to
269.3p per Ordinary Share, all of which are considerably above the
market value of an Ordinary Share of 38p on 19 July 1996. It is
intended (subject to obtaining the necessary consents and/or
approvals) to amend the rules of the ASH Share Option Schemes
so that, subject to the Court sanctioning the Scheme, no options
will be exercisable on or after the Business Day prior to the date of
the Ordinary Court Meeting. Further details of options outstanding
under the ASH Share Option Schemes are set out in paragraphs
7.1(b) and 8 of Appendix VII.
The Convertible Capital Bonds, which are guaranteed by ASH,
will remain outstanding. The Law Debenture Trust Corporation
p.l.c. (the trustee of the Trust Deed which governs the terms of the
Convertible Capital Bonds), ASH Capital Finance (Jersey)
Limited, ASH and ADT have entered into the necessary
documentation so that, subject to the Scheme becoming effective,
ADT will be added as a guarantor of the Convertible Capital
Bonds and will be substituted in place of ASH as the party into
whose share capital the conversion and exchange rights of the
Convertible Capital Bonds are exercisable with effect from the
Effective Date. Such documentation further provides that the
Convertible Capital Bonds effectively convert into ADT Common
Shares at the rate of approximately 13.04 ADT Common Shares
for each 1,000 pound denomination of Convertible Capital Bonds, this
being the rate which reflects the terms being offered to Scheme
Ordinary Shareholders under the Scheme.
12. Cancellation of listings
No transfer of Scheme Shares or ADRs will be registered after the
close of business on the Record Date. Upon the Scheme becoming
effective, certificates for the Scheme Shares and ADRs will cease
to be of value and should, if so requested by ADT, be sent to ASH
for cancellation.
Except with the consent of the Panel on Takeovers and Mergers,
settlement of the consideration to which each Scheme Shareholder
and ADR Holder is entitled under the Scheme will be implemented
in full in accordance with the terms of the Scheme without regard
to any lien, right of set off, counterclaim or other analogous right
to which ADT may otherwise be, or claim to be, entitled against
such shareholder.
The London Stock Exchange will be requested to cancel the listing
of the Scheme Shares with effect from the Effective Date. The
NYSE will be requested to cancel the listing of the ADRs with
effect from the Effective Date.
13. ADT Common Shares
A summary of certain rights attaching to ADT Common Shares
and of the share capital of ADT and a summary which compares
certain rights of ADT shareholders with those of ASH
Shareholders are set out in Appendix V.
14. Exemption of Consideration Common Shares from registration
under the US Securities Act of 1933
In the absence of an applicable exemption, it would be necessary
to register the Consideration Common Shares under the US
Securities Act of 1933, as amended (the "1933 Act"). Section
3(a)(10) of the 1933 Act exempts from registration a security
which is issued in exchange for
17
<PAGE>
outstanding securities where the terms and conditions of such issuance
and exchange are approved, after a hearing upon the fairness of such
terms and conditions at which all persons to whom it is proposed to
issue securities in such exchange have a right to appear, by a court
authorised by law to grant such approval. ADT's US legal counsel has
requested a "no-action letter" from the staff of the US Securities and
Exchange Commission (the "SEC") to the effect that the staff of SEC
will recommend "no action" if, subject to the final order of the Court
approving the Scheme, (i) the Consideration Common Shares are issued
without compliance with the registration requirements of the 1933 Act;
(ii) the Consideration Common Shares are not treated as "restricted
securities" within the meaning of rule 144(a)(3) promulgated under the
1933 Act; and (iii) the holders of the Consideration Common Shares who
are not affiliates of ASH before, and are not affiliates of ADT after,
the Scheme is completed, resell the Consideration Common Shares
without regard to the requirements of rules 144 and 145(c) and (d)
promulgated under the 1933 Act. The receipt of this "no-action letter"
is a condition of the Scheme.
15. US regulatory matters
Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") and the rules promulgated
thereunder by the US Federal Trade Commission (the "FTC"), the
Scheme could not become effective until notifications were given
and certain information furnished to the FTC and the Antitrust
Division of the Department of Justice (the "Antitrust Division"),
and specified waiting period requirements were satisfied. ADT and
ASH have filed notification and report forms with the FTC and the
Antitrust Division. In their notification and report forms, ADT and
ASH requested early termination of the waiting period under the
HSR Act.
At any time before or after the Scheme becomes effective and
notwithstanding the satisfaction of the HSR Act requirements, the
FTC or the Antitrust Division or any state could take action under
US federal or state antitrust laws to seek to enjoin the
consummation of the Scheme. Private parties may also seek to
take legal action under US antitrust laws. Based on information
available to them, ADT and ASH believe that the Scheme can be
effected in compliance with US federal and state antitrust laws.
16. Voting on the Proposals
The Scheme will only become effective in relation to any particular
class of shares if the resolution is passed at the relevant Court
Meeting, the conditions referred to in paragraph 10 are satisfied or
waived and the Court sanctions the Scheme.
Upon the Scheme becoming effective in respect of any class of
Scheme Shares it will be binding on all holders of shares of that
class, irrespective of whether they attended or voted at the
relevant Court Meeting.
Unless ADT otherwise decides, the Scheme will not become
effective unless it is approved at each of the Court Meetings.
The Court Meetings are described in more detail as follows:
16.1 The Ordinary Court Meeting
You will find set out on page 103 of this document a notice of the
Ordinary Court Meeting which has been convened by Order of the
Court for the purpose of considering and, if thought fit, approving
the Scheme (with or without modification). The Ordinary Court
Meeting will be held at The Brewery, Chiswell Street, London
EC1Y 4SD on 22 August 1996 at 11.00 am.
At the Ordinary Court Meeting, voting will be on a poll and
Ordinary Shareholders will be entitled to one vote for each
Ordinary Share held by them. The Resolution will be passed if a
majority in number representing not less than three-fourths in value
of the Ordinary Shares represented by those present and voting,
either in person or by proxy, votes in favour of the Scheme.
It is important that sufficient of the votes attaching to the Ordinary
Shares are cast at the Ordinary Court Meeting so that the Court
can be satisfied that the result is a fair representation of the
18
<PAGE>
opinions of the Ordinary Shareholders. Ordinary Shareholders are
therefore urged to complete and return without delay the RED
FORM OF PROXY in accordance with the instructions printed
thereon. Return of the red form of proxy will not preclude
Ordinary Shareholders from attending and voting in person at the
Ordinary Court Meeting should they wish to do so.
16.2 The 5% Preference Court Meeting
You will find set out on page 103 of this document a notice of the
5% Preference Court Meeting which has been convened by Order
of the Court for the purpose of considering and, if thought fit,
approving the Scheme (with or without modification). The 5%
Preference Court Meeting will be held at The Brewery, Chiswell
Street, London EC1Y 4SD on 22 August 1996 at 11.10 am (or as
soon thereafter as the Ordinary Court Meeting has concluded or
been adjourned).
At the 5% Preference Court Meeting, voting will be on a poll and
5% Preference Shareholders will be entitled to one vote for each
5% Preference Share held by them. The Resolution will be passed
if a majority in number representing not less than three-fourths in
value of the 5% Preference Shares represented by those present
and voting, either in person or by proxy, votes in favour of the
Scheme.
It is important that sufficient of the votes attaching to the 5%
Preference Shares are cast at the 5% Preference Court Meeting so
that the Court can be satisfied that the result is a fair
representation of the opinions of the 5% Preference Shareholders.
5% Preference Shareholders are therefore urged to complete and
return without delay the YELLOW FORM OF PROXY in accordance with
the instructions printed thereon. Return of the yellow form of
proxy will not preclude 5% Preference Shareholders from attending
and voting in person at the 5% Preference Court Meeting should
they wish to do so.
16.3 The 6% Preference Court Meeting
You will find set out on page 103 of this document a notice of the
6% Preference Court Meeting which has been convened by Order
of the Court for the purpose of considering and, if thought fit,
approving the Scheme (with or without modification). The 6%
Preference Court Meeting will be held at The Brewery, Chiswell
Street, London EC1Y 4SD on 22 August 1996 at 11.20 am (or as
soon thereafter as the 5% Preference Court Meeting has concluded
or been adjourned).
At the Court Meeting voting will be on a poll and 6% Preference
Shareholders will be entitled to one vote for each 6% Preference
Share held by them. The Resolution will be passed if a majority in
number representing not less than three-fourths in value of the 6%
Preference Shares represented by those present and voting, either
in person or by proxy, votes in favour of the Scheme.
It is important that sufficient of the votes attaching to the 6%
Preference Shares are cast at the 6% Preference Court Meeting so
that the Court can be satisfied that the result is a fair
representation of the opinions of the 6% Preference Shareholders.
6% Preference Shareholders are therefore urged to complete and
return without delay the GREEN FORM OF PROXY in accordance with
the instructions printed thereon. Return of the green form of
proxy will not preclude 6% Preference Shareholders from attending
and voting in person at the 6% Preference Court Meeting should
they wish to do so.
17. Dissenter Rights
Scheme Shareholders have the right to raise any objections they
may have to the Scheme at those Court Meetings which they are
entitled to attend and at the Court hearing of the petition to
sanction the Scheme. Although ADR Holders do not have the
right to attend the Court Meetings, they have the right to instruct
The Bank of New York, in its capacity as nominee holder of the
Ordinary Shares underlying their ADRs, how to vote at the
Ordinary Court Meeting. Scheme Shareholders and ADR Holders
will not have appraisal, dissenter or similar rights in connection
with the Scheme.
19
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18. Action to be taken
Forms of proxy for use at the Court Meetings are enclosed as
follows:
RED form of proxy: for use by Ordinary Shareholders at the
Ordinary Court Meeting.
YELLOW form of proxy: for use by 5% Preference Shareholders at
the 5% Preference Court Meeting.
GREEN form of proxy: for use by 6% Preference Shareholders at
the 6% Preference Court Meeting.
Whether or not you propose to attend the Court Meetings in person, you
are requested to complete and sign the relevant forms of proxy and to
return them in accordance with the instructions printed on them as
soon as possible to ASH's Registrars, Lloyds Bank Registrars, The
Causeway, Worthing, West Sussex BN99 6DB, so as to be received no
later than 48 hours before the respective times appointed for the
Court Meetings. Forms of proxy for the Court Meetings will also be
valid if handed to the Chairman of the relevant meeting before the
start of such meeting. Completion and return of forms of proxy will
not prevent you from attending the relevant Court Meeting and voting
in person should you subsequently decide to do so.
The Bank of New York (agent bank for the ADRs) is writing
separately to ADR Holders in order to explain how they can
exercise their right to vote. Such holders have the right to become
registered Ordinary Shareholders by converting their ADRs into
Ordinary Shares in order to obtain the right to attend the Ordinary
Court Meeting and the Court hearing of the petition to sanction
the Scheme should they choose to do so.
Provided that the Scheme becomes effective (subject to any
modification, addition or condition approved or imposed by the
Court), Scheme Shareholders will receive their Consideration
Common Shares without having to take any further action.
19. ADT consent
ADT has consented to the issue of this document including
references to ADT in the form and context in which such
references appear.
20. Further information
Your attention is drawn to the Appendices which form part of this
Explanatory Statement and which contain additional relevant
information.
21. Recommendation
The Board of ASH, which has been so advised by the Company's
financial advisers, Charterhouse and Smith Barney, considers the
terms of the Proposals to be fair and reasonable and in the best
interests of the Shareholders as a whole. In providing advice to the
Board, Charterhouse and Smith Barney have taken into account
the Board's commercial assessment of the Proposals. Accordingly,
the Board recommends that you vote in favour of the Proposals, as
the Board members intend to do in respect of their own beneficial
holdings.
Yours faithfully
/s/ Lane of Horsell
Lord Lane of Horsell
Chairman
20
<PAGE>
APPENDICES TO THE EXPLANATORY STATEMENT
APPENDIX I
CONDITIONS AND OPERATION OF THE SCHEME
The Scheme will become effective and binding if each of the following conditions
is fulfilled or, where capable of waiver, waived:
1. the Scheme being approved by a majority in number, representing
three-fourths in value of the shares held by those present and voting
either in person or by proxy, of the holders of:
(a) the Ordinary Shares;
(b) the 5% Preference Shares; and
(c) the 6% Preference Shares;
at their respective Court Meetings (or at any adjournment thereof);
2. the passing at the Extraordinary General Meeting (or at any
adjournment thereof) of a special resolution to amend ASH's articles
of association;
3. the Scheme being sanctioned by the Court and an office copy of the
Court Order being delivered to the Registrar of Companies for
registration no later than 31 October 1996 or such later date as ASH,
ADT and the Court may agree;
4. the Bermuda Monetary Authority (Foreign Exchange Control) granting
consent to the ADT Common Shares being issued as consideration under
the Scheme;
5. the New York Stock Exchange approving for listing the ADT Common
Shares being issued as consideration under the Scheme for trading on
that exchange;
6. the London Stock Exchange agreeing to admit the ADT Common Shares
being issued as consideration under the Scheme to the Official List;
7. ADT receiving, in a form satisfactory to it, a no-action letter from
the US Securities and Exchange Commission in relation to the ADT
Common Shares being issued as consideration under the Scheme
confirming that such issue is exempt from registration under the US
Securities Act of 1933, as amended;
8. the Trustee of the Convertible Capital Bonds, ASH Capital Finance
(Jersey) Limited, ASH and ADT entering into a supplemental trust deed
and ancillary documents in a form satisfactory to ADT and on terms
which give effect to the relevant agreement in principle to add ADT as
a guarantor of the Convertible Capital Bonds and as the party into
whose share capital the conversion and exchange rights of the
Convertible Capital Bonds are exercisable;
9. ASH, the holder of the Senior Notes and the bank acting as security
trustee in relation to the Senior Notes entering into the necessary
documentation in a form satisfactory to ADT to give effect to the
agreement in principle of the holder of the Senior Notes to cancel its
rights to subscribe for 3,706,680 Ordinary Shares conditional upon the
prepayment of the Senior Notes held by it;
10. it having been established, in terms satisfactory to ADT, that the
Scheme or any matter arising from the Scheme will not be referred to
the Monopolies and Mergers Commission;
11. any waiting periods under the HSR Act and the regulations thereunder
having expired or been terminated;
12. no government or governmental, quasi-governmental, supranational,
statutory or regulatory body, trade agency, professional association,
institution, court or any other person or body in any jurisdiction
having instituted, implemented or threatened any action, proceedings,
suit, investigation or enquiry or enacted or made, or having proposed
to enact or make, any statute, regulation, order or decision that
might:
(a) make the Scheme or the arrangements relating to the Convertible
Capital Bonds void, illegal or unenforceable or directly or indirectly
restrict, prohibit, delay or otherwise interfere with the
implementation of, or impose additional material conditions or
material obligations with respect to, the Scheme or the
arrangements relating to the Convertible Capital Bonds;
(b) result, directly or indirectly, in any material delay in the
ability of ADT to acquire all or any of the shares in ASH pursuant to
the Scheme or the arrangements relating to the Convertible Capital
Bonds;
21
<PAGE>
(c) require the divestiture by the ASH Group or by the ADT Group of
all or any part of their respective businesses, assets or properties
or impose any material limitation on the ability of any of them to
conduct their respective businesses or own their respective assets
or properties;
(d) impose any material limitation on the ability of any member of the
ADT Group to acquire or hold, or to exercise effectively, directly or
indirectly, all or any rights of ownership of shares in any member
of the ASH Group or on the ability of any member of the ASH Group
to acquire or hold, or to exercise effectively, directly or
indirectly, all or any rights of ownership of shares in any other
member of the ASH Group; or
(e) otherwise materially and adversely affect the business or profits
of the ASH Group or of the ADT Group, and all applicable waiting or
other periods during which any such government, body, agency
association, institution, court or person could institute,
implement or threaten any such action, proceedings, suit,
investigation or enquiry having expired or been terminated;
13. all authorisations, orders, recognitions, grants, consents,
confirmations, permissions and approvals necessary or appropriate for
or in respect of the Scheme (or the fulfilment of any conditions of
the Scheme) and the proposed acquisition of ASH by ADT being obtained
in terms and form satisfactory to ADT from the appropriate
governments, governmental, quasi-governmental, supranational,
statutory and regulatory bodies, trade agencies, professional
associations, institutions, courts and persons and bodies with whom
any member of the ASH Group or the ADT Group has entered into
contractual arrangements and such authorisations, orders,
recognitions, grants, consents, confirmations, permissions and
approvals remaining in full force and effect and there being no
indication of any intention to revoke any of them and all necessary
filings having been made and all applicable waiting periods under any
applicable legislation or regulation in any jurisdiction having
expired or been terminated and all necessary statutory and regulatory
obligations in any jurisdiction having been complied with;
14. there being no provision of any agreement or other instrument to which
any member of the ASH Group is a party or by or to which any such
member or any of its assets may be bound or be subject which would or
may, as a consequence of the implementation of the Scheme, result, to
an extent which is material in the context of the ASH Group taken as a
whole, in:
(a) any indebtedness of any such member being or becoming capable of
being repayable prior to its stated maturity or the ability of such
member or person to incur any indebtedness being withdrawn or
inhibited;
(b) any such agreement or instrument being terminated or materially
and adversely modified or any material action being taken or onerous
obligation arising thereunder;
(c) any assets of any such member being disposed of otherwise than in
the ordinary course of business;
(d) the financial or trading position or prospects of any such member
being materially and adversely affected;
(e) the interest or business of any such member in or with any person,
firm or company (or any arrangements relating to such interest or
business) being terminated or materially and adversely affected;
or
(f) the creation of any mortgage, charge or other security over the
whole or any part of the business, property or assets of any such
member;
except as disclosed in writing to ADT prior to 19 June 1996, being the
date on which the Proposals were first announced;
15. no member of the ASH Group having since 30 November 1995, (except as
disclosed in writing to ADT prior to 19 June 1996):
(a) issued or authorised or proposed the issue of additional shares of
any class or securities convertible into, or rights, warrants or
options to subscribe for or acquire, any such shares or
convertible securities;
(b) declared, paid or made or proposed to declare, pay or make any
dividend or other distribution whether payable in cash or otherwise,
other than any distribution by any wholly-owned subsidiary within
the ASH Group;
(c) entered into any agreement to acquire, dispose of or transfer
material assets (other than in the ordinary course of trading);
22
<PAGE>
(d) issued any debentures or incurred any indebtedness or contingent
liability which is material in the context of the ASH Group taken as a
whole;
(e) disposed of or transferred, mortgaged or encumbered any assets or
any right, title or interest in any asset which is material in the
context of the ASH Group taken as a whole;
(f) entered into any arrangement, agreement or commitment (whether in
respect of capital expenditure or otherwise) which is of a long term
or unusual nature or which involves or could involve an obligation
of a nature or magnitude which is material in the context of the
ASH Group taken as a whole;
(g) entered into any arrangement, agreement or commitment otherwise
than in the ordinary course of its business which is material in the
context of the ASH Group taken as a whole;
(h) entered into or varied the terms of any service agreement with any
director of ASH;
(i) in the case of ASH, proposed any voluntary winding-up; or
(j) entered into any arrangement, agreement or commitment or passed
any resolution in general meeting with respect to any of the
transactions or events referred to in this paragraph;
16. since 30 November 1995 (except as disclosed in writing to ADT prior to
19 June 1996):
(a) there having been no material adverse change in the financial or
trading position of the ASH Group taken as a whole;
(b) there having been no litigation, arbitration proceedings,
prosecution or other legal proceedings to which any member of the ASH
Group is a party (whether as plaintiff, defendant or otherwise)
and no such proceedings having been threatened against any member
of the ASH Group which in any case is likely to have a material
and adverse effect on the ASH Group taken as a whole; and
(c) no contingent liability having arisen which might be likely
materially and adversely to affect any member of the ASH Group which
in any case is likely to have a material effect on the ASH Group
taken as a whole; and
17. ADT not becoming aware after the date of this document that the
financial or business information concerning the ASH Group as
contained in the information publicly disclosed at any time by any
member of the ASH Group contains a misrepresentation of fact which is
material in the context of the ASH Group taken as a whole or omits to
state a fact necessary to make the information contained therein not
misleading in a manner which is material in such context.
ADT reserves the right to waive all or any of conditions 1(b), 1(c), 2 and 7 to
17 inclusive, in whole or in part. Since the announcement of the Proposals on 19
June 1996, condition 2 has been waived by ADT and conditions 4, 8 and 9 have
been satisfied.
The Scheme will not proceed in the event that the proposed acquisition of the
Scheme Shares is referred to the Monopolies and Mergers Commission prior to the
date of the Court Meetings.
It is expected that the Scheme will become effective on 5 September 1996. Unless
the Scheme has become effective by 31 October 1996 or any later date which ADT
and ASH may agree and the Court may allow, the Scheme shall not become
effective.
23
<PAGE>
APPENDIX II
FINANCIAL INFORMATION ON THE ASH GROUP
1. Financial information in respect of the last three financial years
Basis of preparation
The following information which has been prepared in accordance with UK
GAAP has been extracted from the audited consolidated financial statements of
ASH for each of the years ended 30 November 1995, 1994 and 1993, restated for
changes in accounting standards where applicable.
Consolidated Profit and Loss accounts
Set out below is a summary of the consolidated profit and loss accounts of
ASH for the three years ended 30 November 1995 which have been extracted from
the audited consolidated accounts of ASH.
<TABLE>
<CAPTION>
(as restated) (as restated)
1995 1994 1993
Notes pounds '000 pounds '000 pounds '000
<S> <C> <C> <C> <C>
Turnover:
Continuing operations............ 153,733 154,303 143,136
Discontinued operations.......... 9,616 11,768 17,639
--------------- --------------- ---------------
1 163,349 166,071 160,775
Cost of sales.................... 2 (105,511) (108,235) (105,768)
--------------- --------------- ---------------
Gross profit....................... 57,838 57,836 55,007
--------------- --------------- ---------------
Former Chairman's termination
payment....................... -- (993) --
Refinancing costs................ (3,136) (1,582) --
Other exceptional costs.......... (2,348) -- --
--------------- --------------- ---------------
Exceptional operating expenses... 6 (5,484) (2,575) --
Other operating expenses......... (36,159) (33,899) (35,364)
--------------- --------------- ---------------
Operating expenses............... 2 (41,643) (36,474) (35,364)
--------------- --------------- ---------------
Operating profit:
Continuing operations before
exceptional operating
expenses...................... 20,240 24,245 23,281
Exceptional operating expenses
(as above).................... 6 (5,484) (2,575) --
--------------- --------------- ---------------
Continuing operations............ 14,756 21,670 23,281
Discontinued operations.......... 1,439 (308) (3,638)
--------------- --------------- ---------------
Operating profit................... 16,195 21,362 19,643
Restructuring and reorganisation
costs......................... 6 -- -- (1,378)
Loss on disposal of discontinued
operations.................... 3 (5,675) -- --
Amount written off fixed asset
investments................... 4 (3,066) (20,602) (200)
--------------- --------------- ---------------
Profit on ordinary activities
before interest and similar
charges.......................... 7,454 760 18,065
Net interest payable and similar
charges....................... 5 (14,862) (12,514) (10,754)
--------------- --------------- ---------------
(Loss)/profit on ordinary
activities before taxation....... 6 (7,408) (11,754) 7,311
Taxation 7 (800) (1,000) (1,800)
--------------- --------------- ---------------
(Loss)/profit for the financial
year............................. (8,208) (12,754) 5,511
Dividends - Equity shares........ 8 -- -- (3,473)
- Non-equity shares.... 8 (2,839) (2,839) (2,844)
--------------- --------------- ---------------
Loss transferred from reserves..... 9 & 20(c) (11,047) (15,593) (806)
--------------- --------------- ---------------
(Loss)/profit per Ordinary Share... 10 (9.2 pence) (13.0 pence) 2.3 pence
Adjusted (loss)/earnings per
Ordinary Share................... 10 (1.9 pence) 4.2 pence 2.5 pence
</TABLE>
24
<PAGE>
Consolidated Balance Sheet
Set out below is a summary of the consolidated balance sheet of ASH at 30
November 1995.
<TABLE>
<CAPTION>
1995 1994
Notes pounds '000 pounds '000
<S> <C> <C> <C>
Assets employed
Fixed assets
Tangible assets.................. 11 227,386 223,255
Investments - Associated
undertakings.................. 12(a) 201 3,681
Investments - Own shares......... 12(b) 614 3,680
---------- ----------
Total fixed assets............ 228,201 230,616
---------- ----------
Current assets
Stocks........................... 13 4,600 8,095
Debtors (including amounts
recoverable after more than
one year of pounds 5,651,000
(1994: pounds 4,122,000))..... 14 30,676 33,226
Cash at bank and in hand......... 5,936 3,934
---------- ----------
Total current assets.......... 41,212 45,255
---------- ----------
Creditors: Amounts falling due
within one year
Loans and other borrowings....... 15 83,104 82,568
Other creditors.................. 16(a) 39,712 46,825
---------- ----------
Total creditors: Amounts falling
due within one year.............. 122,816 129,393
---------- ----------
Net current liabilities............ (81,604) (84,138)
---------- ----------
Total assets less current
liabilities...................... 146,597 146,478
---------- ----------
---------- ----------
Financed by Creditors: amounts
falling due after more than one
year
Loans and other borrowings....... 15 37,152 35,019
Convertible Capital Bonds.......... 17 43,813 43,693
Other creditors.................. 16(b) 4,325 2,551
---------- ----------
Total creditors: Amounts falling
due after more than one year..... 85,290 81,263
---------- ----------
Provisions for liabilities and
charges.......................... 18 1,060 1,357
---------- ----------
Deferred income - rentals in
advance.......................... 27,763 28,575
---------- ----------
Capital and reserves:
Called up share capital.......... 19 60,586 60,588
Share premium account............ 20(a) 5,610 5,729
Other reserves................... 20(b) (82,432) (90,681)
Profit and loss account.......... 20(c) 48,720 59,647
---------- ----------
Equity interests................. (16,145) (13,348)
Non-equity interests............. 48,629 48,631
---------- ----------
Shareholders' funds (including
non-equity interests)............ 32,484 35,283
---------- ----------
146,597 146,478
---------- ----------
---------- ----------
</TABLE>
Group Statement of Total Recognised Gains and Losses
<TABLE>
<CAPTION>
1995 1994 1993
pounds pounds pounds
For the year ended 30 November '000 '000 '000
<S> <C> <C> <C>
(Loss)/profit for the financial
year............................. (8,208) (12,754) 5,511
Currency translation differences
on foreign currency net
investments excluding
goodwill...................... 1,415 (2,429) 911
Currency translation differences
on foreign currency hedging... (1,777) 2,136 (1,369)
---------- ---------- ----------
Total recognised gains and
losses relating to the
year........................ (8,570) (13,047) 5,053
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
25
<PAGE>
Reconciliation of Movements in Shareholders' Funds
<TABLE>
<CAPTION>
1995 1994
pounds '000 pounds '000
<S> <C> <C>
Loss for the financial year........ (8,208) (12,754)
Dividends.......................... (2,839) (2,839)
---------- ----------
(11,047) (15,593)
Other recognised gains and losses
relating to the year (net)....... (362) (293)
New share capital subscribed....... -- 1
Share issue expenses............... (1) (14)
Goodwill written off............... (232) (20,193)
Goodwill on acquisition of
subsidiaries and associated
undertakings transferred to
profit and loss account.......... 8,843 17,365
---------- ----------
Net movement in shareholders'
funds............................ (2,799) (18,727)
Opening shareholders' funds........ 35,283 54,010
---------- ----------
Closing shareholders' funds........ 32,484 35,283
---------- ----------
</TABLE>
Accounting Policies
Set out below are the principal accounting policies adopted in
preparing the audited consolidated accounts of ASH. These
policies have been consistently applied for each of the three years
ended 30 November 1995.
1. Basis of consolidation
The financial statements which have been prepared under the
historical cost convention as modified by the revaluation of certain
land and buildings, consolidate the financial statements of the
Company and its subsidiaries made up to 30 November and have
been prepared in accordance with applicable accounting standards
in the UK.
The results and net assets of associated undertakings are dealt with
on an equity accounting basis.
2. Fixed assets
The cost of equipment on contract hire installed by ASH Group
companies is capitalised. Costs comprise materials, labour and
attributable overheads relating to identifiable and recoverable
equipment. All other costs are written off as they are incurred.
On the acquisition of installed systems from third parties, a fair
value is placed on installed equipment acquired.
3. Depreciation and amortisation
The tangible fixed assets are depreciated on a straight line basis at
the following annual rates:
Equipment on contract hire
- Burglar alarms 7 - 10 per cent.
Communication centre equipment 10 per cent.
Freehold buildings 2 1/2 per cent.
Leasehold premises and improvements over unexpired period of lease
Motor vehicles 25 per cent.
Other assets 10-33 1/3 per cent.
No depreciation is provided on freehold land.
4. Development expenditure and distribution rights
Expenditure on development and distribution rights is written off
as it is incurred.
5. Investments
Fixed asset investments are included at cost less amounts provided
where, in the opinion of the Directors, there is a permanent
diminution in value.
Goodwill on the acquisition of associated undertakings is written
off to other reserves at the date of acquisition.
6. Equipment leased to customers
Equipment leased to customers under finance leases is deemed to
be sold at normal selling value which is taken to turnover at the
inception of the lease. Debtors under finance leases represent
outstanding amounts due under these agreements less finance
charges allocated to future periods. Finance lease interest is
recognised over the primary period of the lease so as to produce a
constant rate of return on the net cash investments. Equipment
leased to customers under operating leases is capitalised in
accordance with 2 above. Operating lease income is accounted for
on a straight line basis with any rental increases recognised during
the period to which they relate.
26
<PAGE>
7. Operating leases
Rentals paid under operating leases are charged against income on
a straight line basis over the period of the lease.
8. Stocks
Stocks are valued at the lower of cost and net realisable value on
the FIFO basis. Cost of products manufactured and distributed by
the ASH Group consists of direct material and labour costs,
together with appropriate overheads.
9. Deferred taxation
Deferred taxation is provided on the liability method in respect of
timing differences between profits as computed for taxation
purposes and profits as stated in the financial statements except to
the extent that it is expected that the liability will not be payable in
the foreseeable future. Timing differences arise mainly from the
excess of tax allowances on fixed assets over the corresponding
depreciation charges in the financial statements.
10. Foreign exchange
Foreign currency assets and liabilities of ASH Group companies
are translated into sterling at the rates of exchange ruling at the
balance sheet date. The trading results of overseas subsidiaries and
associated undertakings are translated at the average exchange rate
ruling during the year with the adjustment between average rates
and the rates ruling at the balance sheet date being taken to
reserves. The differences arising on the restatement of the opening
net investment, including goodwill, in overseas subsidiary and
associated undertakings, and of matching foreign currency loans
and foreign currency swap facilities, are dealt with as adjustments
to other reserves. All other exchange differences are dealt with in
the profit and loss account.
11. Goodwill
Goodwill being the excess of the consideration on the acquisition
of businesses over the fair value of the separable net assets
acquired is written off direct to reserves.
12. Pensions
The ASH Group operates a funded defined benefit plan for UK
employees (the "Plan"), based on final pensionable salary, with
assets held in funds administered by the trustees of the Plan. The
cost of providing pensions is spread on a systematic and rational
basis over the period during which the Group benefits from the
members' services. The pension costs and any necessary provisions
are assessed in accordance with the advice of an independent
qualified actuary. Variations from the regular cost are spread over
the average remaining service lives of current employees.
Overseas, the ASH Group in general operates defined contribution
plans for certain executives, the costs of which are recognised on
the basis of contributions payable.
13. Employees' share ownership plan ("ESOP") trust
The Group operates an ESOP for directors and employees. The
ESOP trust holds shares in the Company and is financed by a loan
from the Company. In prior years the net amount due from the
trust was shown in other debtors but following the publication of
Urgent Issues Task Force Abstract 13 in 1995, this balance is now
classified as 'own shares' within fixed assets and the comparative
figures have been restated accordingly.
Provision is made for the diminution in the market value of the
shares held by the ESOP trust.
