<PAGE>
- --------------------------------------------------------------------------------
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: February 13, 1998
CHICAGO MINIATURE LAMP, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 0-25848 73-1412000
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
500 Chapman Street 02121
Canton, Massachusetts (Zip Code)
(Address of principal
executive offices)
(617) 828-2948
(Registrant's telephone
number, including area
code)
- --------------------------------------------------------------------------------
<PAGE>
Item 2. Acquisition of Assets.
NO AMENDMENTS ARE BEING MADE TO THE FOLLOWING TEXT OF ITEM 2 WHICH WAS
CONTAINED IN FORM 8-K FILED WITH THE SEC ON SEPTEMBER 22, 1997
On September 8, 1997, Chicago Miniature Lamp, Inc. (the "Company" or
"CML"), acting through a newly-incorporated subsidiary, Chicago Miniature
Lamp-Sylvania B.V., consummated the purchase of all of the outstanding shares of
capital stock of Sylvania Lighting International, B.V. ("SLI"), a privately held
company headquartered in Geneva, Switzerland for $161.5 million cash, financed
with the Company's internal cash and a $250.0 million credit facility provided
by BankBoston. There was no relationship between the Selling Stockholders of SLI
and the Company or any of its officers, directors, or affiliates. The Company
intends to continue and expand the operations of SLI as presently being
conducted. The acquisition of SLI is being treated as a purchase for accounting
purposes.
SLI is an integrated designer, manufacturer and seller of lighting
systems which are comprised of lamps and fixtures. SLI manufacturers and offers
a complete range of lamps (incandescent, fluorescent, compact fluorescent, high
intensity discharge, halogen, and special lamps) and a complete range of
fixtures to meet the lighting needs of its customers, which include architects,
designers, consultants, specifiers, installers, contractors, wholesale
distributors, OEMs, and retailers. SLI's product portfolio is sold under several
brands, most notably the "SYLVANIA" name, for which SLI has rights in all
regions with the exception of North America. For its years ended December 31,
1996 and 1995 SLI reported revenues of approximately $610.0 and $625.0 million
respectively, and EBIT (before extraordinary charges) of $6.1 and $19.2 million
respectively. SLI believes that it has an approximate 11% market share in lamps,
and is the third largest lighting company in Western Europe. SLI manufactures
approximately 90% of all its product requirements in-house through 13 plants in
nine countries; eight plants are in Europe and five are in Latin America and
Australia. SLI does not currently have a miniature lighting line, and its
products do not overlap those of CML. CML and SLI are complementary from both a
product line and geographical standpoint. The Company intends in the future to
capitalize on the combined strengths and attributes of both CML and SLI.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
At the time of filing of the Form 8-K disclosing the acquisition by the
Registrant of all of the outstanding shares of capital stock of SLI, as set
forth in Item 2 above, the financial statements of the acquired company were not
available. The Registrant committed to file the necessary financial information
within 60 days after the filing date. Such financial statements were not
available at the end of such 60 day period. The following SLI financial
statements, for the calendar years ended December 31, 1996, December 31, 1995
and December 31, 1994, are prepared in
-1-
<PAGE>
accordance with accounting principles generally accepted in the Netherlands but
have not been audited by the Company's independent auditors. The Registrant and
its independent auditors are currently in the process of auditing the financial
statements of SLI in accordance with United States generally accepted accounting
principles and the Company will file such financial statements as soon as they
are available.
(a) Financial Statements of Business Acquired
i) Unaudited Financial Statement; of SLI for the year ended
December 31, 1996.
ii) Unaudited Financial Statement; of SLI for the year ended
December 31, 1995.
iii) Unaudited Financial Statement; of SLI for the year ended
December 31, 1994.
iv) Unaudited Reconciliation of United Kingdom to United States
generally accepted accounting principles (in Pounds Sterling -
thousands) for the years ended December 31, 1995 and 1996.
(b) Pro Forma Financial Information
The following pro forma unaudited financial statement for Chicago
Miniature Lamp, Inc. was prepared to reflect the information as if the
acquisition of SLI described in Item 2 had occurred at the beginning of the
period presented:
i) Pro Forma Condensed Consolidated Balance Sheet as of August
31, 1997.
ii) Pro Forma Condensed Consolidated Statement of Operations for
the nine months ended August 31, 1997.
iii) Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 1, 1996.
(c) Exhibits
*10.1 Copy of Stock Purchase Agreement dated September 4, 1997
between SLI, its stockholders and the Company
* Previously filed.
-2-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHICAGO MINIATURE LAMP, INC.
/s/ Richard F. Parenti
---------------------------------------
Richard F. Parenti, V.P. Finance
Dated: February 13, 1998
-3-
<PAGE>
Annual report 1996
Sylvania Lighting International B.V.
Haarlem
<PAGE>
SYLVANIA LIGHTING INTERNATIONAL B.V.
[LOGO]
Annual report for the year ended 31 December 1996
<TABLE>
<CAPTION>
Pages
<S> <C>
Directors and advisers 1
Financial highlights 2
Operating and financial review 3-10
Directors' report 11
Financial statements
Consolidated profit and loss account 12
Company profit and loss account 13
Balance sheets 14-15
Consolidated cash flow statement 16-17
Notes to the financial statements 18-33
Notes to the cash flow statement 33-34
Principal group companies 35
Other information 36
Summary of accounts 37-38
</TABLE>
<PAGE>
Directors and advisers
These accounts were approved by the Board of Directors of Sylvania Lighting
International B.V. on 20 March 1997.
Directors
Mr. E.P. Bartlett Chief Financial Officer
Mr. J.C. Botts Chairman of the Board (1) * +
Mr. J.F. Joy (1) * +
Mr. N. Scoular President and Chief Executive Officer
Prof. Dr. J. Semler (1) * +
Mr. M.D.C. Smith (1)
Mr. M. Swaanen Executive Vice-President Lamp Operations
(1) Non-executive
* Member of the audit committee
+ Member of the remuneration committee
Registered office
Sylvania Lighting International B.V.
Oudeweg 155
2031 CC Haarlem
The Netherlands
Solicitors
CLIFFORD CHANCE
Apollolaan 171
1077 AS Amsterdam
The Netherlands
Bankers
ABN-AMRO BANK
Postbus 90
1000 AB Amsterdam
The Netherlands
- 1 -
<PAGE>
Financial highlights
<TABLE>
<CAPTION>
Results 1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
Turnover 377,629 387,222
Operating profit before operating exceptional items 3,784 11,907
Net assets 88,000 91,381
Operating cash flow before operating exceptional items 16,021 2,983
Key ratios
Gross profit before operating exceptional items 31.2% 33.3%
Net debt / equity 10.8% 15.1%
Working capital / sales 13.9% 16.4%
Return on capital employed * 4.3% 13.0%
</TABLE>
* Calculated as operating profit before operating exceptional items divided by
net assets
<TABLE>
<CAPTION>
1996 results in: US German French Japanese
Dollars Marks Francs Yen
US$'000 DM'000 FFR'000 YEN'000
<S> <C> <C> <C> <C>
Turnover 592,878 891,204 3,021,032 64,495,257
Operating profit before
operating exceptional
items 5,941 8,930 30,272 646,269
Net assets 150,480 232,320 782,320 17,476,800
Operating cash flow
before operating
exceptional items 25,153 37,810 128,168 2,736,227
Exchange rates to(pounds) US$ DM FFR YEN
Average 1.57 2.36 8.00 170.79
Closing 1.71 2.64 8.89 198.60
</TABLE>
- 2 -
<PAGE>
OPERATING AND FINANCIAL REVIEW
SLI - Clearly focused
Despite tough trading conditions in its main markets, SLI remained clearly
focused in 1996 on its main mission goals, to be "the number one lighting
supplier in Quality, Innovation and Customer Service". Great advances were made
towards these goals; quality attainment at all manufacturing plants reached an
all-time high, an unprecedented number of new products were launched and
measured customer service achieved record levels.
SLI's focus on innovative design and advanced manufacturing technology continued
to be aimed at all aspects of lighting systems performance which create
significant customer benefits; these benefits are measured, principally, in
terms of energy efficiency, ease of installation and use, quality of light and
longevity of product life. SLI designs quality into products and is committed to
total quality, with every plant ISO 9002 approved.
The emphasis SLI has placed upon an integrated approach to lamps and fixtures
marketing, as part of a systems approach to lighting, has ensured that customers
obtain the benefits of being able to install packaged lighting solutions. SLI
continues to position itself in the market as an innovative supplier, carrying a
complete lamp and fixture product line. The exciting new lamps and fixtures
launched by SLI in 1996 demonstrated an ability not only to design for
functionality, efficiency and aesthetic quality, but also to design for the
needs of each channel of distribution.
SLI's focus on customer service, resulted in record levels of "first time, on
time, in full" deliveries. This allowed our customers to benefit from lower
levels of investment in their inventory, whilst satisfying the market's demands
for ever-shortening lead times. As measured, SLI achieved 97% of line order
delivery requirements, on random demand, from all of its service centres around
Europe and is targeting higher levels in 1997.
- 3 -
<PAGE>
Sales and Customers
Whilst overall sales fell by 2.5% from 1995, as a consequence of adverse
economic conditions in mainland Europe, the underlying trends proved to be
encouragingly positive. Sales improved in the overwhelming majority of SLI's
countries of operation, due to the launch of 59 new product lines, in 1996, as
well as the "full year" impact of 1995's crop of bright new products. Added
sales also resulted from the successful integration of small acquisitions made
in 1995. SLI's sales suffered in mature markets, particularly in incandescent
products, which are in long term decline. Sales in emerging markets advanced
significantly; sales of improved technology products, such as compact
fluorescent and high volt halogen, grew impressively, considerably above the
market rate. Strong growth in these expanding sectors of lighting supports SLI's
philosophy of high investment in higher value and improved performance lighting
system solutions.
SLI's commitment to a clearly defined distribution policy and the continuous
timely launch of higher value added products and systems, is being rewarded by a
growing list of international customers. In Europe, Latin America and Asia
Pacific, SLI is expanding its customer base and invigorating the market with a
differentiated approach to integrated lighting systems, aimed at meeting the
ever-changing needs of customers. The strength of SLI's distribution network and
brand recognition proved to be vital in the success of new product launches and
in the penetration of new markets.
Research and Development (R&D)
SLI continued to invest progressively in R&D, having increased expenditure from
1992, by 240%, thereby sustaining the innovation impetus. In launching 59 new
product lines in 1996, SLI continued the investment required to support the
global demand for innovative and energy efficient lighting systems, whilst
dramatically shortening the time traditionally taken in the lighting industry
from design concept to product launch.
- 4 -
<PAGE>
SLI continued to develop its technically advanced production processes, with
particular emphasis on the growth sectors of compact fluorescent and high volt
halogen. The "Hi-Spot" halogen range was enhanced in October 1996, by the
introduction of Hi-Spot ES50. This unique product has been adopted by most of
Europe's leading OEMs, due to the step-change in benefits it provides to users
of accent lighting systems. SLI developed and launched several ranges of
versatile lighting fixtures to complement the Hi-Spot ES50 lamp. In addition,
SLI seized an opportunity to develop a short length T8 fluorescent lamp, giving
OEMs and users a significantly lower initial cost and energy efficient lighting
system alternative. Whilst building up its own development resources, SLI
continues to derive maximum benefits from its successful long term technical
collaboration with Osram.
SLI places development emphasis on:
o Energy saving, tungsten halogen lamps using normal line voltage, for domestic
display and accent lighting. These lamps have the dual capability of
replacing standard incandescent lamps with bright energy-saving tungsten
halogen. They also replace low voltage tungsten halogen lamps, thereby
eliminating the need for costly transformers. SLI continues to show
leadership in this category and launched a new miniature range of halogen
reflector lamps in 1996.
o New energy efficient, long life compact fluorescent lamps. In 1996, SLI was
the first to launch a novel range of lamps in pastel colours, and, also,
first to launch electronic compact fluorescent lamps with automatic daylight
sensor control. Both products created considerable interest with customers in
re-defining the boundaries of the energy saving lamp market.
o High intensity discharge lamps for specialist applications, particularly
film, TV studio, theatre, audio-visual and stadium lighting. In 1996, SLI was
at the forefront of this field with the introduction of innovative retrofit
lamps. In particular, the "Britelux" range of metal halide lamps provides
improved colour and lower energy consumption, yet requires no control gear
change in existing fixtures.
- 5 -
<PAGE>
o T8 tri-phosphor fluorescent lamps with features of short length and improved
life were introduced to OEMs. In 1996, SLI led the introduction of several T8
lamps for specialist application in food production, medical centres,
aquariums and terrariums.
o Trend setting accent fixtures, which incorporate the new ranges of concept
lamps, notably in high voltage halogen and compact fluorescent. In 1996,
Concord launched its successful "Lytespot", "Torus" and "Event" ranges, while
Lumiance launched its highly successful "Sylvania Collection" incorporating
"Cameleo", "Bravo" and "Insaver".
o Industrial/Commercial lighting fixtures to suit the changing legislative and
aesthetic requirements of world markets. In 1996, SLI was the first to launch
a "Lighting System Range" of luminaries, without conventional end-boxes, used
in combination with SLI's Luxline Plus, ES8 lamps. This system provides the
consumer with a 10% energy saving and up to a 17% improvement in lux level.
SLI also launched "SLS", a sensor controlled lighting system which, due to
its unique programming features, saves up to 80% in energy costs. "Speclyte"
vision was also launched - a new optic system designed to significantly
improve direct light output.
o In Latin America, considerable success was achieved with a range of new
Industrial/Commercial and Accent fixtures launched throughout the Andean,
Central America and Mercosur trade regions. This demonstrated SLI's ability
to enhance added value in our customers' business, by providing a full-line
lighting range.
o In Asia, SLI continued to broaden its integrated product offering and by
engaging in a number of new partnerships ventures, expanded its sales
representation.
o In Australia, SLI's newly acquired "Kliktube" business provided an additional
strategic capability in suspended linear systems lighting. Several
imaginative new products were launched in a sector where constant innovation
and project management skills are necessary to maintain market leadership.
Almost all areas of new product development enjoy legislative support, either in
terms of energy conservation or better treatment of the environment.
- 6 -
<PAGE>
Capital Investment
Following the record levels of capital expenditure in 1994 and 1995, capital
requirements were less demanding in 1996. However, investment was maintained at
the levels required to sustain the 'innovation pipeline', provide impetus for
cost reduction and support the creative talents of SLI's people.
Major projects in 1996 included:
o Expansion of production capacity at Shipley, UK, for compact fluorescent
lamps.
o Expansion of production capacity for high voltage halogen lamps at Tienen,
Belgium.
o Expansion of metal halide arc-tube production capacity at Tienen.
o Expansion of production capacity at the Sao Paulo lamp plant, in Brazil.
o Development, tooling and equipment for new Industrial/Commercial and Accent
fixtures in Concord, UK, Lumiance, Holland, San Jose, Costa Rica, Gosford,
Australia, and St. Etienne, France.
Capital investment in 1997 will continue to support the many opportunities
available for the introduction of leading-edge products and penetration of new
markets.
People
1996 was a challenging year in mainland continental Europe. Several important
organisation changes and cost reduction measures were implemented, requiring a
high level of energy and enthusiasm.
SLI's average employment levels fell by 164, mostly in manufacturing locations.
However, SLI continued to develop and promote home-grown talents and to recruit
a healthy number of younger, high potential, professional and technical staff.
- 7 -
<PAGE>
1996 saw two important changes at executive level, with the planned retirement
of Mr. Marinus A. Swaanen, Vice-President Lamp Operations, and Mr. Michael J.L.
Goodwin, Vice-President Sales and Marketing, Europe. SLI was fortunate to find
excellent replacements for both; Wayne L. Platt succeeded Mr. Swaanen and James
H. Baillie succeeded Mr. Goodwin. SLI retains the services of both retiring
executives as consultants. Mr. Swaanen, also, remains as a director of SLI.
Environment
SLI maintained its progressive policy of consistently improving the
environmental management of its products and processes. The implementation of an
advanced environmental management system helped to ensure that the welfare and
safety of our people, as well as the condition of manufacturing plants, are
protected in advance of foreseen legislative requirements.
Financial Performance
Due to depressed economic conditions prevailing in mainland Europe, principally
in France and Germany, SLI sustained a disappointing operating result. Against a
backdrop of falling market demand, SLI successfully held its market share. A
pro-active cost reduction programme was implemented which eliminated (pounds)11
million of annual overhead costs and brought a charge to the 1996 profit and
loss account of (pounds)3.2 million.
Operating profit, before exceptional items, fell to (pounds)3.8 million from
(pounds) 11.9 million in 1995. SLI continued to invest heavily in R&D, customer
service and its brands. This ensured that the group maintained its long-term
development strategy. Sales and operating profits outside Europe continued to
grow. SLI, once again, generated a positive operating cash flow of (pounds)16.0
million before exceptional items, utilising the skill of its people to achieve
record levels of customer serviceability on lower levels of inventory and
working capital. In 1996, SLI resisted the temptation to make any large
acquisitions preferring, instead, to prudently manage its Balance Sheet and
develop its business organically. SLI's healthy
- 8 -
<PAGE>
Balance Sheet, with net debt of only 10.8% of Equity, provides a solid platform
for future expansion.
Outlook
SLI will achieve profitable growth as an integrated lighting business, with an
absolute focus on customer service, quality and customer-driven innovation. As
1997's European economic climate is unlikely to be better than 1996, SLI expects
improvements in performance to come from its own new product and cost reduction
initiatives, rather than from more favourable external conditions. The group
will continue to invest in profitable opportunities to achieve its strategic
goals and looks forward to the future with great confidence.
- 9 -
<PAGE>
To this end, we wish to thank our customers for their tremendous support and
encouragement during another year of dynamic change. Great appreciation is also
due to our people worldwide for their enthusiasm and support.
Norman Scoular
Chief Executive Officer
Geneva, 20 March 1997
- 10 -
<PAGE>
Directors' Report
for the year ended 31 December 1996
The directors present their report and the audited financial statements for the
year ended 31 December 1996.
Principal activities
The principal activities of the group are unchanged from last year, and are the
design, manufacture and distribution of lighting products.
Review of business
The consolidated profit and loss account for the year is set out on page 12. An
explanation of the results, future developments and plans for the business are
explained in the operating and financial review set out on pages 3 to 10.
Dividends and transfers to reserves
In accordance with the company's articles and the terms of the cumulative
redeemable preference shares a dividend of (pounds)963,000 (1995:
(pounds)861,000) was payable.
A loss of (pounds)(6,732,000) (1995: profit of (pounds)6,093,000) will be
transferred to the group's reserves, after charging the above dividend, together
with associated appropriations on the cumulative redeemable preference shares to
the result for the financial year.
Directors
The directors of the company at 31 December 1996 are listed on page 1. They have
all been in office for the whole of the year.
Insurance of directors
The group maintains insurance for directors and officers for general liabilities
in respect of their duties as directors and officers of the group.
Group research and development
The group is committed to research and development activities in order to
enhance its position in the lighting industry, and (pounds)6.7 million (1995:
(pounds)6.9 million) of costs attributable to research and development have been
written off in the year.
Changes in fixed assets
The movements in fixed assets during the year are set out in notes 10 to 12. The
group invested (pounds)10 million (1995: (pounds)19.2 million) mainly in new
production facilities in lamps and fixtures, in order to expand sales in
selected products and to improve cost efficiencies.
Employees
SLI is committed to employee involvement and has a number of well established
consultative and collective bargaining arrangements which ensure that the views
of employees are taken into account.
SLI is committed to providing equal opportunities in employment and expects the
composition of its work force to reflect the composition of the communities in
which its offices and factories are located.
The group's policy is to recruit disabled workers for those vacancies that they
are able to fill. All necessary assistance with initial training courses is
given. Once employed, a career plan is developed so as to ensure suitable
opportunities for each disabled person. Arrangements are made, wherever
possible, for retraining employees who become disabled, to enable them to
perform work identified as appropriate to their aptitudes and abilities.
