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Previous: DREYFUS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND, N-30D, 1997-09-05 |
Next: MUNIYIELD FLORIDA FUND, DEF 14A, 1997-09-05 |
<PAGE> 1
File No. 0-19717
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13, OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
WPI GROUP, INC.
---------------
(Exact name of registrant as specified in charter)
AMENDMENT NO.1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report Dated June 25, 1997
on Form 8 as set forth in the pages attached hereto:
Item 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements:
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
WPI Group, Inc.
BY: /s/ John W. Powers
-----------------------
John W. Powers
Vice President and
Chief Financial Officer
Date: September 8, 1997
The Current Report on Form 8-K dated June 25, 1997 of WPI Group, Inc.
(Commission File No. 0-19717) is hereby amended as follows:
Item 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements:
Husky Computers Limited Combined Financial Statements
as of December 31, 1996 and 1995.
Pro Forma Combined Financial Statements for WPI
Group, Inc. and Husky Computers Companies as of
September 29, 1996 and June 29, 1997.
<PAGE> 2
HUSKY COMPUTERS
FINANCIAL STATEMENTS
2
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
to the Board of Directors of Peek plc.
We have audited the combined balance sheets of Husky Computers as at December
31, 1996 and 1995, and the related combined profit and loss accounts and
statements of cash flows for each of the two years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to form an independent opinion on these
financial statements based on our audits.
We conducted our audits in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Husky Computers at December 31,
1996 and 1995, and the combined results of its operations and its combined cash
flows for each of the two years in the period ended December 31, 1996 in
conformity with accounting principles generally accepted in the United Kingdom
which differ in certain respects from those generally accepted in the United
States (see Note 19 of Notes to the Financial Statements).
ERNST & YOUNG
CHARTERED ACCOUNTANTS
LEICESTER, ENGLAND
28 AUGUST 1997
3
<PAGE> 4
HUSKY COMPUTERS
<TABLE>
COMBINED PROFIT AND LOSS ACCOUNT
<CAPTION>
Year ended December 31
1996 1995
Notes P P
<S> <C> <C> <C>
TURNOVER 3 21,186,528 19,123,855
Cost of sales (13,662,478) (12,371,286)
----------- -----------
Gross profit 7,521,050 6,752,569
Selling and distribution expenses (3,241,439) (2,787,497)
Administrative expenses (1,920,790) (1,654,890)
Research and development (1,618,565) (1,669,675)
----------- -----------
OPERATING PROFIT 4 740,256 640,507
Interest payable 5 (444,858) (236,556)
----------- -----------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 295,398 403,591
Tax on profit on ordinary activities 7 (11,461) 4,036
----------- -----------
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION 283,937 407,987
Dividends (912,560) (2,219,664)
----------- -----------
LOSS FOR THE YEAR* (628,623) (1,811,677)
=========== ===========
</TABLE>
There have been no recognized gains or losses other than the retained loss shown
above.
* A summary of the adjustments to the loss for the year that would be
required had the United States generally accepted accounting principles
been applied instead of those generally accepted in the United Kingdom is
set forth in Note 19 of Notes to the Financial Statements.
The Notes to the Financial Statements are an integral part of these
financial statements.
4
<PAGE> 5
HUSKY COMPUTERS
<TABLE>
COMBINED BALANCE SHEET
<CAPTION>
December 31
1996 1995
Notes P P
<S> <C> <C> <C>
FIXED ASSETS
Tangibles assets 8 2,385,035 2,493,395
----------- -----------
CURRENT ASSETS
Stock and work in progress 9 3,044,694 3,741,746
Debtors 10 3,175,811 4,050,105
Cash at bank and in hand 11 832,775 652,351
----------- -----------
7,053,280 8,444,202
CREDITORS: amounts falling due within one year 12 (10,770,153) (11,850,947)
----------- -----------
NET CURRENT LIABILITIES (3,716,873) (3,406,745)
TOTAL ASSETS LESS CURRENT LIABILITIES (1,331,838) (913,350)
CREDITORS: amounts falling due after more than one year 13 (319,954) (437,626)
----------- -----------
(1,651,792) (1,350,976)
=========== ===========
INVESTED CAPITAL* 15 (1,651,792) (1,350,976)
=========== ===========
</TABLE>
* A summary of the adjustments to invested capital that would be required had
United States generally accepted accounting principles been applied instead
of those generally accepted in the United Kingdom is set forth in Note 19
of Notes to the Financial Statements.
The Notes to the Financial Statements are an integral part of these financial
statements.
