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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 8-K/A
CURRENT REPORT
AMENDMENT NO. 2 TO FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 31, 1996
-----------------------------------------------------------------
KRUG INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
Ohio 0-2901 31-0621189
---- ------ ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) file number) Identification No.)
1290 Hercules Drive, Suite 120, Houston, Texas 77058
---------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (281) 212-1233
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On October 31, 1996, Beldray Limited ("Beldray"), a wholly-owned United
Kingdom-based subsidiary of KRUG International Corp. ( the "Corporation")
acquired all of the issued capital shares of Hago Products Limited ("Hago"), an
United Kingdom manufacturer of child safety gates and fireguards, from Bullough
plc, an United Kingdom company. The purchase price of Hago was approximately
$1.7 million. The acquisition was completed with internally available funds. A
Form 8-K reporting this event was filed November 15, 1996.
Item 7. Financial Statements and Exhibits
The audited financial statements of Hago for the three most recent fiscal years
are being filed with this report. The consent of Coopers & Lybrand dated March
26, 1997 with respect to the three most recent fiscal years audited financial
statements is also included as an exhibit to this report. The Share Transfer
Agreement and pro forma financial information were filed as exhibits to
Amendment No. 1 to Form 8-K filed January 14, 1997 .
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KRUG International Corp.
Date: March 31 , 1997
By: /s/ Robert M. Ellis
------------------------------
Robert M. Ellis
Principal Accounting Officer
<PAGE> 3
Hago Products Limited
Financial statements
for the years ended 31 October 1996, 1995
and 1994
<PAGE> 4
2
HAGO PRODUCTS LIMITED
DIRECTORS' RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
The directors are required by the Companies Act 1985 to prepare financial
statements for each financial year which give a true and fair view of the state
of affairs of the company as at 31 October and of the profit or loss for the
year then ended. It is also the directors' responsibility to:
o maintain adequate accounting records
o safeguard the assets of the company
o prevent and detect fraud and other irregularities
The directors confirm that suitable accounting policies, consistently applied
and supported by reasonable and prudent judgements and estimates, have been used
in the preparation of the financial statements and that applicable accounting
standards have been followed.
<PAGE> 5
3
HAGO PRODUCTS LIMITED
REPORT OF THE INDEPENDENT AUDITORS TO THE BOARD OF
DIRECTORS
We have audited the financial statements set out on pages 5 to 20, which have
been prepared in accordance with accounting principles generally accepted in the
United Kingdom.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described in the statement of directors' responsibilities, 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, on those
financial statements and to report our opinion.
BASIS OF OPINION
We conducted our audit in accordance with UK Auditing Standards issued by the
Auditing Practices Board, which are substantially the same as those issued in
the United States. 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 present fairly, in all material
respects, the financial position of Hago Products Limited at 31 October 1996,
1995 and 1994 and the results of its operations and cash flows for the years
ended 31 October 1996, 1995 and 1994 in accordance with accounting principles
generally accepted in the United Kingdom.
<PAGE> 6
4
HAGO PRODUCTS LIMITED
The accounting principles applied vary in certain respects from accounting
principles generally accepted in the United States. In our opinion, application
of accounting principles generally accepted in the United States would have
affected the determination of the amounts shown as net income for the years
ended 31 October 1996, 1995 and 1994 and the amounts of shareholders' funds and
cash and cash equivalents at 31 October 1996, 1995 and 1994 to the extent
summarised in Notes 21 and 22 on page 21.