27
<PAGE>
Notes to consolidated financial statements
1. Turnover and segmental analysis
Turnover represents the amounts derived from the provision of goods and
services which fall within the ASH Group's ordinary activities stated net of
value added tax. Included in turnover is a figure of 86,105,000 pounds (1994:
88,497,000 pounds; 1993: 84,689,000 pounds) in respect of rental and maintenance
income. Rental and maintenance income from continuing operations amounted to
82,429,000 pounds (1994: 81,495,000 pounds; 1993: 78,710,000 pounds).
Turnover, profit on ordinary activities before tax and net assets by
geographical market are analysed as follows:
<TABLE>
<CAPTION>
UK Europe US
----------------------------------------- ----------------------------------------- -----------
Geographical area by 1995 1994 1993 1995 1994 1993 1995
source pounds '000 pounds '000 pounds '000 pounds '000 pounds '000 pounds '000 pounds '000
<S> <C> <C> <C> <C> <C> <C> <C>
Turnover
Turnover by origin
Total sales............ 118,624 119,139 114,085 3,678 4,029 3,934 41,864
Inter-segment sales.... (817) (600) (759) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Sales to third
parties........... 117,807 118,539 113,326 3,678 4,029 3,934 41,864
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Rental income............ 54,770 52,725 47,899 1,450 1,420 1,697 26,209
Sales.................... 53,421 54,046 47,788 2,228 2,609 2,237 15,655
----------- ----------- ----------- ----------- ----------- ----------- -----------
Continuing operations.... 108,191 106,771 95,687 3,678 4,029 3,934 41,864
Discontinued operations.. 9,616 11,768 17,639 -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
117,807 118,539 113,326 3,678 4,029 3,934 41,864
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Profit before taxation
Segment profit/(loss).... 20,071 18,227 14,168 (261) 482 1,051 5,706
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Corporate and exceptional
operating costs........
Loss on sale of
discontinued
operations.............
Restructuring and
reorganisation costs...
Amount written off fixed
asset investments......
Net interest payable and
similar charges........
Group (loss)/profit on
ordinary activities
before taxation........
Net assets
Segment net assets..... 144,061 144,094 136,288 5,863 8,835 8,740 57,264
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
US Group as restated
-------------------------- -----------------------------------------
Geographical area by 1994 1993 1995 1994 1993
source pounds '000 pounds '000 pounds '000 pounds '000 pounds '000
<S> <C> <C> <C> <C> <C>
Turnover
Turnover by origin
Total sales............ 43,503 43,515 164,166 166,671 161,534
Inter-segment sales.... -- -- (817) (600) (759)
----------- ----------- ----------- ----------- -----------
Sales to third
parties........... 43,503 43,515 163,349 166,071 160,775
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Rental income............ 27,350 29,114 82,429 81,495 78,710
Sales.................... 16,153 14,401 71,304 72,808 64,426
----------- ----------- ----------- -----------
Continuing operations.... 43,503 43,515 153,733 154,303 143,136
Discontinued operations.. -- -- 9,616 11,768 17,639
----------- ----------- ----------- -----------
43,503 43,515 163,349 166,071 160,775
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Profit before taxation
Segment profit/(loss).... 7,358 7,986 25,516 26,067 23,205
----------- -----------
----------- -----------
Corporate and exceptional
operating costs........ (9,321) (4,705) (3,562)
Loss on sale of
discontinued
operations............. (5,675) -- --
Restructuring and
reorganisation costs... -- -- (1,378)
Amount written off fixed
asset investments...... (3,066) (20,602) (200)
Net interest payable and
similar charges........ (14,862) (12,514) (10,754)
----------- ----------- -----------
Group (loss)/profit on
ordinary activities
before taxation........ (7,408) (11,754) 7,311
----------- ----------- -----------
----------- ----------- -----------
Net assets
Segment net assets..... 55,876 74,019 207,188 208,805 219,047
----------- -----------
----------- -----------
Unallocated net
liabilities (6,418) (8,133) (1,355)
----------- ----------- -----------
Total net assets 200,770 200,672 217,692
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Unallocated net liabilities consist of assets and liabilities of the
holding company less investments. No analysis of turnover by destination is
included as this is not materially different from that by source.
<TABLE>
<CAPTION>
1995 1994 1993
pounds pounds pounds
'000 '000 '000
<S> <C> <C> <C>
Reconciliation of net assets to ASH
Group balance sheet:
Total net assets................... 200,770 200,672 217,692
Loans and other borrowings due
within one year................. (83,104) (82,568) (4,039)
Loans and other borrowings due
after more than one year........ (37,152) (35,019) (112,428)
Taxation and dividends in other
creditors....................... (4,217) (4,109) (3,641)
Convertible Capital Bonds.......... (43,813) (43,693) (43,574)
------- ------- -------
Total capital and reserves......... 32,484 35,283 54,010
------- ------- -------
------- ------- -------
</TABLE>
28
<PAGE>
2. Cost of sales and net operating expenses
<TABLE>
<CAPTION>
1995 1994 1993
Continuing Discontinued Total Continuing Discontinued Total Continuing
pounds pounds pounds pounds pounds pounds pounds
'000 '000 '000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C> <C> <C>
Cost of Sales............ 99,310 6,201 105,511 98,739 9,496 108,235 89,554
---------- ------ ------ ---------- ------ ------ ----------
---------- ------ ------ ---------- ------ ------ ----------
Distribution costs....... 12,878 267 13,145 14,592 589 15,181 13,959
Administrative expenses.. 26,203 2,305 28,508 19,148 3,219 22,367 16,207
Share of results of
associated
undertakings........... 586 (596) (10) 154 (915) (761) 135
Other income from
associates............. -- -- -- -- (313) (313) --
---------- ------ ------ ---------- ------ ------ ----------
39,667 1,976 41,643 33,894 2,580 36,474 30,301
---------- ------ ------ ---------- ------ ------ ----------
---------- ------ ------ ---------- ------ ------ ----------
<CAPTION>
1993
Discontinued Total
pounds pounds
'000 '000
<S> <C> <C>
Cost of Sales............ 16,214 105,768
------ ------
------ ------
Distribution costs....... 1,250 15,209
Administrative expenses.. 4,360 20,567
Share of results of
associated
undertakings........... (547) (412)
Other income from
associates............. -- --
------ ------
5,063 35,364
------ ------
------ ------
</TABLE>
3. Loss on sale of discontinued operations
<TABLE>
<CAPTION>
1995 1994 1993
pounds pounds pounds
'000 '000 '000
<S> <C> <C> <C>
Profit on sale of subsidiary and
associated undertakings based on
the consolidated carrying
value............................ 3,168 -- --
Less: Goodwill on acquisition of
subsidiary and associated
undertakings previously written
off to other reserves............ (8,843) -- --
------ ------ ------
Loss on sale of discontinued
operations (5,675) -- --
------ ------ ------
------ ------ ------
</TABLE>
The 1995 loss on sale of discontinued operations relates to the sale of a
subsidiary undertaking, Modern Vitalcall Limited, the business of Modern
Integrated Systems and the Group's investment in two associate undertakings,
Compagnie Generale de Protection et de Securite SA and Microtech Security (UK)
Limited. The total consideration receivable amounted to 9.3 million pounds of
which 0.1 million pounds is receivable in 1996 and 0.5 million pounds is in the
form of loan notes.
4. Amounts written off fixed asset investments
<TABLE>
<CAPTION>
(as restated)
1995 1994 1993
pounds pounds pounds
'000 '000 '000
<S> <C> <C> <C>
Own shares......................... 3,066 450 200
Arius Inc:
Amounts written off investments
and loans..................... -- 862 --
Other provisions................. -- 1,925 --
Goodwill on acquisition
previously written off to
other reserves................ -- 17,365 --
----- ------ -----
3,066 20,602 200
----- ------ -----
----- ------ -----
</TABLE>
As part of the Company's share option schemes the group established the
Automated Security (Holdings) PLC Employees' Share Ownership Plan ('ESOP'). The
ESOP has a loan of 5.9 million pounds from the Company and its assets consist
principally of investments in the Company's shares.
In accordance with Urgent Issues Task Force Abstract 13, issued on 8 June
1995, the amount receivable from the ESOP is reclassified as a fixed asset
investment (see note 12(b)) and any permanent diminution in value is charged to
the profit and loss account. The board believes that a prudent method of
application of this Abstract is to value the shares held by the ESOP at the
market prices as at 30 November 1995. Consequently the shortfall between the
market value of the ESOP's shares and the amount receivable from the ESOP has
been charged to the profit and loss account in the current year.
29
<PAGE>
5. Interest payable and similar charges
<TABLE>
<CAPTION>
1993 1994 1993
pounds pounds pounds
'000 '000 '000
<S> <C> <C> <C>
(a) Net interest payable
Interest payable by the group in
respect of:
Loans wholly repayable within
five years
Bank loans and overdrafts..... 6,612 4,282 3,276
8.28 per cent. Senior Notes... 3,201 1,644 --
------ ------ ------
9,813 5,926 3,276
Loans repayable after five
years--Convertible Capital
Bonds............................ 4,269 4,269 4,269
------ ------ ------
Total interest payable............. 14,082 10,195 7,545
Interest receivable................ (173) (181) (1,269)
Net interest payable............... 13,909 10,014 6,276
------ ------ ------
Interest payable includes
29,000 pounds (1994:
45,000 pounds; 1993:
33,000 pounds) in respect of
lease finance.
(b) Stapled unit charges........... -- 1,942 4,359
------ ------ ------
(c) Other similar charges.......... 953 558 119
------ ------ ------
Total interest payable and
similar charges.................. 14,862 12,514 10,754
------ ------ ------
------ ------ ------
</TABLE>
Other similar charges includes the amortisation of the costs of issue of
Convertible Capital Bonds and 8.28 per cent. Senior Notes and yield maintenance
charges in respect of such notes.
6. Loss on ordinary activities before tax
<TABLE>
<CAPTION>
1993 1994 1993
pounds pounds pounds
'000 '000 '000
<S> <C> <C> <C>
Amounts capitalised in respect of
equipment on contract hire....... (35,919) (41,090) (51,204)
------- ------- -------
------- ------- -------
The loss is stated after
charging/(crediting):
Depreciation....................... 34,612 34,851 40,935
Hire of plant and machinery........ 842 887 843
Other operating lease and hire
charges.......................... 9,402 9,243 6,502
Profit on disposal of tangible
fixed assets..................... (239) (962) 621
Auditors' remuneration............. 400 410 386
Currency exchange
(gains)/losses................... (26) 10 (127)
Development expenditure............ 191 430 1,250
EU grant receivable................ -- (356) (287)
------- ------- -------
------- ------- -------
Exceptional costs:
Refinancing costs.................. 3,136 1,582 --
API Security--computer equipment
and leasehold improvements....... 2,348 -- --
Former Chairman's termination
payment.......................... -- 993 --
Restructuring and reorganisation
costs............................ -- -- 1,378
------- ------- -------
5,484 2,575 1,378
------- ------- -------
------- ------- -------
</TABLE>
Refinancing costs relate to fees to professional advisers and other third
parties in connection with the refinancing of the group. The additional charges
at API Security, Inc. relate to the write off of existing computer systems and
leasehold improvements of $3.7 million as a result of the board's decision to
move to smaller and less expensive premises on expiry of the present lease in
May 1996 and the implementation of enhanced computer monitoring and business
systems.
Finance lease interest receivable of 489,000 pounds (1994: 448,000 pounds; 1993:
867,000 pounds) is included in turnover and profit before interest. Finance
lease rentals receivable in the year were approximately 3.4 million pounds
(1994: 2.9 million pounds; 1993: 3.4 million pounds). Included within cost of
sales is the cost of assets for rental under finance leases of approximately 3.0
million pounds (1994: 3.5 million pounds; 1993: 2.6 pounds million). The
remuneration paid to the auditors in respect of non-audit services during 1995
amounted to 251,000 pounds (1994: 308,000 pounds; 1993: 245,000 pounds).
30
<PAGE>
7. Taxation
<TABLE>
<CAPTION>
1995 1994 1993
pounds pounds pounds
'000 '000 '000
<S> <C> <C> <C>
ACT written off as presently irrecoverable 705 710 2,270
Share of associated undertakings' taxation 173 78 45
Overseas taxation 65 (64) 112
Adjustments in respect of prior years (143) 276 (627)
------ ------ ------
Taxation charge for the year 800 1,000 1,800
------ ------ ------
------ ------ ------
</TABLE>
Advance Corporation Tax ('ACT') written off in 1995 includes accrued ACT of
355,000 pounds in respect of accrued preference dividends.
No tax is payable in respect of the sale of discontinued operations in 1995.
Deferred Tax
Provision for deferred taxation has been made for those timing differences which
are likely to reverse in the foreseeable future as compared with the full
potential liability assuming UK Corporation Tax at 33 per cent.
<TABLE>
<CAPTION>
1995 1995 1994 1994 1993 1993
Provided Potential Provided Potential Provided Potential
pounds pounds pounds pounds pounds pounds
'000 '000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C> <C>
Accelerated capital allowances -- 12,438 -- 13,137 -- 14,463
Other timing differences -- (1,456) -- (1,725) -- (4,848)
-------- --------- -------- --------- -------- ---------
-- 10,982 -- 11,412 -- 9,615
Advance Corporation Tax -- (6,363) -- (6,439) -- (5,200)
-------- --------- --------- -------- ---------
-- 4,619 -- 4,973 -- 4,415
-------- --------- --------- -------- ---------
-------- --------- --------- -------- ---------
</TABLE>
8. Dividends
<TABLE>
<CAPTION>
1995 1994 1993
pounds pounds pounds
'000 '000 '000
<S> <C> <C> <C>
Equity shares:
Ordinary Shares
Interim Nil (1994: Nil; 1993: 3.05p) -- -- 3,473
Proposed Nil (1994: Nil) -- -- --
Non-equity shares:
5% Preference Shares 393 393 398
6% Preference Shares 2,446 2,446 2,446
------ ------ ------
Total dividends for year 2,839 2,839 6,317
------ ------ ------
------ ------ ------
</TABLE>
Dividends of pounds 1,223,000 in respect of the 6% Preference Shares for the six
months to 30 November 1995 have not been paid during the year but have been
accrued in these financial statements.
The 1993 interim dividend on the Ordinary Shares offered an enhanced scrip
dividend alternative such that shareholders could opt to receive new Ordinary
Shares rather than cash. The value of the enhanced scrip dividend was calculated
at 4.575p being 50 per cent. higher than the basic cash dividend of 3.05p per
share. Consequently pounds 435,436 of the Ordinary Share dividend was paid in
cash and the Company issued 3,208,618 Ordinary Shares of 10p each on 13 October
1993.
9. Transfer to/(from) reserves
<TABLE>
<CAPTION>
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
Amounts transferred to/(from) reserves originated from:
The Company 335 (13,917)
Subsidiary undertakings (11,327) (2,253)
Associated undertakings (55) 577
------ ------
(11,047) (15,593)
------ ------
------ ------
</TABLE>
The profit for the financial year of the Company was 3,174,000 pounds (1994:
loss 11,078,000 pounds; 1993: loss 9,085,000 pounds).
31
<PAGE>
10. (Loss)/earnings per ordinary share
The loss per Ordinary Share is calculated by dividing the loss attributable to
Ordinary Shareholders for the year ended 30 November 1995 amounting to
11,047,000 pounds (1994: 15,593,000 pounds; 1993: Profit 2,667,000 pounds) by
the weighted average number of shares of 119.6 million (1994: 119.5 million;
1993 116.5 million) in issue throughout the year.
Adjusted (loss)/earnings per Ordinary Share is calculated by dividing the profit
attributable to Ordinary Shareholders prior to the charge for the amount written
off fixed asset investments and the loss on sale of subsidiary and associated
undertakings, amounting to a loss of 2,306,000 pounds (1994: restated profit
5,009,000 pounds; 1993: restated profit 2,867,000 pounds) by the weighted
average number of shares of 119.6 million (1994: 119.5 million; 1993: 116.5
million) in issue throughout the year. Adjusted earnings have been shown to
illustrate the earnings prior to these exceptional non-recurring charges.
11. Tangible fixed assets
<TABLE>
<CAPTION>
Motor
Land and Equipment on vehicles,
buildings contract Communication fixtures and Total
pounds hire centres plant pounds
'000 pounds '000 pounds '000 pounds '000 '000
<S> <C> <C> <C> <C> <C>
Group cost or valuation
At 1 December 1994 5,144 313,246 8,461 15,203 342,054
Exchange rate adjustment 50 2,345 3 138 2,536
Reclassification 255 -- (255) -- --
Additions 8 35,919 288 2,287 38,502
Disposals (61) (17,913) (3,830) (5,245) (27,049)
-------- ------------ ------ ------- -------
At 30 November 1995 5,396 333,597 4,667 12,383 356,043
-------- ------------ ------ ------- -------
-------- ------------ ------ ------- -------
Depreciation
At 1 December 1994 449 107,752 3,078 7,520 118,799
Exchange rate adjustment 5 865 6 76 952
Provision for the year 394 28,308 2,514 3,396 34,612
Disposals (14) (17,252) (3,828) (4,612) (25,706)
-------- ------------ ------ ------- -------
At 30 November 1995 834 119,673 1,770 6,380 128,657
-------- ------------ ------ ------- -------
-------- ------------ ------ ------- -------
Net book value
At 30 November 1995 4,562 213,924 2,897 6,003 227,386
-------- ------------ ------ ------- -------
At 30 November 1994 4,695 205,494 5,383 7,683 223,255
-------- ------------ ------ ------- -------
-------- ------------ ------ ------- -------
</TABLE>
(i) The depreciation provision for the year includes pounds 1,351,000 in
Communication Centres and 997,000 pounds in Motor Vehicles, Fixtures and
Plant in respect of accelerated depreciation on leasehold improvements,
computer equipment and business systems at API Security.
(ii) Accumulated depreciation of equipment on contract hire at 30 November 1995
includes 5.0 million pounds (1994: 4.1 million pounds) provided in respect
of potential cancellations of rental contracts.
(iii) The net book value of fixed assets includes an amount of pounds Nil (1994:
181,000 pounds) in respect of assets held under finance leases and hire
purchase contracts. The depreciation charge in respect of these assets was
82,000 pounds (1994: 99,000 pounds).
(iv) Land and buildings.
<TABLE>
<CAPTION>
ASH Group
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
The net book values of land and
buildings comprise:
Freehold buildings 2,128 2,173
--------- -----
Leaseholds over 50 years 1,136 954
Other leaseholds 1,298 1,568
--------- -----
Total leaseholds 2,434 2,522
--------- -----
Total land and buildings 4,562 4,695
--------- -----
--------- -----
</TABLE>
32
<PAGE>
11. Tangible fixed assets (continued)
The amount attributable to freehold land included above is 709,000 pounds
(1994: 709,000 pounds). The analysis of the gross book value is as follows:
<TABLE>
<CAPTION>
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
Cost 3,786 3,534
1992 Valuation 1,610 1,610
----- -----
Gross value 5,396 5,144
----- -----
----- -----
</TABLE>
The net book value of land and buildings, determined by reference to their
historical cost, is as follows:
<TABLE>
<CAPTION>
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
Cost 5,396 5,144
Depreciation (834) (449)
----- -----
Net book value at historical cost 4,562 4,695
----- -----
----- -----
</TABLE>
12. Fixed asset investments
<TABLE>
<CAPTION>
Associated Preference
undertakings shares in
share of net associated
assets Loans undertakings Total
pounds '000 pounds '000 pounds '000 pounds '000
<S> <C> <C> <C> <C>
(a) Associated undertakings
The group
Cost
At 1 December 1994 3,251 965 327 4,543
Exchange Adjustments (24) 8 -- (16)
Previously provided amounts
written off (543) (319) -- (862)
Premium on acquisition (232) -- -- (232)
Additions 232 -- -- 232
Disposals (3,409) -- -- (3,409)
Share of retained post
acquisition losses (55) -- -- (55)
------------ ---------- ----- ----------
At 30 November 1995 (780) 654 327 201
------------ ---------- ----- ----------
Provisions
At 1 December 1994 543 319 -- 862
Amounts written off (543) (319) -- (862)
------------ ---------- ----- ----------
At 30 November 1995 -- -- -- --
------------ ---------- ----- ----------
Net book value
At 30 November 1995 (780) 654 327 201
------------ ---------- ----- ----------
At 30 November 1994 2,708 646 327 3,681
------------ ---------- ----- ----------
</TABLE>
Investments comprise:
<TABLE>
<CAPTION>
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
Unquoted-- Directors' valuation
201,000 pounds (1994:
3,681,000 pounds) 201 3,681
------- -------
------- -------
</TABLE>
<TABLE>
<CAPTION>
Accounts Percentage held
prepared to 1995 1994
<S> <C> <C> <C>
TVX Inc 30th September 1995 40 41
Compagnie Generale de Protection et
Securite SA (CGPS) -- -- 40
Microtech Security (UK) Limited -- -- 25
Arius Inc In liquidation 43 43
----- -----
</TABLE>
At 30 November 1995 and 1994 the Group also held 48.5 per cent. of the
redeemable preferred stock par value $0.01, of TVX Inc. Loans of 654,000 pounds
(1994: 646,000 pounds) have also been made to this associated undertaking.
During the year sales of TVX equipment to TVX Inc. amounted to 100,000 pounds
(1994: 947,000 pounds). Arius Inc. went into liquidation during the year. All
investments and loans to Arius Inc. were fully provided in the 1994 financial
statements.
33
<PAGE>
12. Fixed asset investments (continued)
The Group's investment in CGPS and Microtech Security (UK) Limited were
sold during the year. See note 3.
<TABLE>
<CAPTION>
pounds
'000
<S> <C>
(b)Own shares
Cost
At 1 December 1994 (as previously stated) --
Transferred from other debtors 5,930
-------
At 1 December 1994 as restated and at 30 November 1995 5,930
-------
Provisions
At 1 December 1994 (as previously stated) --
Transferred from other debtors (2,250)
-------
At 1 December 1994 (as restated) (2,250)
Charge for the year (3,066)
-------
At 30 November 1995 (5,316)
-------
Net book value
At 30 November 1995 614
-------
-------
At 30 November 1994 3,680
-------
-------
</TABLE>
Own shares held relate to the ESOP trust. The Company has loans outstanding
from the trust of 5.9 million pounds and its principal assets are investments in
the Company's shares. At 30 November 1995 the ESOP trust held the following
shares in the company:
<TABLE>
<CAPTION>
Market
Value
at 30
November
1995 Pounds
No. per share '000
<S> <C> <C> <C>
Ordinary Shares of 10p each 2,124,582 24p 510
5% Preference Shares 70,000 38.5p 27
6% Preference Shares 200,000 38.5p 77
----
614
----
</TABLE>
The ESOP executive share option scheme (the 'ESOP Scheme') involves a
participant being granted an option to subscribe for Ordinary Shares of the
Company at a price based on the market price of such Ordinary Shares at the date
of the grant. All directors and employees of the ASH Group may participate in
the ESOP Scheme at the discretion of the board of directors. The maximum number
of shares which may be granted to any recipient is restricted by reference to a
formula based upon the annual remuneration of the individual director or
employee. The options are exercisable during a period between three and ten
years after the date of the grant (and in certain cases between three and seven
years from the date of the grant) with the last date for such exercise varying
between 1996 and 2000. The prices at which the options are exercisable are in
the range of 2.45 pounds per share to 2,693 pounds per share. At 30 November
1995 there were 722,000 Ordinary Shares subject to option under the ESOP Scheme.
The costs of the ESOP have been met by the trust and the ESOP has not
waived any dividends due on the Company's shares.
13. STOCKS
<TABLE>
<CAPTION>
1995 1994
pounds '000 pounds '000
<S> <C> <C>
Work in progress 1,079 3,388
Raw materials and components 13 738
Finished goods 3,508 3,969
----- -----
4,600 8,095
----- -----
----- -----
</TABLE>
If stocks were stated at replacement cost the amounts above would not be
materially affected for either year.
34
<PAGE>
14. Debtors
<TABLE>
<CAPTION>
as restated
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
Trade debtors 17,301 20,644
Debtors--finance leases 7,714 7,004
Other debtors 2,466 2,292
Prepayments and accrued income 3,195 3,286
------ -----------
30,676 33,226
------ -----------
------ -----------
</TABLE>
Included in the total of ASH Group debtors is an amount due after more than
one year of 5,651,000 pounds (1994: as restated 4,122,000 pounds) of which
5,418,000 pounds (1994: 4,122,000 pounds) is in respect of finance leases.
Included within ASH Group prepayments is a pension prepayment of 87,000 pounds
(1994: 151,000 pounds). Included within other debtors in the ASH Group are loan
notes of 484,000 pounds received on sale of the investment in Microtech Security
(UK) Limited. 251,000 pounds of the loan notes will be repaid in 1996 and the
balance, 233,000 pounds, in 1997.
In 1994 other debtors included 3,680,000 pounds receivable from the ESOP.
In 1995 this amount has been reclassified as a fixed asset investment in
accordance with UITF Abstract 13 and the comparative figures have been restated
accordingly.
15. Loans and other borrowings
<TABLE>
<CAPTION>
1995 1994
pounds '000 pounds '000
<S> <C> <C>
(a) Unsecured bank loans and overdrafts 83,401 82,278
(b) 8.28 per cent. senior notes 36,707 35,019
(c) Other loans 148 290
------ -----------
120,256 117,587
------ -----------
------ -----------
Loans and borrowings mature as follows:
Within one year 83,104 82,568
After one year and before two years -- --
After two years and before five years 37,152 35,019
------ -----------
Total repayable within five years 120,256 117,587
After five years -- --
------ -----------
Total borrowings 120,256 117,587
------ -----------
------ -----------
</TABLE>
At 30 November 1995 the group had bank facilities totalling approximately
89.0 million pounds of which approximately 83.4 million pounds were committed
facilities including 66.3 million pounds under the multiple option facility
which was fully underwritten by the banks concerned until 14 May 1996. All of
the maturity dates of the committed facilities have been extended to 2 January
1998 by agreements dated 21 December 1995 which give security to the banks over
the majority of the assets of the ASH Group.
(a) Unsecured bank loans and overdrafts
<TABLE>
<S> <C> <C>
Bank loans 82,479 82,278
Overdrafts 922 --
------ -----------
83,401 82,278
------ -----------
------ -----------
(b) 8.28 per cent. senior notes
On 27 May 1994 the Company issued $60,721,638, 8.28 per cent. Senior Notes
(the "Notes") of which $5,643,273 was in respect of yield maintenance. The
Notes were due for repayment on 27 May 1999. The Notes were issued to the
Prudential Insurance Company of America to replace the Stapled Units
previously issued by API Security, Inc., a subsidiary undertaking. The
effective interest rate including yield maintenance is 10.73 per cent per
annum. The maturity date of the Notes has been amended to 2 January 1998
by agreement dated 21 December 1995 when it was agreed that the noteholders
would share in the security given to the banks.
(c) Other loans
<CAPTION>
</TABLE>
<TABLE>
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
Obligations under finance leases and
hire purchase contracts 148 290
------ ------
------ ------
</TABLE>
35
<PAGE>
16. Other creditors
<TABLE>
<CAPTION>
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
(a) Amounts falling due within one year
Trade creditors......................... 13,094 14,307
Other creditors......................... 3,684 9,781
Corporation tax......................... 2,797 2,690
Other taxation and social security...... 3,269 3,984
Accrued expenses........................ 16,868 16,063
--------- ---------
39,712 46,825
--------- ---------
--------- ---------
(b) Amounts falling due after more than
one year
Other creditors......................... 2,912 1,516
Accrued expenses........................ 1,413 1,035
--------- ---------
4,325 2,551
--------- ---------
--------- ---------
</TABLE>
17. Convertible capital bonds
<TABLE>
<CAPTION>
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
Convertible Capital Bonds............... 43,813 43,693
--------- ---------
--------- ---------
</TABLE>
The Convertible Capital Bonds were issued by ASH Capital Finance (Jersey)
Limited, a subsidiary of the Company. They are convertible into fully paid 2 per
cent. exchangeable redeemable preference shares in ASH Capital Finance (Jersey)
Limited (2% Preference Shares') guaranteed on a subordinated basis by the
Company. The 2% Preference Shares are redeemable at their paid-up value of
pounds 1 each and are exchangeable for fully paid Ordinary Shares in the Company
at a price of 250p per Ordinary Share, subject to adjustment under certain
circumstances. Under the terms of the issue, the Company may require conversion
of any outstanding Convertible Capital Bonds if 85 per cent. of the issue has
been previously converted or purchased and cancelled, in which case the
Bondholders may elect for redemption in lieu of conversion. In addition, the
Company has the right at any date after 31 May 1996 to require the redemption of
all Bonds.
In accordance with FRS4 the costs of issue have been deducted from the carrying
value of the Convertible Capital Bonds and are being amortised through the
profit and loss account over the life of the Convertible Capital Bonds.
18. Provisions for liabilities and charges
pounds
'000
At 1 December 1994 1,357
Exchange adjustments 13
Utilised/paid during the year: - acquisitions (33)
Utilised/paid during the year: - maintenance and warranty (277)
------
At 30 November 1995 1,060
------
------
Provisions may be analysed as follows:
1995 1994
pounds pounds
'000 '000
Acquisition and reorganisation 470 503
Future maintenance and warranty provisions 590 854
----- -----
1,060 1,357
----- -----
----- -----
36
<PAGE>
19. Called up share capital
<TABLE>
<CAPTION>
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
Authorised:
200,000,000, Ordinary Shares of 10p
each.................................. 20,000 20,000
15,000,000, 5% Preference Shares........ 15,000 15,000
42,000,000, 6% Preference Shares........ 42,000 42,000
--------- ---------
77,000 77,000
--------- ---------
--------- ---------
Issued:
Allotted and fully paid:
119,571,953, Ordinary Shares of 10p
each (1994: 119,571,379)............. 11,957 11,957
7,867,442, 5% Preference Shares (1994:
7,867,490)............................ 7,867 7,868
40,761,578, 6% Preference Shares (1994:
40,763,032)........................... 40,762 40,763
--------- ---------
60,586 60,588
--------- ---------
--------- ---------
</TABLE>
Shares issued during the year:
(i) Holders of 1,454 6% Preference Shares exercised their conversion rights on
31 May 1995 and were duly allotted 545 Ordinary Shares of 10p each
(54.50 pounds nominal value) on the basis of 375p nominal of Ordinary
Shares for every pounds 100 nominal of 6% Preference Shares held.
(ii) Holders of 48 5% Preference Shares exercised their conversion rights on 31
May 1995 and were duly allotted 29 Ordinary Shares of 10p each
(2.90 pounds nominal value) on the basis of one Ordinary Share for every
1,6196 pounds nominal of 5% Preference Shares held.
20. Reserves
(a) Share premium account
<TABLE>
<CAPTION>
pounds
'000
<S> <C>
At 1 December 1994.................................. 5,729
Share premiums received............................. 2
Expenses of issue................................... (1)
Amortised Convertible Capital Bond issue costs
transferred from profit and loss account.......... (120)
---------
At 30 November 1995................................. 5,610
---------
---------
(b) Other reserves
At 1 December 1994.................................. (90,681)
Goodwill in the year written off (note 22).......... (232)
Goodwill of subsidiary and associated undertakings
transferred to profit and loss account............ 8,843
Exchange adjustments on:
Net investments including goodwill.................. 3,387
Hedging arrangements................................ (1,777)
Goodwill............................................ (1,972)
---------
(82,432)
(c)Profit and loss account
At 1 December 1994.................................. 59,647
Result for the year................................. (11,047)
Convertible Capital Bonds issue costs transferred to
share premium account............................. 120
---------
At 30 November 1995................................. 48,720
---------
</TABLE>
37
<PAGE>
21. Financial commitments
(a) Commitments for capital expenditure not provided for in the accounts were as
follows:
<TABLE>
<CAPTION>
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
Contracts placed........................ 475 228
Expenditure authorised but not
contracted for........................ 1,972 706
--------- ---------
2,447 934
--------- ---------
--------- ---------
</TABLE>
(b) Operating Leases
Payments to be made in the year ending 30 November 1996 in respect of
commitments expiring:
<TABLE>
<CAPTION>
Land and
Land and Other buildings Other
buildings pounds pounds pounds
pounds '000 '000 '000 '000
<S> <C> <C> <C> <C>
Within one year............... 706 2,984 203 1,349
Between one and five years.... 1,499 5,126 2,487 7,581
After more than 5 years....... 846 100 999 100
-------- -------- -------- -------
3,051 8,210 3,689 9,030
-------- -------- -------- -------
-------- -------- -------- -------
</TABLE>
22. Goodwill
<TABLE>
<CAPTION>
Cost of
goodwill Exchange
eliminated adjustment Total
pounds pounds pounds
'000 '000 '000
<S> <C> <C> <C>
Eliminated to 30 November 1994.......... 199,324 2,966 202,290
Investment in associated undertakings.... 232 -- 232
Transferred to profit and loss account... (8,843) -- (8,843)
Exchange adjustments (note 20 (b)) -- 1,972 1,972
-------- -------- -------
Eliminated to 30 November 1995........... 190,713 4,938 195,651
-------- -------- -------
-------- -------- -------
</TABLE>
23. Contingent liabilities
(a) The Company has guaranteed advances by bankers to ASH Group companies. At 30
November 1995, the net advances subject to these guarantees totalled
666,000 pounds (1994: 1,525,000 pounds). Interlocking guarantees have been given
to the ASH Group's main UK clearing bank by the Company and its UK subsidiary
undertakings.
