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Previous: AMERICAN EXPRESS CENTURION BANK, 8-K, 1996-09-16 |
Next: KAIM NON TRADITIONAL L P/CA, SC 13D, 1996-09-16 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 1
GT BICYCLES, INC.
----------------------------------------------------------
(Exact name of the registrant as specified in its charter)
Delaware 0-26742 04-3210830
- ------------------------------- ------------ -------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
3100 West Segerstrom Avenue, Santa Ana, California 92704
--------------------------------------------------------
(Address of principal executive offices)
(714) 513-7100
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report)
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8- K,
dated July 3, 1996 as set forth in the pages attached hereto.
<PAGE> 2
<TABLE>
<CAPTION>
Sequential
Page Number
-----------
<S> <C> <C>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
------------------------------------------------------------------
(a) Financial Statements of Business Acquired 3
(b) Pro Forma Financial Information 37
(c) Exhibits
</TABLE>
<TABLE>
<CAPTION>
Exhibit Number
--------------
<S> <C> <C>
2.1 Agreement for the sale and purchase of the whole of the
issued share capital of Caratti Sport Limited, dated
July 3, 1996, between the Company and Mark Brinley Aldo
Edwards, Sarah Edwards and Philip Brinley Antonio Edwards. *
</TABLE>
* Incorporated by reference to the referenced exhibit number to the Company's
Form 8-K filed July 3, 1996.
2
<PAGE> 3
CARATTI SPORT LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDEX PAGE
<S> <C>
Report of the directors 1-2
Report of the auditors 3
Accounting policies 4-5
Profit and loss account 6
Balance sheet 7
Cash flow statement 8
Notes to the financial statements 9-14
</TABLE>
<PAGE> 4
CARATTI SPORT LIMITED
REPORT OF THE DIRECTORS
- --------------------------------------------------------------------------------
The directors present their report together with financial statements for the
year ended 31 October 1994.
PRINCIPAL ACTIVITIES
The company is principally engaged in the wholesale and retail of bicycles,
accessories and parts.
BUSINESS REVIEW
The company has traded successfully during the year and the directors expect
this to continue. The directors consider the year end position to be
satisfactory.
There was a profit for the year after taxation amounting to pound sterling
332,982. The directors do not recommend payment of a dividend and the profit
has therefore been retained.
DIRECTORS
The directors in office at the end of the year are listed below. Both
directors served throughout the year.
The interests of the directors in the shares of the company at 1 November 1993
and at 31 October 1994 were as follows:
<TABLE>
<CAPTION>
ORDINARY SHARES
1994 AND 1993
<S> <C>
M B A Edwards 15,000
P B A Edwards 15,000
</TABLE>
DIRECTORS' RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period. In preparing
those financial statements, the directors are required to :
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records, for
safeguarding the assets of the company and for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Page 1
<PAGE> 5
CARATTI SPORT LIMITED
REPORT OF THE DIRECTORS Continued
- --------------------------------------------------------------------------------
AUDITORS
Grant Thornton offer themselves for reappointment as auditors in accordance
with section 385 of the Companies Act 1985.
ON BEHALF OF THE BOARD
M B A Edwards
Director
10 August 1995
Page 2
<PAGE> 6
Grant Thornton [LOGO]
REPORT OF THE AUDITORS TO THE MEMBERS OF
CARATTI SPORT LIMITED
We have audited the financial statements on pages 4 to 14 which have been
prepared under the accounting policies set out on pages 4 and 5.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 1 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, of those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements made
by the directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the state
of the company's affairs as at 31 October 1994 and of its profit for the year
then ended and have been properly prepared in accordance with the Companies Act
1985.
GRANT THORNTON
REGISTERED AUDITORS
CHARTERED ACCOUNTANTS
BRISTOL
10 AUGUST 1995
Page 3
<PAGE> 7
CARATTI SPORT LIMITED
PRINCIPAL ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost convention.
The principal accounting policies of the company have remained unchanged from
the previous year and are set out below.
TURNOVER
Turnover is the total amount receivable by the company for goods supplied and
services provided, excluding VAT and trade discounts.
DEPRECIATION
Depreciation is calculated to write down the cost less the estimated residual
value of motor vehicles, fixtures, fittings and equipment by the reducing
balance method. Depreciation is calculated to write down the cost less
estimated residual value of computers and leasehold improvements over their
expected useful lives by equal annual instalments.
The rates and periods generally applicable are:
<TABLE>
<S> <C>
Motor vehicles 25%
Fixtures, fittings and equipment 25%
Computers 4 years
Leasehold improvements Various
</TABLE>
STOCK
Stock is stated at the lower of cost and net realisable value.
DEFERRED TAXATION
Deferred taxation is provided for under the liability method using the tax
rates estimated to arise when the timing differences reverse and is accounted
for to the extent that it is probable that a liability or asset will
crystallise. Unprovided deferred tax is disclosed as a contingent liability.
FOREIGN CURRENCIES
Transactions in foreign currencies are translated at the exchange rate ruling
at the date of the transaction. Monetary assets and liabilities in foreign
currencies are translated at the rates of exchange ruling at the balance sheet
date.
Page 4
<PAGE> 8
CARATTI SPORT LIMITED
PRINCIPAL ACCOUNTING POLICIES
Continued
- --------------------------------------------------------------------------------
LEASED ASSETS
Assets held under finance leases and hire purchase contracts are capitalised in
the balance sheet and depreciated over their expected useful lives. The
interest element of the leasing payments represents a constant proportion of
the capital balance outstanding and is charged to the profit and loss account
over the period of the lease.
All other leases are regarded as operating leases and the payments made under
them are charged to the profit and loss account on a straight-line basis over
the lease term.
CONTRIBUTIONS TO PENSION FUNDS
The pension costs charged against profits represent the amount of the
contributions payable to the schemes in respect of the accounting period.
