UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: March 27, 1998
(Date of earliest event reported): January 14, 1998
ACX TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Colorado 0-20704 84-1208699
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
16000 Table Mountain Parkway, Golden, Colorado 80403
(Address of principal executive offices) (Zip Code)
(303) 271-7000
(Registrant's telephone number, including area code)
Item 7. Financial Statements and Exhibits
Set forth below is the information required by Items 7(a),
Financial Statements of Acquired Businesses, and 7(b), Pro Forma
Financial Statements, of Form 8-K with respect to the acquisition
of Britton Group plc by ACX Technologies, Inc. (ACX), as
disclosed on ACX's Form 8-K filed with the Securities and
Exchange Commission on January 29, 1998.
Financial Statements of Acquired Business and Pro Forma Financial
Statements
Pro Forma Financial Statements
Unaudited Pro Forma Statement of Income for the Year
Ended December 31, 1997
Unaudited Pro Forma Balance Sheet as of December 31, 1997
Unaudited Notes to Pro Forma Financial Statements
Britton Group plc Unaudited Financial Statements
Consolidated Profit and Loss Accounts for the Six Months
Ended June 30, 1997 and 1996
Consolidated Balance Sheet as at June 30, 1997
Consolidated Cash Flow Statements for the Six Months Ended
June 30, 1997 and 1996
Notes to the Accounts
Britton Group plc Audited Financial Statements
Independent Auditor's Report
Consolidated Profit and Loss Accounts for the Years Ended
December 31, 1996, 1995 and 1994
Consolidated Balance Sheets as at December 31, 1996 and 1995
Consolidated Cash Flow Statements for the Years Ended
December 31, 1996, 1995 and 1994
Accounting Policies
Notes to the Accounts
PRO FORMA FINANCIAL STATEMENTS
- ------------------------------
ACX Technologies, Inc. Unaudited Pro Forma Balance Sheet as of
December 31, 1997 and Unaudited Pro Forma Statement of Income for
the Year Ended December 31, 1997
The following unaudited pro forma balance sheet as of December
31, 1997 and unaudited pro forma statement of income for the year
ended December 31, 1997 (collectively, the unaudited pro forma
financial statements) give effect to the acquisition by ACX
Technologies, Inc. (ACX) of the common and preferred shares of
Britton Group plc (Britton) as if the acquisition had occurred on
December 31, 1997 for purposes of the balance sheet and on
January 1, 1997 for purposes of the statement of income. The
transaction was accounted for as a purchase in accordance with
the provisions of Accounting Principles Board Opinion No. 16.
On January 14, 1998, ACX completed the previously announced cash
offer of pounds sterling 1.40 per common share and pounds
sterling 1.00 per convertible share, or approximately $335
million, to purchase the entire issued share capital of Britton.
With the assumption of debt and transaction costs, the total
estimated purchase price is approximately $420 million. The offer
was funded with $40 million cash on hand (net of cash acquired),
assumed debt of $93 million, and short-term borrowings against a
new $417 million credit facility from Morgan Guaranty Trust
Company of New York.
The historical financial data included in the unaudited pro forma
financial statements is as of the periods presented. In
accordance with the rules regarding the preparation of pro forma
financial statements, the historical balance sheet and statement
of income of Britton do not include the accounts or operations of
the plastics division of Britton. The plastics division of
Britton will be accounted for as a discontinued operation based
on the decision of ACX's management to sell this business.
Consequently, the historical financial data of Britton as of and
for the year ended December 31, 1997 was derived from unaudited
financial statements of the continuing operations of Britton,
which consists of a folding carton manufacturing operation with
six locations in the United States. The audited historical
consolidated financial statements of Britton (including both the
continuing packaging operations and the discontinued plastics
division) for the three years ended December 31, 1996 are
included separately in this Form 8-K/A.
The unaudited pro forma financial data is based on management's
best estimate of the effects of the acquisition of Britton
including an estimate of the allocation of the purchase price
between the continuing and discontinued operations of Britton.
Pro forma adjustments are based on currently available
information; however, the actual purchase accounting adjustments
will be based on more precise evaluations and estimates of fair
values. It is possible that the actual adjustments could differ
substantially from those presented in the unaudited pro forma
financial statements.
The unaudited pro forma balance sheet as of December 31, 1997 and
the unaudited pro forma statement of income for the year ended
December 31, 1997 are not necessarily indicative of the results
of operations that actually would have been achieved had the
acquisition of Britton been consummated as of the dates
indicated, or that may be achieved in the future. The unaudited
pro forma financial statements should be read in conjunction with
the accompanying unaudited notes, the accompanying historical
financial statements and notes thereto of Britton, and the
audited consolidated financial statements of ACX Technologies,
Inc. and its subsidiaries included in its Annual Report on Form
10-K for 1997.
ACX Technologies, Inc.
Unaudited Pro Forma Statement of Income
For the Year Ended December 31, 1997
(In Thousands of U.S. Dollars, except per share amounts)
Britton
Historical--
ACX Continuing Pro Forma
Historical Operations Adjustments Pro Forma
---------- ------------ ----------- ---------
Net sales $731,085 $224,550 $955,635
Costs and expenses:
Cost of goods sold 552,474 194,124 746,598
Marketing, general and
administration and
research and development 107,190 12,034 4,741 [a] 123,965
Asset impairment and
restructuring charges 21,880 21,880
--------- -------- -------- --------
Operating income 49,541 18,392 (4,741) 63,192
Other income (expense):
Interest expense (8,666) (6,567) (10,697)[a] (25,930)
Interest income 5,688 -- (1,100)[a] 4,588
Miscellaneous, net (447) (449) (896)
--------- ------- -------- --------
Income from continuing
operations before
income taxes 46,116 11,376 (16,538) 40,954
Income tax expense 18,400 4,312 (4,313)[a] 18,399
-------- ------- -------- --------
Income from continuing
operations $27,716 $7,064 ($12,225) $22,555
======== ======= ======== =======
Income from continuing
operations per basic
share of common stock $0.99 $0.80
======== =======
Weighted average shares
outstanding - basic 28,118 28,118
======== =======
Income from continuing
operations per diluted
share of common stock $0.96 $0.78
======== =======
Weighted average shares
outstanding - diluted 28,885 28,885
======== =======
See Unaudited Notes to Pro Forma Financial Statements
ACX Technologies, Inc.