5
<PAGE> 6
HUSKY COMPUTERS HUSKY COMPUTERS
<TABLE>
COMBINED PROFIT AND LOSS ACCOUNT
<CAPTION>
Year ended December 31
1996 1995
Notes P P
<S> <C> <C> <C>
NET CASH INFLOW/(OUTFLOW)
FROM OPERATING ACTIVITIES 11b 4,201,063 (939,847)
RETURNS OF INVESTMENT AND
SERVICING OF FINANCE
Interest paid (399,105) (204,559)
Payment of interest on finance leases (45,753) (31,997)
--------- ----------
NET CASH OUTFLOW FROM RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE (444,858) (236,556)
========= ==========
TAXATION
Corporation tax paid/refunded (including ACT) (197,270) 37,722
--------- ----------
TAX PAID (197,270) 37,722
========= ==========
CAPITAL EXPENDITURE
AND FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets (532,746) (560,178)
--------- ----------
NET CASH OUTFLOW FROM CAPITAL
EXPENDITURE AND FINANCIAL INVESTMENT (532,746) (560,178)
========= ==========
EQUITY DIVIDENDS PAID (912,560) (2,219,664)
========= ==========
NET CASH INFLOW/(OUTFLOW) BEFORE
FINANCING 2,113,629 (3,918,523)
FINANCING
Repayment of capital element of finance leases (131,266) (76,136)
--------- ----------
NET CASH OUTFLOW FROM FINANCING (131,266) (76,136)
--------- ----------
INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS 11a 1,982,363 (3,994,659)
========= ==========
</TABLE>
The significant differences between the statement of Cash Flows presented above
and that required under United States generally accepted accounting principles
are described in Note 19 of the Notes to the Financial Statements.
The Notes to the Financial Statements are an integral part of these financial
statements.
6
<PAGE> 7
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
These financial statements for Husky Computers (the `Company') report the
combined financial statements of Husky Computers Limited, Husky Computers
Inc. and Husky Computers GmbH.
For the purposes of these financial statements, the share capital, share
premium and profit and loss reserves of Husky Computers Limited, Husky
Computers Inc. and Husky Computers GmbH, have been combined and termed
invested capital.
Transactions entered into between Husky Computers Limited, Husky Computers
Inc. and Husky Computers GmbH have been eliminated for the purpose of these
financial statements.
2. ACCOUNTING POLICIES
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention
and in accordance with applicable United Kingdom accounting standards.
TURNOVER
Turnover is attributable to one continuing activity, the manufacture and
sale of handheld computer systems including the provision of related
services in the ordinary course of business, net of value added tax, for
goods sold and services provided outside the Company.
FOREIGN CURRENCIES
Assets and liabilities denominated in foreign currencies are translated at
the rate of exchange ruling at the balance sheet date or where appropriate,
the contracted rate. Differences arising from the changes in exchange rates
on trading transactions are dealt with through the profit and loss account.
Exchange differences arising on translation of the opening net position of
overseas branches are taken to profit and loss account.
RESEARCH AND DEVELOPMENT
Research and development expenditure is written off in the year of
expenditure.
TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at original cost less accumulated
depreciation. Depreciation is calculated to write off the cost less
estimated residual value of each asset evenly over its expected useful
life as follows:
Leasehold improvements - 10% pa
Office equipment - 10% pa
Fixtures and fittings - 10% pa
Computers - 20% pa
Motor vehicles - 20% pa
7
<PAGE> 8
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
2. ACCOUNTING POLICIES (continued)
LEASED ASSETS
Assets held under finance (capital) leases are capitalized in the balance
sheet and are depreciated over their useful lives at the rates applicable to
fixed assets of a similar category owned by the Company.
Rentals under operating leases are charged directly to the profit and loss
account.
STOCK AND WORK IN PROGRESS
Stock and work in progress is valued at direct cost, being on a standard
cost basis, or net realizable value if lower.
DEFERRED TAXATION
Provision is made for deferred taxation on all material timing differences
to the extent that it is probable that a liability or asset will
crystallize.
PENSIONS
The cost of providing pension benefits is charged to the profit and loss
account over the period benefiting from employees' services.
3. TURNOVER
The geographical analysis of turnover and the split of turnover and profit
by class of business is not disclosed as, in the opinion of the directors,
to do so would be seriously prejudicial to the Company's interests.
4. OPERATING PROFIT
Operating profit is stated after charging:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
P P
<S> <C> <C>
Depreciation of owned assets 647,866 532,415
Depreciation of assets held under finance leases and
hire purchase contracts 134,625 95,088
Auditors' remuneration 26,330 15,734
Operating lease rentals
- property 312,405 310,500
- equipment 165,792 188,307
Write off of development expenditure 229,132 364,435
Exceptional bad debt write-off (see below) -- 195,812
======= =======
</TABLE>
The exceptional bad debt write-off relates to a debt due from Husky Computers
BV. The company ceased trading on October 31 1995 and in the opinion of the
directors, the amount outstanding is unlikely to be recoverable.