Page 5
<PAGE> 9
CARATTI SPORT LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTE 1994 1993
POUND STERLING POUND STERLING
<S> <C> <C> <C>
Turnover 1 10,520,655 10,680,325
Cost of sales (7,952,751) (8,212,943)
----------- -----------
Gross profit 2,567,904 2,467,382
Administrative expenses (1,870,812) (1,834,086)
----------- -----------
Operating profit 14 697,092 633,296
Net interest 2 (221,000) (269,616)
----------- -----------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 1 476,092 363,680
Tax on profit on ordinary
activities 4 (143,110) (131,873)
----------- -----------
PROFIT TRANSFERRED TO RESERVES 332,982 231,807
=========== ===========
STATEMENT OF RETAINED PROFITS
At 1 November 1993 1,378,829 1,147,022
Transferred to reserves 332,982 231,807
----------- -----------
At 31 October 1994 1,711,811 1,378,829
=========== ===========
</TABLE>
There were no recognised gains or losses other than the profit for the
financial year.
The accompanying accounting policies and notes form an integral part of these
financial statements.
Page 6
<PAGE> 10
CARATTI SPORT LIMITED
BALANCE SHEET AT 31 OCTOBER 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTE 1994 1993
POUND STERLING POUND STERLING POUND STERLING
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets 5 131,725 140,077
----------
CURRENT ASSETS
Stocks 6 2,605,781 2,899,922
Debtors 7 3,034,342 2,479,740
---------- ----------
5,640,123 5,379,662
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR 8 (3,761,804) (3,838,807)
---------- ----------
NET CURRENT ASSETS 1,878,319 1,540,855
--------- ----------
TOTAL ASSETS LESS CURRENT LIABILITIES 2,010,044 1,680,932
CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR 9 (268,233) (272,103)
--------- ----------
1,741,811 1,408,829
========= ==========
CAPITAL AND RESERVES
Called up share capital 12 30,000 30,000
Profit and loss account 1,711,811 1,378,829
--------- ----------
SHAREHOLDERS' FUNDS 13 1,741,811 1,408,829
========= ==========
</TABLE>
The financial statements were approved by the Board of Directors on 10 August
1995.
M B A Edwards DIRECTOR
The accompanying accounting policies and notes form an integral part of these
financial statements.
Page 7
<PAGE> 11
CARATTI SPORT LIMITED
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 OCTOBER 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
NOTE POUND STERLING POUND STERLING POUND STERLING
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING
ACTIVITIES 14 513,156 9,413
---------
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest paid (217,410) (257,971)
Finance lease interest paid (3,590) (11,645)
-------- ---------
NET CASH OUTFLOW FROM RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE (221,000) (269,616)
-------- ---------
292,156 (260,203)
TAXATION
Corporation tax paid (144,000) (128,250)
-------- ---------
148,156 (388,453)
---------
INVESTING ACTIVITIES
Purchase of tangible fixed assets (32,546) (12,124)
Sale of tangible fixed assets 8,924 50,900
-------- ---------
NET CASH (OUTFLOW)/INFLOW FROM INVESTING
ACTIVITIES (23,622) 38,776
-------- ---------
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING 124,534 (349,677)
---------
FINANCING
Movement on invoice discounting (24,818) 36,994
Receipts from borrowing -- 100,000
Repayment of borrowings (43,718) 39,571
Capital element of finance lease rentals (51,120) (92,448)
-------- ---------
NET CASH (OUTFLOW)/INFLOW FROM FINANCING 15 (119,656) 84,117
-------- ---------
INCREASE/(DECREASE) in CASH AND CASH
EQUIVALENTS 16 4,878 (265,560)
======== =========
</TABLE>
The accompanying accounting policies and notes form an integral part of these
financial statements.
Page 8
<PAGE> 12
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
- --------------------------------------------------------------------------------
1. TURNOVER AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
The turnover and profit before taxation are attributable to the
wholesale and retail of bicycles, accessories and parts.
An analysis of turnover by geographical market is given below:
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
United Kingdom 10,004,194 10,140,356
Other EC countries 516,461 539,969
---------- ----------
10,520,655 10,680,325
========== ==========
</TABLE>
The profit on ordinary activities is stated after:
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
Auditors' remuneration 5,500 5,500
Depreciation of tangible fixed assets:
Owned 14,737 27,708
Held under finance leases and hire
purchase contracts 33,115 19,983
Other operating lease rentals 100,850 100,850
Exchange losses /(gains) 51,284 (234,070)
========== ==========
</TABLE>
2. NET INTEREST
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
On bank loans, overdrafts and other loans:
Repayable within 5 years, otherwise
than by instalments 201,045 242,139
Repayable wholly or partly in more than 5 years 16,365 15,832
Finance charges in respect of finance leases 3,590 11,645
---------- ----------
221,000 269,616
========== ==========
</TABLE>
Page 9
<PAGE> 13
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS Continued
FOR THE YEAR ENDED 31 OCTOBER 1994
- --------------------------------------------------------------------------------
3. DIRECTORS AND EMPLOYEES
Staff costs during the year were as follows:
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
Wages and salaries 838,132 709,702
Social security costs 61,516 56,111
Other pension costs 99,471 91,407
------- -------
999,119 857,220
======= =======
</TABLE>
The average number of employees of the company during the year was 55
(1993: 54).