(b) The Company has guaranteed contract bonds and letters of credit on behalf of
subsidiary undertakings of 1,492,000 pounds (1994: 2,693,000 pounds).
(c) The Company has provided a guarantee in respect of 60 million pounds
Convertible Capital Bonds issued by ASH Capital Finance (Jersey) Limited of
which 15.1 million pounds had been repurchased by 30 November 1994 leaving a
maximum contingent liability of 44.9 million pounds.
24. Directors
<TABLE>
<CAPTION>
1995 1994
pounds pounds
'000 '000
<S> <C> <C>
Directors' emoluments:
Salaries and benefits in kind................ 775 1,055
Pension contributions........................ 28 38
Compensation for loss of office.............. -- 1,231
Pensions paid to previous director........... 9 --
--- ---------
812 2,324
--- ---------
--- ---------
</TABLE>
The remuneration of the executive directors is determined by the Remuneration
Committee. Its policy is to provide appropriate packages to attract, retain and
motivate executive directors of the quality required.
38
<PAGE>
The number of directors whose total emoluments, excluding
pension contributions, compensation for loss of office and in 1994
the emoluments of one director who discharged his duties outside
the UK are as follows:
<TABLE>
<CAPTION>
1995 1994
Number Number
<S> <C> <C>
5,001-10,000........................... -- 1
10,001-15,000.......................... 2 --
15,001-20,000.......................... 1 3
20,001-25,000.......................... 1 1
25,001-30,000.......................... 2 1
30,001-35,000.......................... -- 1
50,001-55,000.......................... 1 --
95,001-100,000......................... 1 --
110,001-115,000........................ -- 1
120,001-125,000........................ -- 1
160,001-165,000........................ 1 --
165,001-170,000........................ 1 1
170,001-175,000........................ 1 1
275,001-280,000........................ -- 1
---- ----
</TABLE>
In 1995 the office of Chairman was held by Lord Lane of Horsell and in 1994
the office of Chairman was held by two directors, Lord Lane of Horsell and T.V.
Buffett. Their emoluments (excluding in 1994 pension contributions and
compensation for loss of office) during the period they occupied the position of
Chairman were as follows:
<TABLE>
<CAPTION>
1995 1994
pounds '000 pounds '000
<S> <C> <C>
Lord Lane of Horsell (from 18 October
1994) 50 4
T V Buffett (until 18 October 1994) -- 279
----- -----
</TABLE>
The highest paid director in 1995 received pounds 173,000. The former
Chairman was the highest paid director in 1994.
Details of share options granted to executive directors are disclosed in
the directors' report. It is not possible to quantify the benefit arising, if
any.
The following directors have contracts with a notice period in excess of
one year:
<TABLE>
<CAPTION>
Notice Period
<S> <C>
M J Hawker* 57 months
J P Smith* 57 months
P M Bertram* 36 months
A P Dignum 24 months
</TABLE>
*On 1 January 1996 notice was given to M J Hawker, J P Smith and P M Bertram
under the terms of their contracts. It is the Board's intention to offer new
contracts to J P Smith and P M Bertram with a notice period of 24 months. M J
Hawker resigned as a director of the Company on 29 May 1996.
The varying notice periods in the directors' contracts reflect current
practice at the time such contracts were entered into. These terms were
considered necessary to attract and retain the services of the executives
concerned.
Annual bonus payments to Executive Directors are pensionable. The
Remuneration Committee believes that, since payments are performance related,
they should be treated as relevant earnings for pension purposes.
25. EMPLOYEES
<TABLE>
<CAPTION>
1993 1994
Number Number
<S> <C> <C>
Employee numbers
Average number of persons employed:
Engineers and sales staff............. 2,227 2,202
Office staff and management........... 779 807
------ ------
3,006 3,009
------ ------
------ ------
pounds '000 pounds '000
Employee costs
Wages and salaries.................... 57,117 59,862
Social security....................... 4,875 4,935
Pension contributions................. 1,563 1,717
------ ------
63,555 66,514
------ ------
------ ------
</TABLE>
39
<PAGE>
The latest actuarial valuation of the UK pension fund was carried
out as at 1 April 1994 using the Projected Unit Method, to assess
the finances of the Plan and to determine the pension cost. For the
valuation, certain long-term assumptions were employed, the most
important being:
(i) Investment return: 8.5 per cent. per annum compound.
(ii) Dividend increases: average of 4.0 per cent. per annum.
(iii) Pensionable salary growth: 6.5 per cent. per annum compound.
(iv) Increases to pensions in payment in excess of GMPs: 0.7 per cent.
per annum compound.
(v) Increases to deferred pensions: 5 per cent. per annum compound.
At 1 April 1994, the market value of the assets of the UK pension
fund was 30.2 million pounds. The actuarial value of the assets amounted
to 119 per cent. of the value of the accrued liabilities of the fund
after allowing for the assumed increases in pensionable salary. The
surplus assets in the fund are being used to reduce the group's
long-term contributions to the fund. The effect upon group profit
is not significant. Overseas, the group in general operates defined
contribution plans for certain executives, the costs of which are
recognised on the basis of contributions payable.
26. Additional Information particularly for US Investors
The following information, which was prepared particularly for US
investors, is unaudited and has been extracted from the 1995 ASH
Annual Report.
Significant differences between UK GAAP and US GAAP
The consolidated financial statements of the ASH Group are
prepared in conformity with UK GAAP which differ in certain
significant respects from US GAAP. Differences which have a
significant effect on consolidated net income or shareholders'
equity are discussed below. While this is not a comprehensive
summary of all differences between UK GAAP and US GAAP,
other differences are not likely to have a significant effect on the
consolidated net income or shareholders' equity of the ASH
Group.
Intangible assets
US GAAP requires that intangible assets are amortised over their
estimated useful life which may not exceed 40 years. Under UK
GAAP the cost of goodwill and other intangible assets which are
considered to be similar in nature to goodwill may be written off
directly to reserves in the year in which the assets are acquired. In
the tables below the intangible assets which are substantially
comprised of goodwill, subscriber contracts and customer lists and
franchise contracts are amortised over estimated useful lives which
range from 15 to 40 years.
Deferred income taxes
Under UK GAAP, deferred taxation is provided on the liability
method for all timing differences except where the directors
consider that no liability will arise in the foreseeable future.
Following the issuance of Statement of Financial Accounting
Standard 109: "Accounting for Income Taxes", US GAAP
provides for the use of the liability method but requires that
provisions be made for all temporary differences. The tables below
incorporate adjustments to shareholders' equity and net income to
reflect full provision for deferred taxation on all temporary
differences under the liability method.
Related companies
In the tables below, estimated adjustments have been made in
respect of related companies accounted for by the ASH Group
under the equity method, where such related companies adopt
accounting policies which conform with UK GAAP which differ
significantly from those required under US GAAP. These
adjustments relate primarily to the accounting treatment for
goodwill (see discussion above on intangible assets).
Sale of subsidiary and related companies
Under UK GAAP goodwill on acquisition of subsidiaries and
related companies is written off to reserves. On sale of these
companies, the goodwill previously written off is recharged in full
to the profit and loss account. Under US GAAP the goodwill on
acquisitions is carried in the balance sheet and amortised over its
estimated useful life. On sale of these companies the profit on sale
is therefore higher under US GAAP by the amount of the
amortisation previously charged to income.
Discontinued activities
The results of discontinued activities are separated on the profit
and loss account under both UK GAAP and US GAAP. Under UK
GAAP a discontinued operation refers to an operation that was
material and whose sale or termination has a material effect on the
nature and focus of the operations and represents a material
reduction in its operating facilities. Under US GAAP, only the
closure, sale or disposal of a separately identifiable segment of a
business qualifies as a discontinued activity.
Redeemable Preference Shares
The 5% and 6% Preference Shares are convertible into Ordinary
Shares at the option of the holder in the month of May in each of
the years 1987 to 1999 for the 5% Preference Shares and on 31
May in each of the years 1991 to 2006 for the 6% Preference
Shares. ASH has the option between 31 May 2000 and 31 May
2005 for the 5% Preference Shares and 1 June 2006 to 31 May
2009 for the 6% Preference Shares to redeem the Preference
Shares at par and in any event
40
<PAGE>
must redeem on 31 May 2005 for the 5% Preference Shares or 31 May 2009
for the 6% Preference Shares. Under UK GAAP the Preference Shares form
part of shareholders' funds whereas under US GAAP they are classified
as a separate non-current liability.
Accordingly, for the purpose of the reconciliation the total amount
of the Preference Shares has been excluded from shareholders'
equity. Further, the dividends on the Preference Shares have been
deducted to compute net income.
Earnings per share
The earnings per share calculation under UK GAAP is set out in
note 10 to the accounts set out above. Under US GAAP, primary
earnings per Ordinary Share is calculated by dividing the profit
attributable to Ordinary Shareholders by the weighted average
number of shares in issue during the year. The weighted average
number of shares includes common stock equivalents including all
convertible preference shares and convertible unsecured loan stock
calculated under the If Converted Method' and share options
using the Treasury Stock Method'. The profit attributable to
Ordinary Shareholders comprises the estimated net income in
accordance with US GAAP and the dividends and interest (net of
tax) of Preference Shares and loan stock which have been included
in calculating the common stock equivalents. Fully diluted earnings
per share have not been presented as they do not vary significantly
from primary earnings per share.
Pre-acquisition tax losses
Under UK GAAP, contingent tax assets on acquired businesses are
recognised at the date of acquisition only to the extent that their
recoverability can be foreseen with reasonable certainty. Any
subsequent benefits which arise are recognised as a reduction in
the tax charge. Under US GAAP such benefits are treated as a
retrospective reduction of the goodwill arising on the acquisition.
Employees' share ownership plan
ASH has advanced funds to the ASH employees' share ownership
plan ("ESOP") trust. Under UK GAAP following the introduction
of Urgent Issues Task Force Abstract 13 the net balance due from
the ESOP has been shown in fixed asset investment for both 1994
and 1995; previously these balances where shown in debtors.
Under US GAAP these receivables are shown as a deduction from
shareholders' equity.
The following is a summary of the adjustments to net income and
shareholders' equity which would have been required if the ASH
Group had applied US GAAP instead of UK GAAP.
<TABLE>
<CAPTION>
Year ended 30 November
1993 1994 1995
pounds pounds pounds 1995
'000 '000 '000 $'000
<S> <C> <C> <C> <C>
Net income
Net income/(loss) under UK
GAAP 5,511 (12,754) (8,208) (12,722)
Adjustments:
Amortisation of subscriber
contracts and customer
lists (3,588) (3,656) (3,903) (6,050)
Amortisation of franchise
contracts (283) (278) (269) (417)
Preference Share dividends (2,844) (2,839) (2,839) (4,400)
Amortisation of goodwill (3,488) (3,445) (3,887) (6,025)
Depreciation and sales of
revalued assets 44 158 -- --
Deferred income taxes 1,212 (981) (602) (933)
Pre-acquisition tax losses (314) -- -- --
Related companies (259) (247) (484) (751)
Effect on profit on disposal
and provisions against
subsidiaries and related
companies 314 -- 2,470 3,829
Employee share ownership
plan provision 200 450 3,066 4,752
------ ------- ------- -------
Net loss in accordance with US
GAAP (3,495) (23,592) (14,656) (22,717)
------ ------- ------- -------
------ ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
Year ended 30 November
1994 1995
pounds pounds 1995
'000 '000 $'000
<S> <C> <C> <C>
Shareholders' equity
Shareholders' equity under UK
GAAP 35,283 32,484 50,350
Adjustments:
Goodwill 98,598 93,636 145,136
Deferred income taxes (15,936) (16,826) (26,080)
Subscriber contracts and customer
lists 50,088 46,902 72,698
Franchise contracts 10,298 10,261 15,905
Related companies 4,861 -- --
Redeemable Preference Shares (48,631) (48,629) (75,375)
Employee share ownership plan (3,680) (614) (952)
------- ------- -------
Shareholders' equity in accordance
with US GAAP 130,881 117,214 181,682
------- ------- -------
------- ------- -------
</TABLE>
The figures relating to the year ended 30 November 1995 in this section have
been expressed in US dollars solely for the purpose of convenience at a rate of
$1.55 to pounds 1.
41
<PAGE>
The following is a summary of certain income statement captions reported in the
consolidated statements of income as adjusted by the significant adjustments
which would have been required if the ASH Group had applied US GAAP instead of
UK GAAP.
<TABLE>
<CAPTION>
Year ended 30 November
1993 1994 1995
pounds pounds pounds 1995
'000 '000 '000 $'000
<S> <C> <C> <C> <C>
Continuing operations under US
GAAP
Net sales 160,775 166,071 163,349 253,191
Cost profit on sales (105,768) (106,889) (105,511) (163,542)
------- ------- ------- -------
Gross profit on sales 55,007 59,182 57,838 89,649
General and administrative
expenses (38,340) (43,792) (49,712) (77,054)
Share of results of related
companies 153 933 (474) (735)
Other expenses:
Loss on closure of
subsidiaries and major
operations (4,816) (2,429) -- --
Profit/(loss) on sale and
provisions against related
companies and subsidiary
companies 260 (20,152) (3,205) (4,968)
Exceptional items (1,378) -- -- --
Interest expense, net (10,635) (12,514) (14,862) (23,036)
------- ------- ------- -------
Income before taxes on income 251 (18,772) (10,415) (16,144)
Taxes on income (902) (1,981) (1,402) (2,173)
------- ------- ------- -------
(651) (20,753) (11,817) (18,317)
Preference share dividends (2,844) (2,839) (2,839) (4,400)
------- ------- ------- -------
Net loss (3,495) (23,592) (14,656) (22,717)
------- ------- ------- -------
------- ------- ------- -------
Net loss per Ordinary Share in
accordance with US GAAP: (3.0p) (19.7p) (12.3p) (19.0c)
------- ------- ------- -------
Weighted average shares
outstanding (millions) 116.5 119.5 119.6 119.6
------- ------- ------- -------
</TABLE>
The following is a summary of certain balance sheet captions reported in the
consolidated balance sheets, together with the related amounts as adjusted by
the significant adjustments which would have been required if the ASH Group had
applied US GAAP instead of UK GAAP.
<TABLE>
<CAPTION>
As reported in
the consolidated As adjusted to
balance conform
sheet (as restated) with US GAAP
1994 1995 1994 1995
pounds pounds pounds pounds
'000 '000 '000 '000
<S> <C> <C> <C> <C>
Current assets 37,453 35,561 37,453 35,561
Intangible assets -- -- 158,984 150,799
Property and equipment 223,255 227,386 223,255 227,386
Other assets 15,163 6,466 16,344 5,852
------- ------- ------- -------
Total assets 275,871 269,413 436,036 419,598
------- ------- ------- -------
------- ------- ------- -------
Current liabilities and
deferred income 157,968 150,579 157,968 68,100
Liabilities due after more
than one year 3,908 5,830 19,844 105,135
Convertible Capital Bonds 43,693 43,813 43,693 43,813
Senior Notes 35,019 36,707 35,019 36,707
Preference Shares -- -- 48,631 48,629
------- ------- ------- -------
Total liabilities 240,588 236,929 305,155 302,384
------- ------- ------- -------
Ordinary Shares 11,957 11,957 11,957 11,957
Preference Shares 48,631 48,629 -- --
Reserves (25,305) (28,102) 118,924 105,257
------- ------- ------- -------
Total shareholders' equity 35,283 32,484 130,881 117,214
------- ------- ------- -------
Total liabilities and
shareholders' equity 275,871 269,413 436,036 419,598
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
42
<PAGE>
2. Material change
Save as noted in the interim statement set out in Appendix III,
there has been no material change in the financial or trading
position of the ASH Group since 30 November 1995, being the
end of the last financial period for which audited results have been
prepared.
43
<PAGE>
APPENDIX III
UNAUDITED INTERIM RESULTS FOR THE ASH GROUP
FOR THE SIX MONTHS ENDED 31 MAY 1996
Set out below is the text of the unaudited interim results for the
ASH Group for the six months ended 31 May 1996 which have
been prepared in accordance with UK GAAP and which were
announced on 15 July 1996.
"AUTOMATED SECURITY (HOLDINGS) PLC
SIX MONTHS RESULTS TO 31 MAY 1996
OVERVIEW
In the six months to May 1996 the Group continued to improve
the overall profitability of its core businesses. Revenue for the
period from continuing operations was up 4.5% from 74.0 million pounds
($114.6 million) to 77.3 million pounds ($119.7 million) and recurring
income increased by 3.6% from 41.6 million pounds ($64.5 million) to
43.1 million pounds ($66.7 million). Core business operating profits were
up 13.2% from 10.5 million pounds ($16.3 million) in 1995 to 11.9
million pounds ($18.5 million) in 1996.
Despite this improvement, the Group made a loss before taxation
of 2.2 million pounds ($3.5 million) for the period.
Contributing to this loss were first, our share of the losses from
our associated company TVX Inc; secondly, non-recurring costs in
respect of our UK vehicle fleet operations; and finally, bank fees of
2.0 million pounds ($3.1 million). Bank fees are accrued at the maximum
rate payable under the new bank agreement, but may reduce
dependent on the speed and size of repayment of bank debt.
There was a credit in the period of 0.2 million pounds ($0.3 million) in
respect of fixed asset investments from the proceeds of the
winding up of Arius Inc (1995: 2.5 million pounds ($3.9 million)
provision in respect of the ESOP).
RECOMMENDED PROPOSALS FOR THE ACQUISITION OF ASH BY ADT LIMITED
In parallel with improving the performance of its core businesses,
the Group continued to pursue its strategy to reduce the high level
of debt. Shortly after the end of the period under review, on 19
June, the Group announced recommended proposals whereby
ADT Limited would acquire all the issued share capital of ASH.
The proposals from ADT Limited will be effected by means of a
Scheme of Arrangement to be sanctioned by the High Court in
England and Wales. It is expected that the formal Scheme
document will be posted to shareholders later this month and that
the Scheme will become effective in September 1996.
CHAIRMAN'S STATEMENT
FINANCIAL HIGHLIGHTS FOR THE PERIOD
<TABLE>
<CAPTION>
1996 1995
pounds m $m pounds m $m
<S> <C> <C> <C> <C>
CONTINUING OPERATIONS
Total revenues..................... 77.3 119.7 74.0 114.6
-------- ----- -------- -----
Recurring revenues................. 43.1 66.8 41.6 64.5
-------- ----- -------- -----
Core business operating profits.... 11.9 18.5 10.5 16.3
Corporate and other costs.......... (3.1) (4.9) (0.7) (1.2)
Bank fees.......................... (2.0) (3.1) (0.8) (1.2)
-------- ----- -------- -----
Continuing operations before
exceptional operating costs...... 6.8 10.5 9.0 13.9
Discontinued operations and
exceptional charges.............. (1.1) (1.7) (13.4) (20.7)
Net interest payable and other
similar charges.................. (7.9) (12.2) (7.3) (11.3)
-------- ----- -------- -----
(Loss)/Profit before taxation...... (2.2) (3.5) (11.7) (18.1)
-------- ----- -------- -----
(Loss)/Earnings per share.......... (3.4)p -- (11.3)p --
(Loss)/Earnings per ADR............ -- (10.4)c -- (35.1)c
</TABLE>
SECOND QUARTER COMMENTARY
Total revenues from continuing operations at 40.0 million pounds ($61.9
million) increased 4.0% from 38.4 million pounds ($59.5 million).
Operating profit was up 33.1% from 2.3 million pounds ($3.5 million) to
3.0 million pounds ($4.7 million). The loss before taxation was reduced
from 12.5 million pounds ($19.4 million) in 1995 to 0.9 million pounds ($1.4
million). Some 7.8 million pounds of the 1995 loss was compensated for
by a write-back to reserves in respect of goodwill previously
wrttten off.
TRADING OVERVIEW FOR THE PERIOD
ASH EUROPE
Total revenue was up 6.3% at 56.6 million pounds ($87.7 million) from
53.3 million pounds ($82.5 million) in 1995 with recurring revenue
improving by 2.9% to 29.4 million pounds ($45.5 million). Operating
margin was up 2.2% from 14.1% to 16.3%, reflecting the benefits
from the restructuring of the UK businesses. All ASH Europe
operating units showed improved profitability compared to last
year. ASH Europe operating profits benefited from both rising
sales and improving margins and were up 23% to 9.2 million pounds
($14.3 million) from 7.5 million pounds ($11.6 million) in 1995.
ASH US
Total revenue was flat at 20.7 million pounds ($32.0 million). Recurring
revenue continued to increase by 5.1% to 13.7 million pounds ($21.2
million). However, sales were down 8.9% at 7.0 million pounds ($10.8
million). This primarily reflected difficult trading conditions for
API Security Inc in Southern California. Reduced sales and rising
costs pushed margins down from 14.8% in 1995 to 13.2% and
operating profits down to 2.7 million pounds ($4.2 million) from 3.1
million pounds ($4.7 million) in 1995.
EXCEPTIONAL OPERATING COSTS
These related to refinancing costs of 1.3 million pounds ($2.1 million)
compared to 1.3 million pounds ($1.9 million) in 1995. These costs
represent continuing fees to professional advisers in connection
with the refinancing of the Group. In addition in 1995 the Group
provided 2.1 million pounds ($3.2 million) in respect of accelerated
depreciation on the replacement of computer systems and
leasehold premises at API Security.
CASH FLOW
Cash flows during the six months to May 1996 were as follows:
1996 1995
pounds m pounds m
Operational cash flow
- - Continuing 9 9
- - Discontinued -- 1
Refinancing costs (3) (2)
Interest paid (7) (8)
Dividends and taxes paid -- (2)
Arius Letter of Credit -- (2)
---- ----
Net cash flow movement (1) (4)
---- ----
---- ----
The cash flow is stated after investing some 16.2 million pounds ($25.1
million), 1995: 18.0 million pounds ($27.9 million), in the establishment
of new rental systems.
DIVIDENDS
In view of the result for the period the Board does not recommend
payment of a dividend in respect of the Ordinary Shares. As
indicated in our announcement of 22 December 1995 the Board
will not be paying Preference dividends for the time being.
OUTLOOK
The Board believes the Proposals from ADT Limited are in the
best interests of shareholders as a whole and has agreed to
recommend them to shareholders. A document detailing the
Scheme is to be distributed to shareholders later this month.
Lord Lane of Horsell
Chairman
45
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC
UNAUDITED GROUP PROFIT AND LOSS ACCOUNT
for the six months ended 31 May 1996
<TABLE>
<CAPTION>
1995 Year to
Six months to May pounds '000 November
1996 1996 (as 1995
*$'000 pounds '000 restated) pounds '000
<S> <C> <C> <C> <C>
REVENUES
Continuing operations 119,717 77,267 73,953 153,733
Discontinued operations -- -- 6,080 9,616
------- ---------- ----------- ----------
119,717 77,267 80,033 163,349
------- ---------- ----------- ----------
------- ---------- ----------- ----------
OPERATING PROFIT
Continuing operations before
exceptional operating costs 10,530 6,796 8,986 20,240
Exceptional operating costs (2,070) (1,336) (3,338) (5,484)
------- ---------- ----------- ----------
Continuing operations 8,460 5,460 5,648 14,756
Discontinued operations -- -- 868 1,439
------- ---------- ----------- ----------
OPERATING PROFIT 8,460 5,460 6,516 16,195
Amount written back/(written
off) fixed asset investments 327 211 (2,503) (3,066)
Provision for loss on
operations to be
discontinued -- -- (8,381) (5,675)
------- ---------- ----------- ----------
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE INTEREST
AND SIMILAR CHARGES 8,787 5,671 (4,368) 7,454
Interest payable and similar
charges (12,247) (7,904) (7,302) (14,862)
------- ---------- ----------- ----------
LOSS BEFORE TAXATION (3,460) (2,233) (11,670) (7,408)
Taxation (581) (375) (400) (800)
------- ---------- ----------- ----------
LOSS AFTER TAXATION (4,041) (2,608) (12,070) (8,208)
Preference dividends (2,198) (1,419) (1,419) (2,839)
------- ---------- ----------- ----------
RETAINED LOSS FOR THE
FINANCIAL PERIOD (6,239) (4,027) (13,489) (11,047)
------- ---------- ----------- ----------
LOSS PER ORDINARY SHARE (5.2)c (3.4)p (11.3)p (9.2)p
Loss per ADR** (10.4)c (6.8)p (22.6)p (18.4)p
------- ---------- ----------- ----------
------- ---------- ----------- ----------
</TABLE>
Notes:
The results of operations discontinued in the year to 30 November 1995 have been
reclassified as discontinued operations in the results of the six months to May
1995.
* US Dollar equivalents are provided for reader convenience at the
exchange rate of 1 pound = US$1.5494.
**Each ADR is equivalent to two Ordinary Shares.
46
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC
UNAUDITED GROUP BALANCE SHEET
at 31 May 1996
<TABLE>
<CAPTION>
May May November
1996 1996 1995
$'000 pounds '000 pounds '000
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 353,124 227,910 227,386
Investments--associated
undertakings -- -- 201
--own shares (ESOP) 951 614 614
-------- ---------- -------
TOTAL FIXED ASSETS 354,075 228,524 228,201
-------- ---------- -------
CURRENT ASSETS
Stocks 7,446 4,806 4,600
Debtors 47,538 30,681 30,676
Cash at bank and in hand 5,485 3,540 5,936
-------- ---------- -------
TOTAL CURRENT ASSETS 60,469 39,027 41,212
-------- ---------- -------
CREDITORS: amounts falling due
within one year
Loans and other borrowings 395 255 83,104
Other creditors 63,924 41,258 39,712
-------- ---------- -------
64,319 41,513 122,816
-------- ---------- -------
Net current liabilities (3,850) (2,486) (81,604)
-------- ---------- -------
TOTAL ASSETS LESS CURRENT
LIABILITIES 350,224 226,038 146,597
-------- ---------- -------
-------- ---------- -------
Financed by:
CREDITORS: amounts falling due
after more than one year
Loans and other borrowings 184,546 119,108 37,152
Convertible Capital Bonds 67,977 43,873 43,813
Other creditors 5,511 3,557 4,325
-------- ---------- -------
258,034 166,53 85,290
-------- ---------- -------
Provisions for liabilities and
charges 1,326 856 1,060
-------- ---------- -------
Deferred income--rentals in advance 46,707 30,145 27,763
-------- ---------- -------
CAPITAL AND RESERVES
Called up share capital 93,870 60,585 60,586
Share premium account 8,601 5,551 5,610
Other reserves (127,655) (82,390) (82,432)
Profit and loss account 69,341 44,753 48,720
-------- ---------- -------
Equity interests (31,188) (20,129) (16,145)
Non-equity interests 75,345 48,628 48,629
SHAREHOLDERS' FUNDS (INCLUDING
NON-EQUITY INTERESTS) 44,157 28,499 32,484
-------- ---------- -------
350,224 226,038 146,597
-------- ---------- -------
-------- ---------- -------
</TABLE>
For US GAAP purposes total shareholder equity as at 30 November 1995 was
117.2 million pounds, the major differences from UK GAAP being the inclusion of
intangible assets (150.8 million pounds) in total assets and the
reclassification under total liabilities of redeemable preferences shares
(48.6 million pounds).
47
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC
CORE BUSINESS TRADING ANALYSIS
for the six months ended 31 May 1996
<TABLE>
<CAPTION>
(as restated)
1996 1996 1995
pounds pounds Change
$'000 '000 '000 %
<S> <C> <C> <C> <C>
CONTINUING OPERATIONS
EUROPE TOTAL
Sales 42,167 27,215 24,710 10.1
Recurring income 45,544 29,395 28,566 2.9
------ ------ ------ ------
87,711 56,610 53,276 6.3
------ ------ ------ ------
Operating profits 14,272 9,211 7,486 23.0
Margin 16.3% 16.3% 14.1%
USA TOTAL
Sales 10,829 6,989 7,674 (8.9)
Recurring income 21,177 13,668 13,003 5.1
------ ------ ------ ------
32,006 20,657 20,677 (0.1)
------ ------ ------ ------
Operating profits 4,217 2,722 3,056 (10.9)
Margin 13.2% 13.2% 14.8%
TOTAL CONTINUING BUSINESS
Sales 52,996 34,204 32,384 5.6
Recurring income 66,721 43,063 41,569 3.6
------ ------ ------ ------
119,717 77,267 73,953 4.5
------ ------ ------ ------
Operating profits 18,489 11,933 10,542 13.2
Margin 15.4% 15.4% 14.3%
Operating profits 18,489 11,933 10,542 13.2
TVX Inc (311) (201) (62) (224.2)
Bank charges (3,138) (2,025) (823) (146.1)
Corporate costs (1,893) (1,222) (989) (23.6)
Other costs (2,617) (1,689) 318 (631.1)
------ ------ ------ ------
Profit before interest and
exceptional operating
expenses 10,530 6,796 8,986 (24.4)
------ ------ ------ ------
</TABLE>
48
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC
UNAUDITED GROUP PROFIT AND LOSS ACCOUNT
FOR THE THREE MONTHS ENDED 31 MAY 1996
<TABLE>
<CAPTION>
(as
restated)
1996 1995
1996 pounds pounds
$'000 '000 '000
<S> <C> <C> <C>
TURNOVER
Continuing operations 61,912 39,959 38,406
Discontinued operations -- -- 3,462
------ ------ ------
61,912 39,959 41,868
------ ------ ------
OPERATING PROFIT
Continuing operations before
exceptional operating costs 6,033 3,894 4,688
Exceptional operating costs (1,318) (851) (2,991)
Discontinued operations -- -- 589
------ ------ ------
OPERATING PROFIT 4,715 3,043 2,286
Amount written off fixed asset
investments -- -- (2,503)
Provision for loss on operations to
be discontinued -- -- (8,381)
------ ------ ------
PROFIT/(LOSS) BEFORE INTEREST 4,715 3,043 (8,598)
Interest payable and similar
charges (6,137) (3,961) (3,896)
------ ------ ------
LOSS BEFORE TAXATION (1,422) (918) (12,494)
TAXATION (291) (188) (250)
------ ------ ------
LOSS FOR THE FINANCIAL PERIOD (1,713) (1,106) (12,744)
Preference dividends (1,100) (710) (710)
------ ------ ------
RETAINED LOSS FOR THE FINANCIAL
PERIOD (2,813) (1,816) (13,454)
------ ------ ------
Loss per share (2.4)c (1.5)p (11.3)p
Loss per ADR (4.7)c (3.0)p (22.6)p
------ ------ ------
------ ------ ------
</TABLE>
49
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC
CONTINUING OPERATIONS
FOR THE SIX MONTHS ENDED 31 MAY 1996
<TABLE>
<CAPTION>
Profit before
interest
Recurring and exceptional
Total revenue revenue items
1996 1995 1996 1995 1996 1995
pounds pounds pounds pounds pounds pounds
'000 '000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C> <C>
OPERATION
MSS/TSL/SONITROL 54,197 51,425 28,586 27,691 9,779 8,309
MSS EIRE 2,075 1,574 809 875 (234) (463)
TVX 338 277 -- -- (334) (360)
------ ------ ------ ------ ------ ------
TOTAL EUROPE 56,610 53,276 29,395 28,566 9,211 7,486
------ ------ ------ ------ ------ ------
$ '000 $ '000 $ '000 $ '000 $ '000 $ '000
API 21,963 23,643 15,039 15,119 2,316 2,872
SONITROL MANAGEMENT CORP 8,346 8,051 5,852 5,555 1,320 1,426
SONITROL CORP 1,265 1,179 522 560
------ ------ ------ ------ ------ ------
TOTAL USA 31,574 32,873 20,891 20,674 4,158 4,858
------ ------ ------ ------ ------ ------
TOTAL USA IN POUNDS '000 20,657 20,677 13,668 13,003 2,722 3,056
------ ------ ------ ------ ------ ------
TOTAL 77,267 73,953 43,063 41,569 11,933 10,542
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
</TABLE>
50
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC
NOTES RELATING TO 1996 INTERIM RESULTS
1. The accounting policies as set out in the 1995 published accounts
have been applied in compiling the results for the six months to 31
May 1996.