8
<PAGE> 9
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
5. INTEREST PAYABLE
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
P P
<S> <C> <C>
Interest payable (444,858) (236,556)
======== ========
</TABLE>
6. EMPLOYEE INFORMATION
The average number of employees during the year was as follows:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
No. No.
<S> <C> <C>
Production 187 181
Engineering 29 34
Sales 43 32
Research and development 8 2
Administration 22 18
--- ---
289 267
=== ===
</TABLE>
Employment costs comprises:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
P P
<S> <C> <C>
Wages and salaries 5,311,801 4,817,422
Social security costs 508,298 396,889
Other pension costs 166,061 108,268
--------- ---------
5,986,160 5,322,579
========= =========
</TABLE>
Peek plc operates a group pension scheme. Particulars of the actuarial valuation
of the scheme are contained in the financial statements of that company.
Contributions to the scheme are based on pension costs across the group as a
whole. The employees of Husky Computers Limited are members of Peek's defined
contribution scheme.
9
<PAGE> 10
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
7. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
P P
<S> <C> <C>
The taxation charge is made up as follows:
UK corporation tax based on profit for the year
at 33% (1995 - 33%) -- 90,408
Overseas tax 52,694 --
Taxation relating to prior years:
Corporation tax (41,233) (94,444)
------- -------
11,461 (4,036)
======= =======
</TABLE>
The tax credit arises primarily as a result of the release of an
overprovision in prior years.
10
<PAGE> 11
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
8. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Fixtures,
Leasehold fittings & Motor
improvements equipment vehicles Total
P P P P
<S> <C> <C> <C> <C>
Cost:
At January 1, 1995 107,665 3,294,523 29,668 3,431,856
Additions 52,403 887,206 17,103 956,712
Disposals -- -- (12,597) (12,597)
Transfer 20,285 (20,285) -- --
Exchange differences
and adjustments -- 8,479 1,410 9,889
------- --------- ------- ---------
At December 31 1995 180,353 4,169,923 35,584 4,385,860
Additions 5,609 540,091 17,046 562,746
Disposals -- (55,789) (15,573) (71,362)
Exchange differences
and adjustments -- (48,718) (2,908) (51,626)
------- --------- ------- ---------
At December 31, 1996 185,962 4,605,507 34,149 4,825,618
======= ========= ======= =========
Depreciation:
At January 1 1995 24,983 1,321,342 22,374 1,368,699
Charge for year 14,058 516,362 1,995 532,415
Disposals 752 (2,081) (12,597) (13,926)
Exchange differences
and adjustments -- 4,469 808 5,277
------- --------- ------- ---------
At December 31 1995 39,793 1,840,092 12,580 1,892,465
Charge for year 19,786 623,808 4,272 647,866
Disposals -- (54,506) (8,919) (63,425)
Exchange differences
and adjustments -- (36,323) -- (36,323)
------- --------- ------- ---------
At December 31, 1996 59,579 2,374,737 6,267 2,440,583
------- --------- ------- ---------
Net book value:
At December 31, 1996 126,383 2,230,770 27,882 2,385,035
======= ========= ======= =========
At December 31,1995 140,560 2,329,831 23,004 2,493,395
======= ========= ======= =========
</TABLE>
11
<PAGE> 12
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
8. TANGIBLE FIXED ASSETS (continued)
The leasehold terms are of less than 50 years.
The net book value of fixtures, fittings and equipment above includes an
amount of P435,176 (1995 - P539,801) in respect of assets held under
finance leases and hire purchase contracts.
9. STOCK AND WORK IN PROGRESS
<TABLE>
<CAPTION>
December 31
1996 1995
P P
<S> <C> <C>
Raw materials and consumables 2,119,669 2,810,373
Work in progress 523,638 438,250
Finished goods and goods for resale 401,387 493,123
--------- ---------
3,044,694 3,741,746
========= =========
</TABLE>
The replacement cost of stock is not materially different from the amounts
stated above.
10. DEBTORS
<TABLE>
<CAPTION>
December 31
1996 1995
P P
<S> <C> <C>
Trade debtors 2,769,144 3,873,704
Amounts owed by fellow subsidiaries 103,005 (482,734)
Prepayments and accrued income 262,825 580,362
Other debtors 40,837 78,773
--------- ---------
3,175,811 4,050,105
========= =========
</TABLE>
12
<PAGE> 13
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
11. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT.