Remuneration in respect of directors was as follows:
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
Management remuneration 305,105 183,700
======= =======
</TABLE>
The emoluments of the directors, excluding pension contributions, were
as follows:
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
The Chairman (1994 - also highest paid director) 116,750 60,400
======= =======
The highest paid director 60,500
=======
</TABLE>
The emoluments of the directors, excluding pension contributions, fell
within the following ranges:
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
pound sterling 60,001 to pound sterling 65,000 - 2
pound sterling 110,001 to pound sterling 115,000 1 -
pound sterling 115,001 to pound sterling 120,000 1 -
======= =======
</TABLE>
4. TAX ON PROFIT ON ORDINARY ACTIVITIES
The tax charge is based on the profit for the year and represents:
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
Corporation tax @33% (1993 33%) 143,110 131,873
======= =======
</TABLE>
Page 10
<PAGE> 14
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS Continued
FOR THE YEAR ENDED 31 OCTOBER 1994
- --------------------------------------------------------------------------------
5. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
SHORT
LEASEHOLD FIXTURES
IMPROVE- FITTINGS & MOTOR COMPUTER
MENTS EQUIPMENT VEHICLES EQUIPMENT TOTAL
POUND STERLING POUND STERLING POUND STERLING POUND STERLING POUND STERLING
<S> <C> <C> <C> <C> <C>
Cost
At 1 November 1993 127,835 112,305 138,948 51,844 430,932
Additions - 4,893 43,907 6,454 55,254
Disposals - - (33,594) - (33,594)
----------------------------------------------------------------------------------
At 31 October 1994 127,835 117,198 149,261 58,298 452,592
----------------------------------------------------------------------------------
Depreciation
At 1 November 1993 127,835 78,259 41,160 43,601 290,855
Provided in the year - 9,848 31,488 6,516 47,852
Disposals - - (17,840) - (17,840)
----------------------------------------------------------------------------------
At 31 October 1994 127,835 88,107 54,808 50,117 320,867
----------------------------------------------------------------------------------
Net book amount at
31 October 1994 - 29,091 94,453 8,181 131,725
==================================================================================
Net book amount at
31 October 1993 - 34,046 97,788 8,243 140,077
==================================================================================
</TABLE>
The figures stated above include assets held under finance leases and
similar hire purchase contracts, as follows:
<TABLE>
<CAPTION>
Fixtures
fittings & Motor
equipment vehicles
pound sterling pound sterling
<S> <C> <C>
Net book amount at
31 October 1994 4,177 76,667
========= =========
Net book amount at
31 October 1993 5,569 82,033
========= =========
Depreciation for the year 1,392 5,366
========= =========
</TABLE>
6. STOCKS
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
Goods for resale 2,605,781 2,899,922
========= =========
</TABLE>
There were no significant differences between the replacement cost and
the values disclosed for stock.
Page 11
<PAGE> 15
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS Continued
FOR THE YEAR ENDED 31 OCTOBER 1994
- --------------------------------------------------------------------------------
7. DEBTORS
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
Trade debtors 1,948,111 1,692,875
Amounts owed by related undertaking 395,609 453,531
Other debtors 663,532 316,834
Prepayments and accrued income 27,090 16,500
--------- ---------
3,034,342 2,479,740
========= =========
</TABLE>
8. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
Bank overdraft 629,041 633,919
Trade creditors 1,158,251 1,145,838
Amounts owed to related undertaking - 14,458
Pension fund loan - 27,000
Corporation tax 141,191 142,081
Social security and other taxes 346,883 434,282
Amounts received from invoice discounting 1,199,956 1,224,774
Accruals and deferred income 102,662 93,602
Directors' loans 63,506 80,224
Other creditors 105,203 2,976
Amounts due under finance leases 15,111 39,653
--------- ---------
3,761,804 3,838,807
========= =========
</TABLE>
The bank overdraft is secured by a fixed and floating charge over all
the assets of the company. Amounts received from the invoice
discounting company are secured over trade debtors.
9. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
Pension fund loans 254,000 254,000
Amounts due under finance leases 14,233 18,103
--------- ---------
268,233 272,103
========= =========
</TABLE>
The pension fund loans are secured by a floating charge over the
assets of the company. Of these, pound sterling 100,000 is repayable
in between two and five years and pound sterling 154,000 is repayable
after more than five years. All other amounts are due within five
years.
Page 12
<PAGE> 16
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS Continued
FOR THE YEAR ENDED 31 OCTOBER 1994
- --------------------------------------------------------------------------------
10. BORROWINGS
Borrowings are repayable as follows:
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
Within one year
Bank overdrafts 629,041 633,919
Amounts due under finance leases 15,111 39,653
Other loans - 27,000
After one and within two years
Amounts due under finance leases 14,233 18,103
After two and within five years
Other loans 100,000 100,000
After five years
Other loans 154,000 154,000
--------------------------------------
912,385 972,675
======================================
</TABLE>
11. DEFERRED TAXATION
At 31 October 1994 and 31 October 1993 there was no liability in
respect of deferred taxation.
12. SHARE CAPITAL
<TABLE>
<CAPTION>
1994 AND 1993
POUND STERLING
<S> <C>
Authorised, allotted, called up and fully paid
30,000 ordinary shares of pound sterling 1 each 30,000
======
</TABLE>
13. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
Profit for the financial year 332,982 231,807
Shareholders' funds at 1 November 1993 1,408,829 1,177,022
--------- ---------
Shareholders' funds at 31 October 1994 1,741,811 1,408,829
========= =========
</TABLE>
14. NET CASH INFLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1994 1993
POUND STERLING POUND STERLING
<S> <C> <C>
Operating profit 697,092 633,296
Depreciation 47,852 47,691
Loss on sale of tangible fixed assets 6,830 6,551
Decrease/(increase) in stocks 294,141 (227,551)
Increase in debtors (554,602) (255,099)
Increase/(decrease) in creditors 21,843 (195,475)
--------- ---------
Net cash inflow from operating activities 513,156 9,413
========= =========
</TABLE>
Page 13
<PAGE> 17
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS Continued
FOR THE YEAR ENDED 31 OCTOBER 1994
- --------------------------------------------------------------------------------
15. ANALYSIS OF CHANGES IN FINANCING
<TABLE>
<CAPTION>
LOANS AND AMOUNTS
DUE UNDER FINANCE
SHARE CAPITAL LEASES
1994 1993 1994 1993
POUND STERLING POUND STERLING POUND STERLING POUND STERLING
<S> <C> <C> <C> <C>
Balance at 1 November 1993 30,000 30,000 1,643,754 1,516,201
Net cash (outflow)/inflow
from financing - - (119,656) 84,117
Inception of finance leases - - 22,708 43,436
-----------------------------------------------------------
At 31 October 1994 30,000 30,000 1,546,806 1,643,754
===========================================================
</TABLE>
16. ANALYSIS OF CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise:
<TABLE>
<CAPTION>
CHANGE IN CHANGE IN
1994 1993 1992 1994 1993
POUND STERLING POUND STERLING POUND STERLING POUND STERLING POUND STERLING
<S> <C> <C> <C> <C> <C>
Bank overdraft 629,041 633,919 368,359 4,878 (265,560)
===============================================================================
</TABLE>
17. CAPITAL COMMITMENTS
The company had no capital commitments at 31 October 1994 or at 31
October 1993.
18. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 October 1994 or 31 October
1993 except in respect of foreign exchange and trade financing
contracts.