/s/ COOPERS & LYBRAND
COOPERS & LYBRAND
CHARTERED ACCOUNTANTS AND REGISTERED AUDITORS
SOUTHAMPTON, ENGLAND
21 MARCH 1997
<PAGE> 7
5
HAGO PRODUCTS LIMITED
PROFIT AND LOSS ACCOUNTS (UK (POUND) - STERLING) FOR THE YEARS ENDED 31 OCTOBER
1996, 1995 AND 1994
<TABLE>
<CAPTION>
Notes 1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C> <C>
TURNOVER 2 6,678 5,175 5,881
Cost of sales (5,872) (4,878) (4,323)
----- ----- -----
Gross profit 806 297 1,558
Net operating expenses 3 (1,496) (1,400) (1,305)
----- ----- -----
OPERATING (LOSS)/PROFIT 4 (690) (1,103) 253
Net interest payable 5 (1) - (3)
----- ----- -----
(LOSS)/PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION (691) (1,103) 250
Taxation on loss/profit on ordinary
activities 6 223 414 (89)
----- ----- -----
(LOSS)/PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION (468) (689) 161
Dividends - - (150)
----- ----- -----
RETAINED (LOSS)/PROFIT (468) (689) 11
===== ===== =====
STATEMENT OF RETAINED PROFIT
Retained profit at beginning of year 1,029 1,718 1,707
Retained (loss)/profit (468) (689) 11
----- ----- -----
RETAINED PROFIT AT END OF YEAR 561 1,029 1,718
===== ===== =====
</TABLE>
The company has no recognised gains and losses other than those included in the
(losses)/profits above and therefore no separate statement of total recognised
gains and losses has been prepared.
There is no difference between the (losses)/profits on ordinary activities
before taxation and the retained (loss)/profit for the year stated above and
their historical cost equivalents.
All amounts above relate to continuing operations.
Notes to the accounts are on pages 10 to 22.
<PAGE> 8
6
HAGO PRODUCTS LIMITED
BALANCE SHEETS (UK (POUND) - STERLING)
AT 31 OCTOBER 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Notes 1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets 10 459 377 391
CURRENT ASSETS
Stocks 12 681 779 900
Debtors 13 1,600 1,225 1,467
Cash at bank and in hand - - 307
----- ----- -----
2,281 2,004 2,674
CREDITORS: amounts falling due within one
year 14 (2,063) (1,236) (1,231)
----- ----- -----
Net current assets 218 768 1,443
----- ----- -----
NET ASSETS 677 1,145 1,834
===== ===== =====
CAPITAL AND RESERVES
Called up share capital 17 113 113 113
Other reserves 18 3 3 3
Profit and loss account 561 1,029 1,718
----- ----- -----
EQUITY SHAREHOLDERS' FUNDS 677 1,145 1,834
===== ===== =====
</TABLE>
The financial statements on pages 5 to 23 were approved by the board of
directors on 20 March 1997 and were signed on its behalf by:
/s/ M H DELL
M H DELL
DIRECTOR
Notes to the accounts are on pages 10 to 22.
<PAGE> 9
7
HAGO PRODUCTS LIMITED
RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
(UK (POUND) - STERLING)
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
(Loss)/profit on ordinary activities after taxation (468) (689) 161
Dividends - - (150)
----- ----- -----
Net (reduction)/increase to equity shareholders' funds (468) (689) 11
Opening equity shareholders' funds 1,145 1,834 1,823
----- ----- -----
CLOSING EQUITY SHAREHOLDERS' FUNDS 677 1,145 1,834
===== ===== =====
</TABLE>
<PAGE> 10
8
HAGO PRODUCTS LIMITED
CASH FLOW STATEMENT
FOR THE YEARS ENDED 31 OCTOBER 1996, 1995 AND 1994
<TABLE>
<CAPTION>
OPERATING ACTIVITIES NOTES 1996 1995 1994
(POUND)'000 (POUND)'000 (POUND)'000
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES 204 12 207
----- ----- -----
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Interest paid (1) - (3)
Dividends paid - (150) -
----- ----- -----
NET CASH OUTFLOW FROM RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE (1) (150) (3)
----- ----- -----
TAXATION
UK corporation tax paid - (72) -
----- ----- -----
TAX PAID - (72) -
----- ----- -----
INVESTING ACTIVITIES
Purchase of tangible fixed assets (210) (114) (193)
Sale of tangible fixed assets 1 - 6
----- ----- -----
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (209) (114) (187)
----- ----- -----
(DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS 19 (6) (324) 17
===== ===== =====
</TABLE>
<PAGE> 11
9
HAGO PRODUCTS LIMITED
RECONCILIATION OF OPERATING PROFIT/(LOSS) TO NET CASH
INFLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
NOTES 1996 1995 1994
(POUND)'000 (POUND)'000 (POUND)'000
<S> <C> <C> <C> <C>
CONTINUING ACTIVITIES
Operating (loss)/profit (690) (1,103) 253
Depreciation on tangible fixed assets 128 128 119
Loss/(gain) on sale of tangible fixed assets (1) - 2
(Increase)/decrease in stocks 98 121 (196)
(Increase)/decrease in debtors (375) 242 -
Increase in creditors 1,044 624 29
----- ----- -----
Net cash inflow from continuing operating
activities 204 12 207
------ ------ ------
</TABLE>
<PAGE> 12
10
Hago Products Limited
NOTES TO THE FINANCIAL STATEMENTS FOR THE THREE YEARS
ENDED 31 OCTOBER 1996, 1995 AND 1994
1 PRINCIPAL ACCOUNTING POLICIES
The financial statements have been prepared in accordance with applicable
Accounting Standards in the United Kingdom. A summary of the more important
accounting policies, which have been applied consistently, is set out below.