11a. CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Cash at bank
and in hand Overdrafts Total
P P P
<S> <C> <C> <C>
At January 1, 1995 2,845,071 -- 2,845,071
Movement in year (2,192,720) (1,801,939) (3,994,659)
---------- ---------- ----------
At January 1, 1996 652,351 (1,801,939) (1,149,588)
Movement in year 180,424 1,801,939 1,982,363
---------- ---------- ----------
At December 31, 1996 832,775 -- 832,775
========== ========== ==========
</TABLE>
11b. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW/(OUTFLOW) FROM
OPERATING ACTIVITIES:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
P P
<S> <C> <C>
Operating profit 740,256 640,507
Depreciation 647,866 532,415
Loss/(profit) on disposal of tangible fixed assets 7,937 (1,329)
Decrease in debtors 698,905 1,221,311
Decrease in stocks 675,814 134,310
Increase/(decrease) in creditors 1,348,831 (3,433,954)
Other non cash movements 81,454 (33,107)
---------- ----------
Net cash inflow/(outflow) from
operating activities 4,201,063 (939,847)
========== ==========
</TABLE>
13
<PAGE> 14
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
11c. RECONCILIATION OF NET CASH FLOWS TO MOVEMENT IN NET DEBT
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
P P
<S> <C> <C>
Increase/(decrease) in cash in year 1,982,363 (3,994,659)
Cash outflow from decrease in debt 131,266 76,136
---------- ----------
Change in net debt resulting from cash flows 2,113,629 (3,918,523)
New finance leases (30,000) (396,534)
---------- ----------
Movement in net debt in the year 2,083,629 (4,315,057)
Net debt at 1 January 1996 (1,707,169) 2,607,888
---------- ----------
Net debt at 31 December 1996 376,460 (1,707,169)
========== ==========
</TABLE>
11d. ANALYSIS OF CHANGES IN NET DEBT
<TABLE>
<CAPTION>
At January 1, Cash Other At December 31,
1996 flows changes 1996
P P P P
<S> <C> <C> <C> <C>
Cash at bank and in hand 652,351 180,424 -- 832,775
Overdrafts (1,801,939) 1,801,939 -- --
Debt due within 1 year (119,955) 131,266 (147,672) (136,361)
Debt due after 1 year (437,626) -- 117,672 (319,954)
---------- --------- -------- --------
Total (1,707,169) 2,113,629 (30,000) 376,460
=========== ========== ======== ========
</TABLE>
14
<PAGE> 15
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
12. CREDITORS: amounts falling due within one year
<TABLE>
<CAPTION>
December 31
1996 1995
P P
<S> <C> <C>
Trade creditors 1,857,606 2,124,641
Bank overdraft -- 1,801,939
Amounts owed to parent undertaking 7,829,452 6,586,399
Corporation tax 47,478 33,287
Other taxation and social security costs 204,601 224,252
Accruals and deferred income 686,424 737,727
ACT payable -- 200,000
Obligations under finance leases and hire purchase
contracts (note 14) 136,361 119,955
Other creditors 8,231 22,747
---------- ----------
10,770,153 11,850,947
=========== ==========
</TABLE>
13. CREDITORS: amounts falling due after more than one year
<TABLE>
<CAPTION>
December 31
1996 1995
P P
<S> <C> <C>
Obligations under finance leases and hire purchase
contracts (note 14) 319,954 437,626
======= =======
</TABLE>
14. OBLIGATIONS UNDER FINANCE LEASES AND HIRE PURCHASE CONTRACTS
<TABLE>
<CAPTION>
December 31
1996 1995
P P
<S> <C> <C>
Amounts payable:
Within one year 166,932 159,036
Within two to five years 348,106 463,539
After more than five years -- 26,966
------- -------
515,038 649,541
Less finance charges allocated to future periods (58,723) (91,960)
------- -------
456,315 557,581
======= =======
</TABLE>
15
<PAGE> 16
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
14. OBLIGATIONS UNDER FINANCE LEASES AND HIRE PURCHASE CONTRACTS (continued)
Finance leases and hire purchase contracts are analyzed as follows:
<TABLE>
<CAPTION>
Year ended
December 31
1996 1995
P P
<S> <C> <C>
Current obligations 136,361 119,955
Noncurrent obligations 319,954 437,626
------- -------
456,315 557,581
======= =======
</TABLE>
Analysis of changes in finance leasing during the year:
<TABLE>
<CAPTION>
Year ended
December 31
1996 1995
P P
<S> <C> <C>
At January 1 557,581 237,183
Inception of finance lease contracts 30,000 396,534
Capital element of finance lease rental payments (131,266) (76,136)
-------- -------
At December 31 456,315 557,581
======== =======
</TABLE>
15. MOVEMENTS IN INVESTED CAPITAL
<TABLE>
<CAPTION>
P
<S> <C>
At January 1, 1995 525,594
Profit for the year 407,987
Dividends (2,219,664)
Foreign exchange differences (64,892)
----------
At December 31, 1995 (1,350,975)
Profit for the year 283,937
Dividends (912,560)
Foreign exchange differences 327,806
----------