Unaudited Pro Forma Balance Sheet
As of December 31, 1997
(In Thousands of U.S. Dollars)
Britton
Historical--
ACX Continuing Pro Forma
Historical Operations Adjustments Pro Forma
---------- ------------ ----------- ---------
Cash $49,355 $14,560 $(25,660)[b] $38,255
Accounts receivable, net 81,359 14,886 96,245
Inventory 113,792 29,943 143,735
Other current assets 25,506 4,798 30,304
-------- -------- -------- --------
Total current assets 270,012 64,187 (25,660) 308,539
Property, plant, and
equipment, net 249,624 121,353 610 [c] 371,587
Note receivable 56,549 -- -- 56,549
Goodwill, net 56,883 14,287 145,805 [c] 216,975
Other noncurrent assets 68,128 -- (28,900)[b] 39,228
-------- -------- ------- --------
Total assets $701,196 $199,827 $91,855 $992,878
======== ======== ======= ========
Accounts payable $43,300 $9,853 $53,153
Accrued expenses and
other liabilities 68,161 13,467 $5,422 [c] 87,050
-------- -------- ------- -------
Total current liabilities 111,461 23,320 5,422 140,203
Long-term debt 100,000 92,675 152,536 [b] 345,211
Other noncurrent
liabilities 46,291 17,729 64,020
-------- -------- ------- --------
Total liabilities 257,752 133,724 157,958 549,434
-------- -------- ------- --------
Minority interest 12,913 -- 12,913
-------- -------- ------- --------
Shareholders' equity 430,531 66,103 (66,103)[c] 430,531
-------- -------- ------- --------
Total liabilities &
shareholders' equity $701,196 $199,827 $91,855 $992,878
======== ======== ======= ========
See Unaudited Notes to Pro Forma Financial Statements
ACX Technologies, Inc.
Unaudited Notes to Pro Forma Financial Statements
(In Thousands of U.S. Dollars)
[a] The following pro forma adjustments are reflected in the
pro forma statement of income for the year ended December 31,
1997:
1. Amortization of goodwill related to
continuing operations recorded pursuant
to purchase accounting (30 year life) $(4,741)
2. Increase in interest expense related to
continuing operations due to new
borrowings at applicable rates for purchase (10,697)
3. Decrease in interest income related to the
assumed use of cash for the purchase of
Britton (1,100)
4. Net tax effect of Pro Forma adjustments at
the statutory rate 4,313
--------
($12,225)
========
[b] The allocation of the estimated purchase price to
continuing operations and discontinued operations for purposes
of the pro forma financial statements is as follows:
Continuing operations:
Cash paid, net of cash acquired $ 40,000
New debt 152,536
Assumed debt 92,675
--------
Estimated purchase price allocated
to continuing operations 285,211
Estimated purchase price allocated to
discontinued operations 135,000
--------
Total estimated purchase price for
Britton Group plc $420,211
========
In the pro forma adjustments, the cash paid of $40,000 for
Britton includes cash of $28,900 paid prior to December 31,
1997 for the acquisition of an approximate 10% interest in
Britton and is net of cash acquired of $14,560. The $28,900
was recorded as an investment and is included in other
noncurrent assets in the ACX historical balance sheet as of
December 31, 1997.
[c] The following pro forma adjustments relating to
continuing operations are made to reflect (1) the allocation
of the purchase price to the fair value of assets acquired
pursuant to purchase accounting, (2) the recording of a
deferred tax asset for the difference between book and tax
basis of the net assets acquired, and (3) the elimination of
Britton's shareholders' equity related to continuing
operations as of December 31, 1997.
Record plant, property, and equipment
at estimated fair market value $ 610
Record acquisition related liabilities (8,610)
Record deferred tax asset 3,188
Record goodwill 145,805
Elimination of Britton's shareholders' equity 66,103
Assumption of debt 92,675
Cash acquired (14,560)
--------
Total allocation of estimated purchase price
to continuing operations $285,211
=======
BRITTON GROUP plc UNAUDITED FINANCIAL STATEMENTS
- ------------------------------------------------
UNAUDITED PROFIT AND LOSS ACCOUNTS
For the six months ended 30 June
(In Thousands of Pounds Sterling, Except Share Data)
1997 1996
Notes
Turnover 109,487 110,045
Cost of sales (89,090) (88,573)
------- -------
Gross profit 20,397 21,472
Distribution costs (2,685) (2,498)
Selling and administrative expenses (7,890) (6,181)
------- -------
Operating profit 9,822 12,793
Net interest payable (1,878) (1,729)
------- -------
Profit before taxation 7,944 11,064
Taxation 6 (1,986) (2,998)
------- -------
Profit after taxation 5,958 8,066
Dividends 7 (2,087) (1,906)
------- -------
Retained profit for the period 3 3,871 6,160
======= =======
Earnings per share 5 4.24p 5.76p
======= =======
Dividend per share, net 7 1.45p 1.32p
======= =======
UNAUDITED BALANCE SHEETS
30 June 1997
(In Thousands of Pounds Sterling)
1997 1997
Fixed assets:
Tangible fixed assets 105,249
Current assets
Stocks 26,060
Debtors 26,728
Cash at bank and in hand 22,886
-------
75,674
Creditors, amounts falling
due within one year:
Bank loans and overdrafts (11,723)
Creditors (34,958)
Finance lease obligations (454)
Dividends (2,051)
-------
(49,186)
-------
Net current assets 26,488
-------
Total assets less current liabilities 131,737
Creditors, amounts falling due
after more than one year:
Loans (55,666)
Finance leases (355)
Provisions for liabilities and charges (3,622)
-------
TOTAL NET ASSETS 72,094
=======
Share capital and reserves:
Called up share capital 14,219
Other reserves 28,509
Profit and loss account 29,366
-------
57,875
-------
SHAREHOLDERS' FUNDS 72,094
=======
Gearing 62.9%
Gearing is calculated as total net indebtedness, including finance leases, as
a percentage of period end shareholders' funds.