19. LEASING COMMITMENTS
Operating lease payments amounting to pound sterling 123,000 (1993:
pound sterling 123,000) are due within one year. The leases to which
these amounts relate expire as follows:
<TABLE>
<CAPTION>
1994 1993
LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER
POUND STERLING POUND STERLING POUND STERLING POUND STERLING
<S> <C> <C> <C> <C>
Between one and two years 19,000 22,000 - 22,000
Between two and five years 30,000 - 19,000 -
In five years or more 52,000 82,000 -
--------------------------------------------------------------
101,000 22,000 101,000 22,000
==============================================================
</TABLE>
20. TRANSACTIONS WITH DIRECTORS
The company trades with Comar Italia SRL, an Italian company in which
Mr P B A Edwards has a material interest. During the year the company
made sales to Comar SRL of pound sterling 480,000 (1993: pound
sterling 540,000) and made purchases from that company of pound
sterling 81,000 (1993: pound sterling 140,000).
Page 14
<PAGE> 18
CARATTI SPORT LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDEX PAGE
<S> <C>
Report of the directors 1 - 2
Report of the auditors 3
Accounting policies 4 - 5
Profit and loss account 6
Balance sheet 7
Cash flow statement 8
Notes to the financial statements 9 - 14
</TABLE>
<PAGE> 19
CARATTI SPORT LIMITED
REPORT OF THE DIRECTORS
- --------------------------------------------------------------------------------
The directors present their report together with financial statements for the
year ended 31 October 1995.
PRINCIPAL ACTIVITIES
The company is principally engaged in the wholesale and retail of bicycles,
accessories and parts.
BUSINESS REVIEW
The company has traded successfully during the year and the directors expect
this to continue. The directors consider the year end position to be
satisfactory.
There was a profit for the year after taxation amounting to pound
sterling 674,512. The directors do not recommend payment of a dividend and the
profit has therefore been retained.
DIRECTORS
The directors in office at the end of the year are listed below. Both
directors served throughout the year.
The interests of the directors in the shares of the company at 1 November 1994
and at 31 October 1995 were as follows:
<TABLE>
<CAPTION>
ORDINARY SHARES
1995 AND 1994
<S> <C>
M B A Edwards 15,000
P B A Edwards 15,000
</TABLE>
DIRECTORS' RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period. In preparing
those financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the
financial statements;
- prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the company will continue in
business.
The directors are responsible for keeping proper accounting records, for
safeguarding the assets of the company and for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Page 1
<PAGE> 20
CARATTI SPORT LIMITED
REPORT OF THE DIRECTORS Continued
- --------------------------------------------------------------------------------
AUDITORS
Grant Thornton offer themselves for reappointment as auditors in accordance
with section 385 of the Companies Act 1985.
ON BEHALF OF THE BOARD
/s/ M B A EDWARDS
- ----------------------------------
M B A Edwards
Director
17 May 1996
Page 2
<PAGE> 21
Grant Thornton [LOGO]
REPORT OF THE AUDITORS TO THE MEMBERS OF
CARATTI SPORT LIMITED
We have audited the financial statements on pages 4 to 14 which have been
prepared under the accounting policies set out on pages 4 and 5.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 1 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, of those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements made
by the directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the state
of the company's affairs as at 31 October 1995 and of its profit for the year
then ended and have been properly prepared in accordance with the Companies Act
1985.
/s/ GRANT THORNTON
- -------------------------------
GRANT THORNTON
REGISTERED AUDITORS
CHARTERED ACCOUNTANTS
BRISTOL
17 May 1996
Page 3
<PAGE> 22
CARATTI SPORT LIMITED
PRINCIPAL ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost convention.
The principal accounting policies of the company have remained unchanged from
the previous year and are set out below.
TURNOVER
Turnover is the total amount receivable by the company for goods supplied and
services provided, excluding VAT and trade discounts.
DEPRECIATION
Depreciation is calculated to write down the cost less the estimated residual
value of motor vehicles, fixtures, fittings and equipment by the reducing
balance method. Depreciation is calculated to write down the cost less
estimated residual value of computer equipment and leasehold improvements over
their expected useful lives by equal annual instalments.
The rates and periods generally applicable are:
<TABLE>
<S> <C>
Motor vehicles 25 %
Fixtures, fittings and equipment 25 %
Computer equipment 4 years
Leasehold improvements Various
</TABLE>
STOCKS
Stocks are stated at the lower of cost and net realisable value.
DEFERRED TAXATION
Deferred taxation is provided for under the liability method using the tax
rates estimated to arise when the timing differences reverse and is accounted
for to the extent that it is probable that a liability or asset will
crystallise. Unprovided deferred tax is disclosed as a contingent liability.
FOREIGN CURRENCIES
Transactions in foreign currencies are translated at the exchange rate ruling
at the date of the transaction. Monetary assets and liabilities in foreign
currencies are translated at the rates of exchange ruling at the balance sheet
date.
Page 4
<PAGE> 23
CARATTI SPORT LIMITED
PRINCIPAL ACCOUNTING POLICIES Continued
- --------------------------------------------------------------------------------
LEASED ASSETS
Assets held under finance leases and hire purchase contracts are capitalised in
the balance sheet and depreciated over their expected useful lives. The
interest element of the leasing payments represents a constant proportion of
the capital balance outstanding and is charged to the profit and loss account
over the period of the lease.
All other leases are regarded as operating leases and the payments made under
them are charged to the profit and loss account on a straight-line basis over
the lease term.
CONTRIBUTIONS TO PENSION FUNDS
The pension costs charged against profits represent the amount of the
contributions payable to the schemes in respect of the accounting period.
Page 5
<PAGE> 24
CARATTI SPORT LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 1995 1994
POUND STERLING POUND STERLING
<S> <C> <C> <C>
Turnover 1 12,492,601 10,664,637
Cost of sales (8,729,830) (7,952,751)
---------- ----------
Gross profit 3,762,771 2,711,886
Administrative expenses (2,459,732) (2,014,794)
---------- ----------
Operating profit 14 1,303,039 697,92
Net interest 2 (332,739) (221,000)
---------- ----------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 1 970,300 476,092
Tax on profit on ordinary
activities 4 (295,788) (143,110)
---------- ----------
PROFIT TRANSFERRED TO RESERVES 674,512 332,982
========== ==========
STATEMENT OF RETAINED PROFITS
At 1 November 1994 1,711,811 1,378,829
Transferred to reserves 674,512 332,982
---------- ----------
At 31 October 1995 2,386,323 1,711,811
========== ==========
</TABLE>
There were no recognised gains or losses other than the profit for the
financial year.