By order of the board
E.P. Bartlett
Chief Financial Officer
20 March 1997
- 11 -
<PAGE>
Consolidated profit and loss account
for the year ended 31 December 1996
<TABLE>
<CAPTION>
Before Exceptional Total Total
exceptional items items
(Note 4)
1996 1996 1996 1995
Note (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C> <C>
Turnover 2, 3 377,629 -- 377,629 387,222
Cost of sales (259,657) (777) (260,434) (258,437)
-------- ------ -------- --------
Gross profit 117,972 (777) 117,195 128,785
Distribution costs (82,618) (1,054) (83,672) (84,413)
Administration expenses (31,570) (2,419) (33,989) (32,465)
-------- ------ -------- -------
Operating (loss)/profit 5 3,784 (4,250) (466) 11,907
-------- ------
Profit on sale of fixed assets 6 551 1,238
-------- -------
Profit on ordinary activities before interest 85 13,145
Net interest payable and similar charges 7 (3,512) (2,710)
------ ------
(Loss)/profit on ordinary activities before taxation (3,427) 10,435
Tax on ordinary activities 8 (3,570) (2,791)
------ ------
(Loss)/profit on ordinary activities after taxation (6,997) 7,644
Minority interests 18 11
------ ------
(Loss)/profit for the financial year (6,979) 7,655
Non-equity dividends and other appropriations 9 247 (1,562)
------ -------
Retained (loss)/profit for the year (6,732) 6,093
====== =======
</TABLE>
- 12 -
<PAGE>
Company profit and loss account
for the year ended 31 December 1996
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
Income from subsidiaries 2,500 7,000
Other income/(expenditure) (1,728) (689)
------ ------
772 6,311
====== ======
</TABLE>
- 13 -
<PAGE>
Balance sheets after the appropriation of results
as at 31 December 1996
<TABLE>
<CAPTION>
Group Company
1996 1995 1996 1995
Restated
Note (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets 10 3,358 3,374 40 47
Tangible assets 11 70,752 82,982 -- --
Investments 12 -- -- 8,268 8,268
------- ------- ------ ------
74,110 86,356 8,308 8,315
------- ------- ------ ------
Current assets
Stocks 13 54,239 67,536 -- --
Debtors 14 81,681 92,160 12,685 20,704
Cash and deposits 15 28,175 35,370 1,250 1,305
-------- -------- ------- -------
164,095 195,066 13,935 22,009
Creditors: amounts falling due within
one year 16 (108,297) (127,870) (3,596) (10,389)
--------- -------- -------- -------
Net current assets 55,798 67,196 10,339 11,620
--------- -------- -------- -------
Total assets less current liabilities 129,908 153,552 18,647 19,935
Creditors: amounts falling due after
more than one year 17 (24,237) (30,850) -- (7,000)
Provisions for liabilities and charges 18 (17,671) (31,321) -- --
------ ------ ------ ------
Net assets 88,000 91,381 18,647 12,935
======= ====== ======= ======
Capital and reserves
Called up share capital 20 31 31 31 31
Share premium account 23 12,054 6,548 12,054 6,548
Other reserves 23 82,285 72,468 - -
Profit and loss account 23 (6,370) 12,316 6,562 6,356
------- ------- ------- ------
Total shareholders' funds 24 88,000 91,363 18,647 12,935
</TABLE>
- 14 -
<PAGE>
Balance sheets after the appropriation of results
as at 31 December 1996
<TABLE>
<CAPTION>
Group Company
1996 1995 1996 1995
Restated
Note (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity shareholders' funds 74,238 82,374 4,885 3,946
Non-equity shareholders' funds 13,762 8,989 13,762 8,989
- --------------------------------------------------------------------------------------------------------------------
Equity minority interests -- 18 -- --
------- ------- ------- ------
88,000 91,381 18,647 12,935
======= ======= ======= ======
</TABLE>
The financial statements on pages 12 to 34 were approved by the Board of
Directors on 20th March 1997 and were signed on its behalf by:
E.P. Bartlett
Chief Financial Officer
- 15 -
<PAGE>
Consolidated cash flow statement
for the year ended 31 December 1996
<TABLE>
<CAPTION>
1996 1995
Note (pounds)'000 (pounds)'000
<S> <C> <C> <C>
Net cash inflow from operating activities before
exceptional items and fundamental restructuring costs 16,021 2,983
Exceptional items paid in year 4 (3,003) (461)
Fundamental restructuring costs 31d (1,340) (5,463)
-------- --------
Net cash inflow/(outflow) from operating activities 31a 11,678 (2,941)
Returns on investments and servicing of finance
Interest received 524 1,564
Interest paid (3,417) (3,661)
Interest element of finance lease rental payments (378) (114)
Non-equity dividends paid (941) (431)
-------- --------
(4,212) (2,642)
Taxation paid (1,701) (926)
Capital expenditure
Purchase of tangible fixed assets (8,914) (14,767)
Purchase of finance lease fixed assets -- (4,141)
Sale of finance lease fixed assets -- 4,141
Sale of tangible fixed assets 896 2,506
------- -------
(8,018) (12,261)
Acquisitions and disposals
Purchase of subsidiaries 22 (1,537) (250)
------- -------
(1,537) (250)
Cash outflow before management of liquid resources ------ -------
and financing (3,790) (19,020)
------ -------
Management of liquid resources
Net cash (withdrawn)/deposited from short term deposits (2,121) 5,360
------- -------
(2,121) 5,360
</TABLE>
- 16 -
<PAGE>
Consolidated cash flow statement
for the year ended 31 December 1996
<TABLE>
<CAPTION>
1996 1995
Note (pounds)'000 (pounds)'000
<S> <C> <C> <C>
Financing
Net increase/(decrease) in short term borrowings 2,799 (2,424)
New loans repayable beyond a year 7,164 6,472
Repayment of loans and other long term borrowings (8,437) (684)
Capital element of finance lease rental payments (306) (269)
------- --------
1,220 3,095
------- --------
Decrease in net cash in the year 31 (4,691) (10,565)
======= ========
</TABLE>
- 17 -
<PAGE>
Notes to the Financial Statements for the Year ended 31 December 1996
1. Basis of presentation of financial statements
Sylvania Lighting International B.V., "the Company", was incorporated in
July 1992 and is registered in the Netherlands. The Company is therefore
required to prepare financial statements in accordance with the provisions
of the Dutch Civil Code Book II, Title 9. Under the provisions of article
362 of this code, it is permissible for the Company to prepare its
financial statements in accordance with generally accepted accounting
principles and practices of the United Kingdom.
Principal accounting policies
The directors have decided to prepare the financial statements in sterling
under the historical cost convention and in accordance with the applicable
Accounting Standards of the United Kingdom due to the international nature
of its operations. Material differences exist in the application of
generally accepted accounting principles (GAAP) in the United Kingdom
compared to Dutch GAAP, due to the valuation of investments in subsidiary
undertakings at historical cost instead of on an equity basis, and due to
the provision of deferred taxation only where it is probable the timing
differences will crystallise, instead of on a full provision basis.
The following is a summary of the main group accounting policies, all of
which have been consistently applied.
Changes in presentation and disclosure
The cash flow statement has been presented under the new format required
by the revised FRS 1 "Cash flow statements".
Comparative figures have been restated as stated in notes 14, 15 and 16.
Basis of consolidation
The consolidated financial statements of the group comprise the financial
statements of the Company and its subsidiaries prepared in accordance with
all the applicable Accounting Standards of the United Kingdom.
All intragroup sales and profits are eliminated fully on consolidation.
The results of subsidiaries acquired or disposed of during the year are
consolidated from or to their respective date of acquisition or disposal.
Goodwill
The negative goodwill arising from the acquisition of the international
lighting businesses of GTE Corporation and GTE International Incorporated
was arrived at after careful consideration and evaluation of the fair
value of acquired net assets. The resultant figure was credited directly
to reserves.
Goodwill which represents the excess of the fair value of the purchase
consideration of the business acquired over the fair values of their
identifiable net assets, is written off immediately to reserves on
acquisition. On the sale of a business, related goodwill previously
written off to reserves, is released to the profit and loss account in the
year of sale.
Foreign currencies
Assets and liabilities of subsidiaries in foreign currencies are
translated into sterling at rates of exchange ruling at the end of the
financial year except where rates of exchange are fixed under contractual
arrangements. The results of the foreign subsidiaries are translated at
the average rate of exchange for the year, except for material exceptional
items which are translated at the rate on the date of the transaction.
Differences on exchange arising from the retranslation of the opening net
investment in subsidiary companies, and from the translation of the
results of those companies at average rate, are taken to reserves. All
other foreign exchange differences are taken to the profit and loss
account in the year in which they arise.
- 18 -
<PAGE>
Where the group operates in countries with hyper-inflationary economies,
adjustments are made to ensure the financial results fairly reflect the
financial position of the foreign operation. The local currency financial
results are recorded in a functional currency, monetary amounts being
recorded at the balance sheet closing rate and non-monetary amounts at the
historical rate ruling when the transaction occurred. The financial
statements remeasured into the functional currency are then translated
into sterling using the method above.
Turnover
Turnover, which excludes value added and sales taxes, represents the
invoiced value of goods and services supplied to third parties.
Deferred taxation
Provision is made for deferred taxation, using the liability method, on
all material timing differences to the extent that it is probable the
liability or asset will crystallise.
Government grants
Capital grants are credited to accruals and deferred income and released
to the profit and loss account over the estimated useful life of the
assets to which they relate.
Intangible fixed assets
Intangible fixed assets comprise trademarks and patents purchased at the
date of acquisition of the international lighting businesses of GTE
Corporation and GTE International Incorporated. Costs of protecting
trademarks and patents together with the costs of registering new patents
and trademarks are charged to the profit and loss account in the year they
are incurred.
No annual provision for depreciation is made in respect of the intangible
assets acquired from GTE as it is considered that the residual value of
the trademarks and patents approximates to cost. The carrying value of the
intangible fixed assets is regularly reviewed by the directors to
determine whether there has been any permanent diminution in value.
Tangible fixed assets
Fixed assets are stated at their historical cost less accumulated
depreciation on a straight line basis over their expected useful economic
lives at the following rates:
<TABLE>
<S> <C>
Freehold buildings 2% to 5%
Long leasehold buildings 2%
Short leaseholds over term of lease
Plant and machinery - heavy 6% to 10%
- other 10% to 33%
Motor vehicles 16.7% to 33%
Computers and software 20% to 33%
</TABLE>
Stocks and work in progress
Stocks and work in progress are stated at the lower of cost or net
realisable value on a first in first out basis. Manufactured products are
valued at direct costs plus the appropriate level of attributable
overheads based on normal levels of activity. Provisions for slow moving,
obsolete and defective stocks are made as necessary.
Finance and operating leases
Finance leases which transfer substantially all of the benefits and risks
of ownership to the group are capitalised as tangible assets and
depreciated over the shorter of the assets economic life or the expected
lease period. Outstanding obligations of such leases, net of finance
charges, are included under creditors. The finance element is charged to
the profit and loss account over the term of the lease. All other leases
are operating leases and the rentals of these are charged to the profit
and loss account as incurred.
- 19 -
<PAGE>
Pension costs
The group operates a variety of defined benefit schemes and defined
contribution schemes in accordance with local conditions and practices in
the countries concerned. The defined benefit schemes are reviewed every
three years by professionally qualified independent actuaries and
contribution rates to the defined benefit schemes revised accordingly.
Pension costs are accounted for on the basis of charging the expected
costs of providing the pensions over the expected service lives of the
current employees. The cost of providing other post-retirement benefits is
recognised on a similar basis.
Research and development
Expenditure on research and development is written off in the year in
which it is incurred except where major projects are undertaken where it
is reasonably anticipated that costs will be recovered through future
commercial activity. Such costs are written off over the period expected
to benefit. No development costs have been capitalised to date.
2. Segmental analysis by class of business
Sylvania Lighting International is an integrated lighting products group.
In the directors' opinion, the turnover and operating result is
attributable to this one activity, the manufacture and distribution of
lighting products.
3. Analysis by geographical area
The analysis by geographical area of the group's turnover is set out
below;
<TABLE>
<CAPTION>
Turnover 1996 1996 1995 1995
Sales by Sales by Sales by Sales by
destination origin destination origin
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Geographical segment
The Netherlands 13,268 13,904 14,545 14,776
Rest of Europe 252,880 270,516 275,848 286,106
Latin America 51,946 54,356 51,850 54,154
Asia Pacific 41,414 38,853 34,172 32,186
Rest of world 18,121 -- 10,807 --
------- ------- ------- -------
377,629 377,629 387,222 387,222
======= ======= ======= =======
</TABLE>
4. Exceptional expenses within operating (loss)/profit
a) In response to difficult market conditions during 1996 the group
instigated a reorganisation of activities to reduce costs and improve the
group profitability. This resulted in a charge of (pounds)3,161,000 being
included within the operating profit.
b) In addition, during the year costs of (pounds)1,089,000 relating to
group reconstruction and the raising of finance were charged to
administration costs, of which (pounds)461,000 was prepaid in 1995.
- 20 -
<PAGE>
5. Operating (loss)/profit
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
Operating (loss)/profit is stated after crediting:
Amortisation of government grants 663 972
Exchange gains 48 --
Profit on disposal of tangible fixed assets 38 --
====== ======
and after charging:
Loss on disposal of tangible fixed assets -- 87
Depreciation charge for the year:
Intangible fixed assets 16 56
Tangible owned fixed assets 11,463 10,697
Tangible fixed assets held under finance leases 122 85
Research and development expenditure all expensed in year 6,674 6,948
Operating lease rentals:
Plant and machinery 2,223 1,851
Land and buildings 3,971 3,852
Exchange losses -- 203
Auditors' remuneration for:
Audit 564 550
Other services 1,181 451
</TABLE>
6. Profit on sale of fixed assets
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
Net profit on sale of freehold property 551 945
Net profit on sale of plant and machinery -- 293
--- -----
551 1,238
=== =====
</TABLE>
7. Net interest payable and similar charges
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
Interest on loans and overdrafts:
Repayable within 5 years, not by instalments 2,926 3,087
Repayable within 5 years, by instalments 687 1,076
Repayable wholly or partly after five years 70 --
Interest on finance leases 378 114
----- -----
4,061 4,277
Less: interest receivable (549) (1,567)
----- -----
Total net interest payable 3,512 2,710
===== =====
</TABLE>
- 21 -
<PAGE>
8. Tax on ordinary activities
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
Tax charge on profit on ordinary activities:
Corporation tax for the year 2,190 1,627
Withholding tax 161 160
Deferred tax 1,282 1,391
Under/(over) provision in respect of prior years
Corporation tax (106) (656)
Deferred tax 43 269
------ ------
3,570 2,791
====== ======
The tax charge shown above comprises the following:
Tax charges/(credits) which give rise to tax payments/(repayments):
Current tax 2,351 1,787
Prior year (106) (656)
Release of deferred tax assets from the utilisation of tax losses existing
at acquisition together with the tax allowable elements of fair value
adjustments which have reduced the tax charges on current year results 404 1,295
Other deferred tax items 921 365
------ ------
3,570 2,791
====== ======
</TABLE>
The group has tax losses carried forward of approximately (pounds)91
million (1995: (pounds)77 million). These losses may only be relieved
against future taxable trading profits arising in the countries in which
the losses reside.
9. Dividends and appropriations
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
On non-equity shares:
Appropriations for:
Foreign exchange (1,210) 701
Preference dividends:
First half year paid 511 431
Second half year proposed 452 430
------ -----
(247) 1,562
======= =====
</TABLE>
In agreement with the articles of association, the dividend payments on
the redeemable preference shares for 1997 and 1998 are payable on 31st
December 1998.
Appropriations for foreign exchange arise as the preference shares are
denominated in NLG (see note 20).
- 22 -
<PAGE>
10. Intangible fixed assets
<TABLE>
<CAPTION>
Group Company
intellectual intellectual
property property
(pounds)'000 (pounds)'000
<S> <C> <C>
Cost at 1 January 1996 3,461 66
Exchange differences (3) --
----- ---
At 31 December 1996 3,458 66
----- ---
Depreciation at 1 January 1996 (87) (19)
Exchange differences 3 --
Charge for year (16) (7)
----- ---
At 31 December 1996 (100) (26)
----- ---
Net book value as at 31 December 1996 3,358 40
===== ===
Net book value as at 31 December 1995 3,374 47
===== ===
</TABLE>
11. Tangible fixed assets
<TABLE>
<CAPTION>
Short
Freehold leasehold Fixtures
land and land and Plant and and
Group buildings buildings machinery fittings Total
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C> <C>
Cost at 1 January 1996 18,236 4,884 71,825 10,422 105,367
Exchange differences (2,206) (784) (8,799) (1,190) (12,979)
Additions 488 536 7,975 989 9,988
Disposals (319) -- (592) (335) (1,246)
Reclassifications within fixed assets 92 -- 117 (209) --
------ ----- ------- ----- -------
At 31 December 1996 16,291 4,636 70,526 9,677 101,130
------ ----- ------- ----- -------
Depreciation at 1 January 1996 (2,662) (101) (16,106) (3,516) (22,385)
Exchange differences 319 14 1,898 422 2,653
Charge for year (905) (270) (8,506) (1,904) (11,585)
Eliminated in respect of disposals 212 -- 421 306 939
------ ---- ------- ------ -------
At 31 December 1996 (3,036) (357) (22,293) (4,692) (30,378)
------ ---- ------- ------ -------
Net book value at 31 December 1996 13,255 4,279 48,233 4,985 70,752
====== ===== ====== ===== ======
Net book value at 31 December 1995 15,574 4,783 55,719 6,906 82,982
====== ===== ====== ===== ======
</TABLE>
Included in plant and machinery is (pounds)1,959,000 (1995:
(pounds)6,305,000) relating to assets under construction.
The net book value of tangible fixed assets includes an amount of
(pounds)4,762,000 (1995: (pounds)5,045,000) in respect of assets held
under finance leases. During the year the group entered into finance lease
arrangements in respect of fixed assets with a total capital value at the
inception of the leases of (pounds)892,000 (1995: (pounds)4,261,000).
Certain freehold land and buildings were valued on 30 September 1996 at
open market value on the basis of existing use by an international firm of
chartered surveyors at (pounds)30.2 million, as opposed to a net book
value of (pounds)15.5 million. The surplus on valuation has not been
accounted for.
- 23 -
<PAGE>
Also certain of the freehold land and buildings and part of the plant and
machinery are held as collateral to secure medium term loans and
facilities amounting to (pounds)26 million (1995: (pounds)50 million).
12. Fixed asset investments
The Company holds interests in group undertakings amounting to
(pounds)8,268,000 (1995: (pounds)8,268,000). A listing of the principal
subsidiary undertakings is given on page 35.
13. Stocks
<TABLE>
<CAPTION>
Group
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
Raw materials and consumables 9,407 10,373
Work in progress 5,454 6,795
Finished goods and goods for resale 39,378 50,368
------ ------
54,239 67,536
====== ======
</TABLE>
The replacement cost of stock and work in progress is not materially
different from the amount above.
14. Debtors
<TABLE>
<CAPTION>
Group Company
1996 1995 1996 1995
Restated
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Trade debtors 71,009 78,812 -- --
Amounts owed by subsidiary
undertakings -- -- 12,641 19,893
Other debtors 4,211 4,112 44 213
Prepayments and accrued income 5,094 6,559 -- 598
Deferred tax (see note 19) -- 590 -- --
Corporation tax recoverable 1,367 2,087 -- --
------- ------- ------- ------
81,681 92,160 12,685 20,704
======= ====== ======= ======
Amounts falling due after more
than one year included in above
Other debtors 947 1,062 41 --
Prepayments and accrued income 1,095 1,121 -- --
Corporation tax recoverable 1,366 1,598 -- --
------ ------ ------ -------
3,408 3,781 41 --
====== ====== ====== =======
</TABLE>
The 1995 comparative has been restated by (pounds)1,121,000 to reflect the
reclassification of a cash deposit held in escrow for the benefit of a
third party from deposits to prepayments falling due after more than one
year, and also for the recognition of (pounds)1,235,000 of trade debtors
previously matched against cash advances received from banks with
recourse.
- 24 -
<PAGE>
15. Cash and deposits
Cash and deposits consist of cash available on demand or within one
working day of (pounds)16,853,000 (1995: (pounds)24,994,000) and short
term deposits of (pounds)11,322,000 (1995: (pounds)10,376,000).
The 1995 comparative has been restated by (pounds)1,121,000 to reflect the
reclassification of a cash deposit held in escrow for the benefit of a
third party from deposits to prepayments falling due after more than one
year.
16. Creditors: amounts falling due within one year
<TABLE>
<CAPTION>
Group Company
1996 1995 1996 1995
Restated
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Bank overdrafts 2,187 4,054 -- --
Financing of receivables with recourse* 7,532 5,437 -- --
Bank loans 3,883 2,657 2,004 --
Other loans -- 6,943 -- 6,943
Obligations under finance leases 321 383 -- --
Payments received on account 175 97 -- --
Trade creditors 45,194 55,806 -- --
Bills payable 8,005 6,169 -- --
Amounts owed to subsidiary
undertakings -- -- 3 1,989
Corporation tax 2,115 2,200 -- --
Other taxation and social security 5,954 5,580 -- --
Other creditors 2,465 2,607 -- 129
Accruals and deferred income 30,014 35,507 1,137 898
Proposed dividends payable 452 430 452 430
------- -------- ------ ------
108,297 127,870 3,596 10,389
======= ======= ====== ======
</TABLE>
* Amounts advanced by financial institutions secured on trade debtors.
The 1995 comparative has been restated to reflect the recognition of
(pounds)1,235,000 of cash advances from banks secured on trade debtors
with recourse.
- 25 -
<PAGE>
17. Creditors: amounts falling due after more than one year
<TABLE>
<CAPTION>
Group Company
1996 1995 1996 1995
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Bank loans 19,396 25,143 -- 7,000
Obligations under finance leases 4,361 4,517 -- --
Corporation tax -- 242 -- --
Accruals and deferred income 480 948 -- --
------- ------ ----- ------
24,237 30,850 -- 7,000
======= ====== ===== ======
Bank loans, overdrafts and other loans
are repayable as follows:
In one year or less 13,602 19,091 2,004 6,943
Between one and two years 5,966 3,020 -- --
Between two and five years 13,105 21,589 -- 7,000
In five years or more 325 534 -- --
------- ------- ----- ------
32,998 44,234 2,004 13,943
======= ====== ===== ======
</TABLE>
The total value of bank borrowings repayable by instalments, any part of
which falls due after more than five years is (pounds)1,087,000 (1995:
(pounds)1,398,000). Of these amounts, (pounds)456,000 (1995:
(pounds)612,000) bear interest at 6% and (pounds)631,000 (1995:
(pounds)786,000) at 5%.
An aggregate amount of (pounds)12,121,000 (1995: (pounds)14,350,000)
repayable by instalments is included within bank borrowings repayable
within five years. This bears interest of FIBOR + between 1.0%-1.5% and is
secured on freehold properties and plant and machinery.