UNAUDITED CASH FLOW STATEMENTS
For the six months ended 30 June
(In Thousands of Pounds Sterlings)
1997 1997 1996 1996
Note
Cash inflow from operating activities 1 13,026 13,900
Costs of servicing finance less
returns on investments:
Interest paid (2,349) --
Interest received 487 302
Finance leases, interest element (44) --
Preference dividends paid (73) (73)
------ ------
Net cash (outflow)/inflow from
servicing of finance less return
on investment (1,979) 229
Taxation paid (527) (1,370)
Capital expenditure and
financial investment:
Purchase of tangible fixed assets (7,786) (16,534)
Sale of tangible fixed assets 213 --
------ ------
(7,573) (16,534)
Acquisitions and disposals:
Purchase of subsidiary undertakings -- (7,573)
Net cash acquired with subsidiaries -- 1,506
------ ------
-- (6,067)
Equity dividends paid (2,751) (2,499)
Financing:
Management of liquid resources; cash
(placed on)/withdrawn from deposit (633) 6,050
Issue of ordinary share capital -- 110
Capital element, finance leases (379) (304)
Decrease in loans (352) --
------ ------
Net cash (outflow)/inflow from
financing (1,364) 5,856
------ ------
Decrease in cash in the period 2 (1,168) (6,485)
====== ======
NOTES TO THE ACCOUNTS
For the six months ended 30 June
(In Thousands of Pounds Sterlings, Except Share Data)
1. OPERATING CASH FLOW
1997 1996
Operating profit 9,822 12,793
Depreciation 4,612 3,376
Decrease in stocks 1,641 3,420
Decrease in debtors 1,014 413
Decrease in creditors (4,348) (6,094)
Profit on disposal of fixed assets (101) --
Foreign exchange movement 386 (8)
------ ------
Net cash inflow from operating activities 13,026 13,900
====== ======
2. RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
1997 1996
Decrease in cash in the period (1,168) (6,485)
Cash outflow from change in debt and lease
financing 731 304
Cash outflow/(inflow) from increase/(decrease)
in liquid resources 633 (6,050)
------ ------
Change in net debt resulting from cash flows 196 (12,231)
Loan notes issued and loans acquired with
subsidiaries -- (5,275)
Translation differences (978) 167
------ ------
Movement in net debt in the period (782) (17,339)
Net debt at start of period (44,530) (28,587)
------ ------
Net debt at end of period (45,312) (45,926)
====== ======
3. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS'
FUNDS
1997
Retained profit for the period 3,871
Foreign exchange gain 826
------
Net increase to shareholders' funds 4,697
Opening shareholders' funds 67,397
------
Closing shareholders' funds 72,094
======
4. SHARE CAPITAL
As at 30 June 1997, there were in issue 138,961,144 ordinary shares and
3,229,673 cumulative convertible preference shares.
5. EARNINGS PER SHARE
The earnings per share for the period has been calculated on the basis of a
post tax profit, after preference share dividends, of pounds sterling
5,885,000 (1996: pounds sterling 7,993,000) and a weighted average number of
ordinary shares in issue of 138,961,144 (1996:138,830,605). Fully diluted
earnings per share is not materially different.
6. TAXATION
The estimated tax charge for the period of 25 per cent. (1996: 27 per cent.)
remains lower than the standard rate of 31 per cent. (1996: 33 per cent.)
due to the availability of accelerated capital allowances arising as a
result of capital expenditure programmes.
7. DIVIDENDS
The interim dividend of 1.45p (1996: 1.32p) per share was paid on
25 November 1997 to all ordinary shareholders on the register as at
10 October 1997. Preference dividends are paid semi-annually on 1 April and
1 October.
8. SUMMARY OF DIFFERENCES BETWEEN UK GAAP AND US GAAP
The unaudited interim financial statements are prepared in accordance with
UK GAAP, which differ in certain significant respects from US GAAP. The
approximate effect of the differences on net income and shareholders' equity,
which are described in note 26 of the full year financial statements, is
shown in the following tables. While this is not a comprehensive summary of
all differences between UK GAAP and US GAAP, other differences are
considered unlikely to have a significant effect on the combined net income
and shareholders' equity of Britton Group plc.
Approximate effects on net income of differences between UK GAAP and US GAAP:
Six months ended
June 30
1997 1996
Net income under UK GAAP 5,958 8,066
US GAAP adjustments:
Amortisation of goodwill (2,269) (2,173)
Plant start-up costs 162 (1,898)
Compensation expense -- (224)
Deferred taxation (1,110) (786)
----- -----
Net income under US GAAP 2,741 2,985
===== =====
Approximate effects on shareholders' equity of differences between UK GAAP
and US GAAP:
30 June
1997
Shareholders' equity under UK GAAP 72,094
US GAAP adjustments:
Goodwill 123,851
Plant start-up costs (2,193)
Compensation expense (7,861)
Deferred taxation
-------
Shareholders' equity under US GAAP 185,891
=======
Cash Flow Information
Cash flows under UK GAAP differ in certain presentational respects from the
format required under SFAS 95. Under UK GAAP, cash paid or received for
interest and income taxes are presented separately from operating activities
and dividends paid are presented separately from financing activities.
Under SFAS 95:
- - cash flows from operating activities are based on net income, which includes
interest and income taxes.
- - dividends paid are included within financing activities.
- - acquisitions and disposals and capital expenditure are included within
investing activities.
In addition, cash flow statements under UK GAAP are based on a narrower
definition of cash than under US GAAP which inlcudes cash equivalents,
being short term investments with original maturities of three months
or less.
Under US GAAP, the following amounts would be reported:
Six months ended
June 30
1997 1996
Net cash provided by operating activities 10,593 12,832
------ ------
Net cash used in investing activities (7,573) (22,601)
------ ------
Net cash (used)/provided by financing activities (4,188) 3,284
------ ------
Net (decrease)/increase in cash and cash equivalents (1,168) (6,485)
====== ======
BRITTON GROUP plc AUDITED FINANCIAL STATEMENTS
- ----------------------------------------------
INDEPENDENT AUDITOR'S REPORT TO THE DIRECTORS AND SHAREHOLDER
OF BRITTON GROUP plc
We have audited the accompanying consolidated balance sheets of Britton Group
plc and subsidiaries as of December 31, 1996 and 1995 and the related
consolidated profit and loss accounts, consolidated statements of total
recognised gains and losses and consolidated cash flows for the years ended
December 31, 1996, 1995 and 1994, all expressed in pounds sterling. The
financial statements are the responsibility of the management of Britton Group
plc. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United Kingdom. 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
presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Britton Group plc and subsidiaries as of
December 31, 1996 and 1995 and the results of their operations and their cash
flows for the years ended December 31, 1996, 1995 and 1994 in conformity with
accounting principles generally accepted in the United Kingdom (which differ in
certain significant respects from generally accepted accounting principles in
the United States of America) (see note 26) on the basis set out in the
Accounting Policies section.