The accompanying accounting policies and notes form an integral part of these
financial statements.
Page 6
<PAGE> 25
CARATTI SPORT LIMITED
BALANCE SHEET AT 31 OCTOBER 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 1995 1994
POUND STERLING POUND STERLING POUND STERLING
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets 5 165,255 131,725
----------
Current assets
Stocks 6 3,827,264 2,605,781
Debtors 7 4,342,420 3,034,342
---------- ----------
8,169,684 5,640,123
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR 8 (5,548,810) (3,761,804)
---------- ----------
NET CURRENT ASSETS 2,620,874 1,878,319
--------- ----------
TOTAL ASSETS LESS CURRENT LIABILITIES 2,786,129 2,010,044
CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR 9 (369,806) (268,233)
--------- ----------
2,416,323 1,741,811
========= ==========
CAPITAL AND RESERVES
Called up share capital 12 30,000 30,000
Profit and loss account 2,386,323 1,711,811
--------- ----------
SHAREHOLDERS' FUNDS 13 2,416,323 1,741,811
========= ==========
</TABLE>
The financial statements were approved by the Board of Directors on 17 May
1996.
M B A Edwards DIRECTOR
[SIG]
The accompanying accounting policies and notes form an integral part of these
financial statements.
Page 7
<PAGE> 26
CARATTI SPORT LIMITED
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 OCTOBER 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 1995 1994
POUND STERLING POUND STERLING
<S> <C> <C> <C> <C>
NET CASH (OUTFLOW)/INFLOW FROM OPERATING
ACTIVITIES 14 (961,176) 513,156
--------
RETURNS AN INVESTMENTS AND
SERVICING OF FINANCE
Interest paid (328,881) (217,410)
Finance lease interest paid (3,858) (3,590)
-------- --------
NET CASH OUTFLOW FROM RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE (332,739) (221,000)
---------- --------
(1,293,915) 292,156
TAXATION
UK corporation tax paid (141,191) (144,000)
---------- --------
(1,435,106) 148,156
--------
INVESTING ACTIVITIES
Purchase of tangible fixed assets (33,077) (32,546)
Sale of tangible fixed assets 18,039 8,924
-------- --------
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES (15,038) (23,622)
---------- --------
NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING (1,450,144) 124,534
--------
FINANCING
Movement on invoice discounting 409,844 (24,818)
Receipts from borrowing 129,454
Repayment of borrowings - (43,718)
Capital element of finance lease rentals (41,328) (51,120)
-------- --------
NET CASH INFLOW/(OUTFLOW) FROM FINANCING 15 497,970 (119,656)
---------- --------
(DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS 16 (952,174) 4,878
========== ========
</TABLE>
The accompanying accounting policies and notes form an integral part of these
financial statements.
Page 8
<PAGE> 27
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
- --------------------------------------------------------------------------------
1. TURNOVER AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
The turnover and profit before taxation are attributable to the
wholesale and retail of bicycles, accessories and parts.
An analysis of turnover by geographical market is given below:
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
United Kingdom 12,141,458 10,148,176
Other EC countries 351,143 516,461
---------- ----------
12,492,601 10,664,637
========== ==========
</TABLE>
The profit on ordinary activities is stated after:
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
Auditors' remuneration 6,000 5,500
Depreciation of tangible fixed assets:
Owned 29,866 14,737
Held under finance leases and hire
purchase contracts 13,083 33,115
Hire of plant and equipment 24,400 -
Other operating lease rentals 101,330 100,850
Exchange (gains)/losses (102,201) 51,284
======== =======
</TABLE>
2. NET INTEREST
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
On bank loans, overdrafts and other loans:
Repayable within 5 years, otherwise
than by instalments 290,243 201,045
Repayable wholly or partly in more than 5 years 38,638 16,365
Finance charges in respect of finance leases 3,858 3,590
------- -------
332,739 221,000
======= =======
</TABLE>
Page 9
<PAGE> 28
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS Continued
FOR THE YEAR ENDED 31 OCTOBER 1995
- --------------------------------------------------------------------------------
3. DIRECTORS AND EMPLOYEES
Staff costs during the year were as follows:
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
Wages and salaries 994,469 838,132
Social security costs 70,541 61,516
Other pension costs 174,707 99,471
--------- -------
1,239,717 999,119
========= =======
</TABLE>
The average number of employees of the company during the year was 62
(1994: 55).