2. The taxation charge for the half year is based on the forecast
charge for the full year.
3. The directors do not recommend the payment of an interim
dividend (1995: Nil).
4. Earnings per Ordinary Share is calculated by dividing the
(loss)/profit attributable to ordinary shareholders for the six
months to 31 May 1996 amounting to a loss of 4,027,000 pounds (1995
loss: 13,489,000 pounds) by the weighted average number of Ordinary
Shares of 119.6 million in issue during the period.
5. The comparative income statement for the year ended 30
November 1995 is abridged and is therefore not the company's
statutory accounts for that period. Those accounts have been
reported on by the company's auditors and delivered to the
Registrar of Companies. The report of the auditors was unqualified
and did not contain a statement under Section 237(2) or (4) of the
Companies Act 1985.
6. This announcement is being sent to all shareholders and copies are
available from the Company Secretary at the registered office: The
Clockhouse, The Campus, Hemel Hempstead, Hertfordshire HP2 7TL."
51
<PAGE>
APPENDIX IV
FINANCIAL INFORMATION ON THE ADT GROUP
1. Financial information in respect of the last three financial years
The following information which has been prepared in US$ and in
accordance with US GAAP has been extracted from the audited
consolidated financial statements of ADT for the year ended 31
December 1995 which were approved by the board of directors of
ADT on 29 February 1996.
Consolidated statements of income
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
Notes $m $m $m
<S> <C> <C> <C> <C>
Net sales 3 1,525.4 1,375.9 1,286.7
Cost of sales (823.5) (748.2) (705.6)
Selling, general and administrative (455.8) (409.2) (384.9)
expenses
Restructuring and other 4 (34.2) (4.5) --
non-recurring charges
Goodwill amortization 3 (26.2) (26.4) (25.9)
------- ------- -------
Operating income 3 185.7 187.6 170.3
Interest income 15.9 14.9 11.4
Interest expense (90.2) (79.8) (58.0)
Loss on disposal of businesses 5,32 (34.4) (1.9) --
Other income less expenses 6 1.1 25.5 9.2
------- ------- -------
Income before income taxes 78.1 146.3 132.9
Income taxes 7 (26.8) (32.0) (21.2)
------- ------- -------
Income from continuing operations 51.3 114.3 111.7
Loss from discontinued operations 8 -- (3.3) --
------- ------- -------
Income before extraordinary items 51.3 111.0 111.7
Extraordinary items (net of income 9 (9.8) -- --
taxes)
------- ------- -------
Net income 41.5 111.0 111.7
Dividends on preference shares (0.3) (13.3) (19.3)
------- ------- -------
Net income available to holders of 41.2 97.7 92.4
Common Shares
======= ======= =======
Primary and fully diluted earnings 10 $ $ $
per Common Share
Income from continuing operations 0.39 0.78 0.80
Loss from discontinued operations -- (0.02) --
-------- ------- -------
Income per Common Share before 0.39 0.76 0.80
extraordinary items
Extraordinary items (0.08) -- --
-------- ------- -------
Net income per Common Share 0.31 0.76 0.80
======== ======= =======
</TABLE>
See notes to consolidated financial statements.
52
<PAGE>
Consolidated balance sheets
<TABLE>
<CAPTION>
At 31 December
1995 1994
Notes $m $m
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents 341.8 215.7
Amounts receivable--net 11 169.9 162.2
Inventories 12 31.0 40.4
Prepaid expenses and other current 13 22.7 43.4
assets
------- -------
Total current assets 565.4 461.7
Investment in and loans to associate 14, 32 88.8 --
Property, plant and equipment--net 15 1,223.5 1,332.2
Goodwill--net 16 823.0 862.7
Other long-term assets 17 74.3 70.0
------- -------
Total assets 2,775.0 2,726.6
======= =======
Liabilities and shareholders' equity
Current liabilities:
Short-term debt 18 38.8 149.1
Accounts payable 92.0 106.3
Other current liabilities 19 189.1 197.8
------- -------
Total current liabilities 319.9 453.2
Long-term debt 20 927.8 852.3
Deferred revenue 21 94.9 91.3
Deferred income taxes 22 116.7 98.6
Other long-term liabilities 23 126.3 130.4
Minority interests 24 15.6 --
------- -------
Total liabilities 1,601.2 1,625.8
------- -------
Commitments and contingencies 30
Convertible redeemable preference shares 25 4.9 5.2
Shareholders' equity:
Common Shares 28 13.2 13.1
Additional paid-in capital
Share premium 724.9 718.0
Contributed surplus 1,436.6 1,436.4
Treasury shares 29 (79.7) (79.8)
Accumulated deficit (922.0) (963.2)
Cumulative currency translation (4.1) (28.9)
adjustments
------- -------
Total shareholders' equity 1,168.9 1,095.6
------- -------
Total liabilities and shareholders' equity 2,775.0 2,726.6
======= =======
</TABLE>
See notes to consolidated financial statements.
53
<PAGE>
Consolidated statements of cash flows
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
Cash flows from operating activities
Net income 41.5 111.0 111.7
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 154.3 136.1 123.6
Goodwill amortization 26.2 26.4 25.9
Restructuring and other non-recurring
charges 32.7 4.5 --
Liquid Yield Option Notes discount
amortization 9.4 -- --
Refinancing costs amortization 4.9 5.3 2.2
Deferred income taxes 17.5 23.4 15.0
Extraordinary items 9.8 -- --
Gain on disposal of property, plant and
equipment (1.3) (1.6) (1.3)
Loss on disposal of businesses 34.4 1.9 --
Loss on disposal of discontinued
operations -- 3.7 --
Gain arising from the ownership of
investments (0.1) (21.5) (8.5)
Gain on currency transaction (0.9) (2.1) (0.2)
Other -- (2.2) 2.1
Changes in assets and liabilities:
Accounts receivable (37.1) (16.6) (20.9)
Inventories (2.4) (4.8) 4.4
Other assets (6.7) (5.9) 15.9
Accounts payable 7.7 11.3 7.5
Deferred revenue 3.5 6.9 0.9
Other liabilits (15.2) 9.0 (6.9)
------ ------ ------
Net cash provided by operating
activities 278.2 284.8 271.4
------ ------ ------
Cash flows from investing activities
Purchase of property, plant and
equipment (264.9) (216.0) (208.8)
Disposal of property, plant and
equipment 6.2 10.8 6.8
Acquisition of businesses (68.3) (14.8) (18.0)
Disposal of businesses 249.3 8.1 --
Disposal of discontinued operations -- 4.6 --
Disposal of investment in associate -- 40.2 --
Disposal of other investments 0.2 72.5 15.9
Transferable sterling loan notes -- -- 66.5
Other 9.7 (6.1) (2.1)
------ ------ ------
Net cash utilized by investing
activities (67.8) (100.7) (139.7)
------ ------ ------
</TABLE>
See notes to consolidated financial statements.
54
<PAGE>
<TABLE>
<CAPTION>
Year Ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
Cash flows from financing activities
Net repayments of short-term debt....... (103.9) (26.2) (2.9)
Repayments of long-term debt.......... (215.9) (1.3) (725.0)
Repayment of long-term acquisition
debt............................... (39.6) -- --
Proceeds from long-term debt.......... 313.3 231.6 600.0
Debt refinancing costs................ (12.0) (1.0) (37.7)
Purchase of senior subordinated
notes.............................. (33.7) -- --
Proceeds from issue of common
shares............................. 7.0 7.3 165.6
Common Shares issue costs............. -- -- (10.8)
Purchase of convertible redeemable
preference shares.................. -- -- (6.5)
Redemption of convertible redeemable
preference shares.................. -- (420.2) --
Dividends paid........................ (0.3) (18.1) (20.0)
Other................................... -- (3.7) 4.6
------ ------ ------
Net cash utilized by financing
activities......................... (85.1) (231.6) (32.7)
------ ------ ------
Effect of currency translation on cash
and cash equivalents............... 0.8 2.1 0.3
------ ------ ------
Net increase (decrease) in cash and cash
equivalents........................... 126.1 (45.4) 99.3
Cash and cash equivalents at beginning
of year............................... 215.7 261.1 161.8
------ ------ ------
Cash and cash equivalents at end of
year.................................. 341.8 215.7 261.1
====== ====== ======
Cash payments during the year for
Interest.............................. 80.1 70.0 37.3
Income taxes.......................... 14.2 8.5 10.3
Non-cash investing and financing
activities
Conversion of convertible redeemable
preference shares.................. 0.1 -- --
Exchange of non-voting exchangeable
shares............................. -- 9.7 0.1
Exchange of exchangeable redeemable
preference shares.................. -- -- 30.1
In conjunction with the acquisition of
businesses, net liabilities (assets)
were assumed as follows:
Goodwill.............................. 123.0 12.7 34.9
Cash paid (net of cash assumed)....... (68.3) (14.8) (18.0)
Deferred consideration................ -- -- (16.7)
------ ------ ------
Net liabilities (assets) assumed...... 54.7 (2.1) 0.2
====== ====== ======
In conjunction with the disposal of
businesses, net assets were disposed
as follows:
Cash received (net of cash
disposed).......................... 249.3 8.1 --
Notes received........................ 87.9 10.3 --
Ordinary shares received.............. 0.9 -- --
Deferred consideration................ 5.4 -- --
Currency translation adjustments
transferred on disposal of
businesses......................... (21.1) -- --
Loss on disposal of businesses
(including net unamortized goodwill
and cumulative currency translation
adjustments)....................... 34.4 1.9 --
------ ------ ------
Net assets disposed................... 356.8 20.3 --
====== ====== ======
In conjunction with the disposal of
discontinued operations, net assets
were disposed as follows:
Cash received (net of cash
disposed).......................... -- 4.6 --
Loss on disposal of discontinued
operations (including net
unamortized goodwill).............. -- 3.7 --
------ ------ ------
Net assets disposed................... -- 8.3 --
====== ====== ======
</TABLE>
See notes to consolidated statements.
55
<TABLE>
Consolidated statements of changes in shareholders' equity
<CAPTION>
Cumulative
Contri- Accum- currency
Common Share buted Treasury ulated translation
shares premium surplus shares deficit adjustments Total
$m $m $m $m $m $m $m
<S> <C> <C> <C> <C> <C> <C> <C>
At 1 January 1993........ 11.0 558.0 1,442.6 (103.1) (1,153.3) (33.7) 721.5
Common Shares issued..... 2.0 152.8 -- -- -- -- 154.8
Treasury purchases of
convertible preference
shares................. -- -- 0.9 -- -- -- 0.9
Exchange of non-voting
exchangeable shares.... -- -- (0.1) 0.2 -- -- 0.1
Exchangeable redeemable
preference shares
premium amortization... -- -- (0.7) -- -- -- (0.7)
Net income............... -- -- -- -- 111.7 -- 111.7
Dividends on preference
shares................. -- -- -- -- (19.3) -- (19.3)
Currency translation
adjustments............ -- -- -- -- -- (11.7) (11.7)
---- ------ ------- ------ -------- ------ ------
At 31 December 1993...... 13.0 710.8 1,442.7 (102.9) (1,060.9) (45.4) 957.3
Common Shares issued..... 0.1 7.2 -- -- -- -- 7.3
Reversal of redemption
premium on convertible
preference shares...... -- -- 1.8 -- -- -- 1.8
Exchange of non-voting
exchangeable shares.... -- -- (8.1) 23.1 -- -- 15.0
Net income............... -- -- -- -- 111.0 -- 111.0
Dividends on preference
shares................. -- -- -- -- (13.3) -- (13.3)
Currency translation
adjustments............ -- -- -- -- -- 16.5 16.5
---- ----- ------- ------ -------- ----- -------
At 31 December 1994...... 13.1 718.0 1,436.4 (79.8) (963.2) (28.9) 1,095.6
Common Shares issued..... 0.1 6.9 -- -- -- -- 7.0
Conversion of convertible
preference shares...... -- -- 0.3 -- -- -- 0.3
Exchange of non-voting
exchangeable shares.... -- -- (0.1) 0.1 -- -- --
Net income............... -- -- -- -- 41.5 -- 41.5
Dividends on preference
shares................. -- -- -- -- (0.3) -- (0.3)
Currency translation
adjustments............ -- -- -- -- -- 3.7 3.7
Currency translation
adjustments transferred
on disposal of
businesses............. -- -- -- -- -- 21.1 21.1
---- ----- ------- ------ ------- ------ -------
At 31 December 1995...... 13.2 724.9 1,436.6 (79.7) (922.0) (4.1) 1,168.9
---- ----- ------- ------ ------- ------ -------
---- ----- ------- ------ ------- ------ -------
</TABLE>
See notes to consolidated financial statements.
56
<PAGE>
Notes to the consolidated financial statements
1. Basis of consolidated financial statements
The consolidated financial statements have been prepared in US
dollars in accordance with generally accepted accounting
principles in the US and as described in note 2. The preparation of
consolidated financial statements in accordance with generally
accepted accounting principles in the US requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain figures at 31 December 1994 and for the years ended 31
December 1994 and 1993 have been reclassified to conform to the
1995 presentation. In particular, corporate expenses have been
reclassified from other income less expenses to a separate
component of operating income, and gains/losses on disposal of
businesses have been reclassified from operating income to a
separate component of income before income taxes. These
reclassifications have had no net effect on the reported earnings for
income before income taxes and net income. In addition, the
balances on the accumulated deficit and the cumulative currency
translation adjustments accounts have been reviewed and reclassified. These
reclassifications have had no net effect on total shareholders'
equity.
2. Summary of significant accounting policies
Principles of consolidation
The consolidated financial statements incorporate the financial
statements of ADT, a company incorporated in Bermuda, and its
subsidiaries. ADT is a holding company with no independent
business operations or assets other than its investment in its
subsidiaries, intercompany balances and holdings of cash and cash
equivalents. ADT's businesses are conducted through its
subsidiaries. ADT consolidates companies in which it owns more
than fifty per cent. of the voting shares unless control is likely to
be temporary. The results of subsidiary companies acquired or
disposed of during the financial year are included in the
consolidated financial statements from the effective date of
acquisition or up to the date of disposal. All significant
intercompany balances and transactions have been eliminated in
consolidation.
Associates
For investments in which the ADT Group owns more than twenty
per cent. of the voting shares, or over which it exerts significant
influence over operating and financial policies, the equity method
of accounting is used in the consolidated financial statements.
The investment in associates is shown in the consolidated balance
sheets as the ADT Group's proportion of the underlying net assets
of these companies plus any goodwill attributable to the
acquisitions less any write off required for a permanent diminution
in value. The consolidated statements of income include the ADT
Group's share of net income of associates less applicable goodwill
amortization.
Currency translation
The results of subsidiaries and associates located outside the US
which account in a functional currency other than US dollars are
translated into US dollars at the average rate of exchange for the
year. The assets and liabilities of subsidiaries and associates
located outside the US which account in a functional currency
other than US dollars are translated into US dollars at the rate
ruling at the balance sheet date. Currency translation adjustments
arising from the use of differing exchange rates from period to
period are included as a separate component in shareholders'
equity.
The gains and losses arising from currency transactions are
included in the consolidated statements of income.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits
and highly liquid instruments, with an original maturity of three
months or less. As a result of the short-term maturity of these
financial instruments their carrying value is approximately equal to
their fair market value.
Inventories
Inventories are carried at the lower of cost or net realizable value.
Cost includes an addition for production overheads where
appropriate and is determined on a first-in first-out basis.
Property, plant and equipment
Property, plant and equipment are carried at cost less accumulated
depreciation. Depreciation is provided to write off the cost of the
assets over their estimated useful lives, using the straight line
method, at the following annual rates:
Owned property and related improvements 2% - 4%
Leased property and related improvements term of lease
Subscriber systems shorter of actual contract
duration or 7%, and 10%
Central monitoring equipment 7% - 14%
Other plant and equipment 10% - 40%
Repairs and maintenance costs are expensed as incurred.
Gains and losses arising on the disposal of property, plant and
equipment are included in the consolidated statements of income.
57
<PAGE>
Goodwill
The goodwill that arises where the acquisition cost of subsidiaries
and associates exceeds the fair values attributable to the underlying
net assets is capitalized and is being amortized on a straight line
basis over its estimated useful life, covering periods not exceeding
forty years. Goodwill arising on the acquisition of associates is
included in investment in associates. Costs attributable to the
acquisition, including the costs of any reorganization
arrangements, less related income, are treated as reducing the
value of the net assets acquired.
The carrying value of goodwill is evaluated periodically in relation
to the operating performance and future undiscounted cash flows
of the underlying businesses. Where, in the opinion of the ADT
Group, a permanent diminution in the value of goodwill has
occurred, the amount of the diminution is included in the
consolidated statements of income.
Income taxes
Deferred tax liabilities and assets are recognized for the expected
future tax consequences of events that have been included in the
consolidated financial statements or tax returns. Deferred tax
liabilities and assets are determined based on the differences
between the consolidated financial statements and tax bases of
assets and liabilities, using tax rates in effect for the years in which
the differences are expected to reverse.
Share premium and contributed surplus
In accordance with the Bermudian Act, when ADT issues shares
for cash at a premium to their par value, the resulting premium is
credited to a share premium account, a non distributable reserve.
When ADT issues shares in exchange for shares of another
company, the excess of the fair value of the shares acquired over
the par value of the shares issued by ADT is credited to
contributed surplus which is, subject to certain conditions, a
distributable reserve.
Net sales
Net sales represent the invoiced value of goods and services to
outside customers net of sales-related taxes.
Revenue recognition
Revenue from services or products is recognized in the
consolidated statements of income as services are rendered or
deliveries made. Service charges, which consist of subscriber
billings for services not yet rendered, are deferred and taken into
income as earned and the deferred element is included in long-term
liabilities. Revenue from the installation of electronic security
systems is recognized when installations are completed.
Pensions and post-retirement benefits
The ADT Group operates various pension and post-retirement
benefit plans designed in accordance with conditions and practices
in the countries concerned. Contributions or accruals for costs are
based on periodic actuarial valuations and are charged to the
consolidated statements of income on a systematic basis over the
expected average remaining service lives of current employees.
3. Segment information
The ADT Group is engaged in two service businesses, electronic
security services in North America and Europe and vehicle auction
and related services in the US. The ADT Group's principal
activities in the electronic security services business are the
electronic monitoring and maintenance of its installed base of
security systems and the installation of new, monitored security
systems to add to its installed base. The ADT Group's vehicle
auction services business operates a network of large auction
centers which provide an organized wholesale marketplace for the
sale and purchase of used vehicles.
Business segments
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
Net sales
Electronic security services (i) 1,092.5 999.8 937.3
Vehicle auction services (ii) 432.9 376.1 349.4
------- ------- -------
1,525.4 1,375.9 1,286.7
------- ------- -------
------- ------- -------
Operating income
Electronic security services (i) 148.7 153.7 135.1
Vehicle auction services (ii) 70.2 62.7 61.6
Corporate (iii) (33.2) (28.8) (26.4)
------- ------- -------
185.7 187.6 170.3
------- ------- -------
------- ------- -------
</TABLE>
(i) In 1995 electronic security services operating income was stated after a
charge of $21.4 million relating to restructuring and other non recurring
charges (note 4(i)).
In November 1995 the ADT Group disposed of its entire European electronic
article surveillance business. The net gain on disposal of $31.4 million
was included in the loss on disposal of businesses (note 5(ii)).
In June 1994 the ADT Group disposed of its entire Australasian electronic
security services businesses and in December 1994 the ADT Group disposed of
certain of its North American (Puerto Rico and US Virgin Islands).
58
<PAGE>
electronic security services operations. The net loss on disposal of
$1.9 million was included in the loss on disposal of businesses
(note 5(iii)).
The information represents the amounts included in the electronic
security services business segment information above which related to
the businesses and operations disposed of.
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
Net sales 45.9 76.2 87.2
Operating (loss) income (4.9) 2.6 4.0
</TABLE>
(ii) In December 1995 the ADT Group disposed of an interest in its UK and
Continental European vehicle auction services businesses ('European
Auctions') (notes 14 and 32). The net loss on disposal of $65.8 million
was included in the loss on disposal of businesses (note 5(i)).
The following information represents the amounts included in the vehicle
auction services business segment information above which related to the
businesses disposed of.
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
Net sales 163.1 122.8 98.2
Operating income 35.9 29.0 24.1
</TABLE>
(iii) Corporate expense comprise administrative, legal and general corporate
expenses. In 1995 corporate expenses were stated after a charge of $12.8
million (1994 - $4.5 million) relating to restructuring and other
non-recurring charges (note 4(ii).
(iv) The total amount of advertising expense for the year included in the
consolidated statements of income amounted to $56.1 million (1994 -
$45.5 million; 1993 - $42.8 million).
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
Depreciation
Electronic security services 135.9 119.1 107.0
Vehicle auction services 17.8 16.3 15.9
Corporate 0.6 0.7 0.7
------- -------- --------
154.3 136.1 123.6
======= ======== ========
Goodwill amortization
Electronic security services 18.6 19.2 18.9
Vehicle auction services 7.6 7.2 7.0
------- -------- --------
26.2 26.4 25.9
======= ======== ========
Capital expenditures
Electronic security services 231.5 192.6 177.1
Vehicle auction services 31.8 23.1 31.3
Corporate 1.6 0.3 0.4
------- ------- -------
264.9 216.0 208.8
======= ======= =======
Identifiable assets
Electronic security services 1,879.0 1,672.6 1,621.6
Vehicle auction services 438.1 809.8 776.8
Corporate 457.9 244.2 360.1
------- ------- -------
2,775.0 2,726.6 2,758.5
Discontinued operations -- -- 32.2
------- ------- -------
2,775.0 2,726.6 2,790.7
======= ======= =======
</TABLE>
59
<PAGE>
Geographical segments
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
Net sales
North America 1,162.3 1,055.4 989.6
Europe 363.1 303.8 267.9
Australasia -- 16.7 29.2
------- -------- --------
1,525.4 1,375.9 1,286.7
======= ======== ========
Operating income
North America 154.3 154.2 140.5
Europe 31.4 33.2 32.2
Australasia -- 0.2 (2.4)
------- -------- --------
185.7 187.6 170.3
======= ======== ========
Identifiable assets
North America 2,344.0 2,067.9 2,098.5
Europe 431.0 658.7 644.1
Australasia -- -- 15.9
------- -------- --------
2,775.0 2,726.6 2,758.5
Discontinued operations -- -- 32.2
------- -------- --------
2,775.0 2,726.6 2,790.7
======= ======== ========
</TABLE>
4. Restructuring and other non-recurring charges
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
Electronic security services (i) (21.4) -- --
Corporate (ii) (12.8) (4.5) --
------- -------- --------
(34.2) (4.5) --
======= ======== ========
</TABLE>
During 1995 the ADT Group commenced a strategic review of its business
operations and its corporate organizational structure with a view to developing
a business strategy which would place the ADT Group in a stronger position to
deal with the changing business environment and challenges facing its core
service businesses in the late 1990's.
(i) As part of the strategic review the ADT Group commenced an evaluation of
the administrative, accounting and management information systems of its
US electronic security services division (the "Re-Engineering Project").
The Re-Engineering Project, which is on-going, is intended to modify and
improve the entire structure of the business operations. As a consequence
of the Re-Engineering Project, and incorporating the effects of the
acquisition of Alert Centre, Inc. ("Alert"), in December 1995 senior
executive management approved an initial restructuring plan which
resulted in a charge for restructuring and other non-recurring items in
the US electronic security services division of $19.4 million.
The US electronic security services division restructuring charge
principally included the closure of the Parsippany, New Jersey and
associated corporate offices, which it is expected will be substantially
completed by December 1996. Full implementation of the restructuring
plan will result in the termination of approximately 250 employees.
Employee severance and other associated costs included in the charge
amounted to $13.6 million; the write off of certain property, plant and
equipment amounted to $1.9 million and other integration and
restructuring costs amounted to $3.9 million.
As part of the strategic review the ADT Group also commenced an
evaluation of the management information systems of its UK electronic
security services division. In December 1995 senior executive management
approved a restructuring plan, which it is expected will be
substantially completed by December 1996, which resulted in a charge for
restructuring and other non-recurring items of $2.0 million principally
relating to the write off of property, plant and equipment.
(ii) In addition, during 1995 the ADT Group also evaluated its group
corporate structure, in particular in the UK. As a result, in December
1995, senior executive management approved a restructuring plan, which
it is expected will be substantially completed by December 1996, which
resulted in a charge for restructuring and other non-recurring items at
the corporate level of $12.8 million.
The corporate restructuring charge included the provision for idle
property leases of $5.6 million, the termination of certain contractual
obligations and other settlement costs of $4.8 million, and employee
severance for four executives, and other associated costs, of $2.4
million.
60
<PAGE>
The corporate restructuring charge in 1994 of $4.5 million was
principally attributable to the ADT Group's corporate administration in
the UK and related to a provision for idle property leases.
5. Loss on disposal of businesses
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
UK and Continental European vehicle
auction services businesses (i) (65.8) --
European electronic article surveillance
business (ii) 31.4 -- --
Other (iii) -- (1.9) --
------- ------- -------
(34.4) (1.9) --
======= ======= =======
</TABLE>
(i) In December 1995 the ADT Group disposed of an interest in European Auctions
(note 32) for an aggregate consideration of $334.9 million (note 14). The
net loss on disposal of $65.8 million included $136.5 million relating to
the write off of net unamortized goodwill (note 16(ii)) and a $23.2 million
charge relating to cumulative currency translation adjustments.
(ii) In November 1995 the ADT Group disposed of its entire European electronic
article surveillance business for an aggregate consideration of $54.0
million, comprising cash of $48.6 million and deferred consideration held
in an escrow account of $5.4 million, which at 31 December 1995 was
included in other long-term assets (note 17). The net gain on disposal of
$31.4 million included a $2.1 million gain relating to cumulative
currency translation adjustments.
(iii) In June 1994 the ADT Group disposed of its entire Australasian
electronic security services businesses and in December 1994 the ADT
Group disposed of certain of its North American (Puerto Rico and US
Virgin Islands) electronic security services operations. The aggregate
consideration on these disposals amounted to $19.5 million (comprising
cash of $9.2 million and notes receivable of $10.3 million) and the net
loss on disposal of $1.9 million included $10.7 million relating to the
write off of net unamortized goodwill (note 16(ii)).
6. Other income less expenses
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
Gains and losses arising from the
ownership of:
Short-term investments -- 3.0 0.8
Long-term investments 0.1 18.5 7.7
Dividend income on investments
0.1 1.9 0.5
Gains and losses on currency
transactions 0.9 2.1 0.2
------- ------- -------
1.1 25.5 9.2
======= ======= =======
</TABLE>
Realized gains and losses arising from the ownership of short-term and long-term
investments are principally stated before carrying costs of interest,
administrative and other expenses. During 1994 gains arising from the ownership
of long-term investments comprised $4.2 million relating to the disposal of the
ADT Group's entire equity investment in Nu-Swift plc ("Nu-Swift") (note 14) and
other net gains of $14.3 million principally arising from the disposal of other
non-core investments. During 1993 gains arising principally from the ownership
of long-term investments included $7.4 million arising principally as a result
of holders of the ADT's exchangeable redeemable preference shares exercising
their option to exchange their exchangeable redeemable preference shares for
ordinary shares of BAA plc ("BAA") (note 27).
7. Income Taxes
(i) The provision for income taxes in the consolidated statements of income
was as follows:
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
Current income taxes:
US (principally state income taxes) (3.0) (4.6) (2.9)
Non US (6.3) (4.0) (3.3)
------ ------- -------
(9.3) (8.6) (6.2)
------- ------- -------
Deferred income taxes: (note 22)
US (principally federal income taxes) (16.5) (22.0) (13.8)
Non US (1.0) (1.4) (1.2)
------- ------- -------
(17.5) (23.4) (15.0)
------- ------- -------
(26.8) (32.0) (21.2)
======= ======= =======
</TABLE>
61
(ii) Income before income taxes included the following components:
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
US income 62.9 81.8 87.9
Non US income 15.2 64.5 45.0
------- ------- -------
Income before income taxes 78.1 146.3 132.9
======= ======= =======
</TABLE>
(iii) The reconciliation between notional US Federal income taxes at the
statutory rate on consolidated income before income taxes and the ADT
Group's income tax provision was as follows:
<TABLE>
<CAPTION>
Year ended 31 December
1995 1994 1993
$m $m $m
<S> <C> <C> <C>
Notional US Federal income taxes at
the statutory rate (27.3) (51.2) (46.5)
Adjustments to reconcile to the ADT
Group's income tax provision:
US state income tax provisions, net (2.6) (3.2) (2.9)
Non US net (losses) earnings (2.0) 17.2 11.3
Utilization and/or recognition of
tax loss carryforwards and other
items 5.1 5.2 16.9
------- ------- -------
Income tax provision (26.8) (32.0) (21.2)
======= ======= =======
</TABLE>
8. Loss from discontinued operations
Discontinued operations represented the disposal during 1994 of
all the ADT Group's non-core businesses, principally the Insight
Travel Group. The ADT Group no longer has any interests in
non-core businesses. The aggregate cash consideration on these
disposals amounted to $11.2 million. Included in the loss from
discontinued operations for 1994 were net losses on disposal of
the non-core businesses amounting to $3.7 million, which included
$19.1 million relating to the write off of net unamortized goodwill
on the disposal of the non-core businesses (note 16(ii)). The net
income from operations for 1994 included in the loss from
discontinued operations amounted to $0.4 million (1993 - nil) on
net sales of $80.6 million (1993 - $96.9 million).
9. Extraordinary items
In July 1995 the ADT Group repaid in full all amounts outstanding
under its previous bank credit agreement, which was subsequently
cancelled. The ADT Group funded the repayment from the net
proceeds of the issue of its zero coupon subordinated Liquid Yield
Option Notes (note 20(iii)). Extraordinary items included the write
off of net unamortized deferred refinancing costs of $12.8 million
(note 17) relating to the early extinguishment of all amounts
outstanding under the previous bank credit agreement, and were
stated net of applicable income taxes of $4.5 million.
During 1995 the ADT Group reacquired in the market certain of
its senior subordinated notes (note 20(ii)), which was financed
from cash on hand. Extraordinary items included the loss arising
on reacquisition of $0.9 million and the write off of net
unamortized deferred refinancing costs of $0.8 million (note 17)
relating to the early extinguishment of certain amounts outstanding
under the senior subordinated notes, and were stated net of
applicable income taxes of $0.2 million.
10. Earnings per Common Share
The calculation of primary earnings per Common Share was based
on the weighted average of 131,248,518 (1994 - 129,113,421;
1993 - 115,008,199) Common Shares in issue during the year after
allowing for full conversion rights attaching to non-voting
exchangeable shares and the allotment of Common Shares under
executive share option schemes, which are considered common
stock equivalents. Primary earnings per Common Share from
continuing operations was based on adjusted net income from
continuing operations available to holders of Common Shares of
$51.0 million (1994 - $101.0 million; 1993 - $91.7 million).