Finance leases
The net finance lease obligations to which the group is committed are:
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
Within one year or less 321 383
Between one and two years 323 287
Between two and five years 897 733
After five years 3,141 3,497
----- -----
4,682 4,900
===== =====
</TABLE>
The total value of leases repayable by instalments, any part of which
falls due after more than five years is (pounds)3,883,000 (1995:
(pounds)4,144,000).
- 26 -
<PAGE>
18. Provisions for liabilities and charges
<TABLE>
<CAPTION>
Group Other Deferred
Pensions Reorganisation provisions taxation Total
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C> <C>
At 1 January 1996 14,876 14,867 1,578 -- 31,321
Release of fair value provisions (1,200) (9,531) -- -- (10,731)
Exchange differences (1,779) (782) (40) -- (2,601)
Profit and loss account 1,519 20 56 823 2,418
Utilised (640) (1,388) (346) -- (2,374)
Transfer to creditors (345) -- (17) -- (362)
------ ------ ------ ----- -------
At 31 December 1996 12,431 3,186 1,231 823 17,671
====== ====== ====== ===== =======
</TABLE>
Pension provisions relate mainly to book reserved funds in Germany,
Belgium and a number of Latin American countries (see note 27). Other
provisions relate mainly to employee fringe benefits. See note 19 for
deferred taxation.
During the year (pounds)10,731,000 of provisions set up as part of the
fair value exercise on the acquisition by Sylvania Lighting International
of the international lighting business of GTE Corporation and GTE
International Incorporated were written back to negative goodwill, as
these provisions are no longer required.
19. Deferred taxation
Deferred taxation recognised in the financial statements, and the amount
unrecognised of the total potential amount, are as follows:
<TABLE>
<CAPTION>
Group Amount recognised Amount unrecognised
1996 1995 1996 1995
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Tax effect of timing differences due to:
Excess of tax allowances over depreciation (1,556) (1,493) (3,337) (7,313)
Other 552 1,819 33,441 23,019
------ ----- ------ ------
(1,004) 326 30,104 15,706
Add: unrelieved advance corporation tax 181 264 -- --
------ ----- ------ ------
Net deferred tax (provision)/asset (823) 590 30,104 15,706
====== ===== ====== ======
</TABLE>
The movements on the group deferred taxation asset/(provision) are as
follows:
<TABLE>
<CAPTION>
(pounds)'000
<S> <C>
As at 1 January 1996 590
Exchange difference (88)
Transfer to profit and loss account (1,325)
------
As at 31 December 1996 (823)
======
</TABLE>
Provision is made for taxation liabilities which will arise on the
distribution of profits of overseas subsidiaries to the extent that it is
intended to remit such profits in the foreseeable future.
- 27 -
<PAGE>
20. Share capital
<TABLE>
<CAPTION>
Par 1996 1995
Votes NLG NLG (pounds)'000 NLG (pounds)'000
Authorised per share
<S> <C> <C> <C> <C> <C> <C>
300,000 "A" ordinary shares 100 1.00 300,000 118 300,000 118
200,000 "B" ordinary shares 35 0.35 70,000 27 70,000 27
495,000 12.5% cumulative
redeemable preference shares 1 0.01 4,950 2 4,950 2
------- --- ------- ----
374,950 147 374,950 147
======= === ======= ====
Issued, called up and fully paid
60,000 "A" ordinary shares 1.00 60,000 24 60,000 24
40,000 "B" ordinary shares 0.35 14,000 6 14,000 6
179,311 12.5% cumulative
redeemable preference shares 0.01 1,793 1 990 1
------- --- ------- ---
75,793 31 74,990 31
======= === ======= ====
</TABLE>
The preference shares may be redeemed at the earlier of a sale or listing
or 31 January 2003 at par plus associated share premium and redemption
premium. This amounted to (pounds)12,054,000 and (pounds)1,256,000 as at
31 December 1996. These have a preferential right to the return of capital
on winding up. During the year the articles of association were changed to
maintain the dividend rate at 12.5% per annum, and to make the preference
shares redeemable at the rate of 2.90 NLG to (pounds)1.
21. Options in shares of SLI BV
To avoid dilution of shareholdings, the right has been granted to an
existing shareholder to receive ordinary shares for no consideration if at
anytime prior to a sale or listing, new shares are issued up to a
capitalisation of US$35 million. If the new issue takes the capitalisation
above US$35 million, then the consideration is calculated proportionately
for the capitalisation above US$35 million. During the year this
shareholder exercised his option to acquire 2,000 "A" ordinary shares and
1,980 preference shares at US$1 per ordinary share and US$100 per
preference share.
Further options exist for senior managers to subscribe for 0.25% of the
equity of the Company in each class of shares at a price of US$2 per
ordinary share and US$200 per preference share, and, for a group of senior
operating managers, 2% of the equity of the company in each class of share
at a price of US$900 per ordinary share and US$100 per preference share,
upon a sale or listing of the Company as defined in the shareholders
agreement which is available for inspection at the Company's registered
office.
- 28 -
<PAGE>
22. Acquisitions
On 5th February 1996, the assets of Kliktube Systems of Australia Pty Ltd,
and Kliktube Systems (NZ) Ltd were acquired and accounted for under the
acquisition method of accounting.
The assets and liabilities of the acquired business at the acquisition
date are set out below, together with the adjustments to reflect the fair
value of the assets and liabilities.
<TABLE>
<CAPTION>
Net book
value at Fair value Adjusted
acquisition adjustments fair value
(pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C>
Fixed assets
Tangible assets 240 82 322
---- --- -----
240 82 322
Current assets
Stock 355 -- 355
---- --- -----
595 82 677
Creditors due within one year (54) -- (54)
---- --- -----
Net assets 541 82 623
=== ===
Goodwill arising on acquisition 914
-----
Consideration in cash 1,537
=====
</TABLE>
The effect of these acquisitions on the turnover and operating profit
during the year was not material.
- 29 -
<PAGE>
23. Share premium account and reserves
<TABLE>
<CAPTION>
Share Profit
premium Other and loss
account reserves account
Group (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C>
At 1 January 1996 6,548 72,468 12,316
Exchange differences -- -- (11,141)
Share premium on new issue of preference shares 5,961 -- --
Expenses of preference share issue (58) -- --
Non-equity shareholders' appropriation -- -- (1,210)
Transfer to reflect the set conversion of 2.9 NLG to
(pounds)1 of the NLG denominated premium account
(see note 20) (397) -- 397
Adjustment to goodwill arising on
fair value at 29 January 1993 -- 10,731 --
Goodwill arising on acquisitions (see note 22) -- (914) --
Retained loss for the year -- -- (6,732)
------ ------ ------
At 31 December 1996 12,054 82,285 (6,370)
====== ====== ======
</TABLE>
As at 31 December 1996 the distributable reserves of the Company amounted
to (pounds)18.6 million (including (pounds)12.1 million of share premium
distributable under Dutch law). The aggregate amount of negative goodwill
net of disposals included within reserves is (pounds)82,285,000 (1995:
(pounds)72,468,000).
<TABLE>
<CAPTION>
Share Profit
premium and loss
account account
Company (pounds)'000 (pounds)'000
<S> <C> <C>
At 1 January 1996 6,548 6,356
Premium on issue of new preference shares 5,961 --
Expenses of preference share issue (58) --
Non-equity shareholders' appropriation -- (1,210)
Transfer to reflect the set conversion of 2.9 NLG to(pounds)1
of the NLG denominated premium account (see note 20) (397) 397
Retained profit for the year -- 1,019
------ -----
At 31 December 1996 12,054 6,562
====== =====
</TABLE>
- 30 -
<PAGE>
24. Reconciliation of movements in shareholders' funds
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
(Loss)/profit for the financial year (6,979) 7,655
Dividends and appropriations 247 (1,562)
------ ------
(6,732) 6,093
Other recognised gains/(losses) relating to the year (net) (11,141) 3,556
Adjustment arising during the year in respect
of negative goodwill at 29th January 1993 10,731 983
Share premium on new issue of preference shares 5,961 --
Expenses of preference share issue (58) --
Goodwill arising on acquisitions (914) (243)
Reversal of non-equity shareholders' appropriation (1,210) 701
------ -------
Net (deduction)/addition to shareholders' funds (3,363) 11,090
Opening shareholders' funds 91,363 80,273
------ -------
Closing shareholders' funds 88,000 91,363
====== ======
</TABLE>
25. Employee information
The average weekly number of persons (including executive directors)
employed by the group during the year was:
<TABLE>
<CAPTION>
1996 1995
Number Number
<S> <C> <C>
Production 3,336 3,431
Distribution 992 1,022
Administration 545 584
------ ------
4,873 5,037
====== ======
</TABLE>
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
Staff costs (for the above persons)
Wages and salaries 86,796 89,189
Social security costs 22,723 21,360
Pension and post retirement benefits (see note 26) 3,754 3,848
-------- --------
113,273 114,397
</TABLE>
The comparatives for 1995 have been adjusted to reflect a reclassification
of (pounds)4,537,000 from pension costs to wages and salaries.
- 31 -
<PAGE>
26. Directors' emoluments
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
Fees 25 27
Salary payments (including benefits in kind) 568 555
Pension contributions 40 41
Annual incentive payments 114 453
Consideration paid to third party
for services of director 69 83
---- -----
816 1,159
==== =====
</TABLE>
27. Pension and similar obligations
The group operates a number of defined benefit and defined contribution
schemes according to local practice and requirements. Apart from the book
reserved amounts, mainly in Germany, Belgium and Colombia, the assets of
the schemes are held in separately administered funds. All major defined
benefit schemes are reviewed on a triennial basis by independent actuaries
for funding purposes. The liabilities of the book reserved funds as at 31
December 1996 are shown under pension provisions in note 18.
Pension costs for the major schemes are assessed in accordance with the
advice of independent professionally qualified actuaries. The total
pension cost for the group was (pounds)3,754,000 (1995: (pounds)3,848,000)
of which (pounds)3,270,000 (1995: (pounds)3,372,000) relates to overseas
schemes. Of these amounts (pounds)1,324,000 (1995: (pounds)1,669,000) were
paid to defined contribution schemes.
The three largest schemes are in the UK, Germany and Switzerland and are
of the defined benefit type. The details of the latest valuation of these
schemes which have been used for the purpose of these financial statements
and the actuarial assumptions applied are as follows:
<TABLE>
<CAPTION>
UK Germany Switzerland
<S> <C> <C> <C>
Date of last valuation 31/03/96 01/01/96 01/01/95
Method of valuation Projected Unit Projected Unit Projected Unit
Market value of assets at valuation (pounds)14,699,000 (pounds)2,000,000 (pounds)6,100,000
Level of funding 107% 101%* 106%
Principal valuation assumptions
Rate of increase in salaries 6.5% 4.0% 3.0%
Rate of return on investments 8.5% 7.0% 4.5%
Rate of increase in pensions in payment 3.0% 2.5% N/A
Rate of increase in dividend income 4.5% N/A N/A
Rate of increase applied to discount liabilities 8.5% 7.0% 4.5%
</TABLE>
* Including a further (pounds)8,030,000 (1995: (pounds)6,722,000) book
reserved amount.
28. Capital commitments
<TABLE>
<CAPTION>
Group Company
1996 1995 1996 1995
Future capital expenditure: (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Contracted but not provided for 3,573 1,447 -- --
===== ===== ====== =====
Authorised but not contracted for 8,077 8,990 -- --
===== ===== ====== =====
</TABLE>
The group has an obligation to buy a plot of land for DM2,103,750 at the
option of the landowner. This option expires in 2015.
- 32 -
<PAGE>
29. Financial commitments
The group had commitments to making the following payments during the next
year in respect of operating leases:
<TABLE>
<CAPTION>
1996 1996 1995 1995
Land & Land &
buildings Other buildings Other
Leases which expire: (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Within one year 832 751 959 690
Between two to five years 2,485 1,574 1,426 1,394
After five years 1,077 106 823 68
----- ----- ----- -----
4,394 2,431 3,208 2,152
===== ===== ===== =====
</TABLE>
It is group practice as part of the normal course of business to buy
currency forward to meet current and budgeted foreign currency
transactions. At the balance sheet date the group had outstanding
contracts to buy foreign currency amounting to (pounds)28,719,000 (1995:
(pounds)27,955,000).
30. Contingent liabilities
Company
1996 1995
(pounds)'000 (pounds)'000
Maximum amount of guarantees in repect of
bank overdrafts of subsidiary undertakings 12,027 36,916
====== =======
In addition to the above, the parent Company had granted letters of
comfort to three banks in connection with facilities amounting to
(pounds)6,283,000 (1995: (pounds)1,265,000).
31. Notes to the cash flow statement
a) Net cash inflow/(outflow) from operating activities
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
Operating (loss)/profit (466) 11,907
Depreciation charges 11,601 10,838
(Gain)/loss on sale of tangible fixed assets (38) 87
Decrease/(increase) in stocks 4,929 (7,128)
(Increase) in debtors (6,114) (204)
Increase/(decrease) in creditors 2,907 (14,279)
(Decrease) in provisions (1,141) (4,162)
------ ------
Net cash inflow/(outflow) from operating activities 11,678 (2,941)
====== ======
</TABLE>
- 33 -
<PAGE>
b) Reconciliation of net cash flow to movement in net debt
<TABLE>
<CAPTION>
1996 1995
(pounds)'000 (pounds)'000
<S> <C> <C>
(Decrease) in cash in the year (4,691) (10,565)
Cash outflow from decrease in debt (1,220) (3,095)
Cash inflow/(outflow) from decrease/(increase) in liquid resources 2,121 (5,360)
------ -------
Change in net debt resulting from cash flows (3,790) (19,020)
Other non-cash items:
Conversion of other loan into preference shares 5,961 --
New finance leases (892) (4,261)
Effect of foreign exchange rates 2,980 (237)
------ -------
Movement in net debt in the year 4,259 (23,518)
Net debt as at 31 December 1995 (13,764) 9,754
------ -------
Net debt as at 31 December 1996 (9,505) (13,764)
====== =======
</TABLE>
c) Analysis of changes in net debt
<TABLE>
<CAPTION>
Net debt Cash Non cash Exchange Net debt
1995 flow movements movement 1996
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C> <C>
Cash in hand and at bank 24,994 (5,972) -- (2,169) 16,853
Bank overdrafts (see note 16) (4,054) 1,281 -- 586 (2,187)
------
(4,691)
Debt due within one year (5,437) (2,799) -- 704 (7,532)
Debt due after one year (34,743) 1,273 5,961 4,230 (23,279)
Finance leases (4,900) 306 (892) 804 (4,682)
------
(1,220)
Cash deposits (see note 15) 10,376 2,121 -- (1,175) 11,322
------- ------ ----- ------ ------
(13,764) (3,790) 5,069 2,980 (9,505)
======= ====== ===== ====== ======
</TABLE>
d) Cash flow relating to fundamental restructuring costs
The group cash outflow of (pounds)1,340,000 relates to the restructuring
plan made in respect of the acquisition by SLI BV of the international
lighting division of the GTE Corporation and GTE International
Incorporated in 1993.
e) Major non cash movements during the year
During the year other loans were cancelled in exchange for 80,311
preference shares creating a non cash movement of (pounds)5,961,000 in the
net debt position.
- 34 -
<PAGE>
32. Sylvania Lighting International B.V. listing of principal group companies
<TABLE>
<CAPTION>
Country of Percentage
operation and of share
Subsidiary companies incorporation capital held
<S> <C> <C>
Sylvania Lighting International Pty Ltd. Australia 100%
Sylvania Ges.mbH Austria 100%
Sylvania N.V. Belgium 100%
S&I Electric N.V. Belgium 100%
Sylvania Illuminacao Ltda Brazil 100%
Sylvania S.A. Costa Rica 100%
Sylvania A/S Denmark 100%
Sylvania SA de C.V. El Salvador 100%
Sylvania Lumiance OY Finland 100%
Le Dauphin S.A. France 100%
SLI France S.A. France 100%
SLI Lichtsysteme GmbH Germany 100%
Sylvania S.A. Guatemala 100%
Sylvania A.E. Greece 100%
Sylvania Asia Pacific Ltd. Hong Kong 100%
Branch office Singapore
Sylvania Spa Italy 100%
Sylvania Mexico SA de CV Mexico 75%
Lumiance B.V. Netherlands 100%
Flowil International Lighting (Holding) B.V.* Netherlands 100%
Sylvania S.A. N.V. Netherlands Antilles 100%
Branch office Colombia
Branch office Ecuador
Sylvania Export Corporation N.V. Netherlands Antilles 100%
Branch office Peru
Sylvania Lighting International Ltd. New Zealand 100%
Sylvania A/S Norway 100%
Sylvania de Panama S.A. Panama 100%
Sylvania Ltda Portugal 100%
SLI Sylvania S.A. Spain 100%
Sylvania AB Sweden 100%
Sylvania Lighting S.A. Switzerland 100%
Sylvania (Thailand) Ltd. Thailand 100%
SLI Lighting Ltd. United Kingdom 100%
Concord Lighting Ltd. United Kingdom 100%
</TABLE>
* Flowil International Lighting (Holding) B.V. is held directly by Sylvania
Lighting International B.V.. All other holdings are indirect.
- 35 -
<PAGE>
Other information
Appropriation of results
In accordance with Article 15 of the company's Articles of Association, the
result for the year is at the disposal of the General Meeting of Shareholders.
A proposal to take the result for the year to retained earnings has been
incorporated into these financial statements.
- 36 -
<PAGE>
Summary of accounts
for the four years ended 31 December 1996
<TABLE>
<CAPTION>
1993 1994 1995 1996
Proforma* Restated
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Turnover 348,607 367,205 387,222 377,629
Cost of sales (243,784) (245,861) (258,437) (260,434)
-------- -------- -------- --------
Gross profit 104,823 121,344 128,785 117,195
Net operating expenses (106,280) (114,092) (116,878) (117,661)
-------- -------- -------- --------
Operating profit/(loss) from continuing operations (1,457) 7,252 11,907 (466)#
Income from interest in discontinued associated undertaking 1,278 1,460 -- --
Profit on sale of associated undertaking -- 5,495 -- --
Profit on sale of fixed assets -- -- 1,238 551
-------- ------- -------- --------
Profit/(loss) on ordinary activities before interest (179) 14,207 13,145 85
Net interest payable and similar charges (3,368) (682) (2,710) (3,512)
-------- --------- -------- --------
Profit/(loss) on ordinary activities before taxation (3,547) 13,525 10,435 (3,427)
Tax on ordinary activities (3,746) (2,996) (2,791) (3,570)
-------- --------- -------- --------
Profit/(loss) on ordinary activities after taxation (7,293) 10,529 7,644 (6,997)
Minority interests 333 (314) 11 18
-------- -------- -------- --------
Profit/(loss) for the financial year (6,960) 10,215 7,655 (6,979)
Dividends and other appropriations in
respect of non-equity shares (618) (726) (1,562) 247
------- ------- ------- ------
Profit/(loss) retained in year (7,578) 9,489 6,093 (6,732)
======== ======== ======== ========
Net assets employed
Fixed assets 72,427 74,014 86,356 74,110
Net current assets 81,139 70,403 67,196 55,798
-------- -------- -------- --------
153,566 144,417 153,552 129,908
Non-current liabilities (51,977) (31,235) (30,850) (24,237)
Provisions (27,682) (32,880) (31,321) (17,671)
-------- ------- -------- --------
73,907 80,302 91,381 88,000
======== ======== ======== ========
Ratios
Gross profit margin 30.1% 33.0% 33.3% 31.0%
Return on capital employed + -2.0% 9.0% 13.0% 4.3%
</TABLE>
+ Calculated as operating profit before exceptional charges divided by net
assets.
* The trading figures for 1993 are based on 11 months audited statements and one
month management accounts of the group before its purchase by SLI B.V.
# After an exceptional charge of (pounds)4,250,000.
- 37 -
<PAGE>
These accounts were approved by the Board of Directors of Sylvania Lighting
International B.V. on 20 March 1997.
Directors: Mr. E.P. Bartlett
Mr. J.C. Botts
Mr. J.F. Joy
Mr. N. Scoular
Prof. Dr. J. Semler
Mr. M.D.C. Smith
Mr. M. Swaanen
- 38 -
<PAGE>
Annual report 1995
Sylvania Lighting International B.V.
Haarlem
<PAGE>
SYLVANIA LIGHTING INTERNATIONAL BV
[LOGO]
Annual report
for the year ended 31 December 1995
<TABLE>
<CAPTION>
Pages
<S> <C>
Directors and advisers 1
Financial highlights 2
Directors' report 3-4
Financial Statements
Consolidated profit and loss account 5
Company profit and loss account 6
Balance sheets 7-8
Consolidated cash flow statement 9
Notes to financial statements 10-28
Listing of principal group companies 29
Other information 30
Summary of accounts 31-32
</TABLE>
<PAGE>
Directors and advisers
Directors
Mr. E. P. Bartlett F.C.M.A. Chief Financial Officer
Mr. J. C. Botts Chairman of the Board (1)*+
Mr. J. F. Joy (1)*+
Mr. N. Scoular F.C.M.A. President and Chief
Executive Officer
Prof. Dr. J. Semler (1)*+
Mr. M. D. C. Smith (1)
Mr. M. Swaanen B.Sc. (Mech. Eng.) Executive
Vice-President Lamp Operations
(1) Non-executive
* Member of the audit committee
+ Member of the remuneration committee
Registered office
S.L.I. B.V.