Remuneration in respect of directors was as follows:
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
Management remuneration 418,405 305,105
======= =======
</TABLE>
The emoluments of the directors, excluding pension contributions, were
as follows:
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
The Chairman and highest paid director 136,085 116,750
======= =======
</TABLE>
The emoluments of the directors, excluding pension contributions, fell
within the following ranges:
<TABLE>
<CAPTION>
1995 1994
NUMBER NUMBER
<S> <C> <C>
pound sterling 110,001 to pound sterling 115,000 - 1
pound sterling 115,001 to pound sterling 120,000 - 1
pound sterling 130,001 to pound sterling 135,000 1 -
pound sterling 135,001 to pound sterling 140,000 1 -
==== ====
</TABLE>
4. TAX AN PROFIT ON ORDINARY ACTIVITIES
The tax charge is based on the profit for the year and represents:
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
Corporation tax @ 33% (1994: 33%) 295,788 143,110
======= =======
</TABLE>
Page 10
<PAGE> 29
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS Continued
FOR THE YEAR ENDED 31 OCTOBER 1995
- --------------------------------------------------------------------------------
5. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
SHORT
LEASEHOLD FIXTURES
IMPROVE- FITTINGS & MOTOR COMPUTER
MENTS EQUIPMENT VEHICLES EQUIPMENT TOTAL
POUND STERLING POUND STERLING POUND STERLING POUND STERLING POUND STERLING
<S> <C> <C> <C> <C> <C>
Cost
At 1 November 1994 127,835 117,198 149,261 58,298 452,592
Additions - 19,205 69,100 7,462 95,767
Disposals - (7,925) (49,321) (3,111) (60,357)
------------------------------------------------------------------------
At 31 October 1995 127,835 128,478 169,040 62,649 488,002
------------------------------------------------------------------------
Depreciation
At 1 November 1994 127,835 88,107 54,808 50,117 320,867
Provided in the year - 11,703 28,523 2,723 42,949
Disposals - (6,324) (31,634) (3,111) (41,069)
------------------------------------------------------------------------
At 31 October 1995 127,835 93,486 51,697 49,729 322,747
------------------------------------------------------------------------
Net book amount at
31 October 1995 - 34,992 117,343 12,920 165,255
========================================================================
Net book amount at
31 October 1994 - 29,091 94,453 8,181 131,725
========================================================================
</TABLE>
The figures stated above include assets held under finance leases and
similar hire purchase contracts, as follows:
<TABLE>
<CAPTION>
Fixtures
fittings & Motor
equipment vehicles
pound sterling pound sterling
<S> <C> <C>
Net book amount at
31 October 1995 - 76,336
===== ======
Net book amount at
31 October 1994 4,177 76,667
===== ======
</TABLE>
6. STOCKS
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
Goods for resale 3,827,264 2,605,781
========= =========
</TABLE>
There were no significant differences between the replacement cost and the
values disclosed for stock.
Page 11
<PAGE> 30
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS Continued
FOR THE YEAR ENDED 31 OCTOBER 1995
- --------------------------------------------------------------------------------
7. DEBTORS
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
Trade debtors 3,387,919 1,948,111
Amounts owed by related undertaking 331,090 395,609
Other debtors 609,911 663,532
Prepayments and accrued income 13,500 27,090
--------- ---------
4,342,420 3,034,342
======== =========
</TABLE>
8. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
Bank overdraft 1,581,215 629,041
Trade creditors 1,455,664 1,158,251
Corporation tax 295,788 141,191
Social security and other taxes 271,430 346,883
Amounts received from invoice discounting 1,609,800 1,199,956
Accruals and deferred income 140,427 102,662
Directors' loans 92,960 63,506
Other creditors 66,626 105,203
Amounts due under finance leases 34,900 15,111
--------- ---------
5,548,810 3,761,804
========= =========
</TABLE>
The bank overdraft is secured by a fixed and floating charge over all
the assets of the company. Amounts received from the invoice
discounting company are secured over trade debtors.
9. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
Pension fund loans 354,000 254,000
Amounts due under finance leases 15,806 14,233
--------- ---------
369,806 268,233
========= =========
</TABLE>
The pension fund loans are secured by a floating charge over the assets
of the company and interest is charged at 3% above bank base rate per
annum.
Page 12
<PAGE> 31
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS Continued
FOR THE YEAR ENDED 31 OCTOBER 1995
- --------------------------------------------------------------------------------
10. BORROWINGS
Borrowings are repayable as follows:
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
Within one year
Bank overdrafts 1,581,215 629,041
Amounts due under finance leases 34,900 15,111
After one and within two years
Amounts due under finance leases 15,806 14,233
After two and within five years
Other loans 200,000 100,000
After five years
Other loans 154,000 154,000
--------- ---------
1,985,921 912,385
========= =========
</TABLE>
11. DEFERRED TAXATION
At 31 October 1995 and 31 October 1994 there was no material liability
in respect of deferred taxation.
12. SHARE CAPITAL
<TABLE>
<CAPTION>
1995 and 1994
POUND STERLING
<S> <C>
Authorised, allotted, called up and fully paid
30,000 ordinary shares of pound sterling 1 each 30,000
=========
</TABLE>
13. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
Profit for the financial year 674,512 332,982
Shareholders' funds at 1 November 1994 1,741,811 1,408,829
--------- ---------
Shareholders' funds at 31 October 1995 2,416,323 1,741,811
========= =========
</TABLE>
14. NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1995 1994
POUND STERLING POUND STERLING
<S> <C> <C>
Operating profit 1,303,039 697,092
Depreciation 42,949 47,852
Loss on sale of tangible fixed assets 1,249 6,830
(Increase)/decrease in stocks (1,221,483) 294,141
Increase in debtors (1,308,078) (554,602)
Increase in creditors 221,148 21,843
---------- ---------
Net cash (outflow)/inflow from operating activities (961,176) 513,156
========== =========
</TABLE>
Page 13
<PAGE> 32
CARATTI SPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS Continued
FOR THE YEAR ENDED 31 OCTOBER 1995
- --------------------------------------------------------------------------------
15. ANALYSIS OF CHANGES IN FINANCING
<TABLE>
<CAPTION>
LOANS AND AMOUNTS
DUE UNDER FINANCE
SHARE CAPITAL LEASES
1995 1994 1995 1994
POUND STERLING POUND STERLING POUND STERLING POUND STERLING
<S> <C> <C> <C> <C>
At 1 November 1994 30,000 30,000 1,546,806 1,643,754
Net cash inflow/(outflow)
from financing - - 497,970 (119,656)
Inception of finance leases - - 62,690 22,708
-------------------------------------------------------------------
At 31 October 1995 30,000 30,000 2,107,466 1,546,806
===================================================================
</TABLE>
16. ANALYSIS OF CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise:
<TABLE>
<CAPTION>
CHANGE IN CHANGE IN
1995 1994 1993 1995 1994
POUND STERLING POUND STERLING POUND STERLING POUND STERLING
<S> <C> <C> <C> <C> <C>
Bank overdraft 1,581,215 629,041 633,919 (952,174) 4,878
=============================================================================
</TABLE>
17. CAPITAL COMMITMENTS
The company had no capital commitments at 31 October 1995 or at 31
October 1994.
18. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 October 1995 or 31 October
1994 except in respect of foreign exchange and trade financing
contracts.