11. Accounts receivable - net
<TABLE>
<CAPTION>
At 31 December
1995 1994
$m $m
<S> <C> <C>
Trade accounts receivable 183.9 176.2
Less: allowance for doubtful receivables (14.0) (14.0)
-------- -------
169.9 162.2
======== =======
</TABLE>
62
<PAGE>
12. Inventories
<TABLE>
<CAPTION>
At 31 December
1995 1994
$m $m
<S> <C> <C>
Raw materials and consumables 8.8 11.6
Work in process 12.5 13.9
Finished goods 9.7 14.9
-------- -------
31.0 40.4
======== =======
</TABLE>
13. Prepaid expenses and other current assets
<TABLE>
<CAPTION>
At 31 December
1995 1994
$m $m
<S> <C> <C>
Prepaid expenses 6.7 11.9
Other current assets 16.0 31.5
------ -------
22.7 43.4
====== =======
</TABLE>
14. Investment in and loans to associate
<TABLE>
<CAPTION>
At 31 December
1995 1994
$m $m
<S> <C> <C>
Vendor Note 83.9 --
Shareholder Loan Notes 13.9 --
------- ------
97.8 --
Less: unamortized discount (9.9) --
------- ------
87.9 --
Investment in ordinary share capital 0.9 --
------- ------
88.8 --
======= ======
</TABLE>
In December 1995 the ADT Group disposed of an interest in
European Auctions to Integrated Transport Systems Limited
("ITS") (note 32) for an aggregate consideration of $334.9 million.
The aggregate consideration received by the ADT Group on
closing was comprised of cash of $235.1 million, $187.6 million
aggregate principal amount at maturity of a subordinated deep
discount zero coupon loan note issued by ITS maturing in March
2004 ("Vendor Note"), $31.1 million aggregate principal amount
at maturity of subordinated deep discount zero coupon loan notes
issued by ITS maturing in March 2004 ("Shareholder Loan
Notes"), and a 43.1 per cent. interest in the ordinary share capital
of ITS at an issue price of $2.0 million.
The Vendor Note is a sterling loan note with an issue price of
$83.9 million, reflecting a yield to maturity of 10.0 per cent. per
annum, and valued by the ADT Group at $74.6 million. There are
no periodic payments of interest. The Vendor Note is a
subordinated, non-collateralized obligation of ITS and is
transferrable, under certain conditions, after December 1998.
The Shareholder Loan Notes are transferrable sterling loan notes
with an issue price of $13.9 million, reflecting a yield to maturity
of 10.0 per cent. per annum, and valued by the ADT Group at
$13.3 million. There are no periodic payments of interest. The
Shareholder Loan Notes are subordinated, non-collateralized
obligations of ITS and are also subordinated to the Vendor Note.
The discount on the Vendor Note of $9.3 million will be amortized
on a basis linked to the yield to maturity over the life of the loan
note as a credit to interest income, and represents the difference
between the stated yield to maturity and the prevailing market
yield to maturity of approximately 11.5 per cent. per annum, for
similar types of loan notes at the time the Vendor Note was issued
in December 1995.
The aggregate fair market value of the Vendor Note and
Shareholder Loan Notes at 31 December 1995 amounted to $87.9
million, and is based on discounting the loan notes at estimated
current sterling interest rates on similar term financial instruments.
The 43.1 per cent. interest in the ordinary share capital of ITS was
valued by the ADT Group at $0.9 million.
In February 1996 the ADT Group disposed of its entire interest in
Shareholder Loan Notes with an issue price of $13.9 million and
valued by the ADT Group at $13.3 million (net of unamortized
discount of $0.6 million), and 33.1 per cent. of the ordinary share
capital of ITS valued by the ADT Group at $0.9 million, for an
aggregate cash consideration of $15.4 million. As a result, the
ADT Group now holds a 10.0 per cent. interest in the ordinary
share capital of ITS, valued by the ADT Group at a nominal
amount, together with the Vendor Note.
63
<PAGE>
In March 1994 the ADT Group disposed of its entire equity
investment in Nu-Swift, a UK quoted company, for an aggregate
consideration of $50.1 million which was satisfied by the receipt of
cash of $41.1 million and $9.0 million in the form of interest
bearing, collateralized sterling loan notes repayable to the ADT
Group in equal installments in each of the years 1995 to 1998 of
which, at 31 December 1995, $2.3 million (1994 - $2.3 million)
was included in other current assets (note 13) and $4.6 million
(1994 - $6.9 million) was included in other long-term assets (note
17). The gain on disposal of $5.1 million, less related costs of $0.9
million, was included in other income less expenses (note 6).
15. Property, plant and equipment - net
<TABLE>
<CAPTION>
At 31 December
1995 1994
$m $m
<S> <C> <C>
Cost:
Property and related improvements 263.3 450.7
Subscriber systems 1,363.8 1,170.6
Other plant and equipment 172.9 200.1
------- -------
Total cost 1,800.0 1,821.4
------- -------
Accumulated depreciation:
Property and related improvements 40.2 42.1
Subscriber systems 431.2 338.2
Other plant and equipment 105.1 108.9
------- -------
Total accumulated depreciation 576.5 489.2
------- -------
Net book values 1,223.5 1,332.2
======= =======
</TABLE>
16. Goodwill - net
<TABLE>
<CAPTION>
1995 1994
$m $m
<S> <C> <C>
Cost:
At 1 January 1,041.5 1,062.7
Acquisitions (i) 123.0 12.7
Disposals (ii) (168.4) (33.9)
------- -------
At 31 December 996.1 1,041.5
------- -------
Accumulated Amortization:
At 1 January 178.8 156.1
Charge for the year (iii) 26.2 26.8
Disposals (ii) (31.9) (4.1)
------- -------
At 31 December 173.1 178.8
------- -------
Net book values:
At 31 December 823.0 862.7
======= =======
</TABLE>
(i) In December 1995 the ADT Group acquired 76.0 per cent. of the
outstanding voting share capital of Alert, an electronic security services
company in the US, for an aggregate cash consideration of $69.0 million,
which was financed from cash in hand. The amount of goodwill arising from
this acquisition was $120.1 million. In January 1995 the ADT Group acquired
a vehicle auction services business in Belgium for an aggregate cash
consideration of $4.2 million, which was disposed of in December 1995 as
part of the disposal by the ADT Group of an interest in European Auctions
(note 16(ii)). During 1995 the ADT Group also acquired several small
electronic security services businesses in the US and Europe for an
aggregate cash consideration of $1.0 million.
In December 1994 the ADT Group acquired a vehicle auction services business
in the UK for an aggregate cash consideration of $14.8 million.
All acquisitions have been accounted for using the purchase method.
Accordingly, the respective purchase prices have been allocated to assets
acquired and liabilities assumed based on their preliminary estimated fair
values. These allocations resulted in goodwill of $123.0 million arising
during the year (1994 - $12.7 million).
(ii) In December 1995 the ADT Group disposed of an interest in
European Auctions (notes 14 and 32). Net unamortized goodwill on disposal
of $136.5 million was included in the loss on disposal of businesses in the
consolidated statements of income (note 5(i)).
In June 1994 the ADT Group disposed of its entire Australasian electronic
security services businesses and in December 1994 the ADT Group disposed of
certain of its North American (Puerto Rico and US Virgin Islands)
electronic security services operations. The net unamortized goodwill on
disposals of $10.7 million was included
64
<PAGE>
in the loss on disposal of businesses in the consolidated statements
of income (note 5(iii)). During 1994 the ADT Group disposed of all its
non-core businesses, principally the Insight Travel Group. Net
unamortized goodwill on disposals of $19.1 million was included in the
loss from discontinued operations in the consolidated statements of
income (note 8).
(iii) The charge for the year in 1994 included $0.4 million (1993 - $0.6
million) relating to discontinued operations (note 8).
17. Other long-term assets
At 31 December
1995 1994
$m $m
Deferred refinancing costs 24.7 31.2
Other long-term assets 49.6 38.8
---- ----
74.3 70.0
==== ====
In connection with the refinancing of certain long-term obligations of the
ADT Group in 1993 and in 1995 (note 20), the ADT Group incurred certain
fees and expenses. These refinancing costs are being amortized as interest
expense through the consolidated statements of income on a straight line
basis over the terms of the respective lives of the senior notes, senior
subordinated notes, Liquid Yield Option Notes and new revolving bank credit
agreement. Refinancing costs incurred during 1995 in respect of the Liquid
Yield Option Notes and new revolving bank credit agreement amounted to
$12.0 million. The refinancing costs amortization for the year amounted to
$4.9 million (1994 - $5.3 million; 1993 - $2.2 million). In July 1995 $12.8
million of net unamortized deferred refinancing costs relating to the early
extinguishment of all amounts outstanding under the previous bank credit
agreement were written off as extraordinary items in the consolidated
statements of income (note 9). During 1995 $0.8 million of net unamortized
deferred refinancing costs relating to the early extinguishment of certain
amounts outstanding under the senior subordinated notes were written off as
extraordinary items in the consolidated statements of income (note 9).
18. Short-term debt
At 31 December
1995 1994
$m $m
Bank and acceptance facilities 38.6 44.3
Current portion of long-term debt (note 20) 0.2 104.8
---- -----
38.8 149.1
==== =====
The average rate of interest on short-term debt outstanding at 31 December
1995 was 7.9 per cent. (1994 - 9.0 per cent.). Short-term debt is generally
repayable on demand or at an interest payment date, and is
non-collateralized except for $0.2 million (1994 - $22.4 million) of the
current portion of long-term debt (note 20).
19. Other current liabilities
At 31 December
1995 1994
$m $m
Accruals 60.1 64.4
Payroll and employee benefits 48.4 48.7
Payments received on account 9.4 8.1
Income taxes 8.3 16.6
Interest payable 21.3 26.7
Short-term restructuring, disposition and
other provisions 35.0 20.4
Other current liabilities 6.6 12.9
----- -----
189.1 197.8
===== =====
65
<PAGE>
20. Long-term debt
At 31 December
1995 1994
$m $m
Senior notes (i) 250.0 250.0
Senior subordinated notes (ii) 317.2 350.0
Liquid Yield Option Notes (iii) 306.8 -
New revolving bank credit agreement (iv) 15.0 -
Previous bank credit agreement
- - Term loans (liquidity letter of
credit facility) - 198.7
- - Revolving credit facility - 32.9
Eurobond issue (v) - 82.0
Other (vi) 39.0 43.5
------ ------
928.0 957.1
Less: current portion (note 18) (0.2) (104.8)
------ ------
927.8 852.3
====== ======
(i) The $250.0 million 8.25 per cent. senior notes due August 2000 were
issued in August 1993, through a public offering, by ADT Operations,
Inc., a company incorporated in the US and an indirect wholly owned
subsidiary of ADT, and are guaranteed on a senior basis by ADT and
certain subsidiaries of ADT Operations, Inc. The senior notes are not
redeemable prior to maturity and interest is payable semi-annually.
The indentures governing the senior notes contain certain covenants
including limitations on indebtedness, limitations on certain
payments, including dividends on ADT's Common Shares, and compliance
with various financial and operating covenants and prohibitions. The
senior notes are non-collateralized senior obligations of ADT
Operations, Inc. ranking pari passu in right of payment with all
other existing and future senior indebtedness of ADT Operations, Inc.
including indebtedness under the new revolving bank credit agreement
referred to in (iv) below.
(ii) The $350.0 million 9.25 per cent. senior subordinated notes due
August 2003 were issued in August 1993, through a public offering, by
ADT Operations, Inc., and are guaranteed on a senior subordinated
basis by ADT. The senior subordinated notes are redeemable in whole
or in part, at the option of ADT Operations, Inc., at any time after
August 1998 at the following redemption prices: during the twelve
month period beginning (a) August 1998 at 103.75 per cent. (b) August
1999 at 102.50 per cent. (c) August 2000 at 101.25 per cent., and
thereafter at 100.00 per cent. of the principal amount. Interest is
payable semi-annually. The indentures governing the senior
subordinated notes contain certain covenants as set out for the
senior notes in (i) above. The senior subordinated notes are
non-collateralized, senior subordinated obligations of ADT
Operations, Inc. ranking pari passu with, or senior in right of
payment to, all other existing and future indebtedness of ADT
Operations, Inc. that is expressly subordinated to senior
indebtedness of ADT Operations, Inc. During 1995 the ADT Group
reacquired in the market $32.8 million face value of the senior
subordinated notes at a purchase cost of $33.7 million, which was
financed from cash in hand. The loss arising on reacquisition of
$0.9 million, and related costs of $0.8 million, was included in
extraordinary items (note 9).
(iii) In July 1995 ADT Operations, Inc. issued $776,250,000 aggregate
principal amount at maturity of its zero coupon subordinated Liquid
Yield Option Notes ("LYO Notes") maturing July 2010. The net proceeds
of the issue amounted to $287.4 million, after costs of issuance of
$10.0 million, which was used to repay in full all amounts
outstanding under ADT Operations, Inc.'s previous bank credit
agreement, which was subsequently cancelled.
The issue price per LYO Note was $383.09, being 38.309 per cent. of
the principal amount of $1,000 per LYO Note at maturity, reflecting a
yield to maturity of 6.5 per cent. per annum (computed on a
semi-annual bond equivalent basis). There are no periodic payments of
interest. The discount amortization on the LYO Notes is being charged
as interest expense through the consolidated statements of income on
a basis linked to the yield to maturity. The LYO Notes discount
amortization charge for 1995 amounted to $9.4 million. Each LYO Note
is exchangeable for ADT Common Shares at the option of the holder at
any time prior to maturity, unless previously redeemed or otherwise
purchased by ADT Operations, Inc., at an exchange rate of 28.23
Common Shares per LYO Note. Any LYO Note will be purchased by ADT
Operations, Inc. at the option of the holder as of July 2002 for a
purchase price per LYO Note of $599.46. At this time, if the holder
exercises the option, ADT has the right to deliver all or a portion
of the purchase price in the form of ADT Common Shares. Beginning on
July 2002 the LYO Notes are redeemable for cash at any time at the
option of ADT Operations, Inc., in whole or in part, at redemption
prices equal to the issue price plus accrued original issue discount
to the date of redemption. The LYO Notes are guaranteed on a
subordinated basis by ADT.
(iv) In August 1995 ADT Operations, Inc. entered into a new $300 million
revolving bank credit agreement which replaced its previous bank
credit agreement. The new agreement has a term of five years and is
guaranteed on a senior basis by ADT and certain subsidiaries of ADT
Operations, Inc. Amounts available under this facility are available
for borrowing and reborrowing (or issuance and reissuance in the case
of letters of credit up to a maximum of $100 million), subject to
certain conditions at that time, until June 2000 at which time all
amounts are repayable in full. At 31 December 1995 $15.0 million was
drawn down under the new agreement plus letters of credit amounting
to $81.0 million which have been issued and have terms of less than
one year. At 31 December 1994 letters of credit amounting to $90.6
million had been issued under the revolving credit facility of the
previous bank credit agreement. The ADT Group utilizes letters of
credit to back certain financing arrangements and insurance policies
as well as for trade purposes. The letters of credit approximately
reflect fair
67
<PAGE>
value as a condition of their underlying purpose. The
ADT Group expects the counterparties to fully perform under the terms
of the agreements.
Amounts drawn down under the new revolving bank credit agreement bear
interest at a floating rate equal, at the option of ADT Operations,
Inc., to either the alternative base rate plus a margin or the
reserve adjusted LIBO rate plus a margin. The average rate of
interest at 31 December 1995 was 7.6 per cent. (1994 - 7.3 per cent.).
The new revolving bank credit agreement contains certain financial
and operating covenants, including restrictions on the ADT Group's
ability to incur additional indebtedness, limitations on certain
payments, including dividends on the Common Shares of ADT and ADT
Operations, Inc., and certain other financial covenants, including a
minimum cash flow coverage ratio, a minimum debt to total
capitalization ratio and a minimum level of shareholders' equity.
(v) In November 1988 the ADT Group made a 6.5 per cent. bearer eurobond
issue of deutschemarks 150 million. In a transaction that met current
ISDA standards, between the ADT Group and a major international
financial institution with a Standard & Poor's credit rating of at
least 'A', the proceeds were swapped into dollars, producing net
proceeds of $82.0 million at a fixed interest rate of 10.55 per cent.
per annum. In November 1995, under the terms of these arrangements,
the ADT Group repaid in full, from cash on hand, all amounts
outstanding under the eurobond issue. At 31 December 1994 this
indebtedness amounted to $82.0 million and was classified in the
current portion of long-term debt (note 18).
(vi) Other long-term debt principally represents revolving facilities with
various banks falling due for repayment in 1999 bearing interest at a
floating rate equal, at the option of the ADT Group, to either the
alternative base rate plus a margin or the reserve adjusted LIBO rate
plus a margin, and is non collateralized except for $1.0 million
(1994 - $3.6 million). The average rate of interest at 31 December
1995 was 6.9 per cent. (1994 - 6.9 per cent.).
The average rate of interest on all long-term debt during the year was 8.2
per cent. (1994 - 8.8 per cent.; 1993 - 6.2 per cent.).
During 1992 the ADT Group entered into two agreements that met current ISDA
standards, each with a major international financial institution with a
Standard & Poor's credit rating of at least "A", which effectively set
interest rate limits on $300.0 million notional amount of the ADT Group's
long-term debt. Both contracts were based on three month US dollar LIBO
rates. The first agreement, with effect from March 1993 to December 1995,
limited interest rates on $200.0 million notional amount of debt to a range
of, at current market rates, 3.625 per cent. to 9.0 per cent. through 1993,
4.625 per cent. to 9.0 per cent. through 1994 and 5.375 per cent. to 9.0
per cent. through 1995. The second agreement with effect from July 1993 to
January 1996, limited interest rates on $100.0 million notional amount of
debt to 7.0 per cent. The purchase cost of the two agreements amounted to
$3.4 million and was amortized as interest expense through the consolidated
statements of income on a straight line basis over the terms of the
respective lives of the two agreements. The amortization charge for the
year, including certain additional costs incurred under the agreements,
amounted to $1.2 million (1994 - $2.2 million; 1993 - $1.1 million). As of
2 January 1996 both of the aforementioned agreements had expired and have
not been renewed or replaced.
Based on estimated interest rates currently available to the ADT Group for
long-term debt with similar terms and average maturities, the fair value of
all long-term debt at 31 December 1995 amounted to approximately $993
million (1994 - approximately $929 million).
The maturities and instalments with respect to long-term debt outstanding
at 31 December 1995 are as follows:
$m
Year ending 31 December 1996 0.2
1997 -
1998 0.8
1999 34.1
2000 266.7
Thereafter 626.2
-----
928.0
=====
21. Deferred revenue
Deferred revenue is comprised of subscriber billings for services not yet
rendered.
22. Deferred income taxes
The movement in deferred income taxes since 1 January 1993 has been as
follows:
1995 1994 1993
$m $m $m
At 1 January 98.6 72.2 55.7
Charge for the year (note 7(i)) 17.5 23.4 15.0
Extraordinary items (note 9) (4.7) - -
Eliminated on disposals (3.3) - -
Currency translation adjustments 0.8 (0.5) (0.7)
Reclassifications 7.8 3.5 2.2
----- ---- ----
At 31 December 116.7 98.6 72.2
===== ==== ====
The charge for the year in 1993 included $1.0 million relating to changes
in the US federal statutory income tax rates during the year.
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<PAGE>
The significant temporary timing differences and tax loss carryforwards
that gave rise to the deferred income tax balance at 31 December 1995 were
as follows:
US Non US Total
$m $m $m
Liabilities:
Depreciation 733.9 63.8 797.7
Other 5.2 14.5 19.7
----- ----- -----
739.1 78.3 817.4
----- ----- -----
Assets:
Tax perating loss carryforwards 331.3 26.7 358.0
Provisions for estimated expenses 59.4 5.7 65.1
Interest expense 99.6 - 99.6
Post-retirement benefit obligations 66.5 - 66.5
----- ----- -----
556.8 32.4 589.2
Valuation allowance (83.2) (13.5) (96.7)
----- ----- -----
473.6 18.9 492.5
----- ----- -----
Gross deferred income tax liability 265.5 59.4 324.9
----- ----- -----
Deferred income tax liability at
statutory tax rates 92.9 23.8 116.7
===== ===== =====
The US tax operating loss carryforwards at 31 December 1995 expire as follows:
$m
Year ending 31 December 1999 6.8
2000 -
2001 21.4
2002 18.3
2003 6.8
2004 72.5
2005 108.9
2006 87.5
2007 9.1
-----
331.3
=====
No provision has been made for deferred income taxes on undistributed earnings
of subsidiaries ($500.0 million at 31 December 1995) which are required to
finance their continuing operations.
The significant temporary timing differences and tax loss carryforwards that
gave rise to the deferred income tax balance at 31 December 1994 were as
follows:
US Non US Total
$m $m $m
Liabilities:
Depreciation 622.1 54.6 676.7
Other 3.5 14.0 17.5
------ ----- ------
625.6 68.6 694.2
------ ----- ------
Assets:
Tax operating loss carryforwards 350.5 20.8 371.3
Provisions for estimated expenses 54.9 4.2 59.1
Interest expense 43.0 - 43.0
Post-retirement benefit obligations 64.0 - 64.0
------ ----- ------
512.4 25.0 537.4
Valuation allowance (99.6) (15.3) (114.9)
------ ----- ------
412.8 9.7 422.5
------ ----- ------
Gross deferred income tax liability 212.8 58.9 271.7
------ ----- ------
Deferred income tax liability at
statutory tax rates 74.5 24.1 98.6
====== ===== ======
68
<PAGE>
23. Other long-term liabilities
At 31 December
1995 1994
$m $m
Pensions (note 31 (iii)) 20.6 20.8
Post-retirement benefits other than
pensions (note 31 (iv)) 47.8 48.0
Long-term restructuring, disposition and
other provisions 37.3 33.5
Other long-term liabilities 20.6 28.1
----- -----
126.3 130.4
===== =====
24. Minority interests
Minority interests represent the 24.0 per cent. interest in the outstanding
voting share capital of Alert held by the minority shareholders of Alert and
not owned by the ADT Group at 31 December 1995. The value is based on the
consolidated net assets of Alert on a historical cost basis.
In February 1996, following approval by Alert's shareholders, Alert was merged
into the ADT Group and, as a result, those shares then held by the minority
shareholders of Alert and not owned by the ADT Group will be converted into the
right to receive in cash the price paid per share by the ADT Group in the
initial tender offer. The aggregate payment to the minority shareholders of
Alert if all of the minority shares are cashed in, including certain other
payments for employee share warrants and options, amounts to $24.2 million.
25. Convertible redeemable preference shares
At 31 December
1995 1994 1993
$m $m $m
Authorized:
225,000 534% convertible cumulative
redeemable preference shares 2002 of
$1 each (1994 - 225,000; 1993 - 225,000) (i) 0.2 0.2 0.2
500,000 6% convertible cumulative redeemable
preference shares 2002 of $1 each (1994 -
500,000; 1993 - 500,000) (ii) 0.5 0.5 0.5
125,000,000 convertible cumulative redeemable
preference shares of $1 each (1994 - 125,000,000;
1993 - 125,000,000) (iii) 125.0 125.0 125.0
----- ----- -----
125.7 125.7 125.7
===== ===== =====
The movement in convertible redeemable preference shares since 1 January 1993
has been as follows:
5 3/4% shares 6% shares
Number $m Number $m
Issued and outstanding:
At 1 January 1993 29,738 35.5 288,400 399.1
Reacquired in the market at
purchase cost - - (5,370) (6.5)
Excess of carrying value of
acquired shares over purchase
cost - - - (0.9)
------- ----- -------- ------
At 31 December 1993 29,738 35.5 283,030 391.7
Reacquired in the market at
purchase cost (25) - - -
Redeemed (28,957) (34.6) (278,625) (385.6)
Reversal of redemption premium
on shares not redeemed - (0.1) - (1.7)
------- ----- -------- ------
At 31 December 1994 756 0.8 4,405 4.4
Converted into Common Shares
(note 28) - - (225) (0.3)
------- ----- -------- ------
At 31 December, 1995 756 0.8 4,180 4.1
======= ===== ======== ======
In January 1994 ADT redeemed 28,957 of its 534 per cent. convertible redeemable
preference shares for an aggregate consideration, including redemption premium,
of $34.6 million. The ADT Group funded the redemption from cash on hand.
In October 1994 ADT redeemed 278,625 of its 6 per cent. convertible redeemable
preference shares for an aggregate consideration, including redemption premium,
of $385.6 million. The ADT Group funded the redemption through the drawdown of
facilities of $231.6 million under its previous bank credit agreement (note 20)
and $154.0 million from cash on hand.
The total carrying value of convertible redeemable preference shares at 31
December 1995 amounted to $4.9 million (1994 - $5.2 million; 1993 - $427.2
million). The aggregate fair market value of convertible redeemable preference
shares at 31 December 1995 amounted to $4.9 million (1994 - $5.2 million) and
is based on quoted market prices.
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<PAGE>
The cumulative number of treasury convertible redeemable preference shares held
by a subsidiary of ADT at purchase cost amounted to:
5 3/4% shares 6% shares
Number $m Number $m
At 31 December 1993 6,000 6.7 116,970 118.2
At 31 December 1994 25 - - -
At 31 December 1995 25 - - -
Dividends on convertible redeemable preference shares amounted to:
Year ended 31 December
1995 1994 1993
$m $m $m
5 3/4% convertible redeemable preference shares - - 1.76%
convertible redeemable preference shares 0.3 13.3 17.0
--- ---- ----
0.3 13.3 18.7
=== ==== ====
(i) 534 per cent. convertible cumulative redeemable preference shares
2002 (par value $1 each).
In April 1987 175,000 of these mandatorily redeemable preference shares
were issued for cash at a price of $1,000 each and during the period to
31 December 1995 139,262 of these preference shares were converted into
Common Shares. The holders of these preference shares are entitled to a
fixed cumulative preferential dividend at the rate of 534 per cent. per
annum. Unless previously redeemed, these preference shares are
convertible at the option of the preference shareholders into Common
Shares. The conversion price is 17.00 pounds per Common Share at a fixed
exchange rate of 1 pound=$1.5750. Unless previously redeemed or converted,
these preference shares will be redeemed on 3 January 2002 at their issue
amount. These preference shares were subject to redemption, at the option
of the holders, in January 1994 at 119.625 per cent. of their issue
amount. ADT has the right to require redemption or conversion of the
preference shares in certain circumstances.
(ii) 6 per cent. convertible cumulative redeemable preference shares 2002 (par
value $1 each).
In September 1987 400,000 of these mandatorily redeemable preference
shares were issued for cash at a price of $1,000 each, and during the
period to 31 December 1995 225 of these preference shares were converted
into Common Shares. The holders of these preference shares are entitled
to a fixed cumulative preferential dividend at the rate of 6 per cent.
per annum. Unless previously redeemed, these preference shares are
convertible at the option of the preference shareholders into Common
Shares. The conversion price is 19.10 pounds per Common Share at a fixed
exchange rate of 1 pound=$1.617. Unless previously redeemed or converted,
these preference shares will be redeemed on 3 October 2002 at their issue
amount. These preference shares were subject to redemption, at the option
of the holders, in October 1994 at 138.375 per cent. of their issue
amount. ADT has the right to require redemption or conversion of the
preference shares in certain circumstances.
(iii) Convertible cumulative redeemable preference shares (par value $1 each).
The rights attaching to these preference shares, none of which are issued
and outstanding, as to dividends, return of capital, redemption,
conversion, voting and otherwise may be determined by ADT on or before
the time of allotment.
In the event of liquidation of ADT, the holders of all of ADT's convertible
redeemable preference shares are together entitled to payment to them of the
amount for which the preference shares were subscribed and any unpaid
dividends, prior to any payment to the holders of Common Shares.
26. Non-voting exchangeable shares
The movement in non-voting exchangeable shares since 1 January 1993 has been as
follows:
Number $m
At 1 January 1993 931,280 15.1
Exchanged into Common Shares held as
treasury shares (note 29) (5,743) (0.1)
-------- -----
At 31 December 1993 925,537 15.0
Exchanged into Common Shares held as
treasury shares (note 29) (922,628) (15.0)
-------- -----
At 31 December 1994 2,909 -
Exchanged into Common Shares held as treasury
shares (note 29) (2,909) -
-------- -----
At 31 December 1995 - -
======== =====
In March 1991 ADT Finance Inc., an indirect wholly owned Canadian subsidiary of
ADT, issued 1,000,000 non-voting exchangeable shares exchangeable for Common
Shares of ADT at the option of the holder, at any time, on a one for one basis.
Holders of non-voting exchangeable shares were entitled only to dividends
equivalent to dividends declared and paid on Common Shares of ADT.
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<PAGE>
27. Exchangeable redeemable preference shares
The movement in exchangeable redeemable preference shares since 1 January 1993
has been as follows:
Number $m
At 1 January 1993 1,088 21.0
Exchanged into BAA shares (1,088) (17.5)
Additional premium amortization - 0.7
Premium release on exchange - (4.2)
------- ------
At 31 December 1993, 31 December,
1994 and 31 December 1995 - -
======= ======
Dividends on exchangeable redeemable preference shares
amounted to:
Year ended 31 December
1995 1994 1993
Exchangeable redeemable preference
shares - - 0.6
=== === ===
In April 1990 ADT issued 7,500 exchangeable cumulative redeemable preference
shares of $1 each at an issue amount of 10,000 pounds per share. The holders of
the exchangeable redeemable preference shares were entitled to a fixed
cumulative preferential dividend at the rate of 8 per cent. per annum. Each
mandatorily redeemable exchangeable preference share was exchangeable at the
option of the holder into 2,268 fully paid ordinary shares of 1 pound each in
BAA, a UK quoted company. The exchangeable redeemable preference shares were
subject to redemption, at the option of the holders, in July 1995 at 141.73 per
cent. of their issue amount.
28. Common Shares
At 31 December
--------------------
1995 1994 1993
$m $m $m
Authorized:
220,000,000 shares of $0.10 each
(1994 - 220,000,000; 1993 - 220,000,000) 22.0 22.0 22.0
==== ==== ====
Issued and outstanding:
131,850,465 shares of $0.10 each
(1994 - 131,062,814; 1993 - 130,329,975) 13.2 13.1 13.0
==== ==== ====
The movement in Common Shares since 1 January 1993 has been as follows:
1995 1994 1993
Number Number Number
----------- ----------- -----------
At 1 January 131,062,814 130,329,975 109,629,562
Exercise of warrants (i) - 697,839 413
Issued for cash (ii) - - 20,700,000
Exercise of executive share
options (iii) 780,366 35,000 -
Conversion of convertible
preference shares
(note 25) 7,285 - -
----------- ----------- -----------
At 31 December 131,850,465 131,062,814 130,329,975
=========== =========== ===========
- ------
(i) In April 1992 an issue was made to holders of Common Shares of warrants
to subscribe for Common Shares of ADT on the basis of one warrant for
every six Common Shares then held. Each warrant gave the holder the right
to subscribe for one Common Share at $10.00 per Common Share during the
period from 1 July 1992 to 30 June 1994. All warrants not exercised at 30
June 1994 have lapsed in accordance with the terms of the warrants.
The movement in warrants since 1 January 1993 has been as follows:
Number
----------
At 1 January 1993 18,254,731
Exercised (413)
-----------
At 31 December 1993 18,254,318
Exercised (697,839)
Lapsed (17,556,479)
At 31 December 1994 and
31 December 1995 -
===========
(ii) In August 1993 20,700,000 Common Shares were issued by ADT, through a
public offering, at a price of $8.00 per share resulting in gross
proceeds of $165.6 million before payment of the costs of issuance of
$10.8 million which have been deducted from the premium arising on the
issuance of the Common Shares.
71
<PAGE>
(iii) At 31 December 1995 13,491,185 executive share options under various
plans and schemes were issued and outstanding of which 5,423,423 are
exercisable. The range of the subscription prices was as follows:
$ pounds
Low 8.00 5.15
High 29.60 18.40
Average 9.85 8.73
The movement in executive share options since 1 January 1993 has been as
follows:
1995 1994 1993
Number Number Number
At 1 January 12,180,778 10,410,425 3,888,630
Granted 3,000,000 1,975,000 7,648,250
Exercised (780,366) (35,000) -
Cancelled on purchase (note 32) (657,832) - -
Lapsed/surrendered (251,395) (169,647) (1,126,455)
---------- ---------- ----------
At 31 December 13,491,185 12,180,778 10,410,425
========== ========== ==========
The executive share options are exercisable at various times in the
period 1996 to 2005 depending on the date the options were granted. The
average price of the executive share options exercised during the year
was $8.88 (1994 - $8.96) per Common Share.