DELOITTE & TOUCHE
Chartered Accountants
London, England
March 27, 1998
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
For the years ended 31 December
(In Thousands of Pounds Sterling, Except Share Data)
1996 1995 1994
Notes
Turnover:
Continuing operations 1 205,579 203,753 50,142
Acquisitions 16,122 -- 71,225
------- ------- -------
Total 221,701 203,753 121,367
------- ------- -------
Cost of sales (175,623)(164,224) (89,872)
Exceptional restructuring costs 4 (1,188) -- --
------- ------- -------
Gross profit 44,890 39,529 31,495
Distribution costs (5,698) (4,683) (3,477)
Selling and administrative costs (15,198) (12,591) (14,926)
------- ------- -------
Operating profit before exceptional items
Continuing operations 23,873 22,255 6,267
Acquisitions 121 -- 6,825
------- ------- -------
Total 2 23,994 22,255 13,092
Exceptional items 4 -- (1,167) (1,285)
------- ------- -------
23,994 21,088 11,807
Net interest payable and other charges 5 (3,572) (1,763) (1,132)
------- ------- -------
Profit on ordinary activities
before taxation 1 20,422 19,325 10,675
Taxation 6 (5,559) (5,132) (3,262)
------- ------- -------
Profit on ordinary activities
after taxation 14,863 14,193 7,413
Dividends 7 (4,731) (4,303) (2,655)
------- ------- -------
Retained profit for the financial year 10,132 9,890 4,758
======= ======= =======
Earnings per ordinary share,
before exceptional items 8 11.45p 11.02p 8.74p
Earnings per ordinary share,
after exceptional items 8 10.60p 10.18p 7.44p
======= ======= ======
Dividends per share, net 7 3.30p 3.00p 2.50p
======= ======= ======
Consolidated statements of total
recognised gains and losses for
the years ended 31 December
1996 1995 1994
Profit on ordinary activities after taxation 14,863 14,193 7,413
Foreign exchange translation differences
on net investment in overseas subsidiaries (3,548) 300 (308)
------ ------ -----
Total recognised gains and losses for the year 11,315 14,493 7,105
====== ====== =====
CONSOLIDATED BALANCE SHEETS
31 December
(In Thousands of Pounds Sterling)
1996 1995
Notes
Fixed assets:
Tangible fixed assets 9 102,669 88,807
------- -------
Current assets:
Stocks 11 27,701 26,432
Debtors 12 30,737 26,971
Cash at bank and in hand 18,074 40,995
------- -------
76,512 94,398
------- -------
Creditors, amounts falling due
within one year:
Creditors 13 (42,755) (37,957)
Bank loans and overdrafts (5,982) (8,018)
Finance lease obligations (830) (762)
Dividends 7 (2,789) (2,532)
------- -------
(52,356) (49,269)
------- -------
Net current assets 24,156 45,129
------- -------
Total assets less current liabilities 126,825 133,936
------- -------
Creditors, amount falling due
after more than one year
Loans 14 (55,434) (59,754)
Finance lease obligations 14 (358) (1,048)
------- -------
(55,792) (60,802)
Provisions for liabilities and charges 15 (3,636) (1,042)
------- -------
TOTAL NET ASSETS 67,397 72,092
======= =======
Share capital and reserves:
Called up share capital 16 14,219 14,186
Other reserves 17 28,509 39,821
Profit and loss account 17 24,669 18,085
------- -------
SHAREHOLDERS' FUNDS 18 67,397 72,092
======= =======
Shareholders' funds are attributable to:
Equity shareholders' funds 64,167 68,845
Non-equity shareholders' funds 3,230 3,247
------- -------
67,397 72,092
======= =======
CONSOLIDATED CASH FLOW STATEMENTS
For the years ended 31 December
(In Thousands of Pounds Sterling)
1996 1995 1994
Notes
Cash inflow from operating activities 19 32,691 21,361 12,316
Returns on investments and servicing
of finance:
Interest received 1,402 2,420 994
Interest paid (4,820) (3,967) (1,855)
Preference dividend paid (146) (146) (74)
Interest element of finance lease
payments (154) (216) (271)
------ ------ ------
Net cash outflow from servicing of
finance less returns on investments (3,718) (1,909) (1,206)
------ ------ ------
Taxation (2,606) (4,562) (3,553)
Capital expenditure and financial
investment:
Purchase of tangible fixed assets (27,724) (22,862) (6,259)
Sale of tangible fixed assets 191 837 457
------ ------ ------
Net cash outflow from capital expenditure
and financial investment (27,533) (22,025) (5,802)
Acquisitions and disposals:
Purchase of subsidiary undertakings (10,705) -- (8,131)
Net cash acquired with subsidiaries 1,385 -- 4,722
Finalisation of TACO deferred
consideration -- -- 1,174
Sale of subsidiary undertaking -- 1,250 --
------ ------ ------
Net cash (deficit)/surplus from
acquisitions and disposals (9,320) 1,250 (2,235)
Equity dividend paid (4,328) (3,729) (939)
Financing:
Management of liquid resources:
Cash withdrawn from/(placed on)
term deposit 12,334 (15,000) --
Issue of ordinary share capital 237 218 25,694
Cost of debt restructuring -- (1,555) --
Capital element, finance leases (622) (765) (402)
(Decrease)/increase in loans (1,508) 21,241 (710)
------ ------ ------
Net cash inflow from financing 10,441 4,139 24,582
------ ------ ------
(Decrease)/increase in cash in the year 20 (4,373) (5,475) 23,163
====== ====== ======
ACCOUNTING POLICIES
For the years ended 31 December
The accounts have been prepared in accordance with applicable accounting
standards, the particular accounting policies are described below:
Accounting convention
The accounts have been prepared under the historical cost convention modified
by the revaluation of certain fixed assets and the translation of foreign
currencies.
Basis of consolidation and accounting for acquisition
The consolidated accounts incorporate audited accounts of the Britton Group
plc and its subsidiaries.
The results of companies and businesses acquired during the year are dealt
with in the consolidated accounts from the date of acquisition. On
acquisition, the purchase consideration and the estimated costs of integrating
the businesses are allocated over the assessed fair values of net assets
required. Adjustments are also made to bring the accounting policies of
businesses acquired into alignment with those of the Group.
The amounts attributed to goodwill are written off against reserves.
Turnover
Turnover represents amounts invoiced in respect of goods and services sold, net
of VAT and intra group transactions.
Stocks and work in progress
Stocks and work in progress are valued at the lower of cost and the estimated
amount realisable from disposal in the normal course of business.
The valuation of finished goods is at the lower of cost and net realisable
value. Cost is defined as all direct expenses plus attributable overheads.
Depreciation
Fixed assets are depreciated on the following bases:
Freehold land is not depreciated. Freehold buildings and long leasehold land
and buildings are depreciated over 50-100 years. Short leasehold land and
buildings are depreciated over the period of the lease. Depreciation on other
fixed assets is calculated to write off their cost on a straight line basis
over their expected useful lives, namely:
Plant and equipment - 10 to 15 years
Other equipment - 3 to 5 years
Investments
Investments held as fixed assets are stated at cost less provision for
permanent diminution of value. Those held as current assets are stated at the
lower of cost and net realisable value.
Deferred taxation
Deferred taxation is provided at the anticipated tax rates on timing
differences arising from the inclusion of items of income and expenditure in
taxation computations in periods different from those in which they are
included in the financial statements, to the extent that it is probable that a
liability or asset will crystallise in the foreseeable future.
No provision is made for tax which would arise if the overseas subsidiary
distributed the balance of its retained earning, as no such repatriations are
expected in the foreseeable future.