(A) BASIS OF ACCOUNTING
The financial statements are drawn up in accordance with the historical
cost convention.
(B) CASH FLOW STATEMENT
Cash flow statements have been prepared in accordance with UK and US
accounting standards and are set out on pages 8 and 23 respectively.
(C) TURNOVER
Turnover represents sales to third parties excluding value added tax.
(D) DEPRECIATION
Depreciation is calculated to write off the cost of fixed assets over
their expected useful lives on a straight line basis. The principal
annual rates used for this purpose, which have been applied
consistently, are as follows:
Short leaseholds and buildings - over terms of the leases
Plant and equipment - 10 to 15%
Motor vehicles - 25%
Computers - 20%
<PAGE> 13
11
Hago Products Limited
1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(E) DEFERRED TAXATION
Taxation deferred as a result of material timing differences is
provided at the rate of taxation ruling when the liabilities are
expected to crystallize except to the extent that such taxation is not
expected to become payable in the foreseeable future.
(F) STOCK AND WORK IN PROGRESS
Stock and work in progress is valued at the lower of cost and net
realisable value. Cost is determined on a first in first out basis and
comprises direct material cost, direct labour cost and attributable
production overheads.
(G) DEVELOPMENT
Development expenditure is written off as incurred.
(H) FOREIGN CURRENCIES
Assets and liabilities are translated to sterling at the rates of
exchange ruling at the balance sheet date. Transactions are translated
at the rate ruling at the date of the transaction. Differences arising
from trading transactions are included in operating profit.
<PAGE> 14
12
Hago Products Limited
1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(I) PENSION COSTS
Pension costs are accounted for on the basis of charging the cost of
providing pensions over the period during which the company benefits
from employees' services. The effects of variations from regular cost
are spread over the expected average remaining working lifetime of
members of the company's pension schemes.
(J) FINANCE AND OPERATING LEASES
Assets held under finance leases are included as tangible assets and
depreciated over the shorter of the lease term or their useful life.
The net obligations related to finance leases are included as a
liability. Costs in respect of operating leases are charged in arriving
at the operating result.
(K) GOODWILL
Goodwill arising on acquisition is written off direct to reserves.
(L) TOOLING
Where significant tooling is purchased as part of an acquisition, or in
the development of a new product, the associated costs are written off
over their useful lives, generally three years.