The ADT Group will be required to adopt Statement of Financial Accounting
Standards No. 123 "Accounting for Stock - Based Compensation" ("SFAS 123") for
the financial year beginning 1 January 1996. SFAS 123 allows companies to
measure compensation cost in connection with employee share option plans and
schemes using a fair value based method, or to continue to use an intrinsic
value based method which generally does not result in a compensation cost. In
addition, SFAS 123 requires certain additional disclosure requirements for all
employee share option plans and schemes. The ADT Group is currently evaluating
the provisions of SFAS 123 and has not yet made a decision as to whether to
adopt the provisions of SFAS 123 when accounting for employee share options.
29. Treasury shares
The movement in treasury Common Shares held by a subsidiary of ADT at purchase
cost since 1 January 1993 has been as follows:
Number $m
--------- ------
At 1 January 1993 4,115,067 103.1
Exchange of non-voting
exchangeable shares (note 26) (5,743) (0.2)
--------- -----
At 31 December 1993 4,109,324 102.9
Exchange of non-voting
exchangeable shares (note 26) (922,628) (23.1)
--------- -----
At 31 December 1994 3,186,696 79.8
Exchange of non-voting
exchangeable shares (note 26) (2,909) (0.1)
Treasury shares given as employee
remuneration (1,000) -
--------- -----
At 31 December 1995 3,182,787 79.7
========= =====
30. Commitments and contingencies
(i) The ADT Group is a defendant in a number of pending legal proceedings
incidental to present and former operations, acquisitions and
dispositions. The ADT Group does not expect the outcome of these
proceedings either individually or in the aggregate to have a material
adverse effect on the results of operations or financial position of the
ADT Group.
(ii) Financial instruments which potentially subject the ADT Group to
concentrations of credit risk principally consist of cash and cash
equivalents and trade receivables. The ADT Group places its cash and cash
equivalents with high credit quality financial institutions throughout
the world and, by policy, limits the amount of credit exposure to any one
financial institution. The ADT Group's trade receivables primarily result
from its electronic security services and vehicle auction services
businesses and reflects a broad international customer base. Credit
limits, ongoing credit evaluation and account monitoring procedures are
utilized to minimize the risk of loss. As a consequence, concentrations
of credit risk are limited. In addition, loans to associate, consisting
principally of the Vendor Note (note 14), also subjects the ADT Group to
credit risk in the event of nonperformance by ITS. However, the ADT Group
expects that ITS will meet its liabilities to the ADT Group under the
terms of the Vendor Note.
(iii) The ADT Group will be required to adopt Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of" for the financial year beginning
1 January 1996. The effect on the ADT Group's consolidated financial
statements cannot be reasonably estimated at this time.
(iv) At 31 December 1995 the ADT Group had issued guarantor surety bonds of
$10.0 million (1994 - nil) to back insurance policies. These surety bonds
have unlimited duration.
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<PAGE>
(v) The ADT Group leases land, buildings, motor vehicles and other equipment
under various contracts. The future total minimum rental payments
required under operating leases that have remaining non cancellable lease
terms in excess of one year at 31 December 1995 are as follows:
$m
Year ending 31 December 1996 53.2
1997 46.6
1998 26.6
1999 19.1
2000 15.3
Thereafter 35.0
-----
195.8
=====
The net operating lease rental charge for the year included in the
consolidated statements of income amounted to $60.4 million (1994 - $54.5
million; 1993 - $55.8 million).
(vi) During 1991 a lengthy review and evaluation of the businesses and assets
acquired in 1990 in respect of Britannia Security Group PLC ("Britannia")
was undertaken by the ADT Group. This review revealed that, at the time
of the acquisition of Britannia by ADT, certain assets, particularly
subscriber systems installed at customer premises, had been included in
the consolidated financial statements of Britannia at values materially
in excess of their net realizable value. During 1992 ADT commenced legal
proceedings against Britannia's auditors at the time of acquisition, BDO
Binder Hamlyn ("BDO"), to seek recovery of the damages suffered.
In December 1995 the High Court of Justice in England awarded damages of
approximately $160 million (including interest) against BDO, plus costs.
BDO has appealed against the judgment. However, the High Court set BDO an
interim payment schedule totalling approximately $90 million, which will
be paid to ADT principally during 1996. The ADT Group will provide BDO
with letters of credit under its new revolving bank credit agreement
covering all payments made. ADT will not recognize the award of any
damages in its consolidated statements of income until the litigation is
ultimately concluded.
At 31 December 1995 the ADT Group had deferred certain legal costs
incurred in connection with the litigation amounting to $11.1 million, in
order to match these costs with the award when recognized. These deferred
costs were included in other long-term assets (note 17).
31. Pension and other plans
The ADT Group operates various defined benefit pension plans designed in
accordance with conditions and practices in the countries concerned.
Contributions are based on periodic actuarial valuations which use the
projected unit credit method of calculation and are charged to the consolidated
statements of income on a systematic basis over the expected average remaining
service lives of current employees. The net pension expense is assessed in
accordance with the advice of professionally qualified actuaries in the
countries concerned or is based on subsequent formal reviews for this purpose.
The ADT Group's US electronic security services operation has a
non-contributory, funded, defined benefit pension plan covering substantially
all of its employees.
The ADT Group has a contributory, funded, defined benefit pension plan in the
UK covering substantially all salaried and non-salaried employees.
Details of the most recent independent actuarial valuations or formal reviews
are set out below:
(i) US plan
The net pension expense for the US plan included the following components:
Year ended 31 December
1995 1994 1993
$m $m $m
Service cost-benefits earned during year 5.1 6.1 5.7
Interest cost on projected benefit obligations 12.9 11.9 11.2
Return on assets (16.3) (16.1) (15.1)
Net amortization and deferral (0.8) 0.1 -
----- ----- -----
Net pension expense 0.9 2.0 1.8
===== ===== =====
73
<PAGE>
The following table sets forth the actuarial present value of accumulated
benefit obligations and funded status for the ADT Group's US plan:
At 31 December
1995 1994
$m $m
Accumulated benefit obligations, including
vested benefits of $157.8 million
(1994-$123.6 million) 164.4 128.6
----- -----
Total projected benefit obligations 189.4 156.9
----- -----
Plan assets at fair value, primarily
stocks, bonds and money market funds 183.5 156.9
Less:
Unrecognized net gain (15.4) (20.6)
Plus: Unrecognized prior service costs 0.7 0.9
----- -----
168.8 137.2
----- -----
Net pension liability 20.6 19.7
----- -----
Benefit cover 97% 100%
===== =====
The actuarial assumptions for the expected long-term rate of return on plan
assets, weighted average discount rate, and rate of increase of future
compensation levels used in determining the actuarial present value of
accumulated benefit obligations for 1995 were 10.0 per cent., 7.0 per cent. and
4.0 per cent., respectively (1994 - 10.0 per cent., 8.5 per cent. and 4.0 per
cent., respectively). The actuarial valuations of the US plan were carried out
by Buck Consultants, Inc.
(ii) UK plan
The net pension expense for the UK plan included the following components:
Year ended 31 December
1995 1994 1993
$m $m $m
Service cost-benefits earned during year 1.8 2.4 1.7
Interest cost on projected benefit obligations 3.9 3.7 3.6
Return on assets (10.2) 4.4 (11.1)
Net amortization and deferral 4.8 (10.0) 6.7
----- ----- -----
Net pension expense 0.3 0.5 0.9
===== ===== =====
The following table sets forth the actuarial present value of accumulated
benefit obligations and funded status for the ADT Group's UK plan:
At 31 December
1995 1994
$m $m
Accumulated benefit obligations, including vested
benefits of $46.2 million (1994-$35.4 million) 46.2 35.4
---- ----
Total projected benefit obligations 49.9 41.7
---- ----
Plan assets at fair value, primarily stocks,
bonds and money market funds 60.7 50.8
Less:
Unamortized net assets (4.7) (5.0)
Less:
Unrecognized net gain (6.1) (5.2)
---- ----
49.9 40.6
---- ----
Net pension liability - 1.1
---- ----
Benefit cover 122% 122%
==== ====
The actuarial assumptions for the expected long-term rate of return on plan
assets, weighted average discount rate, and rate of increase of future
compensation levels used in determining the actuarial present value of
accumulated benefit obligations for 1995 were 9.5 per cent., 8.5 per cent. and
6.5 per cent., respectively (1994 - 9.5 per cent., 9.5 per cent. and 7.5 per
cent., respectively). The actuarial valuations of the UK plan were carried out
by William M. Mercer Fraser Limited.
(iii) The aggregate net pension expense for the year in respect of the US and
UK plans amounted to $1.2 million (1994 - $2.5 million; 1993 - $2.7
million). The net pension liability at 31 December 1995 in respect of the
US and UK plans amounted to $20.6 million (1994 - $20.8 million) (note
23).
(iv) The ADT Group's US electronic security services operation sponsors an
unfunded defined benefit post-retirement plan which covers both salaried
and non-salaried employees and which provides medical and other benefits.
This post-retirement health care plan is contributory, with retiree
contributions adjusted annually.
74
<PAGE>
The net post-retirement benefit expense included the following components:
Year ended 31 December
1995 1994 1993
$m $m $m
Service cost 0.5 0.6 0.6
Interest cost 2.4 2.3 2.4
Net amortization and deferral (1.3) (1.3) (1.1)
---- ---- ----
Net post-retirement benefit
expense 1.6 1.6 1.9
==== ==== ====
The following table sets forth the components of the plan's accumulated
post-retirement benefit obligations and benefit liability:
At 31 December
---------------------
1995 1994
---- ----
$m $m
Retirees 22.8 19.7
Fully eligible active plan
participants 7.7 5.7
Other active plan participants 4.8 5.2
---- ----
Accumulated post-retirement
benefit obligations 35.3 30.6
Plus:
Unrecognized net gain - 0.3
Less:
Unrecognized net loss (3.3) -
Plus:
Unrecognized prior service
credit 15.8 17.1
---- ----
Post-retirement benefit liability
(note 23) 47.8 48.0
==== ====
During the first quarter of 1992 the ADT Group adopted amendments to the plan
that reduced benefits attributable to prior service. These amendments resulted
in approximately a $20 million decrease in the obligation for benefits
attributable to prior service. This decrease is being amortized as a reduction
of plan costs on an actuarially calculated basis over a period of approximately
twenty years beginning January 1992. Effective January 1995 the ADT Group
implemented a defined dollar benefit cap for all current and future retirees,
regardless of age.
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligations was 7.0 per cent. (1994 - 8.5 per cent.).
The actuarial valuations of the plan were carried out by Buck Consultants, Inc.
32. Related party transactions
In December 1995 the ADT Group entered into an agreement with Integrated
Transport Systems Limited ("ITS"), a UK unquoted company, and its wholly owned
subsidiaries Loanoption Limited and ITS Finance Limited (formerly Careerinput
Limited), under which the ADT Group disposed of an interest in European
Auctions.
The aggregate consideration received by the ADT Group on closing was comprised
of cash of $235.1 million, $187.6 million Vendor Note (note 14) with an issue
price of $83.9 million and valued by the ADT Group at $74.6 million, $31.1
million Shareholder Loan Notes (note 14) with an issue price of $13.9 million
and valued by the ADT Group at $13.3 million, and a 43.1 per cent. interest in
the ordinary share capital of ITS at an issue price of $2.0 million and valued
by the ADT Group at $0.9 million.
In February 1996 the ADT Group disposed of its entire interest in Shareholder
Loan Notes and 33.1 per cent. of the ordinary share capital of ITS for an
aggregate cash consideration of $15.4 million. As a result, the ADT Group now
holds a 10.0 per cent. interest in the ordinary share capital of ITS, valued by
the ADT Group at a nominal amount, together with the Vendor Note.
Mr. D.B. Hammond and Mr. T.J. Gibson are both directors of ITS. Mr. Hammond is
presently Deputy Chairman of ADT and Mr. Gibson is the Chief Executive Officer
of ADT Auction Group Limited. However, Mr. Hammond will not be seeking
re-election to the board of directors of ADT at the 1996 annual general
meeting.
Mr. Hammond and Mr. Gibson subscribed $10.4 million and $0.8 million, in total,
respectively, to the capital of ITS and, as a result, are interested in
Shareholder Loan Notes with issue prices of $9.4 million and $0.7 million,
respectively, and 22.3 per cent. and 1.7 per cent. respectively, of the
ordinary share capital of ITS. Other senior management and employees of
European Auctions subscribed $3.7 million to the capital of ITS and, as a
group, are interested in Shareholder Loan Notes with an issue price of $3.3
million and 8.0 per cent. of the ordinary share capital of ITS. In addition, at
closing, Mr. M.A. Ashcroft, Chairman and Chief Executive Officer of ADT,
subscribed $7.0 million to the capital of ITS and, as a result, is interested
in Shareholder Loan Notes with an issue price of $6.3 million and 15.0 per
cent. of the ordinary share capital of ITS, which interest he continues to
hold. Mr. Ashcroft is not an officer or director of ITS or any of its
subsidiaries and has no involvement in the day to day management of ITS or any
of its subsidiaries.
Upon the disposal by the ADT Group of an interest in European Auctions, ADT
share options held by directors and employees of European Auctions became
immediately exercisable. ADT entered into arrangements with Mr. Gibson under
which share options held by him at the time of the disposal by the ADT Group of
an interest in European
75
<PAGE>
Auctions were purchased by ADT for an aggregate economic value totalling $1.2
million, based on ADT's common share price on 19 December 1995, of which Mr.
Gibson invested $0.8 million in the capital of ITS, referred to above. ADT also
entered into similar arrangements with other senior management and employees of
European Auctions under which ADT purchased share options held by them for an
aggregate economic value totalling $0.6 million, in order to enable them to
invest in the capital of ITS. In addition, in order to further enable Mr.
Hammond to invest in the capital of ITS, ADT purchased from him share options
with an aggregate economic value totalling $1.1 million, based on ADT's Common
Share price on 19 December 1995, which would otherwise have been exercisable in
March 1996.
Upon the disposal by the ADT Group of an interest in European Auctions, Mr.
Gibson received a severance payment of $0.3 million and other senior management
and employees of European Auctions, as a group, received severance payments
totalling $0.4 million.
A company controlled by Mr. Ashcroft has made non-collateralized loans to Mr.
Hammond, or companies controlled by him, of an aggregate of $7.8 million,
solely for the purpose of enabling Mr. Hammond or these companies to invest in
the capital of ITS.
The cash consideration paid to the ADT Group on closing was obtained by the ITS
group through the subscription of $26.5 million in the capital of ITS and
approximately $209.7 million through the drawdown of sterling term loans under
a bank credit agreement entered into between the ITS group and a group of
banks. The bank credit agreement has a term of seven years and obligations
thereunder are guaranteed and collateralized by a first priority pledge of the
shares and assets of all the companies comprising European Auctions and the ITS
group.
At closing, the ADT Group entered into an agreement with the ITS group whereby
the ADT Group granted to ITS and its subsidiaries permission to use the ADT
name and certain trademarks for a period of up to three years for a total cash
consideration, paid at closing, of $0.6 million.
At closing, the ADT Group entered into an option agreement with Mr. Ashcroft
which, if exercised, would have required Mr. Ashcroft to purchase from the ADT
Group, for cash fifty days after closing, Shareholder Loan Notes with an issue
price of up to $8.2 million and up to 19.6 per cent. of the ordinary share
capital of ITS. In addition, at closing, ITS entered into an agreement with the
ADT Group and Mr. Ashcroft under which ITS agreed to use its reasonable
efforts, for a forty five day period after closing, to find unrelated third
party investors to purchase Shareholder Loan Notes and ordinary share capital
of ITS from the ADT Group and Mr. Ashcroft, and under which the ADT Group and
Mr. Ashcroft agreed to certain voting restrictions in respect of their holdings
of the ordinary share capital of ITS as described below. In February 1996 the
ADT Group and Mr. Ashcroft agreed that the mutual obligations under the option
agreement be released.
At 31 December 1995 the ADT Group's investment in the ordinary share capital of
ITS has been accounted for as an unconsolidated subsidiary under temporary
control due to an agreement between ITS, the ADT Group and Mr. Ashcroft
limiting the voting rights of each of the ADT Group and Mr. Ashcroft to 15.0
per cent. of the voting rights of ITS, whatever the outcome of ITS's efforts to
find additional unrelated third party investors, and due to the fact that Mr.
Hammond will not be seeking re-election to the board of directors of ADT.
Accordingly, the equity method of accounting has been used in the consolidated
financial statements. The Vendor Note and Shareholder Loan Notes have been
accounted for at their amortized cost.
An opinion regarding the fair value of the transactions described above was
provided to the independent non-executive directors of ADT by a leading
European investment banking firm and the transactions were approved unanimously
by the independent non-executive directors of ADT.
76
<PAGE>
33. Quarterly financial data (unaudited)
<TABLE>
<CAPTION>
1995 1995 1995 1995 1995
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
$m $m $m $m $m
<S> <C> <C> <C> <C> <C>
Net sales:
Electronic security services 261.0 270.6 273.3 287.6 1,092.5
Vehicle auction services 112.3 110.7 106.5 103.4 432.9
------- ------- ------- ------- --------
Net sales 373.3 381.3 379.8 391.0 1,525.4
------- ------- ------- ------- --------
Operating income:
Electronic security services (i) 37.7 43.1 43.4 24.5 148.7
Vehicle auction services 22.7 20.3 17.2 10.0 70.2
Corporate (ii) (5.9) (5.3) (5.2) (16.8) (33.2)
------- ------- ------- ------- --------
Operating income 54.5 58.1 55.4 17.7 185.7
Interest income 3.7 3.8 4.6 3.8 15.9
Interest expense (22.9) (22.9) (23.4) (21.0) (90.2)
Loss on disposal of businesses (iii) -- -- -- (34.4) (34.4)
Other income less expenses 1.1 -- (0.2) 0.2 1.1
------- ------- ------- ------- --------
Income (loss) before income taxes 36.4 39.0 36.4 (33.7) 78.1
Income taxes (9.3) (10.2) (9.0) 1.7 (26.8)
------- ------- ------- ------- --------
Income (loss) before extraordinary items 27.1 28.8 27.4 (32.0) 51.3
Extraordinary items (net of income
taxes) (iv) -- -- (8.0) (1.8) (9.8)
------- ------- ------- ------- --------
Net income (loss) 27.1 28.8 19.4 (33.8) 41.5
Dividends on preference shares (0.1) (0.1) (0.1) -- (0.3)
------- ------- ------- ------- --------
Net income (loss) available to holders
of Common Shares 27.0 28.7 19.3 (33.8) 41.2
======= ======= ======= ======= ========
Primary earnings (loss) per Common Share $ $ $ $ $
Income (loss) before extraordinary items 0.21 0.22 0.21 (0.25) 0.39
Extraordinary items -- -- (0.06) (0.01) (0.08)
------- ------- ------- ------- --------
Net income (loss) per Common Share 0.21 0.22 0.15 (0.26) 0.31
======= ======= ======= ======= ========
Fully diluted earnings (loss) per Common
Share $ $ $ $ $
Income (loss) before extraordinary items 0.21 0.22 0.20 (0.25) 0.39
Extraordinary items -- -- (0.05) (0.01) (0.08)
------- ------- ------- ------- --------
Net income (loss) per Common Share 0.21 0.22 0.15 (0.26) 0.31
======= ======= ======= ======= ========
</TABLE>
Notes:
(i) In the fourth quarter of 1995 electronic security services operating income
was stated after a charge of $21.4 million relating to restructuring and
other non-recurring charges (note 4(i)).
(ii) In the fourth quarter of 1995 corporate expenses were stated after a
charge of $12.8 million relating to restructuring and other non-recurring
charges (note 4(ii)).
(iii) Loss on disposal of businesses comprised the disposal by the ADT Group of
an interest in European Auctions and its entire European electronic
article surveillance business (notes 5(i) and 5(ii)).
(iv) Extraordinary items principally were comprised of the write off of net
unamortized deferred refinancing costs relating to the early
extinguishment of debt (note 9).
77
<PAGE>
<TABLE>
<CAPTION>
1994 1994 1994 1994 1994
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
$m $m $m $m $m
<S> <C> <C> <C> <C> <C>
Net sales:
Electronic security services 237.9 247.5 249.0 265.4 999.8
Vehicle auction services 98.1 93.3 91.3 93.4 376.1
------- ------- ------- ------- --------
Net sales 336.0 340.8 340.3 358.8 1,375.9
------- ------- ------- ------- --------
Operating income:
Electronic security services 32.8 39.6 40.0 41.3 153.7
Vehicle auction services 21.4 18.3 13.7 9.3 62.7
Corporate (9.8) (4.2) (4.3) (10.5) (28.8)
------- ------- ------- ------- --------
Operating income 44.4 53.7 49.4 40.1 187.6
Interest income 2.0 4.1 5.0 3.8 14.9
Interest expense (19.3) (18.4) (19.2) (22.9) (79.8)
Loss on disposal of businesses -- (1.5) -- (0.4) (1.9)
Other income less expenses 8.6 2.0 0.4 14.5 25.5
------- ------- ------- ------- --------
Income before income taxes 35.7 39.9 35.6 35.1 146.3
Income taxes (6.6) (8.6) (8.4) (8.4) (32.0)
------- ------- ------- ------- --------
Income from continuing operations 29.1 31.3 27.2 26.7 114.3
Loss from discontinued operations (2.0) (1.3) -- -- (3.3)
------- ------- ------- ------- --------
Net income 27.1 30.0 27.2 26.7 111.0
Dividends on preference shares (4.3) (4.3) (4.2) (0.5) (13.3)
------- ------- ------- ------- --------
Net income available to holders of
Common Shares 22.8 25.7 23.0 26.2 97.7
------- ------- ------- ------- --------
Primary and fully diluted earnings per
Common Share $ $ $ $ $
Income from continuing operations 0.19 0.21 0.18 0.20 0.78
Loss from discontinued operations (0.01) (0.01) -- -- (0.02)
------- ------- ------- ------- --------
Net income per Common Share 0.18 0.20 0.18 0.20 0.76
======= ======= ======= ======= ========
</TABLE>
78
<PAGE>
2. Results for the first quarter of 1996
The following information has been extracted from the unaudited condensed
consolidated financial statements of ADT for the three months ended 31 March
1996 which were approved by the board of directors of ADT on 6 May 1996.
Consolidated statements of income (unaudited)
Three months ended 31 March
---------------------------
1996 1995
$m $m
---- ----
Net sales 354.3 373.3
Cost of sales (184.4) (200.3)
Selling, general and administrative
expenses (112.6) (111.9)
Charge for the impairment of
long-lived assets (410.1) -
Goodwill amortization (4.2) (6.6)
------ ------
Operating (loss) income (357.0) 54.5
Interest income 6.4 3.7
Interest expense (19.7) (22.9)
Other expenses less income (0.5) 1.1
------ ------
(Loss) income before income taxes (370.8) 36.4
Income taxes (8.3) (9.3)
------ ------
Net (loss) income (379.1) 27.1
====== ======
$ $
Primary (loss) earnings per Common Share (2.94) 0.21
====== ======
79
<PAGE>
Consolidated balance sheets
Unaudited Audited
31 March 31 December
1996 1995
$m $m
--------- -----------
Current assets:
Cash and cash equivalents 322.1 341.8
Accounts receivable - net 219.5 169.9
Inventories 29.3 31.0
Prepaid expenses and other current assets 27.5 22.7
----- -----
Total current assets 598.4 565.4
Property, plant and equipment--net 1,247.6 1,223.5
Goodwill--net 424.1 823.0
Long-term investment 75.5 -
Investment in and loans to associate - 88.8
Other long-term assets 68.1 74.3
------- -------
Total assets 2,413.7 2,775.0
======= =======
Liabilities and shareholders' equity
Current liabilities:
Short-term debt 47.0 38.8
Accounts payable 134.0 92.0
Other current liabilities 167.9 189.1
------- -------
Total current liabilities 348.9 319.9
Long-term debt 919.6 927.8
Deferred revenue 110.4 94.9
Deferred income taxes 121.2 116.7
Other long-term liabilities 116.4 126.3
Minority interests - 15.6
------- -------
Total liabilities 1,616.5 1,601.2
------- -------
Convertible redeemable preference shares 4.9 4.9
Shareholders' equity:
Common Shares 13.2 13.2
Additional paid-in capital
Share premium 729.5 724.9
Contributed surplus 1,436.6 1,436.6
Treasury shares (79.7) (79.7)
Accumulated deficit (1,301.2) (922.0)
Cumulative currency translation
adjustments (6.1) (4.1)
-------- -------
Total shareholders' equity 792.3 1,168.9
-------- -------
Total liabilities and shareholders'
equity 2,413.7 2,775.0
======== =======
80
<PAGE>
Consolidated statements of cash flows (unaudited)
Three months ended 31 March
1996 1995
$m $m
Cash flows from operating activities
Net (loss) income (379.1) 27.1
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Charge for the impairment of long-lived assets 410.1 -
Depreciation 40.0 36.8
Goodwill amortization 4.2 6.6
Interest on ITS Vendor Note (2.1) -
Liquid Yield Option Notes discount
amortization 5.0 -
Refinancing costs amortization 0.8 1.4
Deferred income taxes 5.8 6.7
Gains arising from the ownership of
investments (1.2) -
Loss (gain) on currency transactions 1.7 (0.7)
Other (0.4) (0.8)
Changes in assets and liabilities (29.8) (3.0)
------ -----
Net cash provided by operating activities 55.0 74.1
------ -----
Cash flows from investing activities
Purchase of property, plant and equipment--net (66.7) (56.7)
Acquisition of businesses (20.6) (5.3)
Disposal of investment in and loans to associate 15.4 -
Other (2.4) 8.1
------ -----
Net cash utilized by investing activities (74.3) (53.9)
------ -----
Cash flows from financing activities
Net receipts (repayments) of short term debt 8.9 (1.2)
Repayments of long-term debt (15.0) -
Purchase of senior subordinated notes - (7.5)
Proceeds from issue of Common Shares 4.6 1.9
Other 1.7 1.4
------ -----
Net cash provided (utilized) by financing
activities 0.2 (5.4)
------ -----
Effect of currency translation on cash and cash
equivalents (0.6) 0.7
------ -----
Net (decrease) increase in cash and cash
equivalents (19.7) 15.5
Cash and cash equivalents at beginning
of period 341.8 215.7
------ -----
Cash and cash equivalents at end of period 322.1 231.2
===== =====
(a) Basis Of Presentation
The accompanying unaudited interim consolidated financial statements
incorporate the financial statements of ADT, a company incorporated in Bermuda,
and its subsidiaries and have been prepared in accordance with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X and in accordance with generally
accepted accounting principles in the US. Accordingly, these unaudited interim
consolidated financial statements do not include all of the disclosures
required by generally accepted accounting principles for annual consolidated
financial statements. In the opinion of management, all adjustments considered
necessary for fair presentation have been included; all such adjustments are of
a normal, recurring nature, except as discussed in note (c) where, effective 1
January 1996, the ADT Group adopted Statement of Financial Acounting Standards
No. 121, and except for the acquisition of Alert Centre, Inc. ("Alert") as
discussed in note (h). The preparation of consolidated financial statements in
accordance with generally accepted accounting principles in the US requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Certain figures at 31 December 1995 and for the
three months ended 31 March 1995 have been reclassified to conform to the 1996
presentation. In particular, corporate expenses have been reclassified from
other expenses less income to a separate component of operating income. This
reclassfication has had no net effect on the reported earnings for income
before income taxes and net income. Results of operations for the three months
ended 31 March 1996 are not necessarily indicative of the results that may be
expected for the full year ending 31 December 1996. For further information,
see ADT's consolidated financial statements, including the accounting policies
and notes thereto, included in the Annual Report on Form 10-K for the year
ended 31 December 1995. ADT is a holding company with no independent business
operations or assets other than its investment in its subisdiaries,
intercompany balances and holdings of cash and cash equivalents. ADT's
businesses are conducted through its subsidiaries.
81
<PAGE>
(b) Business segments (unaudited)
Three months ended 31 March
1996 1995
$m $m
Net sales
Electronic security services 279.7 261.0
Vehicle auction services 74.6 112.3
------ ------
354.3 373.3
====== ======
Operating (loss) income
Electronic security services (351.1) 37.7
Vehicle auction services (2.2) 22.7
Corporate (3.7) (5.9)
------ -----
(357.0) 54.5
====== =====
Electronic Security Services
Net sales:
North America 241.6 211.6
Europe* 38.1 49.4
------ -----
279.7 261.0
====== =====
Operating income:
North America 45.1 39.3
Europe* 4.3 3.1
------ -----
Operating income before the
charge for the impairment of
long-lived assets and goodwill
amortization 49.4 42.4
Charge for the impairment of long-lived
assets (397.1) -
Goodwill amortization (3.4) (4.7)
------ -----
Operating (loss) income (351.1) 37.7
====== =====
Depreciation 37.0 32.2
Capital expenditures 63.9 55.3
Vehicle Auction Services
Net sales:
US 74.6 69.6
Europe* - 42.7
------ -----
74.6 112.3
====== =====
Operating income:
US 11.6 11.7
Europe* - 12.9
------ -----
Operating income before the charge
for the impairment of long-lived
assets and goodwill amortization 11.6 24.6
Charge for the impairment of
long-lived assets (13.0) -
Goodwill amortization (0.8) (1.9)
------ -----
Operating (loss) income (2.2) 22.7
====== =====
Depreciation 2.9 4.4
Capital expenditures 3.5 3.7
*The ADT Group's European vehicle auction and electronic article surveillance
businesses were sold in the fourth quarter of 1995.
(c) Charge for the impairment of long-lived assets
Effective 1 January 1996, the ADT Group was required to adopt Statement of
Financial Accounting Standards No. 121 ("SFAS 121") "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
SFAS 121 prescribes a methodology for assessing and measuring an impairment
loss that is significantly different from previous guidelines and procedures.
SFAS 121 requires the recoverability of the carrying value of long-lived
assets, primarily property, plant and equipment, and related goodwill, to be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Under SFAS 121 it
is necessary to evaluate for and calculate an impairment loss at the lowest
level of asset grouping for which there are identifiable cash flows. Under SFAS
121, if an
82
<PAGE>
asset being tested for recoverability was acquired in a business combination
accounted for using the purchase method, the goodwill that arose in the
transaction is included in the impairment evaluation of that asset.
SFAS 121 requires that an impairment loss is recognised when the carrying
amount of an asset exceeds the sum of the estimated undiscounted future cash
flows of the asset. Under SFAS 121 an impairment loss is calculated as the
difference between the carrying amount of the asset, including the related
goowill, and its fair value. The carrying amount of the related goodwill is
eliminated before making any reduction in the carrying amount of any other
impaired long-lived asset.
Prior to the adoption of SFAS 121, the ADT Group's policy was to evaluate for
impairment of long-lived assets, including goodwill, on a global basis for each
business segment. Management has determined that within the electronic security
services division the lowest level of asset grouping referred to above can be
determined on a country by country basis and further split principally in terms
of commercial and residential sectors. The assets principally comprise
subscriber systems installed at customers' premises, which are included in
property plant and equipment, and the related goodwill. Within the vehicle
auction services division the lowest level of asset grouping can be determined
principally on an individual auction center basis, and the assets principally
comprise land and real estate, which are included in property plant and
equipment, and the related goodwill. In adopting SFAS 121 management has
estimated the fair values referred to above by using an analysis of estimated
discounted future cash flows as the best available estimate of fair value. The
basis of the calculation was the ADT Group's business strategy, plans and
financial projections, and an appropriate discount factor based on the ADT
Group's estimated cost of capital.
As a result of the adoption of SFAS 121, in particular the change in
methodology requiring the ADT Group to evaluate assets at the lowest level of
asset grouping, rather than on a global basis, in the first quarter of 1996 the
ADT Group recorded a non-cash charge for the impairment of long-lived assets of
$410.1 million, as a separate line item in the consolidated statement of
income, with no consequential tax effect.
The $410.1 million impairment charge comprised $395.4 million relating to
goodwill in the electronic security services division, $13.0 million relating
to goodwill in the vehicle auction services division, and $1.7 million relating
to other long-lived assets in the electronic security services division, which
faciliated the write-down of the long-lived assets to their estimated fair
values.