At December 31, 1996 (1,651,792)
==========
</TABLE>
16
<PAGE> 17
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
16. FINANCIAL COMMITMENTS
Lease commitments
The company had annual commitments under non-cancellable operating leases as
follows:
<TABLE>
<CAPTION>
December 31 December 31
1996 1995 1996 1995
Land and buildings Other
P P P P
<S> <C> <C> <C> <C>
Operating leases which expire:
within 1 year -- -- 14,817 22,163
within 2-5 years 403,208 310,500 88,295 75,521
======= ======= ====== ======
</TABLE>
Capital commitments
At the end of the year capital expenditure has been committed as follows:
<TABLE>
<CAPTION>
December 31
1996 1995
P P
<S> <C> <C>
Contracted for but not provided in accounts -- 40,352
Authorized but not contracted -- --
=== ======
</TABLE>
17. PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation provided in the financial statements and the amounts not
provided are as follows:-
<TABLE>
<CAPTION>
December 31 December 31
1996 1995 1996 1995
Provided Unprovided
P P P P
<S> <C> <C> <C> <C>
Capital allowances in
advance of depreciation -- -- 150,568 148,656
=== === ======= =======
</TABLE>
18. GUARANTEES AND CONTINGENT LIABILITIES
The company had the following contingent liabilities:
<TABLE>
<CAPTION>
December 31
1996 1995
P P
<S> <C> <C>
Duty deferment guarantee 100,000 100,000
ATA Carnets -- 1,500
------- -------
100,000 101,500
======= =======
</TABLE>
17
<PAGE> 18
HUSKY COMPUTERS
NOTES TO THE FINANCIAL STATEMENTS
19. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
The Company's financial statements are prepared in accordance with accounting
principles generally accepted in the United Kingdom ("U.K.GAAP") which differ in
certain respects from United States generally accepted accounting principles
("U.S. GAAP"). The significant differences as they apply to the Company are
summarized below.
DEFERRED TAXATION
The Company provides for deferred taxation on all material timing differences
using the liability method to the extent that it is probable that a liability on
asset will crystallize. Under U.S. GAAP deferred taxation is required to be
fully provided on all temporary differences using the liability method.
Further, U.S. GAAP require that in the separate financial statements of a
wholly-owned subsidiary deferred tax be recognized on a stand alone basis.
Under U.S. GAAP, deferred tax assets would be recognized to the extent their
recoverability is more likely than not.
The effect of the significant adjustment to the loss for the year and invested
capital which would be required if U.S. GAAP were to be applied instead of U.K.
GAAP is summarized as follows.
<TABLE>
LOSS FOR THE YEAR
<CAPTION>
Year ended December 31
1996 1995
P P
<S> <C> <C>
Loss for the year as reported (628,623) (1,811,677)
Adjustment for deferred taxation (3,689) (32,869)
-------- ----------
Loss for the year as adjusted to comply with U.S. GAAP (632,312) (1,844,546)
======== ==========
<CAPTION>
INVESTED CAPITAL
December 31
1996 1995
P P
<S> <C> <C>
Invested capital as reported (1,651,792) (1,350,975)
Adjustment for deferred taxation (139,944) (136,255)
---------- ----------
Invested capital as adjusted
to comply with U.S. GAAP (1,791,736) (1,487,230)
========== ==========
</TABLE>
18
<PAGE> 19
HUSKY COMPUTERS
NOTES TO FINANCIAL STATEMENTS
19. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
(continued)
CASH FLOW STATEMENT
The cash flow statement prepared in accordance with U.K. GAAP presents
substantially the same information as that required under U.S. GAAP. There
are differences, however, with regard to the classification of items and as
regards the definition of cash and cash equivalents.
Under U.K. GAAP, cash and cash equivalents includes bank overdrafts; under
U.S. GAAP overdrafts are not so included. Under U.K. GAAP cash flows are
presented separately for operating activities, servicing of finance and
returns on investments, taxation, capital expenditure and financial
investment, acquisitions and disposals, equity dividends, management of
liquid resources and financing. Under U.S. GAAP, only three categories of
cash flows are reported; operating, investing and financing. Cash flows from
taxation and servicing of financing and returns on investments under U.K.
GAAP would be included as operating activities under U.S. GAAP. The payment
of dividends would be included as a financing activity under U.S. GAAP, and
cashflows in respect of capital expenditure and financial investment and of
acquisitions and disposals would be included in investing activities under
U.S. GAAP.