Oudeweg 155
2031 CC Haarlem
The Netherlands
Solicitors
CLIFFORD CHANCE
Apollolaan 171
1077 AS Amsterdam
The Netherlands
Bankers
ABN-AMRO BANK
Postbus 90
1000 AB Amsterdam
The Netherlands
<PAGE>
Financial highlights
<TABLE>
<CAPTION>
Results 1995 1994
(pounds)'000 (pounds)'000
<S> <C> <C>
Turnover 387,222 367,205
Operating profit 11,907 7,252
Profit on ordinary activities before interest
and taxation 13,145 14,207
Profit for the financial year 7,655 10,215
Total recognised gains 11,211 14,476
Net assets 91,381 80,302
Key ratios
Gross profit 33.3% 33.0%
Return on capital employed * 13.0% 9.0%
</TABLE>
* Calculated as operating profit divided by net assets
<TABLE>
<CAPTION>
1995 results in: US German French Japanese
Dollars Marks Francs Yen
US$'000 DM'000 FFR'000 YEN'000
<S> <C> <C> <C> <C>
Turnover 611,811 878,994 3,059,054 57,823,861
Operating profit 18,813 27,029 94,065 1,778,072
Profit for the financial
year 12,095 17,377 60,475 1,143,121
Net assets 141,641 203,780 694,496 14,551,510
Exchange rates to(pounds) US$ DM FFR YEN
Average 1.58 2.27 7.9 149.33
Closing 1.55 2.23 7.6 159.24
</TABLE>
- 2 -
<PAGE>
Directors' report
for the year ended 31 December 1995
The directors present their report and the audited financial statements for the
year ended 31 December 1995.
Principal activities
The principal activities of the group are unchanged from last year, and are the
design, manufacture and distribution of lighting products.
Review of business
The momentum of SLI's rejuvenation quickened in 1995. Following the 1993
acquisition and reorganisation of its operations, 1994 saw dynamic investment in
strategic development. In 1995, those strategic developments began to bear
fruit, the "orderly revolution" yielding results well ahead of the original plan
in all aspects of the group's performance.
Sales and Customers
Sales improved despite dull economic conditions in most European countries,
where 78% of SLI's sales originate. Some 13% of European sales in 1995 were
derived from new products. These were launched over the last 3 years,
demonstrating an active displacement of mature products with new energy-saving
ones.
1995 saw a continuation of SLI's pro-active brand marketing policy, targeting
growth sectors, particularly Compact Fluorescent and Halogen products. By
energising its brands, SLI nourished a rare blend of innovation, quality and
customer service, thereby adding value to the business of its customers. In
pursuing a selective distribution policy, SLI has been rewarded by growing
loyalty from its major local and, increasingly, international customers.
Research and Development
In response to the lighting users' consistent demand for innovation, SLI's
Research and Development (R&D) activities were again expanded; this time by
26%, on top of last year's 51% increase. In 1995, (pounds)6.9 million (1994
(pounds)5.5 million) of costs attributable to research and development have
been written off.
Over the last 3 years, product competency centres have succeeded in halving
the typical product development-to-launch time. SLI's objective of being
'quick to market' with innovative value-added products became a consistent
reality. SLI's ability to leverage the benefits of being one of the world's
few integrated lighting companies became ever more potent and was frequently
acknowledged by the market place.
Capital Investment
Capital investment was at a record level, 78% higher than the level of
depreciation. In 1995, the Group invested (pounds)19.2 million (1994
(pounds)15.8 million) mainly in new production facilities in lamps and
fixtures, commercial competency centres and central warehousing in order to
expand sales in selected products and to improve cost efficiencies.
SLI's long-term development plans aim to position SLI as a leading-edge
technology business in all growth sectors of the lamp and fixture industry.
Capital Investment in 1996 will continue to support the considerable
opportunities identified in growth markets.
- 3 -
<PAGE>
Acquisitions
Although SLI's focus in 1995 continued to be upon the organic development of
its business strategy, small acquisitions addressed opportunities to exploit
product niches and growth countries. During 1995, SLI acquired an agricultural
plant growth business in the Netherlands, which will allow the group to
develop sales of speciality lamp and fixture packages. In addition, a lighting
design and marketing business in Finland was acquired, giving SLI reach into
the Baltic States and Western Russia. Late in the year, an agreement was
reached to acquire Kliktube, a small but strategic linear systems lighting
business in Australia and New Zealand.
In 1996, SLI will continue its organic development and seek to acquire
strategic businesses in areas of familiarity. These provide a low risk means
of growth.
Dividends and transfers to reserves
In accordance with the Company's articles
and the terms of the cumulative redeemable preference shares a dividend of
(pounds)861,000 (1994: (pounds)0 ) was payable.
A profit of (pounds)6,093,000 (1994: (pounds)9,489,000) will be transferred to
the group's reserves, after charging the above dividend, together with
associated appropriations on the cumulative redeemable preference shares to the
result for the financial year.
Directors
The directors of the Company at 31 December 1995 are listed on page 1. Except
for R. Beaudelet who resigned on 4 April 1995 for personal reasons, all have
been in office for the whole of the year.
Employees
SLI is committed to employee involvement and has a number of well established
consultative and collective bargaining arrangements which ensure that the views
of employees are taken into account.
SLI is committed to providing equal opportunities in employment and expects the
composition of its workforce to reflect the composition of the communities in
which its offices and factories are located.
The group's policy is to recruit disabled workers for those vacancies that they
are able to fill. All necessary assistance with initial training courses is
given. Once employed, a career plan is developed so as to ensure suitable
opportunities for each disabled person. Arrangements are made, wherever
possible, for retraining employees who become disabled, to enable them to
perform work identified as appropriate to their aptitudes and abilities.
By order of the board
E.P. Bartlett
Chief Financial Officer
2 April 1996
- 4 -
<PAGE>
Consolidated profit and loss account
for the year ended 31 December 1995
<TABLE>
<CAPTION>
Restated
Note (pounds)'000 (pounds)'000
<S> <C> <C> <C>
Turnover
Continuing operations 2 387,222 367,205
Cost of sales (258,437) (245,861)
------- -------
Gross profit 3 128,785 121,344
Distribution costs 3 (84,413) (81,963)
Administration expenses 3 (32,465) (32,129)
------- ------
Operating profit
Continuing operations 3 11,907 7,252
Income from interest in discontinued associated undertaking -- 1,460
Profit on sale of associated undertaking 7 -- 5,495
Profit on sale of fixed assets 8 1,238 --
------- ------
Profit on ordinary activities before interest 13,145 14,207
Net interest payable and similar charges 9 (2,710) (682)
------- ------
Profit on ordinary activities before taxation 6 10,435 13,525
Tax on ordinary activities 10 (2,791) (2,996)
------- ------
Profit on ordinary activities after taxation 7,644 10,529
Minority interests 11 (314)
------- ------
Profit for the financial year 7,655 10,215
Dividends and other appropriations in
respect of non-equity shares 11 (1,562) (726)
------- ------
Retained profit for the year 6,093 9,489
======== ========
</TABLE>
- 5 -
<PAGE>
Company profit and loss account
for the year ended 31 December 1995
<TABLE>
<CAPTION>
1995 1994
(pounds) '000 (pounds)'000
<S> <C> <C>
Income from Subsidiaries 7,000 --
Other income/(expenditures) (689) (538)
----- -----
6,311 (538)
===== =====
</TABLE>
- 6 -
<PAGE>
Balance sheets after the appropriation of results
as at 31 December 1995
<TABLE>
<CAPTION>
Group Company
1995 1994 1995 1994
Restated Restated
Note (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets 12 3,374 3,433 47 54
Tangible assets 13 82,982 70,581 -- --
Investments 14 -- -- 8,268 8,268
------- ------- ------ ------
86,356 74,014 8,315 8,322
------ ------ ------ -----
Current assets
Stocks 15 67,536 56,238 -- --
Debtors 16 89,804 86,864 20,704 16,627
Cash at bank and in hand 27 36,491 46,902 1,305 4,216
-------- -------- ------- -------
193,831 190,004 22,009 20,843
Creditors: amounts falling due within
one year 17 (126,635) (119,601) (10,389) (9,182)
-------- -------- -------- -------
Net current assets 67,196 70,403 11,620 11,661
------- ------- ------- ------
Total assets less current liabilities 153,552 144,417 19,935 19,983
Creditors: amounts falling due after
more than one year 18 (30,850) (31,235) (7,000) (13,359)
Provisions for liabilities and charges 19 (31,321) (32,880) -- --
------- ------- ------- ------
(62,171) (64,115) (7,000) (13,359)
------- ------- ------- ------
Net assets 91,381 80,302 12,935 6,624
======= ======= ======= ======
Capital and reserves
Called up share capital 22 31 31 31 31
Share premium account 25 6,548 6,548 6,548 6,548
Other reserves 25 72,468 71,728 -- --
Profit and loss account 25 12,316 1,966 6,356 45
------- ------- ------- ------
Total shareholders' funds 26 91,363 80,273 12,935 6,624
</TABLE>
- 7 -
<PAGE>
Balance sheets after the appropriation of results
as at 31 December 1995
<TABLE>
<CAPTION>
Group Company
1995 1994 1995 1994
Restated Restated
Note (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity shareholders' funds 82,374 72,415 3,946 (1,234)
Non-equity shareholders' funds 8,989 7,858 8,989 7,858
- ------------------------------------------------------------------------------------------------------------------------
Equity minority interests 18 29 -- --
------- ------- ------- ------
91,381 80,302 12,935 6,624
======= ======= ======= ======
</TABLE>
The financial statements on pages 5 to 28 were approved by the board of
directors on 2 April 1996 and were signed on its behalf by:
E. P. Bartlett
Chief Financial Officer
- 8 -
<PAGE>
Consolidated cash flow statement
for the year ended 31 December 1995
<TABLE>
<CAPTION>
1995 1994
(pounds)'000 (pounds)'000
<S> <C> <C>
Continuing activities
Operating profit 11,907 7,252
Depreciation on fixed assets 10,838 10,016
Loss/(gain) on sale of tangible fixed assets 87 (35)
(Increase) in stocks (7,128) (208)
Decrease in debtors 2,152 7,666
(Decrease)/increase in creditors (14,279) 18,426
Increase in provisions 1,301 788
------ -------
Net cash inflow from continuing operating activities 4,878 43,905
------ -------
Net cash outflow from returns on investments
and servicing of finance (2,642) (689)
Tax paid (926) (1,044)
Net cash outflow from investing activities (17,974) (12,333)
------- -------
Net cash (outflow)/inflow before financing (16,664) 29,839
Net cash inflow/(outflow) from financing 5,519 (17,633)
------- ------
(Decrease)/increase in cash and cash equivalents (11,145) 12,206
======= ======
</TABLE>
- 9 -
<PAGE>
Notes to the Financial Statements for the Year ended 31 December 1995
1. Basis of presentation of financial statements
Sylvania Lighting International B.V., "the Company", was incorporated in
July 1992 and is registered in the Netherlands. The Company is therefore
required to prepare financial statements in accordance with the provisions
of the Dutch Civil Code Book II Title 9. Under these provisions, it is
permissible for the Company to prepare its financial statements in
accordance with generally accepted accounting principles and practices in
the United Kingdom.
Principal accounting policies
The directors have decided to prepare the financial statements in sterling
under the historical cost convention and in accordance with the applicable
Accounting Standards of the United Kingdom and the accounting and
disclosure provisions of the United Kingdom Companies Act 1985 because of
the international nature of its operations. The following is a summary of
the main group accounting policies, all of which have been consistently
applied, except as noted below.
Change in accounting policy
Appropriations made in respect of the cumulative preference shares that
are payable on redemption, previously recorded as preference dividends
accumulated within creditors falling due after more than one year, have
been reclassified to non-equity shareholders' funds as a redemption
premium within the profit and loss reserve, so as to reflect the substance
and cost of the preference shares. This has the effect of increasing the
1995 and 1994 shareholders' funds and net assets by (pounds)1,344,000, and
increasing the non-equity shareholders' appropriation by (pounds)701,000.
Comparative figures have been amended in notes 11, 18, 25 and 26 as
necessary.
Basis of consolidation
The consolidated financial statements of the group comprise the financial
statements of the Company and its subsidiaries prepared in accordance with
all the applicable Accounting Standards of the United Kingdom and the
accounting and disclosure provisions of the United Kingdom Companies Act
1985.
The results of subsidiaries acquired or disposed of during the year are
consolidated from or to their respective date of acquisition or disposal.
In order for the comparatives in notes 10 and 16 to be consistent with the
1995 disclosure, certain figures have been combined or split.
Intragroup sales and profits are eliminated fully on consolidation.
Associated undertakings
The group's share of profits of associated companies was included in the
consolidated profit and loss account up to the date that the group
disposed of its interests.
Goodwill
The negative goodwill arising from the acquisition of the international
lighting businesses of GTE Corporation and GTE International Incorporated
has been arrived at after careful consideration and evaluation of the fair
value of acquired net assets. The resultant figure has been credited
directly to reserves in accordance with SSAP 22.
- 10 -
<PAGE>
Goodwill which represents the excess of the fair value of the purchase
consideration of the business acquired over the fair values of their
identifiable net assets, is written off immediately to reserves on
acquisition. On the sale of a business, related goodwill previously
written off to reserves, is released to the profit and loss account in the
year of sale.
- 11 -
<PAGE>
Foreign currencies
Assets and liabilities of subsidiaries in foreign currencies are
translated into sterling at rates of exchange ruling at the end of the
financial year except where rates of exchange are fixed under contractual
arrangements. The results of the foreign subsidiaries are translated at
the average rate of exchange for the year, except for material
exceptional items which are translated at the rate on the date of the
transaction. Differences on exchange arising from the retranslation of
the opening net investment in subsidiary companies, and from the
translation of the results of those companies at average rate, are taken
to reserves and are reported in the statement of total recognised gains
and losses. All other foreign exchange differences are taken to the
profit and loss account in the year in which they arise.
Where the group operates in countries with hyper-inflationary economies,
adjustments are made to ensure the financial results fairly reflect the
financial position of the foreign operation. The local currency financial
results are recorded in a functional currency, monetary amounts being
recorded at the balance sheet closing rate and non-monetary amounts at
historical rate ruling when the transaction occurred. The financial
statements remeasured into the functional currency are then translated
into sterling using the method above.
Turnover
Turnover, which excludes value added and sales taxes, represents the
invoiced value of goods and services supplied to third parties.
Deferred taxation
Provision is made for deferred taxation, using the liability method, on
all material timing differences to the extent that it is probable the
liability or asset will crystallise.
Government grants
Capital grants are credited to accruals and deferred income and released
to the profit and loss account over the estimated useful life of the
assets to which they relate.
Intangible fixed assets
Intangible fixed assets comprise trademarks and patents purchased at the
date of acquisition of the international lighting businesses of GTE
Corporation and GTE International Incorporated. Costs of protecting
trademarks and patents together with the costs of registering new patents
and trademarks are charged to the profit and loss account in the year they
are incurred.
No annual provision for depreciation is made in respect of the intangible
assets acquired from GTE as it is considered that the residual value of
the trademarks and patents approximates to cost. The carrying value of the
intangible fixed assets is regularly reviewed by the directors to
determine whether there has been any permanent diminution in value.
Tangible fixed assets
Fixed assets are stated at their historical cost less accumulated
depreciation on a straight line basis over their expected useful economic
lives at the following rates;
<TABLE>
<S> <C>
Freehold buildings 2% to 5%
Long leasehold buildings 2%
Short leaseholds over term of lease
Plant and machinery - heavy 6% to 10%
- other 10% to 33%
Motor vehicles 16.7% to 33%
Computers and software 20% to 33%
</TABLE>
- 12 -
<PAGE>
Stocks and work in progress
Stocks and work in progress are stated at the lower of cost or net
realisable value on a first in first out basis. Manufactured products are
valued at direct costs plus the appropriate level of attributable
overheads based on normal levels of activity. Provisions for slow moving,
obsolete and defective stocks are made as necessary.
Finance and operating leases
Finance leases which transfer substantially all of the benefits and risks
of ownership to the group are capitalised as tangible assets and
depreciated over the shorter of the assets economic life or the expected
lease period. Outstanding obligations of such leases, net of finance
charges, are included under creditors. The finance element is charged to
the profit and loss account over the term of the lease. All other leases
are operating leases and the rentals of these are charged to the profit
and loss account as incurred.
Pension costs
The group operates a variety of defined benefit schemes and defined
contribution schemes in accordance with local conditions and practices in
the countries concerned. The schemes are reviewed every three years by
professionally qualified independent actuaries and contribution rates to
the defined benefit schemes revised accordingly. Pension costs are
accounted for on the basis of charging the expected costs of providing the
pensions over the expected service lives of the current employees. The
cost of providing other post-retirement benefits is recognised on a
similar basis.
Research and development
Expenditure on research and development is written off in the year in
which it is incurred except where major projects are undertaken where it
is reasonably anticipated that costs will be recovered through future
commercial activity. Such costs are written off over the period expected
to benefit. No development costs have been capitalised to date.
2. Analysis by geographical area
The analysis by geographical area of the group's turnover is set out
below;
<TABLE>
<CAPTION>
Turnover 1995 1995 1994 1994
Sales by Sales by Sales by Sales by
destination origin destination origin
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
Geographical segment
<S> <C> <C> <C> <C>
UK 38,742 44,799 38,660 42,872
The Netherlands 14,545 14,776 13,410 16,887
Rest of Europe 237,106 241,307 225,324 226,898
Latin America 51,850 54,154 50,997 50,865
Asia Pacific 34,172 32,186 30,753 29,683
Rest of world 10,807 -- 8,061 --
-------- -------- -------- --------
387,222 387,222 367,205 367,205
======== ======== ======== ========
</TABLE>
- 13 -
<PAGE>
3. Other operating income and expenses
<TABLE>
<CAPTION>
Year Year
ended ended
31 December 31 December
1995 1994
Restated
(pounds)'000 (pounds)'000
<S> <C> <C>
Gross profit 128,785 121,344
-------- --------
Distribution costs 84,413 81,963
Administrative expenses 32,465 32,129
-------- --------
Net operating expenses 116,878 114,092
-------- --------
Operating profit 11,907 7,252
======== ========
</TABLE>
The comparatives for the year ended 31 December 1994 have been adjusted to
reflect a reclassification of (pounds)11,363,000 from distribution costs to cost
of sales. All the above are attributable to continuing operations.
4. Directors' emoluments
<TABLE>
<CAPTION>
1995 1994
(pounds)'000 (pounds)'000
<S> <C> <C>
Fees 27 42
Salary payments (including benefits in kind) 555 523
Pension contributions 41 37
Annual incentive payments 453 506
Consideration paid to third party
for services of director 83 82
----- -----
1,159 1,190
===== =====
</TABLE>
5. Employee information
The average weekly number of persons (including executive directors)
employed by the group during the year was:
<TABLE>
<CAPTION>
1995 1994
Number Number
<S> <C> <C>
Production 3,431 3,326
Distribution 1,022 985
Administration 584 594
------ ------
5,037 4,905
====== ======
1995 1994
(pounds)'000 (pounds)'000
</TABLE>
- 14 -
<PAGE>
<TABLE>
<S> <C> <C>
Staff costs (for the above persons)
Wages and salaries 84,652 73,565
Social security costs 21,360 21,648
Pension and post retirement benefits (see note 21) 8,385 8,264
------- -------
114,397 103,477
======= =======
</TABLE>
6. Profit on ordinary activities before taxation
<TABLE>
<CAPTION>
1995 1994
(pounds)'000 (pounds)'000
<S> <C> <C>
Profit on ordinary activities before taxation is stated after charging:
Operating lease rentals:
Plant and machinery 1,851 1,313
Land and buildings 3,852 3,668
</TABLE>
7. Profit on sale of associated undertaking
During 1994 the group sold its investment in SIVI Illuminazione Spa for
(pounds)6,468,000 giving rise to a profit of (pounds)5,495,000 after the
transfer of negative goodwill previously included in reserves in respect
of the investment.
8. Profit on sale of fixed assets
During the year a profit of(pounds)945,000 arose from the disposal of a
freehold property and(pounds)293,000 from the disposal of plant and
machinery.
9. Net interest payable and similar charges
<TABLE>
<CAPTION>
1995 1994
(pounds)'000 (pounds)'000
<S> <C> <C>
Interest on loans and overdrafts :
Repayable within 5 years, not by instalments 3,087 3,074
Repayable within 5 years, by instalments 1,076 40
Interest on finance leases 114 95
------ -----
4,277 3,209
Less: interest receivable (1,567) (2,527)
------ -----
Total net interest payable 2,710 682
====== =====
</TABLE>
- 15 -
<PAGE>
10. Tax on profit on ordinary activities
<TABLE>
<CAPTION>
1995 1994
(pounds)'000 (pounds)'000
<S> <C> <C>
Tax charge on profit on ordinary activities:
Corporation and similar taxes for the year 1,627 861
Withholding tax 160 206
Deferred tax release 1,391 2,198
Over provision in respect of prior years
Corporation tax (656) (1,048)
Deferred tax 269 5
------ -----
2,791 2,222
Associated undertakings -- 774
------ -----
2,791 2,996
====== =====
The tax charge shown above comprises the following:
Tax charges/(credits) which give rise to tax payments/(repayments):
Current tax 1,787 1,632
Prior year (656) (1,035)
Release of deferred tax assets from the utilisation of tax losses
existing at acquisition together with the tax allowable elements of
fair value adjustments which have reduced the tax charges on current
year results 1,295 2,399
Other deferred tax items 365 --
------ ------
2,791 2,996
===== ======
</TABLE>
The group has tax losses carried forward of approximately (pounds)77
million (1994: (pounds)61 million). These losses may only be relieved
against future taxable trading profits arising in the countries in which
the losses reside.