The $395.4 million impairment charge in the electronic security services
division related to an impairment in the carrying value of subscriber systems
principally in the commercial sector, including related goodwill which
principally arose on the acquisition of ADT Security Systems in 1987. In the
US, where the adoption of SFAS 121 coincided with a reorganisation of the
business, the impairment charge amounted to $302.4 million. The Re-Engineering
Project, which was commenced in 1995, is continuing in the US. In the context
of the Re-Engineering Project and changes in the electronic security services
business environment, the electronic security services operations have been
reorganized along separate commercial and residential business lines, rather
than on a geographic basis, with effect from the second quarter of 1996. In
Canada, where the business performance has continued to be disappointing, the
impairment charge amounted to $56.0 million. In Europe, the impairment charge
amounted to $37.0 million, principally due to the business performance of
certain countries not meeting previous expectations.
The $13.0 million impairment charge in the vehicle auction services division
related to an impairment in the carrying value of property and related
improvements, including related goodwill which principally arose on the
acquisition of ADT Automotive in 1987.
(d) Interest income and interest expense
Interest income increased by $2.7 million in the first quarter of 1996 to $6.4
million from $3.7 million in the first quarter of 1995, partly due to the
increase in the level of cash deposits held by the ADT Group in 1996, following
the disposal of European Auctions and the European electronic article
surveillance businesses in the fourth quarter of 1995. During the first quarter
of 1996 interest income included $2.1 million relating to the ITS Vendor Note.
Interest expense declined by $3.2 million from $22.9 million in the first
quarter of 1995 to $19.7 million in the first quarter of 1996, principally due
to the effects of the refinancing which took place in the third quarter of
1995. During the first quarter of 1996 interest expense included $5.0 million
relating to Liquid Yield Option Notes discount amortization and $0.8 million
(1995 - $1.4 million) relating to refinancing costs amortisation.
(e) Other expenses less income
Other expenses less income for the three months ended 31st March 1996 comprised
non-recurring net gains arising from the ownership of investments of $1.2
million (note (g)), losses on currency transactions of $1.7 million (1995 -
$0.7 million gain), and in respect of 1995 other net gains of $0.4 million.
(f) Primary (loss) earnings per Common Share
The calculation of primary (loss) earnings per Common Share was based on the
weighted average of 128,805,641 (1995 - 129,756,727) Common Shares in issue
during the period, which in 1996 did not allow for full coversion rights
attaching to the allotment of Common Shares under executive share option
schemes, which are considered common stock equivalents, because their effect
was anti-dilutive as a consequence of the net loss for the period. Common stock
equivalents included in the weighted average number of Common Shares in issue
during the three months ended 31st March 1995 was 1,870,531. Primary (loss)
earnings per Common Share was based on adjusted net loss of $379.2 million
(1995 - $27.0 milion income).
(g) Investment in and loans to associate
In February 1996, the ADT Group disposed of its entire interest in Shareholder
Loan Notes with an issue price of $13.9 million and valued by the ADT Group at
$13.3 million and 33.1 per cent. of the ordinary share capital of ITS valued by
the ADT Group at $0.9 million, for an aggregate cash consideration of $15.4
million. The net gain arising on the transaction amounted to $1.2 million which
was included in other expenses less income (note (e)).
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As a result of the above transaction, the ADT Group now holds a 10.0 per cent.
interest in the ordinary share capital of ITS, valued by the ADT Group at a
nominal amount, together with the Vendor Note, which at 31 March 1996 is
disclosed as a long term investment amounting to $75.5 million.
(h) Minority interests
In February 1996, following approval by Alert's shareholders, Alert was merged
into the ADT Group and, as a result, those shares then held by the minority
shareholders and not owned by the ADT Group were converted into the right to
receive in cash the price paid per share by the ADT Group in the initial tender
offer. Accordingly, the minority interest outstanding at 31 December 1995 has
been eliminated.
(i) Common Shares
31 March 31 December
1996 1995
Number of Common Shares of $0.10 each:
Authorized 220,000,000 220,000,000
Issued and outstanding 132,303,404 131,850,465
A market purchase program in respect of up to 5,000,000 Common Shares has
been approved by the board, to be carried out at prevailing market prices from
time to time, depending on market conditions and other considerations.
The following is an extract from the Chairman and Chief Executive Officer's
statement which accompanied ADT's First Quarter Report dated 7 May 1996:
"Electronic Security Services
Net sales and operating income before goodwill amortization, and before the
charge arising under SFAS 121, from the Electronic Security Services division
for the three months ended March 31, 1996 amounted to $279.7m and $49.4m,
respectively, compared to $261.0m and $42.2m for the comparable period in 1995.
ADT's total annualized service revenues as of March 31, 1996 were approximately
$719m, representing an annualized growth rate of approximately 11 per cent.
The residential marketplace remains very competitive with industry wide mass
marketing initiatives keeping the per system cost to the consumer down. ADT is
meeting the challenge through strategic alliances and co-ventures. ADT security
systems are now available in approximately 600 RadioShack stores and the
ADT/USAA home security program is producing good results. In the first quarter,
ADT entered into a marketing agreement with HFS, the world's largest franchisor
of hotels and residential real estate brokerage offices. HFS franchises ERA and
Century 21 offices where ADT monitored home security services will be offered
to homebuyers nationwide.
Although significant installation pricing pressures continue to dominate the
residential marketplace, ADT has achieved an increase in average monthly
monitoring fees from new customers of approximately 14 per cent. This increase
will be extended to the rest of the customer base as contracts renew,
generating enhanced growth in annualized service revenues.
During the first quarter, ADT contracted to install and monitor 60,000 new
residential security systems compared with 53,000 systems in the fourth quarter
of 1995. ADT's residential customer base is now approximately 920,000 of which
over 95 per cent is located in the United States.
Demand for large installations remains strong and growth in access control and
CCTV business, particularly in the government and high end retail sectors,
continued to be good. There was also continuation of the trend towards
customers purchasing installations outright.
Core commercial revenues from access control and CCTV business showed strong
growth in the quarter. The Focus Quantum product, released in 1995, is helping
fuel growth in the medium size customer market with unit sales significantly
greater than the Focus 200 product it replaced.
The reorganization of ADT's business in Canada, where recent performance has
been disappointing, will take longer to achieve than in the United States. The
market outlook, however, other than in Quebec, is satisfactory and ADT is
increasing its focus on integrated systems business particularly for new
construction.
ADT is seeing significant growth in CCTV business in the United Kingdom and, in
the first quarter, was awarded a $3.5m contract by Railtrack for the
installation of 72 individual CCTV systems on station platforms. In continental
Europe, the residential and small commercial business experienced satisfactory
growth. An authorized dealer program was initiated in France and affinity
marketing contracts have been signed with two major insurance companies.
Vehicle Auction Services
Net sales and operating income before goodwill amortization, and before the
charge arising under SFAS 121, from the United States Vehicle Auction division
for the three months ended March 31, 1996 amounted to $74.6m and $11.6m
respectively, compared to $69.6m and $11.7m for the comparable period in 1995.
These results were achieved despite extreme adverse weather conditions early in
the quarter, particularly on the East coast. Snow removal alone cost
approximately $500,000 and the weather created difficulties for dealers trying
to reach
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auctions and caused a number of sale days to be lost. However, the overall
number of vehicles sold at ADT Automotive auctions increased by approximately 5
per cent compared to the first quarter of 1995. Demand for used cars in the
quarter was strong and this was reflected in higher conversion ratios. The
number of manufacturers' vehicles entered for sale was, as expected, lower but
the number of vehicles sold from the fleet/lease sector was 39 per cent higher
than in the first quarer of 1995. In addition, ADT Automotive was successful in
increasing the number of vehicles sold on behalf of import manufacturers.
Demand for used cars remains strong and the division is seeing an increase in
mechanical, clean-up, tyre and paint and body work for rent-a-car companies and
for the new used car superstores.
ADT Automotive continues to reinforce its position as an industry leader and
has recently received a number of auction service quality awards from Ford and
Chrysler. Additionally, ADT Automotive has just launched its first report on
the used car market initiating the ADT Automotive Wholesale Used Car Market
Index."
3. Material change
Save as noted in paragraph 2 above, there has been no material
change in the financial or trading position of the ADT Group since
31 December 1995, being the end of the last financial period for
which audited results have been prepared.
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APPENDIX V
ADT COMMON SHARES
1. The following is a summary of certain rights attaching to the ADT Common
Shares and of certain provisions of ADT's Bye-Laws:
1.1 General
Certificates representing the Common Shares are issued in registered form.
The shareholders of ADT have authorised it to purchase its own shares, subject
to certain conditions. Shares so purchased are cancelled and the issued share
capital is reduced by the nominal value of those shares.
1.2 Dividends
The Common Shares are entitled to share equally in dividends declared thereon,
unless they are issued on terms that they rank for dividends as from a
particular date. ADT's board of directors may also declare and pay interim
dividends. A cash dividend or option is declared in dollars and, unless a
shareholder otherwise elects by notice in writing to ADT, a shareholder with a
registered address in the US is paid in dollars and a shareholder with a
registered address in the UK is paid in pounds sterling. At the discretion of
ADT's board of directors, a shareholder with a registered address outside the
US and the UK may be paid cash dividends in the currency of the country in
which the shareholder has his address, such dividends being converted into
local currency at such rate and on such date as the board of directors
considers appropriate. Dividends are payable to holders of Common Shares only
after full payment of dividends to holders of preference shares outstanding.
ADT has not declared any cash dividend or stock dividend on Common Shares since
April 1991.
1.3 Meetings of shareholders
The Annual General Meeting of ADT is held at least once in every calendar year
and notice of such meeting is given by mail, telex or cable to each holder of
Common Shares at his address shown on the register at least five days before
the meeting takes place, stating the time, date and place and, so far as
practicable, the objects of the meeting. ADT's board of directors may convene a
Special General Meeting of ADT whenever, in their judgment, such a meeting is
necessary and such meeting shall be convened by notice in like manner as the
Annual General Meeting at least five days before the meeting takes place.
At any general meeting of ADT not less than two holders of Common Shares
present either in person or by proxy constitute a quorum for the transaction of
business.
1.4 Voting rights
At any general meeting of ADT, each holder of Common Shares present in person
is, on a show of hands, entitled to one vote and, on a poll, is entitled to one
vote for each Common Share held by him. On a poll, votes may be given in person
or by proxy. Any proxy must be a member of ADT.
ADT may suspend a shareholder's voting rights in certain circumstances.
1.5 Liquidation rights
Upon liquidation, holders of Common Shares are entitled to receive any assets
remaining after the payment of ADT's debts and the expenses of the liquidation
subject to the special rights attached to any other class of shares.
2. The following is a summary of the share capital of ADT:
2.1 Authorised and unissued ADT Common Shares
The board of directors is empowered by the Bye-Laws to allot and issue shares
in the capital of ADT that it has been authorised by ADT in general meeting to
allot and issue, upon such terms and subject to such conditions as it finds
appropriate. As at 19 July 1996, ADT had 86,310,980 Common Shares authorised
but unissued out of a total authorised share capital of 220,000,000 Common
Shares, and the authorised but unissued shares include Common Shares reserved
for issue upon exercise of options, warrants and conversion rights.
2.2 ADT preference shares
The authorised share capital of ADT includes 125 million convertible cumulative
redeemable preference shares of US$1 each (the "First Preference Shares") none
of which is outstanding. The board of directors of ADT, in its sole discretion,
may designate, allot and issue one or more series of First Preference Shares
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from the authorised and unissued First Preference Shares. Subject to
limitations imposed by law or ADT's Memorandum of Association and Bye-Laws, the
board of directors of ADT is empowered to determine the designation of and the
number of shares constituting each series of First Preference Shares; the
dividend rate for each series; the terms and conditions of any voting and
conversion rights for each series; the amounts payable on each series upon
redemption or ADT's liquidation, dissolution or winding-up; and the preferences
and the relative rights among the series of First Preference Shares.
ADT had outstanding as at 19 July 1996, 756 534 per cent. Convertible
Cumulative Redeemable Preference Shares 2002 of US$1.00 each, and 4,180 6 per
cent. Convertible Cumulative Redeemable Preference shares 2002 of US$1.00 each.
Both these classes are due to be redeemed no later than 2002, unless previously
redeemed or converted; if converted in full, the holders of those shares would
be entitled to a total of 163,549 Common Shares, subject to adjustment in
certain circumstances. ADT has given notice to redeem all the outstanding
preference shares on 19 July 1996.
3. The following discussion is a summary of certain material differences
between the rights of shareholders in ASH and shareholders in ADT. These
differences arise from differences between English and Bermudian law as well as
from differences between the corporate governing instruments of the two
companies. These differences will result in several changes in the rights of
ASH Shareholders when they become ADT shareholders. The following summary does
not purport to be a complete description of the material differences between
the statutory and other rights of a holder of shares of ASH and ADT, nor does
it address the special rights attached to any preference share capital. Such
differences can be determined in full by reference to the laws and applicable
regulatory requirements of England and Bermuda, the regulations of the London
Stock Exchange and the NYSE, ASH's Memorandum and Articles of Association and
ADT's Memorandum of Association and Bye-Laws.
3.1 General
ASH is incorporated in England and operates under the Act, whereas ADT is
incorporated in Bermuda and operates under the Bermudian Act and the ADT
Limited Company Act 1991. The rights of shareholders of ASH are currently
governed by English law and ASH's Memorandum and Articles of Association. Upon
the issue of Consideration Common Shares to Scheme Shareholders, such
shareholders will become shareholders of ADT and their rights as shareholders
will be governed by the laws of Bermuda and by ADT's Memorandum of Association
and Bye-Laws. Shares of ASH are listed on the London Stock Exchange and its
ADRs are listed on the NYSE. ADT Common Shares are listed on the NYSE with a
secondary listing on the London Stock Exchange. ASH is subject to the
provisions of the City Code; ADT is not but its Bye-Laws contain certain
provisions to enable the directors of ADT to apply certain principles of the
City Code as if ADT was subject to it.
3.2 Meetings of shareholders
As referred to in paragraph 1.3 above, ADT's Bye-Laws require at least five
days' notice to be given of any general meeting although ADT's normal practice
is to give shareholders not less than three weeks' notice of meetings.
Furthermore, the Bermudian Act does not generally prescribe any greater
majority for the passing of a resolution of a general meeting than a simple
majority.
In contrast, a general meeting of ASH normally needs to be convened on a longer
period of notice according to the nature of the meeting and the business
proposed to be conducted at that meeting. The period of notice would be
fourteen days, except in the case of an Annual General Meeting or a meeting at
which a special resolution is to be proposed, in which case twenty one days'
notice is required. Certain types of resolution, such as a special or
extraordinary resolution, also need to be approved by a higher majority vote
(such as three-fourths), rather than by a simple majority.
While a member of ASH may appoint any person as a proxy, the Bye-Laws of ADT
require that only a member may be appointed as a proxy.
3.3 Required vote for authorisation of certain corporate actions
Under the Act, ASH's Articles of Association may be amended, and certain other
fundamental corporate changes may be authorised, only by a special resolution
passed at a general meeting of shareholders. These include: the passing of a
resolution for winding up; non pro rata issues of shares for cash; reductions
of capital (subject to sanction by the Court) and certain repurchases of
shares. If, at such time, the capital of ASH is divided into different classes
of shares and the amendment or other resolution would cause any of the special
rights attached to any class of shares to be varied or abrogated, the amendment
must also be sanctioned in writing by the holders of three-quarters in nominal
value of the issued shares of the class concerned or by an extraordinary
resolution passed at a separate general meeting of the holders of the shares of
that class.
As stated in paragraph 3.2 above, most resolutions of ADT need only to be
passed by a simple majority. If, however, at the relevant time the capital of
ADT is divided into different classes of shares and the resolution
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would vary the rights attached to any class, ADT's Bye-Laws provide that the
variations (unless otherwise provided by the terms of issue of the shares of
that class) may only be made with the written consent of the requisite majority
(namely 75 per cent.) of the holders of the shares of that class or with the
sanction of a resolution passed at a separate meeting of such holders by a
majority of 75 per cent. of such holders voting in person or by proxy.
3.4 Pre-emptive Rights
Under English law, when ASH issues equity shares (or grants certain other
rights to acquire equity shares) ("equity securities") in consideration for
payment of cash, then unless certain provisions of the Act are disapplied by a
special resolution, existing shareholders are entitled to participate in the
offer for such equity securities pro rata to their existing shareholdings. The
usual practice of an English public company whose equity securities are listed
on the London Stock Exchange is, and the past practice of ASH has been, to seek
general disapplication of statutory pre-emption rights on an annual basis: (1)
in respect of its entire unissued ordinary share capital where the equity
securities are to be issued by way of rights to existing shareholders; and (2)
to disapply the statutory pre-emption rights on the issue for cash of equity
securities representing not more than 5 per cent. of ASH's then issued ordinary
share capital.
Under Bermudian company law, there are no rights of pre-emption. However, the
rules of the NYSE require shareholder approval when shares of common stock or
securities convertible into or exercisable for common stock are to be issued in
any transaction or series of related transactions, other than a public offering
for cash: (1) if the common stock to be issued will have voting power equal to
or greater than 20 per cent. of the voting power outstanding before such
issuance; or (2) if the number of shares of common stock to be issued will be
equal to or greater than 20 per cent. of the number of shares of common stock
outstanding before the issuance of the stock.
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APPENDIX VI
ADDITIONAL INFORMATION ON THE ADT/REPUBLIC
MERGER AND ON REPUBLIC
1. The Amalgamation Agreement
By an agreement dated 1 July 1996 (as amended by an agreement dated 15 July
1996) between Republic, RI/Triangle, Limited ("RI Bermuda", a wholly-owned
subsidiary of Republic) and ADT, ADT has agreed to amalgamate with RI Bermuda
pursuant to the provisions of the Bermudian Act (the "Amalgamation Agreement").
In general terms, the Amalgamation Agreement provides that:
(a) the issued share capital of RI Bermuda will be converted into shares of the
amalgamated company, which will be known as "ADT Limited"; and
(b) all the issued ADT Common Shares (other than those held by ADT, Republic or
their respective subsidiaries) will be cancelled and in return holders of those
shares at the time the amalgamation becomes effective (being the date on which
the Registrar of Companies in Bermuda issues a certificate of amalgamation)
will receive Republic Common Shares in the ratio of 0.92857 new Republic Common
Shares for each ADT Common Share, except that fractional entitlements will be
satisfied in cash.
The Amalgamation Agreement contains certain representations and warranties on
the part of Republic, RI Bermuda and ADT and certain covenants regarding, among
other things, the conduct of business of each of Republic and ADT up to the
time the amalgamation becomes effective or the Amalgamation Agreement is
terminated.
Completion of the amalgamation is conditional upon certain conditions,
including regulatory approvals, the approval of both ADT's and Republic's
shareholders and the receipt by ADT of an investment bank's fairness opinion.
If these conditions are not satisfied by 31 December 1996 (or such later date
as the boards of directors of Republic and ADT agree) the Amalgamation
Agreement may be terminated. It may also be terminated at any time by agreement
between ADT and Republic and in certain other circumstances.
Contemporaneously with the execution of the Amalgamation Agreement, ADT issued
to Republic a warrant to purchase 15 million ADT Common Shares at a price of
US$20 per share, exercisable during the period of 180 days after the
termination of the Amalgamation Agreement.
2. Available information on Republic
Republic a corporation incorporated under the laws of the State of Delaware. It
is a diversified company operating in the electronic security service, solid
waste and out-of-home media industries in North America and is expanding into
the automotive industry. Republic's Common Shares are traded on the NASDAQ.
Based on the closing price for Republic Common Shares on 18 July 1996,
Republic's market capitalisation was US$4.4 billion.
Republic is subject to the information requirements of the US Securities
Exchange Act of 1934, as amended, and, in accordance therewith, files reports,
proxy statements and other information with the SEC. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661, Suite 1400, and 7 World Trade Center, New
York, New York 10048. Copies of such material can be obtained at prescribed
rates from the public reference section of the SEC at Judiciary Plaza, 450
Fifth Stree. N.W. Washington, D.C. 20549.
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APPENDIX VII
ADDITIONAL INFORMATION
1. Directors of ASH
The directors of ASH are as follows:
Lord Lane of Horsell - Chairman
Graeme Elliot - Deputy Chairman
Anthony Dignum - Chief Executive
Peter Bertram - Finance Director
John Smith - Executive Director
Ronald Oliver - Non Executive
Sudhakar Pandit - Non Executive
The registered office of ASH, which is also the business address of the
directors of ASH, is The Clock House, The Campus, Hemel Hempstead,
Hertfordshire HP2 7TL.
2. Directors of ADT
The directors of ADT are as follows:
Michael Ashcroft - Chairman and Chief Executive Officer
Stephen Ruzika - Chief Financial Officer
John Danneberg - Non Executive
Alan Henderson - Non Executive
James Pasman - Non Executive
Peter Slusser - Non Executive
William Stinson - Non Executive
Raymond Troubh - Non Executive
The registered office of ADT, which is also the business address of the
directors of ADT, is Cedar House, 41 Cedar Avenue, Hamilton, HM12 Bermuda.
3. Responsibility
3.1 The directors of ASH (whose names appear in paragraph 1 above) accept
responsibility for the information contained in this document other than
information relating to the ADT Group and persons acting in concert with it,
the Amalgamation Agreement and/or Republic. Except as noted in paragraph 3.2
below the directors of ADT (whose names are set out in paragraph 2 above)
accept responsibility for the information contained in this document relating
to the ADT Group and persons acting in concert with it and the Amalgamation
Agreement. To the best of the knowledge and belief of all such directors (who
have taken all reasonable care to ensure that such is the case), the
information contained in this document for which they are responsible is in
accordance with the facts and does not omit anything likely to affect the
import of such information.
3.2 The information in this document relating to Republic has been extracted
from public sources by ADT. The only responsibility of the directors of ADT for
such information has been to ensure that such information has been extracted
accurately.
4. Overseas shareholders
ASH Shareholders who are resident in, or citizens of, foreign jurisdictions
("overseas shareholders") should consult their professional advisers to
ascertain whether allotment or delivery of the Consideration Common Shares to
them under the Scheme or the subsequent disposal thereof by them will be
subject to any restrictions or require compliance with any formalities imposed
by the laws or regulations of, or any body or authority located in, the
jurisdiction in which they are resident. In any case where the issue of
Consideration Common Shares would infringe the law of any foreign jurisdiction,
or necessitate compliance with any special requirement, the Scheme provides
that such shares shall be issued to a nominee and then sold, with the net
proceeds of sale being remitted to overseas shareholders.
5. Market quotations
The Ordinary Shares, 5% Preference Shares, 6% Preference Shares and ADT Common
Shares are traded on the London Stock Exchange and ADRs and ADT Common Shares
are traded on the NYSE. The following tables set out the middle market
quotations for Ordinary Shares, 5% Preference Shares, 6% Preference Shares and
ADT Common Shares (as derived from the London Stock Exchange Daily Official
List) and the closing price for ADT Common Shares and ADRs on the NYSE in each
case for the first day that both the London Stock Exchange and the NYSE were
open for business in each of the six months prior to the date of this document,
for 23 August 1995 (being the Business Day prior to the commencement of the
offer period), for 18 June 1996 (being the Business Day prior to the
announcement of the Proposals), for 1 July 1996 (being the Business Day on
which the ADT/Republic Merger was announced) and for 19 July 1996 (being the
latest practicable date prior to the printing of this document):
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ASH ASH
ASH 5% 6% ADT ADT
Ordinary Preference Preference Common Common
Share Share Share ADR Share Share
Date Price Price Price Price Price Price
pence pence pence $ $ pounds
23 August 1995 44 39 36.25 1 3/8 12.875 8.3450
2 January 1996 28 46 47 7/8 14.750 9.4750
1 February 1996 27 54 53 13/16 14.375 9.5000
1 March 1996 26 52 52 13/16 14.500 9.4870
1 April 1996 30 54 54 7/8 17.750 11.636
1 May 1996 29 55 56 13/16 17.000 11.360
3 June 1996 32 60 60 1 1/8 19.250 12.425
18 June 1996 31 60 60 15/16 18.625 12.180
1 July 1996 45 73 70 1 3/8 22.875 15.500
19 July 1996 38 78 78 1 1/8 19.500 11.750
6. Significant shareholders of ADT
The following table sets forth certain information with respect to beneficial
ownership (determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of Common Shares (i) as at 31 December 1995
by any person known by ADT to beneficially own more than five per cent. of the
outstanding Common Shares, other than Westar Capital, Inc.; and (ii) as at 18
March 1996 by Westar Capital, Inc.
Number of
Common Shares
Beneficially %
Name of Beneficial Owner or Identity of Group Owned(1) (1 and 2)
The Capital Group Companies, Inc. ("CGI")(3) 9,444,800 7.3
333 South Hope Street
Los Angeles, California 90071
FMR Corp. ("FMR")(4) 19,871,135 15.2
82 Devonshire Street
Boston, Massachusetts 02109
Trimark Financial Corporation Inc. ("TFC")(5) 6,925,600 5.4
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, Ontario M5X 1E5
Westar Capital, Inc. ("WCI")(6) 30,800,000 23.9
818 Kansas Avenue
Topeka, Kansas 66601
CGI, FMR and TFC are investment managers and advisers. WCI is a wholly owned
subsidiary of Western Resources, Inc. a diversified energy company, operating
in Kansas and Oklahoma, which is listed on the NYSE.
Notes:
1. For the purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of ADT Common Shares which such person or
persons has or have the right to acquire on or within 60 days after
31December 1995 (18 March 1996 with respect to WCI). For the purposes of
computing the percentage of outstanding Common Shares held by each person
or group of persons named above, any security which such person or
persons has or have the right to acquire on or within 60 days after 31
December 1995 (29 February 1996 with respect to WCI) is deemed to be
outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
2. Based upon ADT Common Shares outstanding on 18 March 1996, but excluding
3,182,787 Common Shares owned by a subsidiary of ADT.
3. ADT has received an Amendment No. 4 to Schedule 13G dated 9 February 1996
filed with the SEC by Capital Research and Management Company and CGI in
respect of ownership of 9,444,800 ADT Common Shares at 31 December 1995
by accounts under the discretionary investment management of subsidiaries
of CGI which act as investment managers or advisers. As of 31 December
1995, CGI exercised sole voting power with respect to 1,783,500 Common
Shares and exercised sole dispositive power with respect to 9,444,800
Common Shares. ADT has not attempted to verify independently any of the
information contained in the Schedule 13G.
4. ADT has received an Amendment No. 2 to Schedule 13G dated 12 February
1996 filed with the SEC by FMR in respect of ownership of 19,871,135 ADT
Common Shares at 31 December 1995 by accounts under the discretionary
investment management of its wholly owned subsidiaries Fidelity
Management Research Company and Fidelity Management Trust Company. As of
31 December 1995 FMR exercised sole voting power with respect to 158,609
Common Shares and sole dispositive power with respect to 19,871,135
Common Shares. ADT has not attempted to verify independently any of the
information contained in the Schedule 13G.
5. ADT has received a Schedule 13G dated 12 February 1996 filed with the SEC
by TFC in respect of ownership of 6,925,600 ADT Common Shares at 31
December 1995 by accounts under the discretionary investment managment of
subsidiaries of TFC which act as investment managers or advisers. As of
31 December 1995, TFC exercised sole voting power with respect to
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6,925,600 Common Shares and exercised sole dispositive power with respect
to 6,925,600 Common Shares. ADT has not attempted to verify independently
any of the information contained in the Schedule 13G.
6. ADT has received a Schedule 13D dated 18 March 1996 filed with the SEC by
WCI, a wholly owned subsidiary of Western Resources, Inc. in respect of
ownership of 30,800,000 ADT Common Shares. ADT has not attempted to
verify independently any of the information contained in the Schedule
13D.
7.1 Shareholdings and dealings
In this document "disclosure period" means the period commencing on 24 August
1994 (the date twelve months prior to the commencement of the "offer period"
for the purposes of the City Code) and ending on 19 July 1996 (the latest
practicable date prior to the posting of this document).
7.1 ASH
(a) The beneficial interests of the Directors in Ordinary Shares are as
follows:
Number of
Name Ordinary Shares
Lord Lane of Horsell 10,208
Graeme Elliot -
Anthony Dignum -
Peter Bertram -
John Smith -
Ronald Oliver 133,186
Sudhakar Pandit -
(b) The following options over Ordinary Shares have been granted to certain
Directors and remain outstanding:
Weighted Earliest Date Latest Number of
Average From Which Expiry Ordinary
Name Exercise Price Exercisable Date Shares
pounds
Peter Bertram 1.49 29.3.1996 28.3.2003 150,000
John Smith 2.33 10.7.1990 22.3.2002 141,876
All the executive Directors are interested as employees and therefore potential
beneficiaries of the ASH Employees Share Ownership Plan Trust in shares held by
the Trust.
(c) Save as disclosed in this paragraph 7.1, neither ASH nor any of the
Directors (nor any members of their immediate families) owned, controlled or
was interested in any of the share capital of ASH or ADT nor in any securities
convertible into, or exchangeable for, rights to subscribe for options
(including traded options) in respect of, or derivatives referenced to, any of
the foregoing on 19 July 1996 (the latest practicable date prior to the posting
of this document) nor has any such person dealt for value therein during the
disclosure period and no bank, stockbroker, financial or other professional
adviser nor any person controlling, controlled by or under the same control as
any such adviser (other than an exempt market maker) nor any person whose
investments are managed on a discretionary basis by a fund manager (other than
an exempt fund manager) connected with ASH nor any subsidiary of ASH nor any
pension fund of ASH or any of its subsidiaries, owned or controlled any shares
in ASH or ADT on 19 July 1996 nor has any such person dealt for value therein
during the offer period.
7.2 ADT
(a) The beneficial interests of the directors of ADT in the ADT Common Shares
are as follows:
Number of
Common Shares
Michael Ashcroft 1,375,718
John Danneberg 102
Alan Henderson 621
James Pasman, Jr 2,000
Stephen Ruzika 3,742
Peter Slusser 2,500
William Stinson 10
Raymond Troubh 2,500
In addition, Michael Ashcroft and Stephen Ruzika are interested in options in
respect of 11,250,000 Common Shares and 1,670,000 Common Shares respectively,
at prices between $8.00 and $15.00, expiring
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between 8 August 1996 and 11 May 2005. There have been no dealings in the
Common Shares by the directors of ADT or their immediate families during the
disclosure period with the exception of the acquisition by Michael Ashcroft of
825,000 Common Shares (upon exercise of share options in April 1996 at an
average price of US$9.22) and by Peter Slusser of 1,334 Common Shares (by
purchases in March 1995 and January 1996 at prices of US$11.25 and US$15.25,
respectively).
(b) Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates
(collectively "Merrill Lynch") have been deemed by the Panel on Takeovers and
Mergers to be acting in concert with ADT for the purposes of the City Code in
relation to the Proposals by virtue of its providing financial advice to ADT in
connection with the ADT/Republic Merger. The information in this paragraph has
been provided to ADT by Merrill Lynch.
(i) As of 17 July 1996, a mutual fund managed by Fund Asset Management, L.P.
held 5,500,000 ADRs. As of 17 July 1996, the following Merrill Lynch
companies held, either in proprietary or discretionary accounts, the
following positions in ADT Common Shares: Merrill Lynch, Pierce, Fenner &
Smith Incorporated, 9,700 shares; Merrill Lynch Trust Company, New
Jersey, 1,000 shares; Merrill Lynch Trust Company, California, 2,000
shares; Merrill Lynch Trust Company, Florida, 5,269 shares; Merrill Lynch
Trust Company, Illinois, 2,000 shares; mutual funds and accounts managed
by Merrill Lynch Asset Management, L.P., 593,800 shares; a mutual fund
managed by Fund Asset Management, L.P., 1,100,000 shares. As of 17 July
1996, Merrill Lynch, Pierce, Fenner & Smith Incorporated held
US$42,106,000 principal amount of ADT's Liquid Yield Option Notes 2010
convertible into 1,188,652 ADT Common Shares.
As of 17 July 1996, Merrill Lynch held (other than in the capacity of
exempt market-maker) 2,134,999 6% Preference Shares, 1,130,935 5%
Preference Shares and pounds3,210,000 nominal of Convertible Capital
Bonds.