19. LEASING COMMITMENTS
Operating lease payments amounting to pound sterling 119,900 (1994 :
pound sterling 123,000) are due within one year. The leases to which
these amounts relate expire as follows :
<TABLE>
<CAPTION>
1995 1994
LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER
POUND STERLING POUND STERLING POUND STERLING POUND STERLING
<S> <C> <C> <C> <C>
Between one and two years 19,000 16,500 19,000 22,000
Between two and five years 30,000 2,400 30,000 -
In five years or more 52,000 - 52,000 -
------------------------------------------------------------
101,000 18,900 101,000 22,000
============================================================
</TABLE>
20. TRANSACTIONS WITH DIRECTORS
The company trades with Comar Italia SRL, an Italian company in which
Mr P B A Edwards has a material interest. During the year the company
made sales to Comar Italia SRL of pound sterling 350,000 (1994: pound
sterling 480,000) and made purchases from that company of pound
sterling 66,000 (1994: pound sterling 81,000).
Page 14
<PAGE> 33
CARATTI SPORT LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 APRIL 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in pounds sterling)
<S> <C>
Turnover 5,782,348
Cost of Sales (4,110,819)
----------
Gross profit 1,671,529
Administrative expenses (1,199,906)
----------
Operating profit 471,623
Net interest (180,520)
----------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 291,103
Tax on profit on ordinary activities (101,886)
----------
PROFIT TRANSFERRED TO RESERVES 189,217
==========
STATEMENT OF RETAINED PROFITS
At 1 November 1995 2,386,323
Transferred to reserves 189,217
----------
At 30 April 1996 2,575,540
==========
</TABLE>
See accompanying notes to interim unaudited financial statements.
33
<PAGE> 34
CARATTI SPORT LIMITED
BALANCE SHEET AT 30 APRIL 1996
(UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in pounds sterling)
<S> <C> <C>
FIXED ASSETS
Tangible assets 219,853
CURRENT ASSETS
Stocks 5,287,401
Debtors 4,216,149
----------
9,503,550
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (6,634,920)
----------
NET CURRENT ASSETS 2,868,630
---------
TOTAL ASSETS LESS CURRENT LIABILITIES 3,088,483
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (482,943)
---------
2,605,540
=========
CAPITAL AND RESERVES
Called up share capital 30,000
Profit and loss account 2,575,540
---------
SHAREHOLDERS' FUNDS 2,605,540
=========
</TABLE>
See accompanying notes to interim unaudited financial statements.
34
<PAGE> 35
CARATTI SPORT LIMITED
CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 APRIL 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in pounds sterling)
<S> <C> <C>
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES (58,671)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (178,401)
Finance lease interest paid (2,119)
--------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (180,520)
INVESTING ACTIVITIES
Purchase of tangible fixed assets (85,922)
Sale of tangible fixed assets 13,111
--------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (72,811)
--------
NET CASH OUTFLOW BEFORE FINANCING (312,002)
FINANCING
Movement on invoice discounting 447,739
Receipts from borrowing 33,529
--------
NET CASH INFLOW FROM FINANCING 481,268
--------
INCREASE IN CASH AND CASH EQUIVALENTS 169,266
========
</TABLE>
See accompanying notes to interim unaudited financial statements.
35
<PAGE> 36
CARATTI SPORT LIMITED
NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 APRIL 1996
-----------------------------------------------------------------------
1) The interim unaudited financial statements have been prepared in
accordance with applicable accounting standards and include all
adjustments which are, in the opinion of management, necessary for
a fair presentation of the results for the interim period
presented. All such adjustments are, in the opinion of management,
of a normal recurring nature. Results for the six months ended
April 30, 1996 are not necessarily indicative of results to be
expected for a full year.
36
<PAGE> 37
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data of GT Bicycles,
Inc. (the "Company") presents the Pro Forma Consolidated Balance Sheet at June
30, 1996, giving effect to the acquisition of Caratti Sport Limited ("Caratti")
as if the acquisition was consummated on that date. Also presented are Pro
Forma Consolidated Statements of Operations for the twelve months ended
December 31, 1995 and for the six months ended June 30, 1996, after giving
effect to the acquisition as if it was consummated on January 1, 1995. The pro
forma data is based on the historical financial statements of the Company and
Caratti giving effect to the transaction under the assumptions and adjustments
outlined in the accompanying Notes to Unaudited Pro Forma Consolidated
Financial Data.
The unaudited pro forma data is provided for comparative purposes only. It
does not purport to be indicative of the results that actually would have
occurred if the acquisition had been consummated on the date indicated or which
may be obtained in the future. The pro forma consolidated financial data
should be read in connection with the notes thereto contained elsewhere herein,
the audited financial statements of Caratti with the notes thereto contained
elsewhere herein and the audited consolidated financial statements of the
Company and the related notes thereto incorporated herein by reference.
37
<PAGE> 38
GT BICYCLES, INC.
PRO FORM CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
GT Bicycles, Caratti Sport
Inc. Limited Adjustments Pro Forma
------------ ------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Trade accounts receivable, net $ 36,829 $ 6,397 $ (954)(2) $ 42,272
Inventories 45,433 9,793 -- 55,226
Income taxes receivable -- -- -- --
Deferred income taxes 1,558 -- -- 1,558
Prepaid expenses and other assets 1,495 235 -- 1,730
-------- ------- ------- --------
Total current assets 85,315 16,425 (954) 100,786
Property, plant and equipment, net 3,696 433 -- 4,129
Goodwill, net 9,221 -- 10,376 (1) 19,597
Covenants not to compete, net 520 -- -- 520
Other assets 1,611 -- -- 1,611
-------- ------- ------- --------
$100,363 $16,858 $ 9,422 $126,643
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $-- $ 1,879 $-- $ 1,879
Short term debt - invoice discounting -- 3,302 -- 3,302
Current portion of long term debt -- -- 2,625 (3) 2,625
Current portion of capital lease obligations 183 73 -- 256
Accounts payable 8,239 6,386 (954)(2) 13,671
Accrued liabilities 3,719 1,003 (1,016)(4) 3,706
Income taxes payable 392 419 -- 811
-------- ------- ------- --------
Total current liabilities 12,533 13,062 655 26,250
Long-term debt, net of current portion 36,122 -- 11,437 (3)
1,016 (4) 48,575
Capital lease obligations, net of current portion 566 110 -- 676
-------- ------- ------- --------
Total liabilities 49,221 13,172 13,108 75,501
Stockholders' equity 51,142 3,686 (3,686) 51,142
-------- ------- ------- --------
$100,363 $16,858 $ 9,422 $126,643
======== ======= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial data.