11. Dividends and appropriations
<TABLE>
<CAPTION>
1995 1994
Restated
(pounds)'000 (pounds)'000
<S> <C> <C>
On non-equity shares:
Appropriations for:
Redemption premium on preference shares -- 726
Foreign exchange 701 --
Preference dividends:
First half year paid 431 --
Second half year proposed 430 --
------ ----
1,562 726
===== ===
</TABLE>
In agreement with the conditions of issue, dividend payments on the
redeemable preference shares started on 30 June 1995. (Also see change in
accounting policy described in note 1.)
- 16 -
<PAGE>
12. Intangible fixed assets
<TABLE>
<CAPTION>
Group Company
intellectual intellectual
property property
(pounds)'000 (pounds)'000
<S> <C> <C>
Cost at 1 January 1995 3,462 66
Exchange differences 4 --
Disposals (5) --
----- --
At 31 December 1995 3,461 66
----- ---
Depreciation at 1 January 1995 (29) (12)
Exchange differences (2) --
Charge for year (56) (7)
--- --
At 31 December 1995 (87) (19)
---- ----
Net book value as at 31 December 1995 3,374 47
===== ==
Net book value as at 31 December 1994 3,433 54
===== ==
</TABLE>
13. Tangible fixed assets
<TABLE>
<CAPTION>
Group Short
Freehold leasehold Fixtures
land and land and Plant and and
buildings buildings machinery fittings Total
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C> <C>
Cost at 1 January 1995 17,888 1,045 53,515 9,079 81,527
Release of fair value provisions -- -- 983 -- 983
Exchange differences 1,060 64 4,669 731 6,524
Additions 633 3,775 12,355 2,444 19,207
Disposals (1,345) -- (822) (707) (2,874)
Reclassifications within fixed assets -- -- 1,125 (1,125) --
------- ----- ------- ------- --------
At 31 December 1995 18,236 4,884 71,825 10,422 105,367
------ ----- ------- ------ -------
Depreciation at 1 January 1995 (1,779) (31) (7,049) (2,087) (10,946)
Exchange differences (198) (10) (1,549) (176) (1,933)
Charge for year (981) (60) (7,832) (1,909) (10,782)
Eliminated in respect of disposals 296 -- 324 656 1,276
------ ---- ------- ------ -------
At 31 December 1995 (2,662) (101) (16,106) (3,516) (22,385)
------- ----- -------- ------- --------
Net book value at 31 December 1995 15,574 4,783 55,719 6,906 82,982
====== ===== ====== ===== ======
Net book value at 31 December 1994 16,109 1,014 46,466 6,992 70,581
====== ===== ====== ===== ======
</TABLE>
- 17 -
<PAGE>
Included in plant and machinery is (pounds)6,305,000 (1994:
(pounds)4,169,000) relating to assets under construction (the 1994 figure
includes (pounds)1,125,000 reclassed from fixtures and fittings to plant
and machinery during 1995).
The net book value of tangible fixed assets includes an amount of
(pounds)5,045,000 (1994: (pounds)949,000) in respect of assets held under
finance leases. During the year the group entered into finance lease
arrangements in respect of fixed assets with a total capital value at the
inception of the leases of (pounds)4,261,000 (1994: (pounds)382,000).
Certain of the freehold land and buildings and part of the plant and
machinery are held as collateral to secure medium term loans and
facilities amounting to (pounds)50 million.
14. Fixed asset investments
The Company holds interests in group undertakings amounting to
(pounds)8,268,000 (1994: (pounds)8,268,000). A listing of the principal
subsidiary undertakings is given on page 28.
15. Stocks
<TABLE>
<CAPTION>
Group
1995 1994
(pounds)'000 (pounds)'000
<S> <C> <C>
Raw materials and consumables 10,373 8,525
Work in progress 6,795 4,938
Finished goods and goods for resale 50,368 42,775
------- ------
67,536 56,238
====== ======
</TABLE>
The replacement cost of stock and work in progress is not materially
different from the amount above.
- 18 -
<PAGE>
16. Debtors
<TABLE>
<CAPTION>
Group Company
1995 1994 1995 1994
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Trade debtors 73,375 67,292 -- 63
Discounted bills of exchange 4,202 7,155
Amounts owed by subsidiary
undertakings -- -- 19,893 16,414
Other debtors 4,112 4,583 213 150
Prepayments and accrued income 5,438 3,979 598 --
Deferred tax (see note 20) 590 2,131 -- --
Corporation tax recoverable 2,087 1,724 -- --
------- ------- ------- -------
89,804 86,864 20,704 16,627
======= ======= ======= =======
Amounts falling due after more
than one year included in above
Other debtors 1,062 935 -- 150
Corporation tax recoverable 1,598 1,454 -- --
Deferred tax -- 607 -- --
------ ------ ----- -----
2,660 2,996 -- 150
====== ====== ======== =====
</TABLE>
- 19 -
<PAGE>
17. Creditors: amounts falling due within one year
<TABLE>
<CAPTION>
Group Company
1995 1994 1995 1994
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Bank loans and overdrafts* 10,913 9,093 -- 27
Other loans 6,943 -- 6,943 --
Obligations under finance leases 383 227 -- --
Payments received on account 97 13 -- --
Trade creditors 55,806 53,020 -- --
Bills payable 6,169 8,291 -- --
Amounts owed to subsidiary
undertakings -- -- 1,989 6,882
Corporation tax 2,200 1,472 -- --
Other taxation and social
security 5,580 4,124 -- --
Other creditors 2,607 2,827 129 --
Accruals and deferred income 35,507 40,534 898 2,273
Proposed dividends payable 430 -- 430 --
-------- -------- ------- -----
126,635 119,601 10,389 9,182
======= ======= ====== =====
</TABLE>
* Within bank loans and overdrafts are overdrafts of (pounds)8,256,000
(1994: (pounds)9,093,000), of which (pounds)4,202,000 (1994: 7,155,000)
relates to discounted receivables secured on trade debtors.
- 20 -
<PAGE>
18. Creditors: amounts falling due after more than one year
<TABLE>
<CAPTION>
Group Company
1995 1994 1995 1994
Restated Restated
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Bank loans 25,143 20,788 7,000 7,000
Other loans -- 6,359 -- 6,359
Obligations under finance leases 4,517 615 -- --
Corporation tax 242 -- -- --
Other creditors -- 1,979 -- --
Accruals and deferred income 948 1,494 -- --
------- ------- ------ -------
30,850 31,235 7,000 13,359
====== ====== ====== ======
Bank loans, overdrafts and other
loans are repayable as follows:
In one year or less 17,856 9,093 6,943 27
Between one and two years 3,020 2,050 -- --
Between two and five years 21,589 24,797 7,000 13,359
In five years or more 534 300 -- --
------- ------- ------- ------
42,999 36,240 13,943 13,386
======= ====== ====== ======
</TABLE>
The bank borrowings repayable wholly or in part after five years amount to
(pounds)1,398,000 in total and are repayable by instalments. Of these
amounts, (pounds)612,000 bear interest at 6% and (pounds)786,000 at 5%.
An aggregate amount of (pounds)14,350,000 repayable by instalments is
included within bank borrowings repayable within five years. This bears
interest at FIBOR + between 1.0%-1.5% and is secured on freehold
properties and plant and machinery.
A further (pounds)7,000,000 is not repayable by instalments and bears
interest at LIBOR + 1.5% and is repayable on 31 January 1999.
Other loans of (pounds)6,359,000 previously classified as repayable in two
to five years, have been classified in 1995 as due within one year as the
directors anticipate early repayment. These are not repayable by
instalments and bear interest at 10% for 1995 and 12.5% for 1996.
As stated in note 1, the comparatives for 1994 have been restated to
reclassify (pounds)1,344,000 previously classed as preference dividend
accumulated, to the profit and loss reserve as a premium on redemption.
- 21 -
<PAGE>
Finance leases
The net finance lease obligations to which the group is committed are:
<TABLE>
<CAPTION>
1995 1994
(pounds)'000 (pounds)'000
<S> <C> <C>
Within one year 383 227
Between one and two years 287 212
Between two and five years 733 364
After five years 3,497 39
------ ---
4,900 842
===== ===
</TABLE>
The total obligation of leases repayable by instalments, any part of which
falls due after more than five years is (pounds)4,144,000 (1994:
(pounds)347,000).
19. Provisions for liabilities and charges
Group
<TABLE>
<CAPTION>
Other
Pensions Reorganisation provisions Total
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
At 1 January 1995 11,691 18,464 2,725 32,880
Exchange differences 707 1,866 29 2,602
Profit and loss account 828 -- -- 828
Utilised -- (5,463) (674) (6,137)
Transfer from/(to) creditors 1,650 -- (502) 1,148
------- ------- ------ -------
At 31 December 1995 14,876 14,867 1,578 31,321
====== ====== ===== ======
</TABLE>
Pension provisions relate mainly to book reserved funds in Germany,
Belgium and a number of Latin American countries (see note 21). Other
provisions relate mainly to employee fringe benefits.
20. Deferred taxation
Deferred taxation recognised in the financial statements, and the amount
unrecognised of the total potential amount, are as follows:
<TABLE>
<CAPTION>
Group Amount recognised Amount unrecognised
1995 1994 1995 1994
Restated
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Tax effect of timing differences
because of:
Excess of tax allowances over
depreciation (1,493) (1,319) (7,313) (7,253)
</TABLE>
- 22 -
<PAGE>
<TABLE>
<CAPTION>
Amount recognised Amount unrecognised
1995 1994 1995 1994
Restated
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Other - (Principally arising
on fair value adjustments) 1,819 3,186 23,019 20,251
------ ----- ------- -------
326 1,867 15,706 12,998
Add: unrelieved advance
corporation tax 264 264 -- --
------ ------ ------- -------
Net deferred tax asset 590 2,131 15,706 12,998
====== ===== ====== ======
</TABLE>
The movements on the group deferred taxation asset are as follows:
<TABLE>
(pounds)'000
<S> <C>
As at 1 January 1995 2,131
Exchange difference 119
Transfer to profit and loss account (1,660)
-----
As at 31 December 1995 590
=====
</TABLE>
Provision is made for taxation liabilities which will arise on the
distribution of profits retained by overseas subsidiaries to the extent
that it is intended to remit such profits in the foreseeable future.
The comparative for the amount unrecognised has been restated to include
losses from trading activities and to gross up the liability, arisen from
the excess of tax allowances over depreciation.
21. Pension and similar obligations
The group operates a number of defined benefit and defined contribution
schemes according to local practise and requirements. Apart from the book
reserved amounts, mainly in Germany, Belgium and Colombia, the assets of
the schemes are held in separately administered funds. All major defined
benefit schemes are reviewed on a triennial basis by independent actuaries
for funding purposes. The liabilities of the book reserved funds as at 31
December 1995 are shown under pension provisions in note 19.
Pension costs for the major schemes are assessed in accordance with the
advice of independent professionally qualified actuaries. The total
pension cost for the group was (pounds)8,385,000 (1994: (pounds)8,264,000)
of which (pounds)7,909,000 (1994: (pounds)7,820,000) relates to overseas
schemes. Of these amounts (pounds)5,592,000 (1994: (pounds)4,932,000) were
paid to defined contribution schemes.
The three largest schemes are in the UK, Germany and Switzerland and are
of the defined benefit type. The details of the latest valuation of these
schemes which have been used for the purpose of these financial statements
and the actuarial assumptions applied are as follows:
- 23 -
<PAGE>
<TABLE>
<CAPTION>
UK Germany Switzerland
<S> <C> <C> <C>
Date of last valuation 30/9/93 01/01/95 01/01/95
Method of valuation Projected Unit Projected Unit Projected Unit
Market value of assets at valuation (pounds)11,721,700 (pounds)1,771,000 (pounds)6,100,000
Level of funding 97.2% 103%* 106%
<CAPTION>
UK Germany Switzerland
Principal valuation assumptions
Rate of increase in salaries 6.5% 4.0% 3.0%
Rate of return on investments 8.5% 7.0% 4.5%
Rate of increase in pensions in payment 3.0% 2.5% N/A
Rate of increase in dividend income 4.5% N/A N/A
Rate of increase applied to discount liabilities 8.5% 7.0% 4.5%
</TABLE>
* Including a further (pounds)6,722,000 book reserved amount.
22. Share capital
<TABLE>
<CAPTION>
1995 1994
Number Par NLG Votes (pounds)'000 (pounds)'000
Authorised per share
<S> <C> <C> <C> <C> <C> <C>
"A" Ordinary shares 300,000 NLG 1.00 300,000 100 118 118
"B" Ordinary shares 200,000 NLG 0.35 70,000 35 27 27
RedeemableCumulative
Preference shares 495,000 NLG 0.01 4,950 1 2 2
-------- --------- ---- ----
374,950 147 147
======= === ====
<CAPTION>
Consideration
Issued, called up and fully paid (pounds)'000
<S> <C> <C> <C> <C> <C> <C>
"A" Ordinary shares 60,000 NLG 1.00 60,000 39 24 24
"B" Ordinary shares 40,000 NLG 0.35 14,000 26 6 6
Redeemable Cumulative
Preference shares 99,000 NLG 0.01 990 6,514 1 1
------- ------ --- ---
74,990 6,579 31 31
====== ===== == ==
</TABLE>
The preference shares may be redeemed at the earlier of a sale or listing
or 31 January 2003 at par plus associated share premium, amounting to
(pounds)7,096,000 at 31 December 1995 exchange rates, together with a
redemption premium of (pounds)1,463,000. These have a preferential right
to the return of capital on winding up. The dividend rate is fixed at 10%
per annum for 1995 and then increases by 2 1/2% per year up to a maximum
of 20%.
- 24 -
<PAGE>
23. Options in shares of SLI BV
To avoid dilution of shareholdings, the right has been granted to an
existing shareholder to receive ordinary shares for no consideration if at
anytime prior to a sale or listing, new shares are issued up to a
capitalisation of US$35 million. If the new issue takes the capitalisation
above US$35 million, then the consideration is calculated proportionately
for the capitalisation above US$35 million. This shareholder also has an
option to acquire 2,000 "A" ordinary shares and 1,980 preference shares at
US$1 per ordinary share and US$100 per preference share on a sale or
listing.
Further options have been granted for a senior manager to subscribe for
0.75% of the equity of the Company in each class of shares at a price of
US$2 per ordinary share and US$200 per preference share, and, for a group
of senior operating managers, 1.5% of the equity of the Company in each
class of share at a price of US$900 per ordinary share and US$100 per
preference share, upon a sale or listing of the Company as defined in the
shareholders' agreement which is available for inspection at the Company's
registered office.
24. Acquisitions
On 30 June 1995, the assets of Nijssen Lighting Division B.V. were
acquired, and on 7 July 1995, 100% of Lumiance O.Y. was acquired. These
acquisitions were accounted for under the acquisition method of
accounting.
The assets and liabilities of the acquired companies as at their
acquisition date are set out below, together with the adjustments to
reflect the fair value of the assets and liabilities.
<TABLE>
<CAPTION>
Net book
value at Fair value Adjusted
acquisition adjustments fair value
(pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C>
Fixed assets
Intangible assets 35 (30) 5
Tangible assets 114 8 122
Investments 6 3 9
----- ----- ------
155 (19) 136
Current assets
Stock 195 (19) 176
Debtors 126 (7) 119
Cash 155 -- 155
----- ----- -----
476 (26) 450
Creditors due within
one year (424) -- (424)
----- ----- -----
Net assets 207 (45) 162
===== ===== =====
Goodwill arising on acquisition 243
-----
Consideration in Cash 405
Less: cash acquired (155)
-----
Net cash outflow 250
=====
</TABLE>
The effect of these acquisitions on the turnover and operating profit
during the year was not material.
- 25 -
<PAGE>
25. Share premium account and reserves
<TABLE>
<CAPTION>
Group Share Profit
premium Other and loss
account reserves account
(pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C>
At 1 January 1995 as previously stated 6,548 71,728 622
Adjustment for accrued redemption premium
on preference shares (see note 1) -- -- 1,344
------ ------- -------
At 1 January 1995 as restated 6,548 71,728 1,966
Exchange differences -- -- 3,556
Adjustment to goodwill arising on
fair value at 29 January 1993 -- 983 --
Goodwill arising on acquisitions (see note 24) -- (243) --
Reversal of non-equity shareholders' appropriation -- -- 701
Retained profit for the year -- -- 6,093
------ ------- -------
At 31 December 1995 6,548 72,468 12,316
====== ====== ======
</TABLE>
As at 31 December 1995 the distributable reserves of the Company amounted
to (pounds)12.9 million (including (pounds)6.5 million of share premium
distributable under Dutch law) and that of the group (pounds)59.2 million.
<TABLE>
<CAPTION>
Company Share Profit
premium and loss
account account
(pounds)'000 (pounds)'000
<S> <C> <C>
At 1 January 1995 previously stated 6,548 (1,299)
Adjustment for accrued redemption premium
on preference shares (see note 1) -- 1,344
------ ------
At 1 January 1995 as restated 6,548 45
Retained profit for the year -- 6,311
------ ------
At 31 December 1995 6,548 6,356
====== =====
</TABLE>
26. Reconciliation of movements in shareholders' funds
<TABLE>
<CAPTION>
1995 1994
(pounds)'000 (pounds)'000
<S> <C> <C>
Profit for the financial year 7,655 10,215
Dividends and appropriations (1,562) (726)
------ ------
6,093 9,489
</TABLE>
- 26 -
<PAGE>
<TABLE>
<CAPTION>
Share Profit
premium and loss
account account
(pounds)'000 (pounds)'000
<S> <C> <C>
Other recognised gains/(losses) relating to the year (net) 3,556 4,261
Adjustment arising during the year in respect
of negative goodwill at 29th January 1993 983 (2,505)
Goodwill arising on acquisitions (243) 282
Reversal of non-equity shareholders' appropriation 701 726
Negative goodwill written back to profit and
loss account on sale of associate -- (6,453)
------- -------
Net addition to shareholders' funds 11,090 5,800
Opening shareholders' funds (originally (pounds)78,929,000
before a prior year adjustment of (pounds)1,344,000, (pounds)618,000
relating to 1993) 80,273 74,473
------- -------
Closing shareholders' funds 91,363 80,273
====== ======
</TABLE>
27. Cash and cash equivalents
<TABLE>
<CAPTION>
1995 1994
(pounds)'000 (pounds)'000
<S> <C> <C>
Changes during the year
At 1 January 1995 37,809 25,151
Net cash (outflow)/inflow before adjustments for
the effects of foreign exchange rates (11,145) 12,206
Effect of foreign exchange rates 1,571 452
------- -------
At 31 December 28,235 37,809
====== ======
Analysis of balances
Cash at bank and in hand per Balance Sheet 36,491 46,902
Bank overdrafts (see note 17) (8,256) (9,093)
------- -------
At 31 December 28,235 37,809
====== ======
</TABLE>
28. Analysis of changes in financing during the year
<TABLE>
<CAPTION>
Share Loans and Share Loans and
capital finance capital finance
(incl. lease (incl. lease
premium) obligations premiums) obligations
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
At 1 January 1995 6,579 27,989 6,579 43,355
Cash inflows/(outflows) from financing -- 5,519 -- (17,633)
Exchange differences -- 1,874 -- 1,885
Inception of finance lease contracts -- 4,261 -- 382
------ ------- ------ -------
At 31 December 1995 6,579 39,643 6,579 27,989
====== ====== ====== =======
</TABLE>
- 27 -
<PAGE>
29. Capital commitments
<TABLE>
<CAPTION>
Group Company
1995 1994 1995 1994
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
Future capital expenditure
<S> <C> <C> <C> <C>
Contracted but not provided for 1,447 2,319 -- --
===== ===== ====== =====
Authorised but not contracted for 8,990 7,654 -- --
===== ===== ====== =====
Commitments under finance leases
entered into, but not yet provided for -- -- -- --
======= ======= ====== =====
</TABLE>
During 1995 the group entered into an obligation to buy a plot of land
for(pounds)945,000 at the option of the land owner. This option expires in
2015.
30. Contingent liabilities
<TABLE>
<CAPTION>
Group Company
1995 1994 1995 1994
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Maximum amount of guarantees
in respect of bank overdrafts of
subsidiary undertakings -- -- 36,916 33,926
====== ======== ====== =======
</TABLE>
In addition to the above, the parent Company had granted letters of
comfort to two banks in connection with facilities amounting to
(pounds)1,265,000 (1994: (pounds)4,950,000).
31. Financial commitments
The group had commitments to making the following payments during the next
year in respect of operating leases:
<TABLE>
<CAPTION>
1995 1995 1994 1994
Land & Land &
buildings Other buildings Other
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Leases which expire:
Within one year 959 690 349 380
Between two to five years 1,426 1,394 1,871 1,010
After five years 823 68 1,277 62
------ ------ ------ ------
3,208 2,152 3,497 1,452
====== ====== ====== =====
</TABLE>
It is group practice as part of the normal course of business to buy
currency forward to meet current and budgeted foreign currency
transactions. At the balance sheet date the group had outstanding
contracts to buy foreign currency amounting to (pounds)27,955,000 (1994:
(pounds)9,781,000).