(ii) Merrill Lynch has dealt for value in shares and other securities of ASH
and ADT during the disclosure period and up to 17 July 1996 (other than
in its capacity as an exempt market-maker) as follows:
ADRs
Date Number of ADRs Price ($) Transaction
17 July 1995 50,000 1.63 Sale
18 July 1995 7,500 1.63 Sale
21 July 1995 152,500 1.38 Sale
24 July 1995 10,000 1.38 Sale
25 July 1995 44,000 1.38 Sale
26 July 1995 33,600 1.38 Sale
28 July 1995 100,000 1.25 Sale
31 July 1995 5,000 1.25 Sale
1 August 1995 2,000 1.25 Sale
2 August 1995 7,000 1.25 Sale
3 August 1995 10,000 1.25 Sale
7 August 1995 11,500 1.25 Sale
8 August 1995 2,000 1.25 Sale
9 August 1995 2,000 1.25 Sale
10 August 1995 6,500 1.25 Sale
15 August 1995 206,400 1.00 Sale
27 September 1995 2,041 1.25 Sale
31 October 1995 500,011 0.63 Sale
1 November 1995 250,000 0.63 Purchase
27 November 1995 115,000 0.64 Purchase
29 November 1995 79,600 0.68 Purchase
29 November 1995 42,900 0.68 Purchase
1 December 1995 88,700 0.73 Purchase
1 December 1995 47,800 0.72 Purchase
4 December 1995 40,613 0.69 Purchase
4 December 1995 21,800 0.69 Purchase
5 December 1995 71,500 0.69 Purchase
5 December 1995 38,500 0.69 Purchase
6 December 1995 19,500 0.63 Purchase
6 December 1995 10,500 0.62 Purchase
11 December 1995 36,500 0.86 Purchase
11 December 1995 123,500 0.86 Purchase
4 March 1996 81,900 0.81 Purchase
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ADRs
Date Number of ADRs Price ($) Transaction
5 March 1996 18,100 0.94 Purchase
15 March 1996 1,700 1.00 Sale
18 March 1996 32,700 1.00 Sale
19 March 1996 14,700 1.00 Sale
1 May 1996 50,900 0.79 Sale
7 May 1996 100,000 0.79 Sale
10 May 1996 100,000 0.81 Sale
10 May 1996 100,000 0.79 Sale
5% Preference Shares
Date Number of shares Price (pence) Transaction
8 March 1996 625,000 54.52 Purchase
4 July 1996 505,935 88.44 Purchase
6% Preference Shares
Date Number of shares Price (pence) Transaction
5 October 1995 500,000 41.38 Purchase
21 February 1996 600,000 50.50 Purchase
13 May 1996 100,000 56.00 Purchase
13 May 1996 300,000 56.00 Purchase
14 May 1996 60,000 55.50 Purchase
22 May 1996 50,000 59.29 Purchase
29 May 1996 500,000 60.50 Sale
4 July 1996 274,999 88.44 Purchase
10 July 1996 1,000,000 83.92 Purchase
12 July 1996 250,000 81.50 Purchase
16 July 1996 500,000 77.00 Purchase
16 July 1996 500,000 78.00 Sale
Convertible Capital Bonds
Date Pound nominal Price (pence) Transaction
28 April 1995 500,000 64.00 Purchase
16 May 1995 550,000 63.00 Purchase
16 May 1995 275,000 63.00 Sale
17 May 1995 1,000,000 63.88 Purchase
17 May 1995 500,000 64.50 Sale
1 June 1995 100,000 68.00 Purchase
6 June 1995 100,000 67.75 Purchase
3 November 1995 700,000 71.00 Purchase
7 November 1995 200,000 70.75 Purchase
8 November 1995 225,000 71.50 Sale
8 November 1995 225,000 71.50 Sale
13 November 1995 1,400,000 70.50 Purchase
13 November 1995 200,000 71.00 Sale
13 November 1995 500,000 71.00 Sale
9 January 1996 500,000 76.25 Purchase
25 January 1996 1,000,000 79.00 Purchase
29 January 1996 300,000 79.75 Sale
29 January 1996 200,000 79.75 Sale
8 February 1996 500,000 82.05 Purchase
8 February 1996 586,000 82.00 Purchase
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Date Pound nominal Price (pence) Transaction
1 March 1996 250,000 80.75 Purchase
4 March 1996 125,000 80.50 Purchase
4 March 1996 65,000 80.91 Purchase
7 March 1996 2,000,000 82.31 Purchase
7 March 1996 1,000,000 81.25 Sale
8 March 1996 50,000 81.50 Purchase
8 March 1996 1,550,000 82.64 Sale
8 March 1996 500,000 82.64 Sale
8 March 1996 450,000 82.64 Sale
8 March 1996 5,259,000 83.44 Purchase
21 March 1996 2,000,000 84.00 Sale
11 April 1996 1,000,000 83.00 Sale
17 April 1996 3,000,000 84.25 Sale
18 April 1996 1,000,000 84.63 Sale
3 May 1996 1,000,000 87.25 Purchase
3 May 1996 1,000,000 89.00 Sale
7 May 1996 500,000 88.50 Purchase
7 May 1996 1,000,000 88.50 Purchase
19 June 1996 1,000,000 95.50 Sale
19 June 1996 250,000 95.00 Purchase
12 July 1996 1,000,000 93.00 Purchase
12 July 1996 500,000 93.25 Sale
ADT Common Shares
Date Number of shares Price ($) Transaction
27 September 1994 100,000 Not advised Purchase
12 January 1995 100,000 10.11 Sale
1 February 1995 5,000 9.75 Purchase
23 June 1995 128,000 10.38 Purchase
23 June 1995 38,000 10.57 Purchase
26 June 1995 200,300 10.40 Purchase
26 June 1995 62,000 10.40 Purchase
27 June 1995 50,000 10.88 Purchase
10 July 1995 186,900 11.88 Purchase
8 August 1995 15,000 12.88 Purchase
21 September 1995 1,000 13.75 Sale
21 September 1995 1,000 13.75 Sale
22 December 1995 10,000 13.97 Purchase
4 January 1996 30,000 15.25 Sale
4 January 1996 100,000 15.22 Sale
4 January 1996 3,300 15.50 Sale
5 January 1996 300,000 15.38 Sale
10 January 1996 100,000 15.38 Sale
10 January 1996 6,700 15.13 Sale
30 January 1996 85,100 14.63 Sale
31 January 1996 39,900 14.39 Sale
1 July 1996 100,000 23.48 Sale
2 July 1996 200 21.63 Sale
8 July 1996 5,000 21.25 Sale
(iii) There is no understanding between Merrill Lynch and ADT regarding the
retention of the above securities or the way in which Merrill Lynch may
vote at the Court Meetings.
(c) Save as disclosed above, none of ADT, the directors of ADT, their immediate
families and persons acting in concert with ADT owns or controls or (in the
case of the directors of ADT) is interested in any shares of ADT or ASH or any
securities convertible into, rights to subscribe for or options (including
traded options) in respect of, or derivatives referenced to, such shares, nor
has any person dealt for value therein during the disclosure period.
8. ASH Share Option Schemes
ASH has the following share option schemes currently in use:
1. The Automated Security Share Option Scheme.
2. The Automated Security (Holdings) PLC ESOP Executive Share Option Scheme.
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3. The Automated Security Sharesave Scheme (1993).
4. The Automated Security Executive Share Option Scheme (1993).
As at 19 July 1996, options were outstanding over Ordinary Shares pursuant to
the above share option schemes as set out below:
Names of Share Option Schemes Outstanding Exercisable Exercise Price
The Automated Security
Share Option Scheme 1,640,818 1,640,818 pounds 1.30-
pounds 2.693
The ASH ESOP Executive
Share Option Scheme 710,000 710,000 pounds 2.45-
pounds 2.693
The Automated Security
Sharesave Scheme (1993) 315,025 Nil pounds 1.28
The Automated Security
Executive Share Option
Scheme (1993) Nil Nil Nil
9. Service contracts of the directors and former directors of ASH
(a) Anthony Peter Dignum has a service contract with the Company dated 26
September 1995, pursuant to which he receives an annual salary of pounds265,000.
Mr Dignum is entitled to be paid bonuses in relation to each financial year of
the Company decided by the Remuneration Committee of the board, having regard to
the Company's earnings per share, cash generation and his own performance. In
respect of the year ended 30 November 1995, Mr Dignum did not receive a bonus.
The contract is terminable by the Company giving Mr Dignum 24 months' notice in
writing, expiring at any time, or by Mr Dignum giving the Company 12 months'
notice in writing expiring at any time. The Company can terminate Mr Dignum's
employment at any time with immediate effect by paying Mr Dignum salary in lieu
of notice.
(b) Peter Bertram has a service contract with the Company dated 4 December
1992, pursuant to which he receives an annual salary of pounds135,000 (index
linked). Mr Bertram is entitled to a bonus each financial year calculated by
reference to the results of the Company, the amount of any bonus being at the
discretion of the Board. In respect of the year ended 30 November 1995, Mr
Bertram received a bonus of pounds20,000. If control of the Company is acquired
by a third party, Mr Bertram may resign and will then be entitled to claim an
amount equal to three times the sum of his annual salary at the date of the
acquisition and the average of the bonuses he has received during the previous
two financial years. The contract is terminable by either Mr Bertram or the
Company giving the other not less than 36 months' notice in writing. On 1January
1996, notice was given to Mr Bertram in accordance with the terms of his
contract. It is the Board's intention to offer a new contract to Mr Bertram with
a notice period of 24 months.
(c) John Patrick Smith has a service contract with Modern Security Systems
Limited ("Moderns") dated 17 March 1992, pursuant to which he receives an
annual salary of pounds140,000 (index-linked). Mr Smith is entitled to a bonus
each financial year calculated by reference to the contribution to the company
from those geographical areas for which he is primarily responsible. In respect
of the year ended 30 November 1995, Mr Smith received a bonus of pounds20,000.
If control of the Company is acquired by a third party, Mr Smith may resign and
will then be entitled to claim an amount which is equal to the sum of his annual
salary at the date of the acquisition and the average of the bonuses he has
received during the previous two financial years, divided by 12 and multiplied
by 57. The contract is terminable by either Mr Smith or Moderns giving to the
other not less than 57 months' notice in writing. On 1 January 1996, notice was
given to Mr Smith in accordance with the terms of his contract. It is the
Board's intention to offer a new contract to Mr Smith with a notice period of 24
months.
(d) Save as set out above, there are no service contracts between any director
of ASH and ASH or any of its subsidiaries having more than twelve months to run
and no such service contract has been entered into, replaced or amended within
the six months preceding the date of this document.
(e) Michael James Hawker resigned as a director on 29 May 1996. Mr Hawker has a
service contract with the Company dated 22 September 1988, pursuant to which he
receives an annual salary of pounds172,000 (index-linked). Mr Hawker is entitled
to a bonus each financial year calculated by reference to the results of the
Company, the amount of any bonus being at the discretion of the Board. In
respect of the year ended 30 November 1995, Mr Hawker did not receive a bonus.
If control of the Company is acquired by a third party, Mr Hawker may resign and
will then be entitled to claim an amount which is equal to the sum of his annual
salary at the date of the acquisition and the average of the bonuses he has
received during the previous two financial years, divided by 12 and multiplied
by 57. The contract is terminable by either Mr Hawker or the Company giving to
the other not less than 57 months' notice in writing. On 1 January 1996, notice
was given to Mr. Hawker in accordance with the terms of his contract.
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10. Material contracts
The following contracts (not being contracts entered into in the ordinary
course of business) have been entered into by ADT and/or other members of the
ADT Group and/or by ASH and/or by other members of the ASH Group within the
period of two years immediately preceding the date of this document and are or
may be material:
10.1 ASH
(a) an agreement dated 20 July 1995 between Automated Security Limited,
Tunstall Group PLC and ASH whereby Automated Security Limited agreed to sell
the entire issued share capital of Modern Vitalcall Limited to Tunstall Group
PLC for an effective aggregate consideration of approximately 1,791,954
(including the repayment of indebtedness not exceeding pounds1,350,000);
(b) a stock transfer form dated 26 July 1995, whereby ASH disposed of the
whole of its interest in Compagnie Generale de Protection et Securite SA to
Securifin for a consideration of FF34,000,000;
(c) an agreement dated 31 October 1995 between Automated Security Limited,
Modern Security Systems Limited, ASH and Argus Alarms Limited whereby ASH
agreed to sell the goodwill, assets and business of its division trading as
Modern Integrated Services to Argus Alarms Limited for a consideration of
approximately pounds2,350,000, subject to certain adjustment;
(d) a First Supplemental Trust Deed dated 19 July 1996 between ASH Capital
Finance (Jersey) Limited, ASH, The Law Debenture Trust Corporation p.l.c. and
ADT which, subject to the Scheme becoming effective, modifies the provisions
of, and substitutes ADT as the Guarantor under, the Trust Deed dated 31 May
1991 constituting the Convertible Capital Bonds;
(e) a Supplemental Deed Poll dated 19 July 1996 made by ASH which, subject to
the Scheme becoming effective, releases and discharges ASH from its obligations
as a guarantor in relation to the preference shares of ASH Capital Finance
(Jersey) Limited pursuant to a Deed Poll dated 31 May 1991; and
(f) a deed of prepayment and release dated 18 July 1996 between ASH and The
Prudential Insurance Company of America ("PRICOA") pursuant to which ASH will
pay to PRICOA (subject to the Scheme becoming effective on or prior to 19 June
1997) a sum representing the principal amount outstanding, and interest to the
date of prepayment and certain other matters in full and final settlement of
ASH's obligations under a Note Agreement dated 27 May 1994. The warrant
certificate issued by ASH on or around 12 September 1990 will be cancelled upon
such repayment.
10.2 ADT
(a) a purchase agreement dated 29 June 1995 between ADT Operations, Inc., ADT
and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
(the "Underwriter") whereby the Underwriter agreed to purchase $675,000,000
principal amount at maturity of zero coupon subordinated Liquid Yield Option
Notes 2010, exchangeable for Common Shares ("LYONs") and was granted an option
to subscribe for a further $101,250,000 principal amount at maturity of LYONs
together with a supplemental price determination agreement of the same date;
(b) an indenture dated 1 July, 1995 between ADT Operations, Inc., ADT and Bank
of Montreal Trust Company as trustee constituting $776,250,000 in principal
amount at maturity of LYONs;
(c) an agreement and plan of merger dated 7 November 1995 between Alert Centre,
Inc., ADT Acquisition Corp. and ADT whereby ADT Acquisition Corp. agreed to
commence a tender offer to purchase all of the outstanding shares of common
stock of Alert Centre, Inc. for a total consideration of $90.6 million.
(d) an agreement dated 30 November 1995 between ADT (UK) Limited, ADT,
Electronic Signatures, Inc. and Checkpoint Systems Inc. whereby ADT (UK)
Limited agreed to sell all the issued share capital of Actron Group Limited to
Electronic Signatures Inc. for a consideration (including the repayment of
certain group loans) of approximately $54 million, subject to certain
adjustments;
(e) an agreement dated 29 December 1995 between ADT (UK) Limited, ADT Holdings
BV, Ruskin Limited, ADT, (all being members of the ADT Group), Loanoption
Limited and Integrated Transport Systems Limited (together "ITS") whereby
certain members of the ADT Group sold to ITS all the issued share and loan
capital of the companies comprising the ADT European Auctions Group for an
effective aggregate consideration of $334.9 million (including a loan note
issued by ITS valued by ADT at $74.6 million);
(f) the Amalgamation Agreement referred to in paragraph 1 of Appendix VI; and
(g) a Common Share purchase warrant dated 1 July 1996 issued by ADT to Republic
whereby Republic may purchase 15 million ADT Common Shares at a price of US$20
per share exercisable during the period of 180 days after the termination of
the Amalgamation Agreement.
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11. Miscellaneous
(a) Charterhouse and Smith Barney have given and have not withdrawn their
respective written consents to the issue of this document with the inclusion
therein of their respective names and the references to them and to their
recommendations in the form and context in which they appear.
(b) The emoluments of the directors of ADT will not be affected by the
acquisition of ASH or by any other associated transaction.
(c) Except as disclosed in this document, no agreement, arrangement or
understanding (including any compensation arrangements) exists between ADT or
any person acting in concert with ADT for the purposes of the Scheme and any of
the directors or recent directors, shareholders or recent shareholders of ASH,
having any connection with or dependence on the outcome of the Scheme.
(d) Except as disclosed in this document, there is no agreement, arrangement or
understanding whereby the beneficial ownership of any of the Scheme Shares to
be acquired by ADT upon the implementation of this Scheme will be transferred
to any other person, except that ADT reserves the right to transfer any such
Scheme Shares to any wholly owned subsidiary of ADT.
(e) It is not ADT's intention that the payment of interest on repayment of, or
security for, any liability (contingent or otherwise) will depend on the
business of ASH.
(f) No member of the ASH Group or any associate has any indemnity or option
arrangement or any agreement or understanding, formal or informal, of whatever
nature, relating to relevant securities (as defined for the purposes of rule 8
of the City Code) of ASH or ADT which may be an inducement to deal or refrain
from dealing.
(g) None of ADT or any person acting in concert with ADT has any indemnity or
option arrangement or any agreement or understanding, formal or informal, of
whatever nature, relating to relevant securities (as defined for the purposes
of rule 8 of the City Code) of ASH or ADT which may be an inducement to deal or
refrain from dealing.
(h) Save as disclosed in paragraph 9 of this Appendix, no proposal exists in
connection with the Scheme that any payment or other benefit shall be made or
given to any director of ASH or any director of ADT as compensation for loss of
office or as consideration for or in connection with his retirement from
office.
(i) Payments aggregating up to 921,580, which excludes payments which could be
made to persons referred to in paragraph 9 of this Appendix, could become
payable by ASH in the event of certain persons electing to resign from their
positions in the ASH Group on the change of control of ASH.
12. Documents for inspection and available information
Copies of the following documents will be available for inspection during usual
business hours on any Business Day at the offices of Clifford Chance, 200
Aldersgate Street, London, EC1A 4JJ, and at the registered office of ASH, The
Clock House, The Campus, Hemel Hempstead, Hertfordshire, HP2 7TL, in each case
until whichever is the earlier of the Effective Date and the date on which the
Scheme lapses:
(i) the Memorandum and Articles of Association of ASH;
(ii) the Memorandum of Association and Bye-Laws of ADT;
(iii) the audited reports and accounts of the ASH Group for the years
ended 30 November 1994 and 30 November 1995;
(iv) the unaudited interim results for the ASH Group for the six
months ended 31 May 1996;
(v) the audited consolidated financial statements of ADT for the two
accounting periods ended 31December 1994 and 31 December 1995 and ADT's
First Quarter Report in respect of the quarter ended 31 March 1996 and
the ADT proxy statement for the 1996 annual general meeting of ADT;
(vi) the service agreements referred to in paragraph 9 of this Appendix VII;
(vii) the material contracts referred to in paragraph 10 of this Appendix VII;
(viii) the letters of consent referred to in paragraph 11 of this Appendix VII;
and
(ix) certain documents filed by Republic with the SEC, being form 10-Q for
the quarter ended 31 March 1996, form 10-K for the year ended 31 December
1995, forms 8-K dated 22 February 1996, 5 March 1996, 13 March 1996, 2
April 1996, 9 May 1996, 13 May 1996, 15 May 1996, 16 May 1996, 21 May
1996, 31 May 1996, 17 June 1996 and 9 July 1996, forms S-3 dated 21 March
1996 and 22 May 1996, Schedule 14A dated 19 April 1996 and a prospectus
dated 31 May 1996.
Dated 22 July 1996.
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IN THE HIGH COURT OF JUSTICE No. 003889 of 1996
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF AUTOMATED SECURITY
(HOLDINGS) PLC
- and -
IN THE MATTER OF THE COMPANIES ACT 1985
SCHEME OF ARRANGEMENT
- under -
SECTION 425 OF THE COMPANIES ACT 1985
- between -
AUTOMATED SECURITY (HOLDINGS) PLC
- and -
the holders of
(1) the Scheme Ordinary Shares;
(2) the 5% Preference Shares;
(3) the 6% Preference Shares;
(all as respectively hereinafter defined)
- and -
ADT LIMITED
-----------------
PRELIMINARY
(A) In this Scheme, unless inconsistent with the subject or context, the
following expressions shall have the following meanings namely:
"ADT" ADT Limited
"ADT Common Shares"
"or "Common Shares" common shares of US$0.10 each in the
capital of ADT
"Business Day" a day (excluding Saturdays and
public holidays) on which banks are
open for business in London
"Consideration Common Shares" ADT Common Shares to be issued as
consideration under the Scheme
"Effective Date" date on which this Scheme becomes
effective in accordance with its
terms
"ASH" or the "Company" Automated Security (Holdings) PLC
"Ordinary Shares" ordinary shares of 10p each in the
capital of ASH
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"5% Preference Shares" 5 per cent. convertible cumulative
redeemable preference shares of pounds 1
each in the capital of ASH
"6% Preference Shares" 6 per cent. convertible cumulative
redeemable preference shares of pounds 1
each in the capital of ASH
"Preference Shares" 5% Preference Sharess and 6% Preference
Shares
"Record Date" Business Day immediately preceding the
Effective Date
"Scheme" this scheme of arrangement in its
present form or with any modification,
addition or condition approved or imposed
by the Court
"Scheme Ordinary Shares" such of the Ordinary Shares as are in
issue on the date hereof together with
such Ordinary Shares (a) as shall be in
issue at the close of business on the
Business Day prior to the date of the
Ordinary Court Meeting and (b) if any,
as shall be issued thereafter and
before the close of business on the
Record Date in respect of which the
allottees thereof have agreed to be
bound by this Scheme
"Scheme Shares" Scheme Ordinary Shares and Preference
Shares
and where the context so admits or requires, the plural includes the singular
and vice versa.
(B) The authorised share capital of ASH at the date of this Scheme is
pounds77,000,000 divided into 200,000,000 Ordinary Shares of which
119,572,497 have been issued and are fully paid and the remainder are
unissued; 15,000,000 5% Preference Shares of which 7,867,040 have been
issued and are fully paid and the remainder are unissued; and 42,000,000
6% Preference Shares of which 40,760,788 have been issued and are
fully paid and the remainder are unissued.
(C) ADT was incorporated in Bermuda on 28 September 1984 as an exempted
company and has an authorised share capital of US$147,750,000 divided
into 220,000,000 Common Shares of which 133,689,020 have been issued and
are fully paid and the remainder are unissued; 125,000,000 convertible
cumulative redeemable preference shares of US$1 each none of which is in
issue; 225,000 534 per cent. convertible cumulative preference shares of
US$1 each of which 756 have been issued and are fully paid and the
remainder are unissued; 500,000 6 per cent. convertible cumulative
redeemable preference shares of US$1 each of which 4,180 have been issued
and are fully paid and the remainder are unissued; and 25,000
exchangeable redeemable preference shares 2005 of US$1 each none of which
is in issue.
(D) ADT has agreed to appear by Counsel on the hearing of the Petition to
sanction this Scheme and to undertake to the Court to be bound thereby
and to execute and do and procure to be executed and done all such
documents, acts and things as may be necessary or desirable to be
executed or done by it for the purpose of giving effect to this Scheme.
THE SCHEME
1. Transfer of the Scheme Shares
1.1 On the Effective Date, ADT shall acquire all the Scheme Shares free from
all liens, charges, equities, and encumbrances and together with all
rights at the date of this Scheme or hereafter attached thereto.
1.2 For such purpose the Scheme Shares shall be transferred to ADT or to its
nominees and to give effect thereto any person may be appointed by ADT to
execute as transferor an instrument of transfer of any such Scheme Shares
and every instrument of transfer so executed shall be as effective as if
it had been executed by the holder or holders of the Scheme Shares
thereby transferred.
2. Consideration
2.1 In consideration for the transfer of the Scheme Shares ADT shall, subject
as herein otherwise provided, on the Effective Date allot and issue
credited as fully paid to the persons who at the close of business on the
Record Date are the holders of Scheme Shares, the following:
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for every 92 Scheme Ordinary Shares 3 ADT Common Shares
for every 31 5% Preference Shares 2 ADT Common Shares and
for every 31 6% Preference Shares 2 ADT Common Shares.
2.2 In consideration for the transfer of the Scheme Shares, no fraction of an
ADT Common Share will be allotted pursuant to the provisions of this
Scheme but ADT will pay cash to a holder of Scheme Shares in respect of
such fractional entitlement. The value of the cash paid for such
fractional entitlement shall be determined by multiplying such fractional
entitlement by the closing price of an ADT Common Share on the New York
Stock Exchange on the Effective Date. Holders of Scheme Shares with
registered addresses in the UK will receive cheques in sterling drawn on
an appropriate UK clearing bank with such sterling amount calculated by
reference to the spot exchange rate between the US dollar and sterling
(as quoted by the Bank of England) at the close of business on the
Effective Date. All other holders of Scheme Shares will receive cheques
denominated in US dollars and drawn on an appropriate US bank.
2.2 The Consideration Common Shares shall rank pari passu in all respects
with all other ADT Common Shares in issue on the Effective Date including
for all dividends or distributions made, paid or declared thereon
following the Effective Date.
3. Certificates for Scheme Shares
From and including the Effective Date, all certificates representing holdings
of Scheme Shares shall cease to have effect as documents of title to the Scheme
Shares comprised therein and each holder of any of the Scheme Shares shall be
bound at the request of ADT to deliver to ADT the certificate(s) for his or her
holding(s) thereof.
4. Operation of the Scheme
4.1 The Scheme shall become effective as soon as an office copy of the Order
of the High Court sanctioning the Scheme under Section 425 of the
Companies Act 1985 shall have been duly delivered to the Registrar of
Companies in England and Wales for registration.
4.2 Unless the Scheme shall have become effective on or before 31 October
1996, or such later date, if any, as ASH and ADT may agree and as the
Court may allow, the Scheme shall never become effective.
4.3 If the Scheme shall not be approved by the requisite majority at the
meeting of any class or classes of Scheme Preference Shares convened by
Order of the Court or if the Scheme shall not be sanctioned in respect of
any such class or classes, the Scheme shall nevertheless, but only with
the consent of ADT, be capable of taking effect with respect to the
Scheme Ordinary Shares and, if appropriate, the other class of Preference
Shares and all necessary modifications to the Scheme shall be made
accordingly.
5. Despatch of consideration
5.1 ADT shall, within 21 days after the Effective Date, unless prohibited by
law, send to the allottees certificates for the Consideration Common
Shares and send cheques to the holders of Scheme Shares entitled thereto
in accordance with Clause 2.2 of this Scheme. If, in respect of any
holder of Scheme Shares with a registered address outside the UK, ADT is
advised that the issue of Consideration Common Shares pursuant to Clause
2.1 of the Scheme would infringe the laws of any jurisdiction outside the
UK, or would require ADT to observe any governmental or other consent or
any registration, filing or other formality, ADT may determine that no
Consideration Common Shares shall be allotted to such holder pursuant to
Clause 2.1 but shall instead be allotted and issued to a nominee
appointed by ADT, as trustee for such holder, on terms that the nominee
shall as soon as practicable following the Effective Date sell the
Consideration Common Shares so allotted and issued at the best price
which can reasonably be obtained and shall account by cheque for the net
proceeds of such sale (after the deduction of all expenses and
commissions, including any value added tax payable thereon) by sending a
cheque to the holder of such Scheme Shares in accordance with the
provisions of Clause 5.2 of this Scheme within seven days of any such
sale.
5.2 All certificates required to be sent by ADT pursuant to this Scheme and
all cheques required to be sent by ADT or the nominee referred to in
Clause 5.1 shall be sent through the post in prepaid envelopes addressed
to the persons entitled thereto at their respective registered addresses
as appearing in the register of members of ASH at the close of business
on the Record Date (or, in the case of joint holders, to the address of
that one of the joint holders whose name stands first in the register
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in respect of such joint holding) or in accordance with any special
instructions regarding communications, and neither ADT nor the nominee
shall be responsible for any loss or delay in transmission.
5.3 Each mandate in force at the close of business on the Record Date
relating to dividends on any Scheme Shares or the issue of Ordinary
Shares in lieu of cash dividends and each instruction given to ASH
relating to notices and communications shall, unless and until varied or
revoked, be deemed as from the Effective Date to be also an effective
mandate or instruction to ADT in relation to the corresponding
Consideration Common Shares then allotted and issued pursuant to this
Scheme.
6. Consent to modifications
ASH and ADT may jointly consent on behalf of all persons concerned to any
modification of, or addition to, the Scheme or to any condition which the Court
may approve or impose.
Dated 22 July 1996
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AUTOMATED SECURITY (HOLDINGS) PLC
NOTICE OF COURT MEETINGS
IN THE HIGH COURT OF JUSTICE No. 003889 of 1996
CHANCERY DIVISION
COMPANIES COURT
Mr. Registrar Buckley
IN THE MATTER OF AUTOMATED SECURITY
(HOLDINGS) PLC
- and -
IN THE MATTER OF THE COMPANIES ACT 1985
NOTICE IS HEREBY GIVEN that by an Order dated 18 July 1996 made in the above
matters, the Court has directed separate meetings to be convened of the holders
of (i) the ordinary shares of 10p each (the "Ordinary Shares"); (ii) the 5 per
cent. convertible cumulative redeemable preference shares of 1 each (the "5%
Preference Shares"); and (iii) the 6 per cent. convertible cumulative
redeemable preference shares of 1 each (the "6% Preference Shares") in the
capital of AUTOMATED SECURITY (HOLDINGS) PLC (the "Company") for the purpose of
considering and, if thought fit, approving (with or without modification) a
Scheme of Arrangement proposed to be made between the Company and the holders
of its Scheme Ordinary Shares, Scheme 5% Preference Shares and Scheme 6%
Preference Shares (as respectively defined in the Scheme of Arrangement) and
ADT Limited and that such meetings will be held at The Brewery, Chiswell
Street, London EC1Y 4SD on 22 August 1996 at the respective times mentioned
below, namely:
(i) the meeting of the holders of the Ordinary Shares at 11.00 am.
(ii) the meeting of the holders of the 5% Preference Shares at 11.10 am (or as
soon thereafter as the preceding meeting shall have concluded or been
adjourned); and
(iii) the meeting of the holders of the 6% Preference Shares at 11.20 am (or as
soon thereafter as the preceding meeting shall have concluded or been
adjourned),
at which place and respective times all the holders of the Ordinary Shares, 5%
Preference Shares and 6% Preference Shares are requested to attend.
A copy of the said Scheme of Arrangement and a copy of the Explanatory
Statement required to be furnished pursuant to Section 426 of the
above-mentioned Act are incorporated in the document of which this Notice forms
a part.
The holders of Ordinary Shares, 5% Preference Shares and 6% Preference Shares
may vote in person at such of the said meetings as they are entitled to attend
or they may appoint another person, whether a member of the Company or not, as
their proxy to attend and vote on their behalf.
Forms of proxy for use at all the meetings are enclosed herewith. Red forms are
for the use of the holders of Ordinary Shares, yellow forms are for the use of
the holders of the 5% Preference Shares and green forms are for the use of
holders of the 6% Preference Shares.
Completion of a form of proxy will not prevent the holder of an Ordinary Share,
5% Preference Share or 6% Preference Share from attending and voting at the
relevant Court Meeting.
In the case of joint holders of any of the Ordinary Shares, 5% Preferences
Shares or 6% Preference Shares, the vote of the senior who tenders a vote
whether in person or by proxy will be accepted to the exclusion of the votes of
the other joint holders and for this purpose seniority will be determined by
the order in which the names stand in the Register of Members of the Company in
respect of the joint holding.
It is requested that forms appointing proxies be returned to the Company's
Registrars, Lloyds Bank Registrars, The Causeway, Worthing, West Sussex BN99
6DB not less than 48 hours before the times appointed for the said meetings,
but if forms are not so returned they may be handed to the Chairman of the
meeting, prior to the commencement of the meeting at which they are to be used.
By the said Order the Court has appointed Lord Lane of Horsell or, failing him,
Anthony Peter Dignum to act as Chairman of each of the said meetings and has
directed the Chairman to report the result of each such meeting to the Court.
The said Scheme of Arrangement will be subject to the subsequent approval of
the Court.
DATED 22 July 1996
Clifford Chance
200 Aldersgate Street
London EC1A 4JJ
Solicitors for the Company