Foreign exchange
The financial statements of the foreign subsidiary are translated into sterling
using the net investment method. The profit and loss account is translated
using the average rates ruling during the year. The balance sheet is
translated at the rate of exchange at the year end and the difference arising
from the translation of the operating net investment in the subsidiary at the
closing rate is taken to reserves.
The foreign currency assets and liabilities of UK companies are translated
into sterling at the rate of exchange ruling at the year end. Translation
differences relating to the investment in subsidiaries are taken to reserves.
Translation differences on other assets and liabilities with those gains or
losses on trading transactions are taken to the profit and loss account as
incurred.
Leased assets
Fixed assets held under finance leases are capitalised and depreciated over
their expected useful lives. Finance charges are amortised over each lease
to give a constant rate of charge on the remaining balance of the obligation.
The costs of operating leases are charged to the profit and loss account as
they accrue.
Pension costs
The expected costs of defined benefit pension schemes is charged to the profit
and loss account so as to spread the cost of pensions over the service lives
of employees in the schemes.
The costs of defined contribution schemes are charged directly to the profit
and loss account as incurred.
NOTES TO THE ACCOUNTS
Years ended 31 December
(In Thousands of Pounds Sterling, Except Share Data)
1. SEGMENTAL ANALYSIS
1996 1995 1994
Turnover by destination:
UK 66,235 60,044 45,602
Europe 15,019 13,254 10,792
USA 140,120 129,940 63,857
Other 327 515 1,116
------- ------- -------
221,701 203,753 121,367
======= ======= =======
Turnover is derived from the supply of folded cartons in the USA and the
extrusion, conversion and printing of polythene in the UK and Europe.
Turnover Profit before tax
1996 1995 1994 1996 1995 1994
Analysis by origin:
UK packaging 81,608 73,813 57,510 8,710 7,148 6,527
US packaging 140,093 129,940 63,857 12,900 13,344 5,433
------- ------- ------- ------ ------ ------
221,701 203,753 121,367 21,610 20,492 11,960
Exceptional items -- -- -- (1,188) (1,167) (1,285)
------- ------- ------- ------ ------ ------
221,701 203,753 121,367 20,422 19,325 10,675
======= ======= ======= ====== ====== ======
2. OPERATING PROFIT
1996 1995 1994
Operaing profit is stated after charging:
Depreciation of wholly owned tangible fixed assets 7,133 5,439 3,262
Depreciation of fixed assets held
under hire purchase agreements 456 429 432
Loss on disposal of fixed assets 360 4 --
Loss on foreign exchange 211 103 26
Hire of equipment - operating leases 438 380 343
Provision for funding costs of long
term incentive plan -- -- 400
===== ===== =====
3. EMPLOYMENT COSTS
Total Group employment costs, including directors, were:
1996 1995 1994
Wages and salaries 37,726 31,447 21,199
Social security costs 2,997 2,519 1,731
Other pension costs 920 874 461
------ ------ ------
41,643 34,840 23,391
====== ====== ======
The average weekly number of persons employed by the Group, including
directors, was as follows:
1996 1995 1994
Production 1,585 1,328 802
Administration 280 217 176
----- ----- ---
1,865 1,545 978
===== ===== ===
Directors' emoluments
Total Pensions
1996 1995 1994 1996 1995 1994
Executive
R G W Williams 195 235 164 25 22 25
S D Beart 197 233 161 25 22 25
J R Hutton 262 451 264 27 27 15
C A Smith 197 157 -- 11 8 --
Non-executive
E W Dawnay 30 2 -- -- -- --
D H O'Shaughnessy 16 15 13 -- -- --
--- ----- --- --- --- ---
897 1,093 602 88 79 65
=== ===== === === === ===
Directors' share options
As at Granted Granted
1.1.94 and during As at during As at
1.1.95 1995 31.12.95 1996 31.12.96
R G W Williams 1,228,098 -- 1,228,098 50,000 1,278,098
S D Beart 1,228,098 -- 1,228,098 50,000 1,278,098
J R Hutton 350,000 -- 350,000 -- 350,000
C A Smith -- 290,000 290,000 50,000 340,000
Exercise Exercise
dates prices(p)
R G W Williams 1997-2004 86.2-163.4
S D Beart 1997-2004 86.2-163.4
J R Hutton 1997-2004 163.4
C A Smith 1998-2005 138.0-151.0
The non executive directors do not hold options. The market price of the
Group's ordinary shares at 31 December 1996 was 147p.
4. EXCEPTIONAL ITEMS
1996 1995 1994
Restructuring costs of acquired
subsidiaries (1,188) -- --
Group profit on disposal of former
subsidiary, net of disposal costs -- 388 --
Fees and prepayment penalties relating
to group debt restructuring -- (1,555) --
Amount written off investment -- -- (1,285)
----- ----- -----
Net exceptional items (1,188) (1,167) (1,285)
===== ===== =====
5. NET INTEREST PAYABLE AND OTHER CHARGES
1996 1995 1994
Bank overdraft and loans repayable
within five years 2,730 3,967 265
Term loans repayable after five years 2,090 -- 1,590
Hire purchase and lease finance 154 216 271
----- ----- -----
4,974 4,183 2,126
Interest receivable (1,402) (2,420) (994)
----- ----- -----
Net interest payable and other charges 3,572 1,763 1,132
===== ===== =====
6. TAXATION
1996 1995 1994
UK corporation tax payable at 33% 2,308 2,126 1,439
ACT written back -- (8) --
UK deferred tax 2,531 234 370
Overseas tax 805 3,628 1,710
Double tax relief -- (646) --
Prior year adjustment (85) (202) (257)
----- ----- -----
5,559 5,132 3,262
===== ===== =====
7. DIVIDENDS
1996 1995 1994 1996 1995 1994
Ordinary shares
10p - Equity:
Interim, paid November 1.32p 1.2p 1.0p 1,833 1,662 514
Final, proposed,
payable May 1.98p 1.8p 1.5p 2,752 2,495 2,067
---- --- --- ----- ----- -----
3.30p 3.0p 2.5p 4,585 4,157 2,581
==== === === ===== ===== =====
1996 1995 1994
4.5% cumulative convertible preference
shares - Non-equity 146 146 74
=== === ===
8. EARNINGS PER SHARE AND FULLY DILUTED EARNINGS PER SHARE
The calculations of undiluted earnings per share are based on i) the profit on
ordinary activities after taxation and preference share dividends but before
exceptional items of pounds sterling 15,905,000 (1995: pounds sterling
15,214,000; 1994: pounds sterling 8,624,000) and ii) a profit on ordinary
activities after taxation, preference share dividends and exceptional items
of pounds sterling 14,717,000 (1995: pounds sterling 14,047,000; 1994:
pounds sterling 7,339,000). The weighted average number of ordinary shares
in issue during the year was 138,857,828 (1995: 138,011,173; 1994: 98,697,650)
The difference between earnings per share and fully diluted earnings per share
is not material for the purposes of calculating earnings per share.