<PAGE> 15
13
Hago Products Limited
2 Turnover
The geographical analysis of turnover which represents sales of wire and tube
products was:
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
United Kingdom 5,874 4,749 5,644
European Union 587 422 228
Rest of the world 217 4 9
----- ----- -----
6,678 5,175 5,881
===== ===== =====
</TABLE>
3 Net operating expenses
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
Selling and distribution costs 846 849 771
Administrative expenses 650 551 534
----- ----- -----
1,496 1,400 1,305
===== ===== =====
</TABLE>
4 Operating (loss)/profit
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
OPERATING (LOSS)/PROFIT IS STATED AFTER CHARGING:
Depreciation - Owned assets 128 128 119
Auditors remuneration 17 15 16
Non-audit fees payable to auditors 3 13 9
Directors' emoluments including pension
contributions 95 128 155
Compensation for loss of office 59 9 23
Operating lease rentals:
Hire of plant and machinery - 3 6
Other 200 238 246
=== === ===
</TABLE>
5 Net interest payable
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
Interest receivable 1 1 1
Interest payable - on bank loans and overdrafts (2) (1) (4)
--- --- ---
Net interest payable (1) - (3)
=== === ===
</TABLE>
<PAGE> 16
14
Hago Products Limited
6 Taxation on loss/profit on ordinary activities
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
UK corporation tax at rate of 33%
Current 233 343 (95)
Adjustments in respect of prior years
Current (10) 71 6
--- --- ---
223 414 (89)
=== === ===
</TABLE>
7 Directors' emoluments
Particulars of the emoluments (excluding pension contributions) of the company's
directors are:
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
Former Chairman - 1 14
Chairman - 4 -
Highest paid director 50 50 48
</TABLE>
In addition, the former chairman received (POUND)9,000 compensation for loss
of office in 1994/95
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
The emoluments of all directors fall within
the following bands:
Nil to (POUND)5,000 7 4 3
(POUND)10,001 to (POUND)15,000 - - 2
(POUND)25,001 to (POUND)30,000 - - 2
(POUND)30,001 to (POUND)35,000 1 2 1
(POUND)45,001 to (POUND)50,000 - - 1
(POUND)50,001 to (POUND)55,000 1 1 -
</TABLE>
The directors who are employed as directors of Bullough plc are remunerated by
that company in respect of their services to the Bullough group as a whole.
Their emoluments are dealt with in the accounts of Bullough plc; no emoluments
are received from this company. The emoluments of the Chairman are paid by
Bullough plc for his services to the company.
<PAGE> 17
15
Hago Products Limited
8 Employee information
The average number of persons employed by the company (including executive
directors) during the year was:
<TABLE>
<CAPTION>
1996 1995 1994
NUMBER NUMBER NUMBER
<S> <C> <C> <C>
Production 148 111 97
Selling and distribution 9 12 13
Administration 17 8 8
--- --- ---
174 131 118
=== === ===
</TABLE>
Employment costs (including executive directors):
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
Aggregate gross wages and salaries 1,871 1,466 1,389
Social security costs 137 128 131
Other pension costs 28 16 21
----- ----- -----
2,036 1,610 1,541
===== ===== =====
</TABLE>
9 Pension costs
The company's employees are members of a fellow subsidiary's retirement and
death benefits plan known as the John Pring & Son Ltd Retirement and Death
Benefit Plan ("the Plan"). The Plan is of the defined benefits type - ie where
benefits are related to final pensionable salary. John Pring & Son Ltd is the
principal employer for all purposes relating to the Plan.
The assets of the Plan are held separately from those of the company (and the
assets of the three other participating companies) being invested in an
insurance company managed fund.
<PAGE> 18
16
Hago Products Limited
Contributions to the Plan are charged to the profit and loss account so as to
spread the cost of pensions over employees' working lives with the company. The
contributions are determined by a qualified actuary on the basis of triennial
valuations using the projected unit method. The most recent valuation report
(dated June 1995) was in respect of a valuation carried out as at 30 April 1995.
The assumptions which have the most significant effect on the results of the
valuation are those relating to the rate of return on investments and the rates
of increase in salaries and pensions. It was assumed that the investment returns
would be 8.5% per annum and that salary increases would average 7.0% per annum.
Present and future pensions are assumed to increase at the rate of 3% per annum
in respect of members' entitlement to guaranteed minimum pensions. Pensions in
excess of guaranteed minimum pensions for works and staff employees are to
increase at the rate of 5% per annum in respect of pensionable service after
this date. Pensions in excess of guaranteed minimum pensions for senior staff
are to increase at the rate of 5% per annum.
The pension charge for the years ended 31 October 1996, 1995 and 1994 were
(POUND)17,000, (POUND)10,000 and (POUND)21,000 respectively.
The most recent actuarial valuation showed that the actuarial value of the
Scheme assets was (POUND)1.471m and that the value of those assets represented
100% of the benefits that had accrued to members after allowing for expected
future increases in earnings.