- 28 -
<PAGE>
Sylvania Lighting International B.V. listing of principal group companies
<TABLE>
<CAPTION>
Country of Percentage of
operation and equity share
Subsidiary companies incorporation capital held
<S> <C> <C>
Sylvania Lighting International Pty Ltd. Australia 100%
Sylvania Ges.mbH Austria 100%
Sylvania N.V. Belgium 100%
S&I Electric N.V. Belgium 100%
Sylvania Illuminacao Ltda Brazil 100%
Sylvania S.A. Costa Rica 100%
Sylvania A/S Denmark 100%
Sylvania SA de C.V. El Salvador 100%
Sylvania Lumiance OY Finland 100%
Le Dauphin S.A. France 100%
SLI France S.A. France 100%
SLI Lichtsysteme GmbH Germany 100%
Sylvania S.A. Guatemala 100%
Sylvania A.E. Greece 100%
Sylvania (Hong Kong) Ltd. Hong Kong 100%
Branch office Singapore
Sylvania Spa Italy 100%
Sylvania Mexico SA de CV Mexico 75%
Lumiance B.V. Netherlands 100%
Flowil International Lighting (Holding) B.V.* Netherlands 100%
Sylvania Export Corporation N.V. Netherlands Antilles 100%
Branch office Colombia
Branch office Ecuador
Sylvania S.A. N.V. Netherlands Antilles 100%
Branch office Peru
Sylvania Lighting International Ltd. New Zealand 100%
Sylvania A/S Norway 100%
Sylvania de Panama S.A. Panama 100%
Sylvania Ltda Portugal 100%
SLI Sylvania S.A. Spain 100%
Sylvania AB Sweden 100%
Sylvania Lighting S.A. Switzerland 100%
Sylvania (Thailand) Ltd. Thailand 100%
SLI Lighting Ltd. ** United Kingdom 100%
Concord Lighting Ltd. ** United Kingdom 100%
</TABLE>
* Flowil International Lighting (Holding) B.V. is held directly by Sylvania
Lighting International B.V. All other holdings are indirect.
** Registered in England and Wales
- 29 -
<PAGE>
Other information
Appropriation of results
In accordance with Article 15 of the company's Articles of Association, the
result for the year is at the disposal General Meeting of Shareholders of the
General Meeting of Shareholders.
A proposal to take the result for the year to retained earnings has been
incorporated into these financial statements.
- 30 -
<PAGE>
Summary of accounts
for the three years ended 31 December 1995
<TABLE>
<CAPTION>
Unaudited
Proforma * Restated
(pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C>
Turnover from continuing operations 348,607 367,205 387,222
Cost of sales (243,784) (245,861) (258,437)
-------- -------- --------
Gross profit 104,823 121,344 128,785
Net operating expenses (106,280) (114,092) (116,878)
-------- -------- --------
Operating profit/(loss) from continuing operations (1,457) 7,252 11,907
Income from interest in discontinued associated undertaking 1,278 1,460 --
Profit on sale of associated undertaking -- 5,495 --
Profit on sale of fixed assets -- -- 1,238
-------- -------- --------
Profit/(loss) on ordinary activities before interest (179) 14,207 13,145
Net interest payable and similar charges (3,368) (682) (2,710)
--------- -------- --------
Profit/(loss) on ordinary activities before taxation (3,547) 13,525 10,435
Tax on ordinary activities (3,746) (2,996) (2,791)
--------- -------- --------
Profit/(loss) on ordinary activities after taxation (7,293) 10,529 7,644
Minority interests 333 (314) 11
-------- -------- -------
Profit/(loss) for the financial year (6,960) 10,215 7,655
Dividends and other appropriation in
respect of non-equity shares (618) (726) (1,562)
------- ------- ------
Profit/(loss) retained in year (7,578) 9,489 6,093
========= ========== ========
Net assets employed
Fixed assets 74,384 75,083 86,356
Net current assets 85,390 70,403 67,196
-------- -------- --------
159,774 145,486 153,552
Non-current liabilities (45,907) (31,235) (30,850)
Provisions (40,778) (32,880) (31,321)
------- ------- -------
73,089 81,371 91,381
====== ======= ======
</TABLE>
- 31 -
<PAGE>
Ratios
Operating margin 30.1% 33.0% 33.3%
Return on capital employed + (2.0)% 8.9% 13.0%
+ Calculated as operating profit divided by net assets
* The trading figures for 1993 are based on 11 months audited statements and one
month management accounts of the group before its acquisition by SLI B.V.
These accounts were approved by the board of directors of Sylvania Lighting
International B.V. on
2 April 1995.
Directors: Mr. E.P. Bartlett
Mr. J.C. Botts
Mr. J.F. Joy
Mr. N. Scoular
Prof. Dr. J. Semler
Mr. M.D.C. Smith
Mr. M. Swaanen
- 32 -
<PAGE>
Annual report for the year ended
31 December 1994
Sylvania Lighting International B.V.
<PAGE>
SYLVANIA LIGHTING INTERNATIONAL B.V.
[LOGO]
<TABLE>
<CAPTION>
Annual report
for the year ended 31 December 1994 Pages
<S> <C>
Directors and advisers 1
Directors' report 2-3
Financial Statements
Consolidated profit and loss account 4
Company profit and loss account 5
Balance sheets 6
Consolidated cash flow statement 7-8
Notes to financial statements 9-30
List of principal group companies 31
Other information 32
</TABLE>
<PAGE>
These accounts were approved by the board of directors of Sylvania Lighting
International B.V. on 27 March 1995.
Directors :
Mr. E. P. Bartlett
Mr. R. Beaudelet
Mr. J. C. Botts
Mr. J. F. Joy
Mr. N. Scoular
Prof. Dr. J. Semler
Mr. M.D.C. Smith
Mr. M. Swaanen
<PAGE>
Directors and advisers
Directors
Mr. E.P. Bartlett F.C.M.A., ACIS, J.Dip.M.A. Chief
Financial Officer
Mr. R. Beaudelet (1)+
W. J. C. Botts Chairman of the Board (1)*+
Mr. J. F. Joy (1)*+
Mr. N. Scoular B.A., F.C.M.A. President and Chief
Executive Officer
Prof. Dr. J. Semler (1)
Mr. M.D.C. Smith (1)
W. M. Swaanen B. Sc. (Mech. Eng.) Executive Vice-President
Lamp Operations
(1) Non-executive
* Member of the audit committee
+ Member of the remuneration committee
Secretary and registered office
Mr. E.P. Bartlett
Oudeweg 155
2031 CC Haarlem
The Netherlands
Solicitors
CLIFFORD CHANCE
Apollolaan 171
1077 AS Amsterdam
The Netherlands
Bankers
ABN-AMRO BANK
Postbus 90
1000 AB Amsterdam
The Netherlands
- 1 -
<PAGE>
Directors' Report
for the year ended 31 December 1994
The directors present their second report and the audited financial statements
for the year ended 31 December 1994.
Principal activities
The principal activities of the Group which are unchanged from last year, are
the design, manufacture and distribution of lighting products.
Review of business
The consolidated profit and loss account for the year is set out on page 4.
The momentum of SLI's rejuvenation gathered place in 1994. Following the 1993
acquisition and reorganization of its operations, 1994 was a year when strategic
investments began to bear fruit. Indeed, the "olderly revolution" produced
results well ahead of expectation in all aspects of the group's performance.
Sales and Customers
After adjusting for a longer period (12 months in 1994 versus 11 months in
1993), underlying sales improved by 6%. Given the adverse economic conditions
prevailing in most European markets, where 76% of SLI sales arise, this was an
encouraging result. The entire increase in sales came from new products launched
in 1994.
Research and Product Development
Consistent with lighting users' demand for innovation, SLI's Research and
Development (R&D) activities were again expanded; this time by 51%, on top of a
28% increase in 1993. By establishing competency centres for each product group
with specialist design, production and marketing skills, SLI created an ability
to be "quick to market" with innovative value-added products. Increasingly,
SLI's competency centres brought lamp and fixture lighting solutions to the
market, leveraging the benefits of being one of the world's few integrated
lighting companies.
Capital investment
1994 saw a 62% increase in capital investment, mainly centred on new product and
process innovation. SLI's long term development plan aims to position SLI as a
leading-edge technology business in all growth sectors of the lamp and fixture
industry. Capital investment in 1995 will continue to support the considerable
opportunities identified in growth markets and will be more than double the
level of 1993.
Dividends and transfers to reserves
No dividends are payable in the year but in accordance with the Company's
articles and the terms of the cumulative redeemable preference shares, a
dividend of (pounds) 726,000 (1993 (pounds) 618,000) was accrued.
After charging the above dividend to the result for the financial year, a profit
of(pounds)9,489,000 (1993(pounds)5,227,000 loss) will be carried to the Group's
reserves.
- 2 -
<PAGE>
Changes in fixed assets
The movements in fixed assets during the year are set out in notes 10 to 12. The
Group invested (pounds) 15.8 million (1993 (pounds) 8.9 million) in new
production facilities in Lamps and Fixtures in order to expand sales in selected
products and to improve cost efficiencies. The Company also closed its Precision
Materials company and sub-contracted the work, which resulted in substantial
cost savings which will be ongoing.
Directors
The directors of the Company at 31 December 1994 are listed on page 1. Except
for Mr. M.D.C. Smith, who was appointed on 25 March 1994, all have been in
office for the whole of the year.
Employees
SLI is committed to employee involvement and has a number of well established
consultative and collective bargaining arrangements which ensure that the views
of employees are taken into account.
SLI is committed to providing equal opportunities in employment and expects the
composition of its workforce to reflect the composition of the communities in
which its offices and factories are located.
The Group's policy is to recruit disabled workers for those vacancies that they
are able to fill. All necessary assistance with initial training courses is
given. Once employed, a career plan is developed so as to ensure suitable
opportunities for each disabled person. Arrangements are made, wherever
possible, for retraining employees who become disabled, to enable them to
perform work identified as appropriate to their aptitudes and abilities.
E.P. Bartlett
Company Secretary
27 March 1995
- 3 -
<PAGE>
Consolidated profit and loss account
for the year ended 31 December 1994
<TABLE>
<CAPTION>
Year ended Period
31 December ended
1994 31 December
1993
(11 months
trading)
Note (pounds)'000 (pounds)'000
Turnover
<S> <C> <C> <C>
Continuing operations 2 367,205 316,711
Cost of sales (234,498) (211,660)
--------- ---------
Gross profit 132,707 105,051
Distribution costs (93,326) (80,822)
Administrative expenses (32,129) (23,494)
--------- ---------
Operating profit
Continuing operations 7,252 735
Income from interest in discontinued associated undertaking
1,460 1,218
Profit on sale of associated undertaking 6 5,495 --
--------- ---------
Profit on ordinary activities before interest 14,207 1,953
Net interest payable and similar charges 7 (682) (3,149)
--------- ---------
Profit/(loss) on ordinary activities before taxation 13,525 (1,196)
Tax on ordinary activities 8 (2,996) (3,746)
--------- ---------
Profit/(loss) on ordinary activities after taxation 10,529 (4,942)
Minority interests (314) 333
--------- ---------
Profit/(loss) for the financial period 10,215 (4,609)
Preference dividends 9 (726) (618)
Profit/(loss) retained in period 9,489 (5,227)
===== =======
</TABLE>
The company, which was incorporated in July 1992, did not trade until 29 January
1993 when it purchased the international lighting businesses of GTE Corporation
and GTE International Incorporated (the "companies acquired").
The comparative consolidated results for the period from incorporation to 31
December 1993 include the results of the companies acquired from the date of
acquisition to 31 December 1993, an eleven month trading period.
- 4 -
<PAGE>
Company profit and loss account
for the year ended 31 December 1994
<TABLE>
<CAPTION>
Year ended Period
31 December ended
1994 31 December
1993
(11 months
trading)
(pounds)'000 (pounds)'000
<S> <C> <C>
Income from subsidiaries -- --
Other income/(expenditure) (538) (1,015)
----- -------
(538) (1,015)
===== =======
</TABLE>
- 5 -
<PAGE>
Balance sheets after the
appropriation of results
<TABLE>
<CAPTION>
Group Company
As at 31 As at 31 As at 31 As at 31
December December December December
1994 1993 1994 1993
Note (pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets 10 3,433 3,456 54 60
Tangible assets 11 70,581 62,475 -- --
Investments 12 -- 6,496 8,268 8,268
-------- ------- ------ ------
74,014 72,427 8,322 8,328
-------- ------- ------ ------
Current assets
Stocks 13 56,238 51,713 -- --
Debtors 14 86,864 94,144 16,627 8,567
Cash at bank and in hand 25 46,902 34,336 4,216 1,787
-------- ------- ------ ------
190,004 180,193 20,843 10,354
Creditors: amounts falling due within
one year 15 (119,601) (99,054) (9,182) (1,671)
-------- ------- ------ ------
Net current assets 70,043 81,139 11,661 8,683
-------- ------- ------ ------
Total assets less current liabilities
144,417 153,566 19,983 17,011
-------- ------- ------ ------
Creditors: amounts falling due after
more than one year 16 (32,579) (51,977) (14,703) (11,193)
Provisions for liabilities and charges
17 (32,880) (26,923) -- --
Deferred taxation 18 -- (759) -- --
-------- ------- ------ ------
(65,459) (79,659) (14,703) (11,193)
-------- ------- ------ ------
Net assets 78,958 73,907 5,280 5,818
======== ======= ====== ======
Capital and reserves
Called up share capital 20 31 31 31 31
Share premium account 23 6,548 6,548 6,548 6,548
Other reserves 23 71,728 80,404 -- --
Profit and loss account 23 622 (13,128) (1,299) (761)
-------- ------- ------ ------
Total shareholders' funds 24 78,929 73,855 5,280 5,818
- ---------------------------------------------------------------------------------------------------------------------
Equity shareholders' fund 71,071 66,723 (2,578) (1,314)
Non-equity shareholders' funds 7,858 7,132 7,858 7,132
- ---------------------------------------------------------------------------------------------------------------------
Minority interests 29 52 -- --
-------- ------- ------ ------
78,958 73,907 5,280 5,818
======== ======= ====== ======
</TABLE>
The financial statements on pages 6 to 30 were approved by the board of
directors on 27 March 1995.
- 6 -
<PAGE>
Consolidated cash flow statement
for the year ended 31 December 1994
<TABLE>
<CAPTION>
Year ended Period
31 December ended
1994 31 December
1993
(11 months
trading)
(pounds)'000 (pounds)'000
<S> <C> <C>
Net cash inflow from continuing operating activities 43,905 53,616
Net cash (outflow)/inflow from returns on investments and
servicing of finance (689) 1,339
Tax paid (1,044) (1,578)
Net cash outflow from investing activities (12,333) (40,337)
Net cash inflow before financing 29,839 13,040
Net cash (outflow)/inflow from financing (17,633) 12,254
------- ------
Increase in cash and cash equivalents 12,206 25,294
======= ======
</TABLE>
- 7 -
<PAGE>
Reconciliation of operating profit to net cash inflow from operating activities
<TABLE>
<CAPTION>
Year ended Period
31 December ended
1994 31 December
1993
(11 months
trading)
(pounds)'000 (pounds)'000
<S> <C> <C>
Continuing activities
Operating profit 7,252 735
Depreciation on fixed assets 10,016 8,375
(Gain) on sale of tangible fixed assets (35) (148)
(Increase)/decrease in stocks (208) 19,182
Decrease in debtors 7,666 4,339
Increase in creditors 18,426 20,471
Increase in provisions 788 662
------ ------
Net cash inflow from continuing operating activities 43,905 53,616
------ ------
</TABLE>
- 8 -
<PAGE>
Notes to the financial statements for the year ended 31 December 1994
1. Basis of presentation of financial statements
Sylvania Lighting International B.V., the "Company", was incorporated in
July 1992 and is registered in the Netherlands. The Company is therefore
required to prepare financial statements in accordance with the provisions
of the Dutch Civil Code Book II Title 9. Under these provisions, it is
permissible for the Company to prepare its financial statements in
accordance with generally accepted accounting principles and practices in
the United Kingdom.
The Company purchased the international lighting businesses from GTE
Corporation and GTE International Incorporated on 29 January 1993, thereby
creating the Sylvania International Lighting B.V. Group (the "Group").
The financial statements on pages 5 to 31 represent the full year to 31
December 1994 and the eleven month comparative period to 31 December 1993.
Principal accounting policies
The directors have decided to prepare the financial statements in sterling
under the historical cost convention and in accordance with the applicable
Accounting Standards of the United Kingdom and the accounting and
disclosure provisions of the United Kingdom Companies Act 1985 because of
the international nature of its operations. A summary of the more
important group accounting policies is set out below.
Changes in accounting policies
Following the introduction of the new accounting standards FRS 4 'Capital
instruments' and FRS 5 'Reporting the substance of transactions' during
the year, the following changes have been made:
a) The amount of shareholders' funds attributable to equity and non-equity
interests has been separately disclosed under FRS 4.
b) In previous years bills discounted with recourse were treated as a
contingent liability. Under FRS 5 amounts received from banks in
discounting bills with recourse represent financing and are recognized as
a liability with a corresponding debtor until the bills are settled. This
has resulted in discounted bills of exchange of (pounds) 7,155,000 (1993:
(pounds) 7,283,000) now being included within debtors and a corresponding
liability under bank loans and overdrafts. The comparative figures in the
balance sheet and cash flow statement and applicable notes to the accounts
have been restated accordingly.
- 9 -
<PAGE>
Basis of consolidation
The consolidated financial statements of the Group comprise of the
financial statements of the Company and its subsidiaries all of which are
made up to 31 December 1994, and include the results of associated
undertakings on the basis set out below.
The results of subsidiaries acquired or disposed of during the year are
consolidated from or to their respective date of acquisition or disposal.
Intra-group sales and profits are eliminated fully on consolidation.
Associated undertakings
The Group's share of profits of associated companies is included in the
consolidated profit and loss account up to the date that the Group
disposed of its interests. The amounts are taken from management accounts
of those undertakings prepared up to the date of disposal.
Negative goodwill
The negative goodwill arising from the acquisition of the international
lighting businesses of GTE Corporation and GTE International Incorporated
has been arrived at after careful consideration and evaluation of the fair
value of acquired net assets. The resultant figure has been credited
directly to reserves in accordance with SSAP 22.
Turnover
Turnover, which excludes value added and sales taxes, represents the
invoiced value of goods and services supplied to third parties.
Government grants
Capital grants are credited to accruals and deferred income and released
to the profit and loss account over the estimated useful life of the
assets to which they relate.
Foreign currencies
Assets and liabilities of subsidiaries in foreign currencies are
translated into sterling at rates of exchange ruling at the end of the
financial year and the results of the foreign subsidiaries are translated
at the average rate of exchange for the year. Differences on exchange
arising from the retranslation of the opening net investment in subsidiary
companies, and from the translation of the results of those companies at
average rate, are taken to reserves and are reported in the statement of
total recognized gains and losses. All other foreign exchange differences
are taken to the profit and loss account in the year in which they arise.
- 10 -
<PAGE>
Where the group operates in countries with hyper-inflationary economies,
adjustments are made to ensure the financial results fairly reflect the
financial position of the foreign operation. The local currency financial
results are recorded in the functional currency, by applying the temporal
method. The financial statements remeasured into functional currency are
then translated into sterling using the method above.
Deferred taxation
Provision is made for deferred taxation, using the liability method, on
all material timing differences to the extent that it is probable the
liability or asset will crystallise.
Intangible fixed assets
Intangible fixed assets comprise trademarks and patents purchased at the
date of acquisition of the international lighting businesses of GTE
Corporation and GTE International Incorporated.
Costs of protecting trademarks and patents together with the costs of
registering new patents and trademarks are charged to the profit and loss
account in the year they are incurred.
No annual provision for depreciation is made in respect of the intangible
assets acquired from GTE as it is considered that the residual value of
the trademarks and patents approximates to cost. The carrying value of the
intangible fixed assets is regularly reviewed by the directors to
determine whether there has been any permanent diminution in value.
Tangible Fixed assets
Fixed assets are recorded at their original cost at acquisition less
accumulated depreciation on a straight line basis at the following rates:
<TABLE>
<S> <C>
Freehold buildings 2% to 5%
Long leasehold buildings 2%
Short leaseholds over term of lease
Plant and machinery -- heavy 6% to 10%
-- other 10% to 33%
Motor vehicles 16.7% to 33%
Computers and software 20% to 33%
</TABLE>
These rates are considered to be appropriate to correctly amortize the
asset over its expected useful life.
Stocks and work in progress
Stocks and work in progress are stated at the lower of cost or net
realizable value on a first in first out basis. Manufactured products are
valued at direct costs plus the appropriate level of attributable
overheads based on normal levels of activity. Provisions for slow moving,
obsolete and defective stocks are made as necessary.
- 11 -
<PAGE>
Finance and operating leases
Finance leases which transfer substantially all of the benefits and risks
of ownership to the company are capitalized as tangible assets and
depreciation is provided accordingly. Outstanding obligations of such
leases, net of finance charges, are included under creditors. The finance
element is charged to the profit and loss account over the term of the
lease. All other leases are operating leases and the rentals of these are
charged to the profit and loss account as incurred.
Pension costs
The Group operates a variety of defined benefit schemes and defined
contribution schemes in accordance with local conditions and practices in
the countries concerned. The schemes are regularly reviewed by independent
actuaries and contribution rates to the defined benefit schemes revised
accordingly. Pension costs are accounted for on the basis of charging the
expected costs of providing the pensions over the expected service lives
of the current employees.