The calculation of fully diluted earnings per share is based on the profit on
ordinary activities after taxation and before preference share dividend and
after adding the interest income net, of full rate corporation tax, which
would have arisen had all the outstanding ordinary share options granted under
the Company's schemes been exercised on the first day of the financial year,
or at the date granted if later, and the proceeds invested in 2% consolidated
stock.
The amount so derived has been divided over the fully diluted, weighted
average number of ordinary shares in issue during the year, adjusted for the
issue of shares under the option schemes.
The earnings per share amounts for prior years have been adjusted to take
account of subsequent rights issues.
9. TANGIBLE FIXED ASSETS
Freehold Plant
land and Short and
buildings leaseholds equipment Total
Cost:
At 1 January 1995 23,533 197 74,797 98,527
Acquisitions -- -- -- --
Additions 3,710 61 23,067 26,838
Disposals (300) (21) (946) (1,267)
Exchange 155 -- 466 621
------ --- ------- -------
At 1 January 1996 27,098 237 97,384 124,719
------ --- ------- -------
Acquisitions 202 50 7,285 7,537
Additions 3,511 23 21,378 24,912
Disposals -- -- (4,471) (4,471)
Exchange (1,674) -- (5,998) (7,672)
------ --- ------- -------
At 31 December 1996 29,137 310 115,578 145,025
------ --- ------- -------
Accumulated depreciation:
At 1 January 1995 268 66 29,923 30,257
Charge for the year 259 27 5,582 5,868
Disposals -- (21) (405) (426)
Exchange 42 -- 171 213
------ --- ------- -------
At 1 January 1996 569 72 35,271 35,912
------ --- ------- -------
Acquisitions 42 50 5,283 5,375
Charge for the year 285 32 7,272 7,589
Disposals -- -- (3,920) (3,920)
Exchange (454) -- (2,146) (2,600)
------ --- ------- -------
At 31 December 1996 442 154 41,760 42,356
------ --- ------- -------
Net book value:
At 31 December 1996 28,695 156 73,818 102,669
====== === ======= =======
At 31 December 1995 26,529 165 62,113 88,807
====== === ======= =======
Plant and equipment includes payments on account of pounds sterling 3,672,000
(1995: pounds sterling 14,802,000). The payments on account have not been
depreciated in either year. The cost of freehold land which is not subject to
depreciation is pounds sterling 2,659,000 (1995: pounds sterling 1,953,000).
Included in the Group's fixed assets are assets held under finance leases with
a net book value of:
1996 1995
Plant and equipment 2,142 3,047
===== =====
10. INVESTMENT IN SUBSIDIARIES
The principal subsidiaries of Britton Group plc as at 31 December 1996, which
are all wholly owned, are shown below. All of the companies are incorporated
in Great Britain, except for Universal Packaging Corporation which is
incorporated and operates in the USA.
Name of company Activity
Universal Packaging Corporation Packaging
Britton Group Plastics Limited Packaging
Britton TACO Limited (formerly TACO Holdings Limited) Packaging
Britton Gelplas Limited (formerly Gelplas Industrial Limited) Packaging
Britton Security Packaging Limited (formerly
NMC Security Products Limited) Packaging
Britton Precision Limited (formerly Precision Packaging Limited) Packaging
Britton Polyian Limited (formerly Polyian Limited) Packaging
Britton Decoflex Limited (formerly Decoflex Limited) Packaging
Britton Polymon Limited (formerly Polymon FilmsLimited) Packaging
Britton Packbourne Limited (formerly Packbourne Limited) Packaging
During 1996 the Group made six acquisitions within the Plastics Division,
being the businesses of Polylope and Transrap and the following limited
companies: Packbourne; Polyian; Polymon and Decoflex. These acquisitions
have been accounted for under the acquisition method. No acquisitions were
made in 1995. Details of the assets acquired and the related consideration
are set out below:
Fair
value
Book to the
value Adjustments Group
Assets:
Tangible fixed assets 2,999 (837) 2,162
Current assets:
Stock 1,696 (61) 1,635
Debtors 3,522 (44) 3,478
Cash at bank and in hand 1,510 -- 1,510
----- ----- ------
9,727 (942) 8,785
Liabilities:
Creditors (3,971) (115) (4,086)
Bank overdrafts (125) -- (125)
Bank loans (1,608) -- (1,608)
Deferred taxation (110) -- (110)
----- ----- ------
Net assets acquired 3,913 (1,057) 2,856
Goodwill 11,516
------
Cost of acquisitions 14,372
======
Satisfied by:
Cash 10,705
Deferred consideration 3,667
------
14,372
======
The above acquisitions contributed pounds sterling 1,668,000 to the Group's
net operating cash flows, paid pounds sterling 161,000 in respect of taxation
and utilised pounds sterling 512,000 in respect of investing activities. The
acquisitions made a profit of pounds sterling 544,000 before tax from
1 January 1996 to the dates of acquisition and a profit before tax of pounds
sterling 1,301,000 in the previous financial year.
Goodwill arising from acquisitions written off to reserves as at 31 December
1996 totals pounds sterling 136.1 million.
The principal fair value accounting adjustments for 1996 are to recognise the
fair value of net assets at acquisition.
11. STOCKS
1996 1995
Raw materials and consumables 13,622 13,449
Work in progress 5,053 7,303
Finished goods and goods for resale 9,026 5,680
------ ------
27,701 26,432
====== ======
The estimated replacement cost of stock does not exceed the balance sheet
value by a material amount.
12. DEBTORS
1996 1995
Trade debtors 25,379 23,336
Other debtors and prepayments 2,363 1,457
Corporation tax recoverable 1,172 559
ACT recoverable 697 633
Overseas tax recoverable 1,126 986
------ ------
30,737 26,971
====== ======
ACT recoverable is due after more than one year.