The categories of cash flow activity under US GAAP can be summarized as
follows:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
P P
<S> <C> <C>
Cash flows for operating activities 1,675,542 696,365
Cash inflows/(outflows) on investing activities (532,746) (560,178)
Cash flows from financing activities (1,043,826) (2,295,800)
---------- ----------
Increase/(decrease)in cash and cash equivalents 98,970 (2,159,613)
Effect of foreign exchange rate changes 81,454 (33,107)
---------- ----------
180,424 (2,192,720)
Cash at January 1 652,351 2,845,071
---------- ----------
Cash at December 31 832,775 652,351
========== ==========
</TABLE>
19
<PAGE> 20
WPI GROUP, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
SEPTEMBER 29, 1996
(UNAUDITED)
The following unaudited pro forma combined statements of operations give
effect to the acquisition of Husky Computers Limited, Husky Computers, Inc. and
Husky Computers GmbH ("Husky Computers"), by WPI Group, Inc., assuming that the
acquisition was effective on September 24, 1995 and that the transaction was
accounted for as a purchase. The pro forma data reflect the acquisition of the
assets and assumption of liabilities of Husky Computers by WPI Group, Inc. The
unaudited pro forma combined statements of operations for the period ended
September 29, 1996 combine the historical statements of operations of WPI Group,
Inc. for the year ended September 29, 1996 and of Husky Computers for the year
ended December 31, 1996. The following pro forma information is presented for
illustration purposes only and is not necessarily indicative of the actual
results of operations that would have been reported if the acquisition had been
effected at that date or which may be reported in the future. This statement
shall be read in conjunction with the accompanying explanatory notes; the pro
forma combined balance sheet and the respective historical financial statements
and related notes of WPI Group, Inc. and Husky Computers.
The unaudited pro forma statement of operations of Husky Computers has been
translated for convenience at (pound)1 = $1.588 the average rate for the period
ended December 31, 1996. No representation is made that the pounds sterling
amounts have been, could have been, or could be converted into US dollars at
that or any other rate of exchange.
20
<PAGE> 21
WPI GROUP INC
<TABLE>
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
PERIOD ENDED SEPTEMBER 29, 1996
<CAPTION>
HUSKY ADJUSTED
WPI GROUP, INC COMPUTERS PRO FORMA PRO FORMA
SEPTEMBER 29, DECEMBER 31, ADJUSTMENTS COMBINED COMBINED
1996 1996 (UNAUDITED) (UNAUDITED) (UNAUDITED)
-------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales $47,498,058 $33,639,442 $ -- $ 81,137,500 $ 81,137,500
Cost of Sales 29,580,058 21,696,015 250,000 (8) 51,526,073 50,776,073 (9)
----------- ----------- ----------- ------------ ------------
Gross profit 17,918,000 11,943,427 (250,000) 29,611,427 30,361,427
----------- ----------- ----------- ------------ ------------
Operating expenses:
Research and new product development 2,939,984 2,570,280 -- 5,510,264 5,510,264
Selling, general and administration 10,783,030 8,197,620 519,444 (1) 19,500,094 19,085,59 (9)
----------- ----------- ----------- ------------ ------------
Total operating expenses 13,723,014 10,767,900 519,444 25,010,358 24,595,858
----------- ----------- ----------- ------------ ------------
Operating income 4,194,986 1,175,527 (769,444) 4,601,069 5,765,569
Other income (expense):
Interest income 18,377 -- -- 18,377 18,377
Interest expense (694,370) (706,435) (1,530,073)(4) (2,224,443) (2,224,443)
706,435 (7)
Other, net 229,197 -- -- 229,197 229,197
----------- ----------- ----------- ------------ ------------
Income before provision for income taxes 3,743,190 469,092 (1,593,082) 2,624,200 3,788,700
Provision for income taxes 1,227,000 18,200 (541,648)(6) 703,552 1,099,482
=========== =========== =========== ============ ============
Net income $ 2,521,190 $ 450,892 $(1,051,434) 1,920,648 2,689,218
=========== =========== =========== ============ ============
Net income per share $ .42 $ .32 $ .45
=========== ============ ============
Weighted average common shares and
common equivalent shares outstanding 6,001,438 6,001,438 6,001,438
=========== ============ ============
</TABLE>
See notes to pro forma combined financial statements.