38
<PAGE> 39
GT BICYCLES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
GT Bicycles, Caratti Sport
Inc. Limited
12 months 12 months
ended ended
12/31/95 10/31/95 Adjustments Pro Forma
------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $168,933 $19,762 $(4,611) (6) $184,084
Cost of sales 124,524 13,810 (3,458) (6) 134,876
-------- ------- ------- --------
Gross profit 44,409 5,952 (1,153) 49,208
Selling, general and administrative exp 28,429 3,891 (552) (8) 31,768
Amortization of intangibles and deferred
financing costs 3,313 -- 415 (5) 3,728
Nonrecurring charge 4,707 -- -- 4,707
-------- ------- ------- --------
Operating income 7,960 2,061 (1,016) 9,005
Interest expense 6,070 526 952 (7) 7,548
-------- ------- ------- --------
Income before taxes and extraordinary i 1,890 1,535 (1,968) 1,457
Income tax expense 1,028 468 (787) (9) 709
-------- ------- ------- --------
Income before extraordinary item 862 1,067 (1,181) 748
Extraordinary loss from early extinguishment
of debt, net of taxes (1,146) -- -- (1,146)
-------- ------- ------- --------
Net income (loss) $ (284) $ 1,067 $(1,181) $ (398)
======== ======= ======= ========
Net income per share before
extraordinary item $ 0.12 $0.11
Net loss - extraordinary item (0.16) (0.16)
-------- --------
Net loss per share $ (0.04) $ (0.05)
======== ========
Weighted average common and
common equivalent shares 7,376 7,376
======== ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial data.
39
<PAGE> 40
GT BICYCLES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
GT Bicycles, Caratti Sport
Inc. Limited
6 months 6 months
ended ended
06/30/96 04/30/96 Adjustments Pro Forma
------------ ------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $92,964 $8,877 $(4,223) (6) $97,618
Cost of sales 67,231 6,311 (3,167) (6) 70,375
------- ------ ------- -------
Gross profit 25,733 2,566 (1,056) 27,243
Selling, general and administrative exp 16,636 1,842 (281) (8) 18,197
Amortization of intangibles 271 -- 208 (5) 479
------- ------ ------- -------
Operating income 8,826 724 (983) 8,567
Interest expense 1,467 277 377 (7) 2,121
------- ------ ------- -------
Income before taxes 7,359 447 (1,360) 6,446
Income tax expense 2,944 156 (544) (9) 2,556
------- ------ ------- -------
Net income $ 4,415 $ 291 $ (816) $ 3,890
======= ====== ======= =======
Net income per common and common
equivalent share $ 0.45 $ 0.39
======= =======
Weighted average common and
common equivalent shares 9,910 9,910
======= =======
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial data.
40
<PAGE> 41
GT BICYCLES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
On July 3, 1996, GT Bicycles, Inc. (the "Company") purchased all share capital
of Caratti Sport Limited ("Caratti"), pursuant to an Agreement for the sale and
purchase of the whole of the issued share capital of Caratti Sport Limited and
in consideration of (pound sterling) 8,300,000 (approximately U.S.$12,968,750).
In addition, the Company agreed to pay a contingent amount of up to an
additional aggregate amount of (pound sterling) 700,000 (approximately
U.S.$1,093,750) based on Caratti's future operating results. Caratti is
involved in the business of distributing wholesale and retail bicycles, parts
and accessories. Prior to this acquisition, Caratti was a customer of the
Company. The purchase price was determined pursuant to arms-length negotiations
between the parties. The purchase of Caratti by the Company was funded through
a $14,062,500 overadvance credit added to the Company's existing line of credit.
On August 14, 1996, $14,000,000 of the overadvance credit was rolled over into a
four year term loan with the Company's primary lender. The term loan is due in
equal quarterly installments over four years beginning December 31, 1996 with
various interest rates. The Company intends to continue substantially the same
use of the assets acquired from Caratti.
The pro forma consolidated statements of operations for the twelve months ended
December 31, 1995 and for the six months ended June 30, 1996 were prepared on
the basis of using Caratti's financial statements for the twelve month period
ended October 31, 1995 and for the six month period ended April 30, 1996,
respectively. The translation of Caratti's financial statements was done using
the month end exchange rate for the balance sheet and an average for the period
for the profit and loss statements.
The pro forma consolidated financial data may not include all potential fair
value adjustments and opening balance sheet accruals which will be identified
within the twelve months succeeding the acquisition.
The pro forma consolidated balance sheet has been adjusted to reflect the above
transaction as follows:
(1) The purchase price paid in excess of the acquired assets net book
value was allocated to acquired intangibles (goodwill) and will be
amortized on a straight-line basis over 25 years.
(2) Receivables and payables between the Company and Caratti have been
eliminated to reflect the elimination of intercompany accounts.
(3) The debt obtained to purchase Caratti has been recorded to reflect
the financing of the acquisition.
(4) As agreed upon in the acquisition agreement, $1,015,625 was borrowed
from the Company's primary lender by Caratti to payoff the existing
pension fund and director loans.
The pro forma consolidated statements of operations have been adjusted to
reflect the above transaction as follows:
(5) The purchase price paid in excess of the acquired assets net book
value was allocated to acquired intangibles (goodwill) and
amortized on a straight-line basis over 25 years.
(6) Sales and the related cost of sales (using an average estimated
gross margin of 25%) between the Company and Caratti were
eliminated to reflect the elimination of intercompany sales.
(7) Interest expense on the debt used to finance the acquisition was
recorded using an estimated average interest rate of 7.5%.
41
<PAGE> 42
GT BICYCLES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(8) Pension costs and director fees were eliminated/reduced as was
agreed upon between the Company and Caratti.
(9) The income tax effect of the pro forma adjustments was reflected
utilizing a statutory tax rate of 40%.
42
<PAGE> 43
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GT BICYCLES, INC.
Date: September 16, 1996 By: /s/ Michael C. Haynes
-------------------------------------
Michael C. Haynes
President and Chief Executive Officer
(Principal Executive Officer and Duly
Authorized Officer)
43
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