13. CREDITORS, AMOUNTS FALLING DUE WITHIN ONE YEAR
1996 1995
Loan notes -- 100
Trade creditors 19,400 20,193
Taxation and social security 834 619
Corporation tax 2,899 1,352
Accruals and deferred income 15,250 11,062
Overseas tax payable 3,196 3,563
ACT payable 1,176 1,068
------ ------
42,755 37,957
====== ======
14. CREDITORS, AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
1996 1995
Loans 55,434 59,754
Finance lease obligations 358 1,048
------ ------
55,792 60,802
====== ======
Amounts included in creditors relating to borrowings are:
1996 1995
Bank loan 58,200 60,004
Finance lease obligations 1,188 1,810
------ ------
59,388 61,814
Less: amounts falling due within one year (3,596) (1,012)
------ ------
Amounts falling due after more than one year 55,792 60,802
====== ======
Borrowings repayment schedule
1996 1995
Loans:
Within one year or on demand 2,766 250
Between one and two years 1,000 --
Between two and five years 24,338 16,427
After more than five years 30,096 43,327
------ ------
58,200 60,004
Finance lease obligations:
Within one year 830 762
Between one and two years 279 787
Between two and five years 79 261
------ ------
59,388 61,814
====== ======
The principal element of the Group's borrowings relates to a private placement
of US$92.5 million fixed rate loan notes carrying an average coupon of 7.13
per cent. The loan notes are unsecured and are redeemable in varying amounts
commencing in January 1999 with final repayment in January 2006. The Group
also had available an unutilised US$25 million revolving loan facility as at
31 December 1996 available for draw down at 0.75 per cent. under US prime rate
or 1.25 per cent. over LIBOR.
In the UK, the Group had an undrawn, unsecured overdraft facility of pounds
sterling 10 million as at 31 December 1996 with options to borrow via a range
of short dated instruments at margins varying between 0.675 per cent. and 1
per cent. over LIBOR.
15. PROVISION FOR LIABILITIES AND CHARGES
1996 1995
Deferred taxation 3,636 1,042
===== =====
Deferred tax movement in the year:
Opening balance 1,042 808
Acquired during the year 110 --
Movement in the year 2,484 234
----- -----
Closing balance 3,636 1,042
===== =====
The amount of deferred tax provided in the financial statements is:
1996 1995
Capital allowances in excess of depreciation 2,873 1,042
Other short term timing differences 763 --
----- -----
3,636 1,042
===== =====
The potential amount of unprovided deferred tax is as follows:
1996 1995
Capital allowances in excess of depreciation 9,711 9,246
Losses (679) (31)
Other short term timing differences (2,281) (2,538)
----- -----
Amount unprovided 6,751 6,677
===== =====
16. CALLED UP SHARE CAPITAL
Authorised Issued
Nominal Nomimal
No. value No. value
Ordinary shares of 10p:
As at 1 January 1995 180,000,000 18,000 137,822,823 13,782
Exercise of share options -- -- 154,163 15
Deferred consideration -- -- 632,763 64
----------- ------ ----------- ------
As at 1 January 1996 180,000,000 18,000 138,609,749 13,861
Exercise of share options -- -- 342,207 34
Converted from preference
shares -- -- 9,188 1
----------- ------ ----------- ------
As at 31 December 1996 180,000,000 18,000 138,961,144 13,896
=========== ====== =========== ======
Nominal
No. value
4.5% Cumulative convertible preference shares:
As at 1 January 1995 and 1 January 1996 3,246,673 325
Converted to ordinary shares (17,000) (2)
--------- ---
As at 31 December 1996 3,229,673 323
========= ===
The Company has in issue 3,229,673 (1995 - 3,246,673) cumulative convertible
preference shares ("CCPS") which are convertible into ordinary shares at the
rate of 54.05 ordinary Britton Group shares for every 100 CCPS held.
Conversion rights are exercisable on 1 July 1996 to 2005 inclusive. The CCPS
are not redeemable and are subject to mandatory conversion on 2 October 2005.
The CCPS pay a total dividend of 4.5p net per share, payable in two equal
instalments on 1 April and 1 October annually. The CCPS have no voting rights
except in the event of the winding up of the Company. In the event of a
liquidation, holders of CCPS would receive pound sterling 1 for every share
held and accruals of dividends where relevant. The authorised number of CCPS
is 18,500,000.
Nominal Nominal
value value
1996 1995
Ordinary shares 13,896 13,861
CCPS 323 325
------ ------
Total nominal value 14,219 14,186
====== ======
17. RESERVES
Profit Special Share Merger
and loss reserve premium reserve Total
As at 1 January 1995 7,895 4,410 23,981 11,291 47,577
Share premium arising
upon new share issues -- -- 139 -- 139
Foreign exchange
movement 300 -- -- -- 300
Profit for the year 9,890 -- -- -- 9,890
------ ----- ------ ------ ------
As at 1 January 1996 18,085 4,410 24,120 11,291 57,906
Share premium arising
upon new share issues -- -- 204 -- 204
Goodwill arising on
acquisitions -- -- -- (11,516) (11,516)
Foreign exchange
movement (3,548) -- -- -- (3,548)
Profit for the year 10,132 -- -- -- 10,132
------ ----- ------ ------ ------
As at 31 December 1996 24,669 4,410 24,324 (225) 53,178
====== ===== ====== ====== ======
18. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
1996 1995
Profit for the financial year 10,132 9,890
New share capital issued 33 79
Share premium on new shares issued 204 139
Foreign exchange (loss)/gain (3,548) 300
Goodwill written off (11,516) --
------ ------
Net (reduction in)/addition to shareholders' funds (4,695) 10,408
Opening shareholders' funds 72,092 61,684
------ ------
Closing shareholders' funds 67,397 72,092
====== ======
19. RECONCILIATION OF OPERATING PROFIT TO NET CASH
FLOW FROM OPERATING ACTIVITIES
1996 1995 1994
Operating profit 23,994 22,255 13,092
Depreciation 7,589 5,868 3,694
Decrease/(increase) in stocks 366 (2,027) (6,380)
Decrease/(increase) in debtors 529 (1,039) (2,403)
Increase/(decrease) in creditors 2,078 (3,518) 4,669
Loss/(profit) on sale of fixed assets 360 4 (260)
Foreign exchange movement (2,225) (182) (96)
------ ------ ------
Net cash inflow from operating activities 32,691 21,361 12,316
====== ====== ======
20. RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
1996 1995 1994
(Decrease)/increase in cash in the year (4,373) (5,475) 23,163
Cash outflow/(inflow) from change
in debt and lease financing 2,130 (20,576) 1,112
Cash (inflow)/outflow from decrease/increase
in liquid resources (12,334) 15,000 --
------ ------ ------
Changes in net debt resulting from cash flows (14,577) (11,051) 24,275
Loan notes issued and loans
acquired with subsidiaries (5,275) -- (38,961)
Translation differences 3,909 74 --
------ ------ ------
Movement in net debt in the year (15,943) (10,977) (14,686)
Net debt at 1 January (28,587) (17,610) (2,924)
------ ------ ------
Net debt at 31 December (44,530) (28,587) (17,610)
====== ====== ======
21. ANALYSIS OF NET DEBT
1996 1995 1994
Cash at bank and in hand 15,408 25,995 28,202
Overdrafts (3,216) (8,018) (4,674)
------ ------ ------
12,192 17,977 23,528
Term deposits 2,666 15,000 --
Bank loans (54,434) (59,754) (38,563)
Loan notes (3,766) -- --
Finance leases (1,188) (1,810) (2,575)
------ ------ ------
Balance at 31 December (44,530) (28,587) (17,610)
====== ====== ======
22. OPERATING LEASE COMMITMENTS
As at 31 December 1996 and 1995 the Group was committed to making the
following payments in the next financial year:
1996 1995
Land and Land and
buildings Other buildings Other
Leases which expire:
Within one year 16 64 -- 106
Within two to five years 69 181 80 119
After five years 252 1 140 6
--- --- --- ---
337 246 220 231
=== === === ===
23. CAPITAL COMMITMENTS
Amounts not provided for in these financial statements:
1996 1995
Contracted 6,033 17,706
Authorised but not contracted 2,966 2,473
----- ------
8,999 20,179
===== ======
24. CONTINGENT LIABILITIES AND GUARANTEES
At the balance sheet date, the Group had amounts outstanding under guarantees
given in the normal course of business totalling pounds sterling 60,000 (1995:
pounds sterling 60,000).