21
<PAGE> 22
WPI GROUP, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
JUNE 29, 1997
(UNAUDITED)
The following unaudited pro forma combined statements of operations give
effect to the acquisition of Husky Computers Limited, Husky Computers, Inc. and
Husky Computers GmbH ("Husky Computers"), by WPI Group, Inc., assuming that the
acquisition was effective on September 24, 1995 and that the transaction was
accounted for as a purchase. The pro forma data reflect the acquisition of the
assets and assumption of liabilities of Husky Computers by WPI Group, Inc. The
unaudited pro forma combined statements of operations for the period ended
June 29, 1997 combine the historical statements of operations of WPI Group,
Inc. for the nine months ending June 29, 1997 and of Husky Computers for the
nine month period ending June 29, 1997. The following pro forma information is
presented for illustrative purposes only and is not necessarily indicative of
the actual results of operations that would have been reported if the
acquisition had been effected at that date or which may be reported in the
future. This statement should be read in conjunction with the accompanying
explanatory notes; the pro forma combined balance sheet and the respective
historical financial statements and related notes of WPI Group, Inc. and Husky
Computers.
The unaudited pro forma statement of operations of Husky Computers has been
translated for convenience at P1 = $1.6325 average rate for the nine month
period ending June 29, 1997. No representation is made that the pounds sterling
amounts have been, could have been, or could be converted into US dollars at
that or any other rate of exchange.
22
<PAGE> 23
WPI GROUP INC
<TABLE>
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 29, 1997
<CAPTION>
HUSKY
WPI GROUP, INC COMPUTERS
9 MONTHS TO 9 MONTHS TO ADJUSTED
JUNE 29, JUNE 29, PRO FORMA PRO FORMA
1997 1997 ADJUSTMENTS COMBINED COMBINED
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
-------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales $43,893,178 $23,019,683 $ -- $69,234,818 $66,912,861
Cost of Sales 26,442,415 14,450,129 -- 43,214,501 40,330,044 (9)
----------- ----------- ----------- ----------- -----------
Gross profit 17,450,76 8,569,554 -- 26,020,317 26,582,817
----------- ----------- ----------- ----------- -----------
Operating expenses:
Research and new product development 2,995,491 1,988,832 4,984,323 4,984,323
Selling, general and administration 9,915,704 6,413,461 389,583 (1) 16,718,748 16,407,87 (9)
----------- ----------- ----------- ----------- -----------
Total operating expenses 12,911,195 8,402,293 389,583 21,703,071 21,392,196
----------- ----------- ----------- ----------- -----------
Operating income 4,539,568 167,261 (389,583) 4,317,246 5,190,621
Other income (expense):
Interest income 66,056 27,323 (27,323)(7) 66,056 66,056
Interest expense (1,286,956) (525,288) (1,147,555)(4) (2,434,511) (2,434,511)
525,288 (7)
Other, net 571,298 -- -- 571,298 571,298
----------- ----------- ----------- ----------- -----------
Income (loss) before provision for income taxes 3,889,966 (330,704) (1,039,173) 2,520,089 3,393,464
Provision for income taxes 1,245,000 (112,440) (353,319)(6) 779,241 1,076,189
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 2,644,966 $ (218,264) $ (685,854) $ 1,740,848 $ 2,317,275
=========== =========== =========== =========== ===========
Net income per share $ .43 $ .28 $ .38
=========== ============ ===========
Weighted average common shares and
common equivalent shares outstanding 6,168,327 6,168,327 6,168,327
=========== ============ ===========
</TABLE>
See notes to pro forma combined financial statements.
23
<PAGE> 24
WPI GROUP, INC.
PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 29, 1996
(UNAUDITED)
The following unaudited pro forma combined balance sheet gives effect to the
acquisition of Husky Computers Limited, Husky Computers, Inc. and Husky
Computers GmbH ("Husky Computers") by WPI Group, Inc., assuming that the
acquisition was consummated as of September 29, 1996 and assumes that the
acquisition was accounted for as a purchase. The pro forma data reflect the
acquisition of the assets and assumption of liabilities of Husky Computers by
WPI Group, Inc. The unaudited pro forma combined balance sheets combine the
historical balance sheets of WPI Group, Inc. as of September 29, 1996 and of
Husky Computers as of December 31, 1996. The following pro forma information is
presented for illustrative purposes only and is not necessarily indicative of
the financial position that would have been reported had the acquisition been
consummated as of September 29, 1996 or which may be reported in the future. The
consolidated balance sheet of WPI Group, Inc. included in the Form 10Q for the
period ended June 29, 1997 includes Husky Computers. Accordingly, a pro forma
combined balance sheet is not provided. This statement shall be read in
conjunction with the accompanying explanatory notes; the pro forma combined
statement of operations and the respective historical financial statements and
related notes of WPI Group, Inc. and Husky Computers.