2. Analysis by geographical area
Turnover
<TABLE>
<CAPTION>
Year ended Period ended
31 December 1994 31 December 1993
(11 months trading)
Sales by Sales by Sales by Sales by
destination origin destination origin
(pounds) '000 (pounds) '000 (pounds) '000 (pounds) '000
Geographical segment
<S> <C> <C> <C> <C>
UK 38,660 42,872 35,250 32,839
The Netherlands 13,410 16,887 9,980 17,405
Central Europe 71,275 72,779 59,530 60,484
Rest of Europe 154,049 154,119 137,366 139,613
Latin America 50,997 50,865 40,356 40,818
Far East and Australia 30,753 29,683 26,445 25,552
Other 8,061 -- 7,784 --
------- ------- ------- -------
367,205 367,205 316,711 316,711
======= ======= ======= =======
</TABLE>
- 12 -
<PAGE>
3. Directors' emoluments
<TABLE>
<CAPTION>
Year ended Period ended
31 December 31 December
1994 1993
(11 months
trading)
(pounds) '000 (pounds) '000
<S> <C> <C>
Fees 42 12
Salary payments (including benefits in kind) 523 457
Pension contributions 37 30
Annual incentive payments 506 318
Consideration paid to third party
for services of director 82 33
----- -----
1,190 850
===== =====
</TABLE>
4. Employee information
The average weekly number of persons (including executive directors)
employed by the Group during the period was:
<TABLE>
<CAPTION>
Year Period
ended ended
31 December 31 December
1994 1993
(11 months trading)
Number Number
<S> <C> <C>
Production 3,326 3,446
Distribution 985 1,029
Administration 594 584
----- -----
4,905 5,059
===== =====
</TABLE>
- 13 -
<PAGE>
<TABLE>
<CAPTION>
Year ended Period
31 December ended
1994 31 December
1993
(11 months
trading)
(pounds) '000 (pounds) '000
<S> <C> <C>
Staff costs (for the above
persons)
Wages and salaries 73,565 62,142
Social security costs 21,648 18,596
Pension and post retirement
benefits (see note 19) 8,264 7,672
------- ------
103,477 88,410
======= ======
</TABLE>
- 14 -
<PAGE>
5. Profit on ordinary activities before taxation
<TABLE>
<CAPTION>
Year Period
ended ended
31 December 31 December
1994 1993
(11 months
trading)
(pounds) '000 (pounds) '000
Profit on ordinary activities before taxation is stated
after debiting:
<S> <C> <C>
Hire of plant and machinery - operating leases 1,313 1,020
Hire of other assets - operating leases 3,668 4,553
</TABLE>
6. Exceptional item
During the year the Group sold its investment in SIVI Illuminazione Spa.
<TABLE>
<CAPTION>
(pounds) '000
<S> <C>
Share of net assets at date of sale 7,426
Transfer of negative goodwill previously included
in reserves in respect of the investment (6,453)
Profit on disposal 5,495
-----
Satisfied by cash 6,468
=====
</TABLE>
- 15 -
<PAGE>
7. Net interest payable and similar charges
<TABLE>
<CAPTION>
Year Period
ended ended
31 December 31 December
1994 1993
(11 months
trading)
(pounds) '000 (pounds) '000
<S> <C> <C>
On bank loans, overdrafts and other loans:
Repayable within 5 years, not by instalments 3,114 4,902
On finance leases 95 125
------ ------
3,209 5,027
Less: interest receivable (2,527) (1,878)
------ ------
Total net interest payable 682 3,149
====== ======
</TABLE>
- 16 -
<PAGE>
8. Tax on ordinary activities
<TABLE>
<CAPTION>
Year Period
ended ended
31 December 31 December
1994 1993
(11 months
trading)
(pounds) '000 (pounds) '000
<S> <C> <C>
Tax on ordinary activities
United Kingdom Corporation tax at 33%
Current tax 76 380
Deferred tax 451 444
(Over) provision in prior periods (108) --
Overseas taxation
Current tax 785 591
On withholding tax 206 326
Deferred tax 1,747 1,316
(Over) provision in prior periods (935) --
Associated Companies 774 689
----- -----
2,996 3,746
===== =====
The tax charge shown above comprises the following:
Tax charges/(credit) which give rise to tax payments or repayments:
Current tax 1,632 1,917
Prior year (1,035) --
Release of deferred tax assets representing the utilization of tax
losses at the date of acquisition together with the tax allowable
elements of fair value adjustments which have reduced the tax charges
on current year results 2,399 1,829
----- -----
2,996 3,746
===== =====
</TABLE>
The Group has tax losses carried forward of approximately (pounds)43
million (1993 (pounds)35 million). These losses may only be relieved
against future taxable trading profits arising in the countries in which
the losses reside.
- 17 -
<PAGE>
9. Preference dividends
<TABLE>
<CAPTION>
Year Period
ended ended
31 December 31 December
1994 1993
(11 months
trading)
(pounds) '000 (pounds) '000
<S> <C> <C>
Final accumulated preference 726 618
--- ---
</TABLE>
No dividends are payable in the period in accordance with the Company's
articles and the terms of the cumulative redeemable preference shares.
10. Intangible fixed assets
<TABLE>
<CAPTION>
Group Company
intellectual intellectual
property property
(pounds) '000 (pounds) '000
<S> <C> <C>
Cost at 1 January 1994 3,462 66
Exchange differences 4 --
Disposals (4) ---
At 31 December 1994 3,462 66
----- ---
Depreciation at 1 January 1994 (6) (6)
Charge for period (23) (6)
----- ---
At 31 December 1994 (29) (12)
------ ---
Net book value as at 31 December 1994 3,433 54
===== ===
Net book value as at 31 December 1993 3,456 60
===== ===
</TABLE>
- 18 -
<PAGE>
11. Tangible fixed assets
Group
<TABLE>
<CAPTION>
Short
Freehold leasehold Fixtures
land and land and Plant and and
buildings buildings machinery fittings Total
(pounds) '000 (pounds) '000 (pounds) '000 (pounds) '000 (pounds) '000
<S> <C> <C> <C> <C> <C>
Cost at 1 January 1994 17,225 634 46,536 7,168 71,563
Fair value adjustment -- -- 888 -- 888
Exchange differences 609 37 2,494 253 3,393
Additions 946 438 11,884 2,488 15,756
Disposals (938) -- (4,499) (4,636) (10,073)
Reclassifications within fixed assets 46 (64) (3,788) 3,806 --
------ ----- ------ ------ -------
At 31 December 1994 17,888 1,045 53,515 9,079 81,527
------ ----- ------ ------ -------
Depreciation at 1 January 1994 (868) (30) (7,019) (1,171) (9,088)
Exchange differences (34) (1) (148) (19) (202)
Charge for period (918) (64) (7,314) (1,697) (9,993)
Eliminated in respect of disposals 41 -- 4,684 3,612 8,337
Reclassifications within fixed assets -- 64 2,748 (2,812) --
------ ----- ------ ------ -------
At 31 December 1994 (1,779) (31) (7,049) (2,087) (10,946)
------ ----- ------ ------ -------
Net book value at 31 December 1994 16,109 1,014 46,466 6,992 70,581
====== ===== ====== ====== =======
Net book value at 31 December 1993 16,357 604 39,517 5,997 62,475
====== ===== ====== ====== =======
</TABLE>
The net book value of tangible fixed assets includes an amount
of(pounds)949,000 (1993:(pounds)666,000) in respect of assets held under
finance leases.
Certain of the freehold land and buildings and part of the plant and
machinery are held as collateral to secure medium term loans (see note
16).
During the year the group entered into finance lease arrangements in
respect of fixed assets with a total capital value at the inception of the
leases of (pounds)382,000.
Company
The Company does not own any tangible fixed assets.
- 19 -
<PAGE>
12. Fixed asset investments
<TABLE>
<CAPTION>
Group Associated Other
undertaking investments Total
(pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C>
Cost or valuation
At 1 January 1994 6,438 58 6,496
Exchange differences 302 3 305
Share of retained profit 686 -- 686
Disposals (7,426) (61) (7,487)
------ --- ------
At 31 December 1994 -- -- --
====== === ======
<CAPTION>
Company
Interests
in group
undertaking
(pounds)'000
<S> <C>
Cost or valuation
At 1 January 1994 8,268
Acquisitions --
At 31 December 1994 8,268
=====
</TABLE>
Interests in group undertakings shown on page 32.
13. Stocks
<TABLE>
<CAPTION>
Group
As at As at
31 December 31 December
1994 1993
(pounds)'000 (pounds)'000
<S> <C> <C>
Raw materials and consumables 8,525 10,926
Work in progress 4,938 5,337
Finished goods and goods for resale 42,775 35,450
------ ------
56,238 51,713
====== ======
</TABLE>
The replacement cost of raw materials and consumables does not exceed the
balance sheet value of raw materials and consumables by any substantial
amount.
- 20 -
<PAGE>
14. Debtors
<TABLE>
<CAPTION>
Group Company
As at As at As at As at
31 December 31 December 31 December 31 December
1994 1993 1994 1993
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Amounts failing due after more
than one year
Amounts owed by subsidiary
undertakings -- -- -- 1,216
Other debtors 2,389 1,603 150 --
Deferred tax 607 -- -- --
------ ------ ------ -----
2,996 1,603 150 1,216
====== ====== ====== =====
Amounts falling due within one year
Trade debtors 67,292 74,853 63 6,226
Discounted bills of exchange 7,155 7,283 -- --
Amounts owed by subsidiary
undertakings -- -- 16,414 731
Amounts owed by associated
undertakings -- 1 -- --
Other debtors 3,918 3,739 -- 394
Prepayments and accrued income 3,979 6,665 -- --
Deferred tax 1,524 -- -- --
------ ------ ------ -----
83,868 92,541 16,477 7,351
------ ------ ------ -----
86,864 94,144 16,627 8,567
====== ====== ====== =====
</TABLE>
Comparative amounts for the group have been adjusted for bills of exchange
discounted as described in note 1
- 21 -
<PAGE>
15. Creditors: amounts falling due within one year
<TABLE>
<CAPTION>
Group Company
As at As at As at As at
31 December 31 December 31 December 31 December
1994 1993 1994 1993
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Bank loans and overdrafts 9,093 9,185 27 770
Obligations under finance leases 227 144 -- --
Payments received on account 13 3 -- --
Trade creditors 53,020 39,007 -- --
Bills payable 8,291 6,007 -- 14
Amounts owed to subsidiary
undertakings -- -- 6,882 --
Amounts owed to associated
undertakings -- 115 -- --
Corporation tax 1,472 1,464 -- --
Other taxation and social
security 4,124 2,588 -- 1
Other creditors 2,827 1,270 -- --
Accruals 40,534 39,271 2,273 886
------- ------ ----- -----
119,601 99,054 9,182 1,671
======= ====== ===== =====
</TABLE>
Comparative amounts for the group have been adjusted for bills of exchange
discounted as described in note 1
16. Creditors: amounts falling due after more than one year
<TABLE>
<CAPTION>
Group Company
As at As at As at As at
31 December 31 December 31 December 31 December
1994 1993 1994 1993
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Bank loans 20,788 -- 7,000 --
Other loans 6,359 42,729 6,359 10,575
Obligations under finance leases 615 482 -- --
Other creditors 1,979 1,308 -- --
Accruals and deferred income 1,494 6,840 -- --
Preference dividends accumulated 1,344 618 1,344 618
------ ------ ------ ------
32,579 51,977 14,703 11,193
====== ====== ====== ======
Bank and other loans are repayable as follows:
In one year or less 9,093 9,185 27 770
Between one and two years 2,050 -- -- --
Between two and five years 24,797 42,729 13,359 10,575
In five years or more 300 -- -- --
------ ------ ------ ------
36,240 51,914 13,386 11,345
====== ====== ====== ======
</TABLE>
The interest rate chargeable in 1994 on these loans varied between 6% and
10% for the Group and the Company.
- 22 -
<PAGE>
At 31 December 1994(pounds)13 million of bank loans (1993:(pounds)35.8
million of other loans) were secured by certain freehold properties and
certain plant and machinery.
Finance leases
The net finance lease obligations to which the Group is committed are:
<TABLE>
<CAPTION>
As at As at
31 December 31 December
1994 1993
(pounds)'000 (pounds)'000
<S> <C> <C>
In one year or less 227 144
Between one and two years 212 203
Between two and five years 364 236
Over five years 39 43
--- ---
842 626
=== ===
</TABLE>
17. Provisions for liabilities and charges
Group
<TABLE>
<CAPTION>
Other
Pension Reorganisation provisions Total
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
At 1 January 1994 2,631 21,304 2,988 26,923
Exchange differences 9 -- 54 63
Fair value adjustment 1,022 7,129 -- 8,151
Profit and loss account 474 -- 442 916
Utilized -- (10,294) (128) (10,422)
Transfer from creditors 7,555 325 (631) 7,249
------ ------ ----- ------
At 31 December 1994 11,691 18,464 2,725 32,880
====== ====== ===== ======
</TABLE>
- 23 -
<PAGE>
18. Deferred taxation
Deferred taxation provided in the financial statements, and the amount
unprovided of the total potential liability, are as follows:
<TABLE>
<CAPTION>
As at As at As at As at
31 December 31 December 31 December 31 December
1994 1993 1994 1993
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Tax effect of timing
differences
because of:
Excess of tax allowances
over depreciation 1,319 898 -- --
Other (3,186) 150 (7,812) --
------ --- ------ ---
(1,867) 1,048 (7,812) --
Less: advance corporation (264) (289) -- --
tax
------ ----- ------ ---
Net deferred tax (2,131) 759 (7,812) --
liability/(asset) ====== ===== ====== ===
</TABLE>
The movements on the Group provision/(asset) for deferred taxation are as
follows :
<TABLE>
<CAPTION>
(pounds)'000
<S> <C>
Provision at 1 January 1994 759
Exchange difference 85
Transfer to fair value (4,461)
Transfer from creditors (717)
Transfer to profit and loss account 2,203
------
Asset at 31 December 1994 (2,131)
======
</TABLE>
No provision is made for taxation liabilities which would arise on the
distribution of profits retained by overseas subsidiaries because there is
no intention in the foreseeable future that such profits will be remitted.
19. Pension and similar obligations
The group operates a number of pension schemes of the defined benefits
type and the defined contribution type according to local practice and
requirements. Apart from Germany, the assets of the schemes are held in
separately administered funds and are regularly reviewed. The liabilities
of the book reserved finds at 31 December 1994 are shown under pension
provisions in note 17.
- 24 -
<PAGE>
A review of the assets and liabilities of the schemes is regularly carried
out by an independent international firm of benefit consultants. The
assumptions which have the most significant effects on the results of the
valuations are those relating to the expected rate of return on assets and
the rates of increase in salaries and pensions. Typical assumptions for
the European, Far East and Latin American schemes are that rates of return
on assets will be 5 % to 10 % per annum, salary increases will be 3 % to 7
% per annum and pension increases will be 2% per annum.
The actuarial value of assets in funded schemes, together with book
reserves amounted to (pounds)30,795,000 (1993 (pounds)29,477,000). For the
principal schemes, the actuarial asset value was sufficient to cover
between 61 % and 115% of projected accrued liabilities.
20. Called up share capital
<TABLE>
<CAPTION>
Number Par NLG As at As at
31 December 31 December
1994 1993
(pounds)'000 (pounds)'000
<S> <C> <C> <C> <C> <C>
Authorized
"A" Ordinary shares 300,000 NLG 1.00 300,000 118 118
"B" Ordinary shares 200,000 NLG 0.35 70,000 27 27
Redeemable Cumulative
Preference Shares 495,000 NLG 0.01 4,950 2 2
------- --- ---
374,950 147 147
======= === ===
</TABLE>
<TABLE>
<CAPTION>
Allotted, called up and fully paid
Consideration
(pounds)'000
<S> <C> <C> <C> <C> <C> <C>
"A" Ordinary shares 60,000 NLG 1.00 60,000 39 24 24
"B" Ordinary shares 40,000 NLG 0.35 14,000 26 6 6
Redeemable Cumulative
Preference Shares 99,000 NLG 0.01 990 6,514 1 1
------ ----- --- ---
74,990 6,579 31 31
====== ===== === ===
</TABLE>
The preference shares may be redeemed at the earlier of a sale or listing
or 31 January 2003 at par plus any share premium thereon and an amount of
aggregated accrued dividends and have a preferential right to the return
of capital on winding up. The dividend rate is fixed at 10% per annum for
1993, 1994, 1995 and then increases by 2 1/2 % per year up to a maximum of
20%.
21. Options in shares of SLI BV
A right has been granted to an existing shareholder for additional 'A'
Ordinary shares for no consideration on a sale or listing if new shares
are issued up to a capitalisation of $35 million. If the new issue takes
the capitalisation above $35
- 25 -
<PAGE>
million, then the consideration is calculated proportionately for the
capitalisation above $35 million.
Further options have been granted to subscribe for 0.75 % of the equity of
the Company in each class of shares at a price of $2 per ordinary share
and $200 per preference share, and for 1.5% of the equity of the company
in each class of share at a price of $900 per ordinary share and $100 per
preference share, upon a sale or listing of the Company as defined in the
shareholders agreement which is available for inspection at the Company's
registered office.
22. Acquisitions
On the 29th January 1993, the Company acquired the international lighting
businesses of GTE Corporation and GTE International Incorporated with the
exception of GTE's Thailand branch which was acquired on the 31st March
1993 and GTE's Export trading operation which was acquired at the end of
May 1993. On the 30th June 1994 a 51% shareholding in S&I Electric N.V.
was increased to 100%. Other than the above no other acquisitions were
made.
The acquired companies made losses before taxation of(pounds)3,353,000
from 1 January 1993 to the date of acquisition and losses
of(pounds)14,097,000 for the previous financial year.
23. Share premium account and reserves
<TABLE>
<CAPTION>
Share Profit
premium Other and loss
account reserves account
(pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C>
At 1 January 1994 6,548 80,404 (13,128)
Exchange differences -- -- 4,261
Goodwill arising on fair value adjustment -- (2,505) --
Goodwill arising on acquisition -- 282
Transfer of negative goodwill on sale of associate -- (6,453) --
Retained profit for the period -- -- 9,489
----- ------ ---
At 31 December 1994 6,548 71,728 622
===== ====== ===
Group's share of post acquisition reserves
of associated undertakings included above
At 1 January 1994 -- -- 529
Exchange differences -- -- 302
Retained profit for the period -- -- 686
Disposal -- -- (1,517)
----- ------ ---
At 31 December 1994 -- -- --
===== ====== ===
</TABLE>
- 26 -
<PAGE>
<TABLE>
<CAPTION>
Company Share Profit
premium and loss
account account
(pounds)'000 (pounds)'000
<S> <C> <C>
At 1 January 1994 6,548 (761)
Retained loss for the period -- (538)
----- ------
At 31 December 1994 6,548 (1,299)
===== ======
</TABLE>
Profit retained and the results for the period shown in the Company
accounts and the notes thereto differ from the amounts shown under these
headings in the consolidated Balance sheets and Profit and Loss account
since investment in subsidiary undertakings are stated at cost in the
Company accounts whereas the Group accounts reflect the equity value of
these investments.
24. Reconciliation of movements in shareholders' funds
<TABLE>
<CAPTION>
Year Period
ended ended
31 December 31 December 1993
1994 (11 months
trading)
(pounds)'000 (pounds)'000
<S> <C> <C>
Profit/(loss) for the financial period 10,215 (4,609)
Preference dividends (726) (618)
------ ------
9,489 (5,227)
Other recognised gains/(losses) relating to the period (net) 4,261 (7,901)
New share capital issued -- 6,579
Adjustment arising during the period in respect
of negative goodwill at 29th January 1993 (2,505) 80,404
Goodwill arising on acquisition 282 --
Negative goodwill written back to
profit and loss account on sale of associate (6,453) --
------ ------
Net addition to shareholders' funds 5,074 73,855
Opening shareholders' funds 73,855 --
------ ------
Closing shareholders' funds 78,929 73,855
====== ======
</TABLE>
- 27 -
<PAGE>
25. Cash and cash equivalents
<TABLE>
<CAPTION>
Year Period
ended ended
31 December 31 December
1994 1993
(11 months
trading)
(pounds)'000 (pounds)'000
<S> <C> <C>
Changes during the period
At beginning of period 25,151 --
Net cash inflow before adjustments for the effects
of foreign exchange rates 12,206 25,294
Effect of foreign exchange rates 452 (143)
------ ------
At 31 December 37,809 25,151
====== ======
Analysis of balances
Cash at bank and in hand per Balance Sheet 46,902 34,336
Bank overdrafts (see note 15) (9,093) (9,185)
------ ------
At 31 December - Net Cash 37,809 25,151
====== ======
</TABLE>
26. Analysis of changes in financing during the period
<TABLE>
<CAPTION>
Year ended Period ended
31 December 1994 31 December 1993
(11 months trading)
Share Share
capital Loans and capital Loans and
(incl. finance lease (incl. finance lease
premium) obligations premium) obligations
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
As at beginning of period 6,579 43,355
Acquisitions -- 36,089
New share capital issued -- -- 6,579 --
Cash (outflows)/inflows from financing -- (17,633) -- 5,675
Exchange differences -- 1,885 -- (3,564)
Inception of finance lease contracts -- 382 -- 666
Loan note issued for non-cash consideration -- -- -- 4,489
----- ------ ----- ------
At 31 December 1994 6,579 27,989 6,579 43,355
===== ====== ===== ======
</TABLE>
27. Post balance sheet events
There are no significant post balance sheet events.