25. PENSION
The Group operates a number of pension schemes throughout the UK and the US
under which contributions are paid by Group companies and employees. The
assets of these schemes are held separate from the finances of the Group in
independently administered funds.
Contributions by the Group during the period were as follows:
1996 1995 1994
UK defined contribution schemes 321 268 195
Foreign schemes 575 620 266
--- --- ---
Total 896 888 461
=== === ===
The pension costs relating to the defined benefit schemes in the US are
assessed in accordance with the advice of qualified actuaries as a result of
periodic valuations, using recognised methods of projected investment returns
and earnings. The latest valuation took place in 1995 and assumed an
investment return of 9.25% and salary growth of 3.5% and indicated no material
surplus or deficiency.
An amount of pounds sterling 278,000 is included in creditors (1995: pounds
sterling 259,000) at the year end.
26. SUMMARY OF DIFFERENCES BETWEEN UK AND US GAAP
The financial statements are prepared in accordance with UK GAAP, which differ
in certain significant respects from US GAAP. These differences relate
principally to the following items and the approximate effect of net income
and shareholders' equity is shown in the following tables. While this is not
a comprehensive summary of all differences between UK GAAP and US GAAP, other
differences are considered unlikely to have a significant effect on the
combined net income and shareholders' equity of Britton Group plc.
Goodwill
Under UK GAAP, goodwill arising on business combinations treated as
acquisitions may be written off against retained earnings. Under US GAAP,
goodwill arising on acquisitions made after October 31, 1970 is required to be
amortised over the period of its estimated life, to a maximum of 40 years.
An estimated life of 30 years has been used for the purposes of the adjustment.
Plant start-up costs
Under UK GAAP, certain start-up costs for a capital project can be capitalised
and amortised over the useful economic life of that capital project. Under US
GAAP, these costs are required to be written off immediately to the income
statement.
Ordinary dividends
Under UK GAAP, dividends are provided for in the year in respect of which they
are proposed by the directors. Under US GAAP, such dividends would not be
provided for until they are formally declared by the directors.
Long term incentive plan
Under UK GAAP, full provision for the difference between the cost of shares
awarded under the Group's long term incentive plan and the amount which
beneficiaries are required to pay for the shares was made retrospectively in
the year ended 31 December 1997 following the publication of UITF 17. Under
US GAAP, compensation expense is required to be recognised in the year in
which the award of shares was earned.
Deferred taxation
Under UK GAAP, deferred taxation is provided at the anticpated tax rates on
timing differences arising from the inclusion of items of income and
expenditure in taxation computations in periods different from those in
which they are included in the financial statements, to the extent that it
is probable that an asset or a liability will crystallise in the foreseeable
future, in accordance with SSAP 15. Under US GAAP, deferred taxation is
provided on all temporary differences under the liability method, subject to a
valuation allowance where applicable in respect of deferred taxation assets,
in accordance with SFAS 109, Accounting for Income Taxes.
Approximate effects on net income of differences between UK GAAP and US GAAP:
Year ended December 31
1996 1995 1994
Net income under UK GAAP 14,863 14,193 7,413
US GAAP adjustments:
Amortisation of goodwill (4,442) (4,153) (951)
Plant start-up costs (2,355) -- --
Compensation expense (224) (431) 89
Deferred taxation (1,616) (2,213) (415)
------ ------ -----
Net income under US GAAP 6,226 7,396 6,136
====== ====== =====
Under US GAAP, the exceptional amount written off investment of pounds
sterling 1,285,000 in 1994 would be included in operating profit.
Under US GAAP, exceptional financing costs of pounds sterling 1,555,000
incurred in 1995 would be disclosed, on a net of tax basis, as an
extraordinary item.
Approximate effects on shareholders' equity of differences between UK GAAP and
US GAAP:
At December 31
1996 1995
Shareholders' equity under UK GAAP 67,397 72,092
US GAAP adjustments:
Goodwill 126,120 119,046
Plant start-up costs (2,355) --
Ordinary dividends 2,752 2,495
Compensation expense (566) (342)
Deferred taxation (6,751) (6,677)
------- -------
Shareholders' equity under US GAAP 186,597 186,614
======= =======
Cash Flow Information
Cash flows under UK GAAP differ in certain presentational respects from the
format required under SFAS 95. Under UK GAAP, cash paid or received for
interest and income taxes are presented separately from operating activities
and dividends paid are presented separately from financing activities.
Under SFAS 95:
- - cash flows from operating activities are based on net income, which includes
interest and income taxes.
- - dividends paid are included within financing activities.
- - acquisitions and disposals and capital expenditure are included within
investing activities.
In addition, cash flow statements under UK GAAP are based on a narrower
definition of cash than under US GAAP which includes cash equivalents,
being short term investments with original maturities of three months
or less.
Under US GAAP, the following amounts would be reported:
Year ended December 31
1996 1995 1994
Net cash provided by operating activities 26,513 15,036 7,902
------ ------ -----
Net cash used in investing activities (36,853) (20,775) (8,037)
------ ------ -----
Net cash provided by financing activities (6,367) 15,264 23,298
------ ------ ------
Net (decrease)/increase in cash and
cash equivalents (16,707) 9,525 23,163
====== ===== ======
Reconciliation of cash and cash equivalents:
Cash under UK GAAP 12,192 17,977 23,528
Short term investments with maturity
within three months 2,666 15,000 --
------ ------ ------
Cash and cash equivalents under US GAAP 14,858 32,977 23,528
====== ====== ======
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
ACX TECHNOLOGIES, INC.
Date: March 27, 1998 By /s/ Beth A. Parish
------------------------------
(Controller and Principal
Accounting Officer)