The unaudited pro forma balance sheet for Husky Computers has been
translated for convenience at (pound)1 = $1.7123, the noon buying rate in New
York City in pounds sterling as certified for customs purposes by the Federal
Reserve Bank of New York on December 31, 1996. No representation is made that
the pounds sterling amounts have been, could have been, or could be converted
into US dollars at that or any other rate of exchange.
24
<PAGE> 25
WPI GROUP INC
<TABLE>
COMBINED BALANCE SHEETS
SEPTEMBER 29, 1996
<CAPTION>
HUSKY
WPI GROUP, INC COMPUTERS PRO FORMA
SEPTEMBER 29, DECEMBER 31, ADJUSTMENTS COMBINED
1996 1996 (UNAUDITED) (UNAUDITED)
-------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 206,829 $ 1,425,961 $ (1,300,000)(3) $ 332,790
Accounts receivable - net of allowance for
doubtful accounts 10,881,315 4,741,605 -- 15,622,920
Accounts receivable - other 1,618,873 246,301 -- 1,865,174
Inventories 7,068,496 5,213,430 -- 12,281,926
Prepaid expenses and other current assets 230,509 450,035 -- 680,544
Prepaid income taxes 1,103,84 -- -- 1,103,840
Refundable income taxes 547,570 -- -- 547,570
----------- ----------- ------------ -----------
Total current assets 21,657,612 12,077,332 (1,300,000) 32,434,944
Property, plant and equipment:
At cost, less accumulated depreciation 9,447,758 4,083,895 -- 13,531,653
Other assets 1,940,653 -- -- 1,940,653
Goodwill 17,628,921 -- 12,986,100 (2) 30,615,021
----------- ----------- ------------ -----------
$50,674,944 $16,161,227 $ 11,686,100 $78,522,271
=========== =========== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,265,217 $ 3,245,360 $ -- $ 7,510,577
Accrued expenses 3,464,164 1,773,287 1,000,000 (5) 6,237,451
Amounts owed to parent and affiliates -- 13,341,790 (13,341,790)(2) --
Accrued income taxes 1,772,630 81,297 -- 1,853,927
----------- ----------- ------------ -----------
Total current liabilites 9,502,011 18,441,734 (12,341,790) 15,601,955
Long term liabilities:
Long term debt 18,650,000 -- 20,959,900 (3) 39,609,900
Non compete agreement 20,000 -- -- 20,000
Obligations under capital lease -- 547,857 -- 547,857
Deferred income taxes 1,954,287 239,626 -- 2,193,913
----------- ----------- ------------ -----------
Total liabilities 30,126,298 19,229,217 8,618,110 57,973,625
----------- ----------- ------------ -----------
Stockholders' equity:
Common stock - WPI Group ($.01 par) 59,479 -- -- 59,479
Common stock - Husky Computers -- 1,027,380 (1,027,380)(2) --
Additional paid-in capital 13,658,604 -- -- 13,658,604
Retained earnings 6,815,801 (4,155,562) 4,155,562 (2) 6,815,801
Foreign currency translation 14,762 60,192 (60,192)(2) 14,762
----------- ----------- ------------ -----------
Total stockholder's equity 20,548,646 (3,067,990) 3,067,990 20,548,646
----------- ----------- ------------ -----------
$50,674,944 $16,161,227 $ 11,686,100 $78,522,271
=========== =========== ============ ===========
</TABLE>
See notes to pro forma combined financial statements
25
<PAGE> 26
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(1) Adjustment to reflect amortization of goodwill over 25 years.
(2) Adjustment to reflect goodwill arising on acquisition, elimination of
amounts owed to former parent and affiliated companies, and elimination
of share capital and pre acquisition retained earnings.
(3) Adjustment to reflect the net debt drawn down to finance the acquisition
of Husky Computers Limited, Husky Computers, Inc. and Husky Computers
GmbH ("Husky Computers") the use of substantially all of Husky
Computers' cash balance to reduce the debt drawn to finance the
acquisition.
(4) Adjustment to reflect interest expense on debt drawn down to finance the
acquisition, at a rate of 7.3%, the current borrowing rate under terms
of the credit facilities agreement (variable interest rate).
(5) Adjustment to reflect estimated accrued acquisition expenses, primarily
legal and accounting expenses, and estimated related costs.
(6) Adjustment to reflect tax effect of pro forma adjustments at federal
statutory rate of 34%.
(7) Adjustment to eliminate historical interest income on cash balances used
to finance the acquisition, and historical interest expense related to
loans from former parent and affiliated companies.
(8) Adjustment to reflect inventory acquired at estimated fair value.
(9) Adjustment to reflect specific cost savings which would not have been
incurred had the acquisition occurred on September 24, 1995. Such cost
savings related to compensation expense and management fees in excess of
amounts that will be paid in future.
26
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