- 28 -
<PAGE>
28. Capital commitments
<TABLE>
<CAPTION>
Group Company
As at As at As at As at
31 December 31 December 31 December 31 December
1994 1993 1994 1993
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Future capital expenditure
Contracted but not provided for 2,319 2,351 -- --
===== ===== ===== ====
Authorised but not contracted for 7,654 5,921 -- --
===== ===== ===== ====
Commitments under finance leases
entered into, but not yet provided for -- -- -- --
===== ===== ===== ====
</TABLE>
29. Contingent liabilities
<TABLE>
<CAPTION>
Group Company
As at As at As at As at
31 December 31 December 31 December 31 December
1994 1993 1994 1993
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Maximum amount of guarantees
in respect of bank overdrafts
of subsidiary undertakings -- 202 33,926 --
===== ===== ====== ====
</TABLE>
In addition to the above, the parent Company had granted letters of
comfort to three banks in connection with facilities amounting to
(pounds)4,950,000 (1993 (pounds)1,717,000).
It is the Group practise to buy currency forward to hedge future foreign
currency transactions. At the balance sheet date the group had entered
into hedging contracts amounting to (pounds)15,211,000 (1993:
(pounds)3,760,000).
- 29 -
<PAGE>
30. Financial commitments
The Group had commitments to making the following payments during the next
year in respect of operating leases:
<TABLE>
<CAPTION>
At 31 December 1994 At 31 December 1993
Land and Land and
buildings Other Buildings Other
(pounds)'000 (pounds)'000 (pounds)'000 (pounds)'000
<S> <C> <C> <C> <C>
Leases which expire:
Within one year 349 380 556 360
Between two to five years 1,871 1,010 2,435 1,494
After five years 1,277 62 1,087 --
----- ----- ----- -----
3,497 1,452 4,078 1,854
----- ----- ----- -----
</TABLE>
The comparative for land and buildings expiring between two and five years
has been reduced by (pounds)5,963,000 from the previous year in order to
reflect the annual payments rather than the aggregate payments.
31. Ultimate parent Company
Sylvania Lighting International B.V. is a privately held Group owned by a
number of institutional shareholders and management. The owners are
committed to a policy of continuous investment in order to realise the
long term potential of the Company.
- 30 -
<PAGE>
Sylvania Lighting International B.V. listing of principal group companies
<TABLE>
<CAPTION>
Country of Percentage
Subsidiary companies Operation and of equity
incorporation share capital held
<S> <C> <C>
Sylvania lighting International Pty Ltd. Australia 100%
Sylvania Ges.mbH Austria 100%
Sylvania N.V. Belgium 100%
S&I Electric N.V. (49% purchased 30 June 1994) Belgium 100%
Sylvania Illuminacao Ltda Brazil 100%
Sylvania S.A. Costa Rica 100%
Sylvania A/S Denmark 100%
Sylvania SA de C.V. El Salvador 100%
Sylvania OY Finland 100%
Le Dauphin S.A. France 100%
SLI France S.A. France 100%
Precision Materials (France) (Sarl) France 100%
SLI Lichtsysteme GmbH Germany 100%
Sylvania S.A. Guatemala 100%
Sylvania A.E. Greece 100%
Sylvania S.A. Honduras 100%
Sylvania (Hong Kong) Ltd. Hong Kong 100%
Branch office Singapore
Sylvania Spa Italy 100%
Sylvania Mexico SA de CV Mexico 75%
Lumiance B.V. The Netherlands 100%
Flowil International Lighting (Holding) B.V.* The Netherlands 100%
Sylvania Export Corporation N.V. Netherlands Antilles 100%
Branch office Columbia
Branch office Ecuador
Sylvania S.A. N.V. Netherlands Antilles 100%
Branch office Peru
Sylvania Lighting International Ltd. New Zealand 100%
Sylvania A/S Norway 100%
Sylvania de Panama S.A. Panama 100%
Sylvania Ltda Portugal 100%
SLI Sylvania S.A. Spain 100%
Sylvania AB Sweden 100%
Sylvania Lighting S.A. Switzerland 100%
Sylvania (Thailand) Ltd. Thailand 100%
Sylvania (U.K.) Holding Co. Ltd. ** United Kingdom 100%
SLI Lighting Ltd. ** United Kingdom 100%
Concord Lighting ** United Kingdom 100%
</TABLE>
* Flowil International Lighting (Holding) B.V. is held directly by Sylvania
Lighting International B.V.. All other holdings are indirect.
** Registered in England and Wales
- 31 -
<PAGE>
Other Information
Appropriation of results
In accordance with Article 15 of the company's Articles of Association, the
result for the year is at the disposal of the General Meeting of Shareholders.
A proposal to take the result for the year to retained earnings has been
incorporated into these financial statements.
- 32 -
<PAGE>
Unaudited Reconciliation of United Kingdom to United States generally accepted
accounting principles (in pounds Sterling - thousands) for the years ended
December 31, 1995 and 1996.
The financial statements of Sylvania Lighting International BV (the "Company")
have been prepared in accordance with the applicable Accounting Standards of the
United Kingdom and the accounting and disclosure provisions of the United
Kingdom Companies Act 1985 (collectively "U.K. GAAP"). U.K. GAAP differs in
certain respects from United States generally accepted accounting principles
("U.S. GAAP"). Difference estimated to have a significant effect on the
statements of consolidated profit (loss) and balance sheets are summarized
below.
Goodwill
Goodwill (negative goodwill) arising on the acquisition of a subsidiary is
written off in the year in which that subsidiary is required. Negative goodwill
is calculated after making provision for reorganization costs. Under U.S. GAAP,
negative goodwill is first allocated against non-current assets and any excess
negative goodwill is classified as a deferred credit and amortized to income
over the estimated period which is benefited, not to exceed 40 years. Goodwill
is capitalized and amortized through the income statement over its estimated
useful life, not exceeding 40 years.
The effect of applying U.S. GAAP on the consolidated financial statements as at
December 31, 1995 and 1996 would be to reduce non current assets, primarily
tangible fixed assets, by approximately (pounds)66,200. Further, the impact of
allocating negative goodwill against tangible fixed assets would be to reduce
the accumulated depreciation on tangible fixed assets at December 31, 1995 and
1996 by approximately (pounds)22,600 and (pounds)29,200 respectively.
Deferred Taxation
The Company provides for deferred taxation using the liability method, only to
the extent that it is probable that the liability or asset will arise in the
foreseeable future. Under Financial Accounting Standards Board Statement No. 109
"Accounting for Income Taxes" (FASB 109), all deferred taxes are recognized to
the extent that it is more likely than not that ultimately they will be
recoverable. In addition, deferred taxes are provided under FASB 109 on the
difference between the accounting and tax bases of assets and liabilities of
subsidiaries acquired.
The effect of applying FASB 109 on the consolidated financial statements as at
December 31, 1995 results in a deferred tax liability of approximately
(pounds)1,400 at December 31, 1996 and approximately (pounds)1,800 at December
31, 1996.
- 1 -
<PAGE>
Pension Costs
The group provides for the cost of retirement benefits based upon consistent
percentages of employees' pensionable pay as recommended by actuaries. Under
U.S. GAAP, FASB Statement No. 87 "Employers' Accounting for Pension Costs" (FASB
87) requires that the projected benefit obligation be matched against the fair
value of the plans' assets and be adjusted to reflect any unrecognized
obligations or assets in determining the pension cost or credit for the year.
Under FASB 87, the group's provision for pension liabilities is estimated to be
approximately (pounds)15,200 and (pounds)14,000 at December 31, 1995 and 1996,
respectively. This represents an increase of approximately (pounds)300 and
(pounds)1,600 at December 31, 1995 and 1996 respectively, over the provision for
pension liabilities reported in the financial statements prepared under U.K.
GAAP.
Foreign Currency
Under both U.K. and U.S. GAAP, the income statements of foreign subsidiaries are
translated at the average rate for the period and the balance sheets are
translated at the rate in effect on the balance sheet date. The resulting net
difference on balance sheet translation is recorded as a credit or charge to
shareholders' equity under U.K. GAAP but is required to be shown as a separate
component of shareholders' equity under U.S. GAAP. Transaction gains or losses
are reflected in the income statement under both methods of accounting.
The following is a summary of the significant adjustments to the statements of
profit and loss that would be required if U.S. GAAP had been applied instead of
U.K. GAAP.
<TABLE>
<CAPTION>
Profit available for appropriation in Pounds Years ended
Sterling-thousands December 31,
1996 1995
---- ----
<S> <C> <C>
Profit (loss) available for appropriation as reported
in the consolidated profit and loss account (6,979) 7,655
Significant adjustments:
Provision for reorganization costs 0 (498)
Adjustment to original fair value post allocation
period 10,731 983
Tangible fixed asset depreciation 6,616 7,226
Pensions and other 424 131
Taxation (359) (1,448)
----- -------
17,412 6,394
====== =====
Profit available for appropriation (net income)
as adjusted to accord with U.S. GAAP 10,433 14,049
====== ======
</TABLE>
- 2-
<PAGE>
Consolidated statement of cash flows
The Consolidated cash flow statement prepared in accordance with UK Financial
Reporting Standard No. 1 presents substantially the same information as that
required under U.S. GAAP by FASB Statement No. 95 "Statement of Cash Flows".
These standards differ, however, with regard to classification of items within
the statement and with regards to the definition of cash and cash equivalents.
Under U.S. GAAP, cash and cash equivalents would not include bank overdrafts and
borrowings with initial maturities of less than three months. Under U.K. GAAP,
cash flows are presented separately for operating activities, servicing of
finance and returns on investments, taxation, investing activities and financing
activities. U.S. GAAP, however, requires only three categories of cash flow
activity to be reported: operating, investing and financing. Cash flows from
taxation and servicing of finance and returns on investments shown under U.K.
GAAP would, with the exception of dividends paid, be included as operating
activities under U.S. GAAP. The payment of dividends would be included as a
financing activity under U.S. GAAP.
The categories of cash flow activity under U.S. GAAP can be summarized as
follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities................. 6,706 620
Cash outflows on investing activities................ (9,555) (17,974)
Cash flows from financing activities................. (1,002) 4,502
------- ------
(Increase) decrease in cash and cash equivalents..... (3,851) (12,852)
Effect on foreign exchange rate changes.............. (3,344) 1,320
Cash and cash equivalents at January 1............... 35,370 46,902
------ --------
Cash and cash equivalents at December 31............. 28,175 35,370
====== ========
</TABLE>
- 3 -
<PAGE>
CHICAGO MINIATURE LAMP, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited Pro Forma Condensed Consolidated Balance Sheet gives effect to the
acquisition of Sylvania Lighting International (SLI) as if it occurred August
31, 1997. The unaudited Pro Forma Condensed Consolidated Statement of Operations
for the nine months ended August 31, 1997 gives effect to the following as if
each had occurred on December 2, 1996: (i) the Power Lighting Products (PLP)
acquisition and (ii) the SLI acquisition. The unaudited Pro Forma Condensed
Consolidated Statement of Operations for the year ended December 1, 1996 gives
effect to the following as if each had occurred on December 4, 1995: (i) the
Alba acquisition, (ii) the PLP acquisition, and (iii) the SLI acquisition.
The unaudited Pro Forma Condensed Consolidated Financial Statements are based on
(i) Chicago Miniature Lamp, Inc.'s audited Consolidated Statement of Income for
the year ended December 1, 1996 and unaudited Consolidated Statement of Income
for the nine months ended August 31, 1997, (ii) Alba's unaudited Combined Income
Statement for the four months ended April 30, 1996, (iii) PLP, formerly Valmont
Electric, audited Consolidated Statement of Operations for the year ended
December 28, 1996 and unaudited Consolidated Statement of Operations for the two
months ended February 2, 1997 and (iv) SLI unaudited Consolidated Statement of
Operations for the year ended December 31, 1996 and unaudited Consolidated
Statement of Operations for the eight months ended August 31, 1997, restated to
reflect unaudited adjustments necessary to conform with U.S. Generally Accepted
Accounting principals and restated in U.S. Dollars.
The SLI acquisition was accounted for under the purchase method of accounting.
The total purchase price for the acquisition was allocated to tangible assets
and liabilities based on management's estimate of their fair values.
The unaudited Pro Forma Condensed Consolidated Financial Statements do not
purport to be indicative of the combined results of operations that actually
would have occurred if the transactions described above had been effected at the
dates indicated or to project future results of operations for any period. The
unaudited Pro Forma Condensed Consolidated Financial Statements should be read
in conjunction with Chicago Miniature Lamp, Inc.'s Consolidated Financial
Statements included in the Company's Form 10-K filed with the Securities and
Exchange Commission and dated February 25, 1997 and SLI's unaudited Consolidated
Financial Statements and respective related notes thereto included elsewhere in
this filing.
1
<PAGE>
PRO FORMA BALANCE SHEET
As of August 31, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
Company
Historical Pro Forma
as of SLI as of
8/31/97 Acquisition Adjustments 8/31/97
------- ----------- ----------- -------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 69,938 $ 22,148 $(40,000)(1) $ 52,086
Investments -- -- -- --
Accounts receivable, net of
allowance for doubtful accounts 34,120 90,198 -- 124,318
Inventories 45,682 89,448 -- 135,130
Prepaid expenses and other
current assets 4,156 11,180 -- 15,336
----- ------ --------- ------
Total current assets 153,896 212,974 (40,000) 326,870
Property, plant and equipment 80,328 175,381 188 (2) 255,897
Less accumulated depreciation 8,219 121,245 (121,245)(2) 8,219
----- ------- -------- -----
72,109 54,136 121,433 247,678
Other long-term assets 16,081 7,275 4,703 28,059
------ ----- ----- ------
Total assets $242,086 $274,385 $ 86,136 $602,607
======== ======== ========= ========
Short-term notes payable $ 32,395 $ 1,315 $ -- $33,710
Current portion of long-term debt 671 17,464 -- 18,135
Accounts payable and accrued
expenses 43,927 133,080 3,253 (3) 180,260
------ ------- ----- -------
Total current liabilities 76,993 151,859 3,253 232,105
Long-term debt, less current
portion 665 30,149 121,537 (4) 152,351
Other long-term liabilities 9,567 38,317 15,406 (5) 63,290
Stockholders' equity 154,861 54,060 (54,060)(6) 154,861
------- ------ ------- -------
Total liabilities and
stockholders' equity $242,086 $274,385 $ 86,136 $602,607
======== ======== ========= ========
</TABLE>
- ----------
(1) Approximately $40,000,000 of cash on hand was used to finance the
acquisition of SLI.
(2) Step-up of approximately $121,000,000 to fair market value of SLI'S fixed
assets resulting from the acquisition of SLI and the elimination of SLI's
accumulated depreciation as of acquisition date.
(3) Recognition of provisions established as of acquisition date and accrued
professional fees in connection with the SLI acquisition.
(4) Increase in bank debt to finance the SLI acquisition.
(5) Recognition of deferred tax provision and other provisions established in
connection with the SLI acquisition.
(6) Elimination in consolidation of stockholders' equity of SLI prior to the
acquisition.
2
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended August 31, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Company
Historical Pro Forma Pro Forma Pro Forma
Nine Months Adjustments Adjustments Nine Months
Ended PLP for PLP SLI for SLI ended
8/31/97 Acquisition (1) Acquisition Acquisition (4) Acquisition 8/31/97
------- --------------- ----------- ----------- --- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Net sales $131,817 $15,491 $ -- $409,914 $ -- $557,222
Cost of products sold 93,231 13,149 (50)(2) 263,950 (5,676)(5) 364,604
-------- ------ ----- ------- -------- -------
Gross margin 38,586 2,342 50 145,964 5,676 192,618
Selling, general and
administration 22,293 2,445 (25)(2) 132,444 157,157
Restructuring charges 1,415 -- -- -- -- 1,415
------- ----- ----- ------- ------- ---------
Operating income 14,878 (103) 75 13,520 5,676 34,046
Interest expense (2,591) 2,776 9,564 (6) 9,749
Other expense (income) (1,944) (5) -- 1,111 -- (838)
------- ---------- ----- ------- ------- ----------
Income before income
taxes 19,413 (98) 75 9,633 (3,888) 25,135
Income taxes 6,433 (35) 28 (3) 2,001 10 (7) 8,437
------- --------- ------ ------- -------- ---------
Net income $ 12,980 $ (63) $ 47 $ 7,632 $(3,898) $16,698
====== ======== ==== ======= ======== ========
Earnings per common
share $ 0.68 $ 0.87
========= ========
Weighted average shares
outstanding 19,201 19,106 (8)
====== =======
</TABLE>
- ----------
(1) Two months of PLP operations have been added.
(2) Depreciation has been adjusted to reflect revised estimated useful lives
and revaluation of fixed assets to fair market value as if the PLP
acquisition had occurred on December 2, 1996.
(3) The adjustment gives effect to an effective tax rate of approximately 31%
for the PLP acquisition and related Pro Forma adjustments.
(4) Nine months of SLI's operations have been added.
(5) Depreciation has been adjusted to reflect revised estimated useful lives
and revaluation of fixed assets to fair market value as if the SLI
acquisition had occurred on December 2, 1996.
(6) Interest expense has been adjusted to reflect interest expense on bank
debt as a result of the SLI acquisition and interest expense due to the
use of cash for the common stock buyback completed in May 1997, as if
these transactions occurred on December 2, 1996.
(7) The adjustment gives effect to an effective tax rate of approximately 35%
for the SLI acquisition and related Pro Forma adjustments.
(8) Pro forma weighted average shares outstanding eliminates 95,000 shares to
give effect to the common stock buyback completed in May 1997 as if this
transaction occurred on December 2, 1996.
3
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 1, 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
Company Pro Forma
Historical Adjustments
Year Ended Alba for Alba PLP
12/1/96 Acquisition (1) Acquisition Acquisition (5)
------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Net sales $94,171 $10,668 $ -- $92,945
Cost of products sold 61,147 8,146 51 (2) 78,894
------ ----- -- -- ------
Gross margin 33,024 2,522 (51) 14,051
Selling, general and
administration 14,552 2,938 (474)(3) 14,671
------ ----- ---- ------
Operating income 18,472 (416) 423 (620)
Interest expense 301 141 -- --
Other income (1,294) (49) -- (32)
------ --- --- ---
Income before income 19,465 (508) 423 (588)
taxes
Income taxes 6,029 46 (72)(4) (207)
----- -- --- ----
Net income $13,436 $ (554) $ 495 $ (381)
======= ======== ===== ========
Earnings per share $ 0.83
=======
Weighted average shares
outstanding 16,238
======
</TABLE>
- ----------
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Adjustments Pro Forma
for PLP SL for SLI Year Ended
Acquisition Acquisition (8) Acquisition 12/1/96
----------- --------------- ----------- -------
<S> <C> <C> <C> <C>
Net sales $ -- $610,588 $ -- $808,372
Cost of products sold (326)(6) 410,398 (7,568)(9) 550,742
---- ------- ------ -------
Gross margin 326 200,190 7,568 257,630
Selling, general and
administration (147)(6) 187,801 -- 219,341
---- ------- ------- -------
Operating income 473 12,389 7,568 38,289
Interest expense -- 5,679 8,505 (10) 14,626
Other income (29) -- (1,404)
---- ------ ------ ------
Income before income 473 6,739 (937) 25,067
taxes
Income taxes 170 (7) 6,353 (4,322)(11) 7,997
--- ----- ------ ------
Net income $ 303 $ 386 $ 3,385 $17,070
===== ======= ======= =======
Earnings per share $ 0.89
=======
Weighted average shares
outstanding 19,106 (12)
======
</TABLE>
(1) Four months of Alba operations have been added.
(2) Depreciation has been adjusted to reflect revised estimated useful lives
and revaluation of fixed assets to fair market value as if the Alba
acquisition had occurred on December 4, 1995.
(3) Gives effect to the Alba Acquisition and adjustments to selling, general
and administrative expenses resulting from the implementation of the
Company's acquisition plans to reduce sales commissions and realign
certain operations.
(4) The adjustment gives effect to an effective tax rate of approximately 31%
for the Alba acquisition and related Pro Forma adjustments.
(5) Twelve months of PLP operations have been added.
(6) Depreciation has been adjusted to reflect revised estimated useful lives
and revaluation of fixed assets to fair market value as if the PLP
acquisition had occurred on December 4, 1995.
(7) The adjustment gives effect to an effective tax rate of approximately 31%
for the PLP acquisition and related Pro Forma adjustments.
(8) Twelve months of SLI operations have been added.
(9) Depreciation has been adjusted to reflect revised estimated useful lives
and revaluation of fixed assets to fair market value as if the SLI
acquisition had occurred on December 4, 1995.
(10) Net interest expense has been adjusted to reflect interest expense on bank
debt incurred as a result of acquisition and interest income on net
proceeds from the October 1996 public offering after giving effect to the
common stock buyback completed in May 1997, as if these transactions
occurred on December 4, 1995.
(11) The adjustment gives effect to an effective tax rate of approximately 35%
for the SLI acquisition and related Pro Forma adjustments.
(12) Pro forma weighted average shares outstanding adds 2,868,000 shares to the
Company historical for the year ended December 1, 1996 to give effect to
the October 1996 public offering and the common stock buyback completed in
May 1997, as if these transactions occurred on December 4, 1995.
4