<PAGE> 19
17
Hago Products Limited
10 Tangible fixed assets
<TABLE>
<CAPTION>
LAND AND
BUILDINGS PLANT FIXTURES
SHORT MACHINERY FITTINGS
LEASEHOLD AND VEHICLES AND TOOLS TOTAL
(POUND)000 (POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C> <C>
COST
At 1 November 1993 206 1,181 315 1,702
Additions - 182 11 193
Disposals and adjustments - (55) - (55)
----- ----- ----- -----
AT 31 OCTOBER 1994 206 1,308 326 1,840
Additions - 114 - 114
Disposals and adjustments - (5) - (5)
----- ----- ----- -----
AT 31 OCTOBER 1995 206 1,417 326 1,949
Additions - 207 3 210
Disposals and adjustments - (1) - (1)
----- ----- ----- -----
AT 31 OCTOBER 1996 206 1,623 329 2,158
----- ----- ----- -----
DEPRECIATION
At 1 November 1993 143 979 255 1,377
Charge for year 16 85 18 119
Disposals and adjustments - (47) - (47)
----- ----- ----- -----
AT 31 OCTOBER 1994 159 1,017 273 1,449
Charge for year 14 98 16 128
Disposals and adjustments - (5) - (5)
----- ----- ----- -----
AT 31 OCTOBER 1995 173 1,110 289 1,572
Charge for year 9 103 16 128
Disposals and adjustments - (1) - (1)
----- ----- ----- -----
AT 31 OCTOBER 1996 182 1,212 305 1,699
----- ----- ----- -----
NET BOOK VALUE
AT 31 OCTOBER 1996 24 411 24 459
===== ===== ===== =====
AT 31 OCTOBER 1995 33 307 37 377
===== ===== ===== =====
AT 31 OCTOBER 1994 47 291 53 391
===== ===== ===== =====
</TABLE>
<PAGE> 20
18
Hago Products Limited
11 Capital commitments
Outstanding commitments of the company for capital expenditure at 31 October
1996, 1995, and 1994 amounted to (POUND)Nil, (POUND)Nil and (POUND)67,000
respectively.
12 Stocks
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
Raw materials 193 359 321
Work in progress 216 184 177
Finished goods 272 236 402
--- --- ---
681 779 900
=== === ===
</TABLE>
13 Debtors
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Trade debtors 1,252 1,040 967
Amounts owed by other group companies - 41 275
Taxation 223 - -
Other debtors 3 5 3
Prepayments and accrued income 122 139 222
----- ----- -----
1,600 1,225 1,467
===== ===== =====
</TABLE>
<PAGE> 21
19
Hago Products Limited
14 Creditors: amounts falling due within one year
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
Trade creditors 1,038 932 621
Amounts owed to other group companies 739 92 101
Taxation - - 117
Social security 95 108 131
Other creditors 168 87 111
Bank overdraft 23 17 -
Proposed dividend - - 150
----- ----- -----
2,063 1,236 1,231
===== ===== =====
</TABLE>
Other creditors at 31 October 1996 include redundancy costs of (POUND)60,000.
15 Analysis of lease commitments
The annual commitments under non-cancellable operating leases at 31 October
were:
<TABLE>
<CAPTION>
LAND AND BUILDINGS
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
Expiry of operating leases within two to five years 200 200 257
=== === ===
</TABLE>
16 Deferred taxation
Analysis of provision and full potential liability/(asset)
<TABLE>
<CAPTION>
FULL FULL FULL
POTENTIAL POTENTIAL POTENTIAL
LIABILITY LIABILITY LIABILITY
/(ASSET) /(ASSET) /(ASSET)
1996 1995 1994
(POUND)'000 (POUND)'000 (POUND)'000
<S> <C> <C> <C>
Accelerated capital allowances (14) (16) (11)
Other timing differences (3) (21) (2)
---- ---- ----
At 31 October (17) (37) (13)
==== ==== ====
</TABLE>
No amounts have been recognised in respect of deferred tax in the periods.
<PAGE> 22
20
Hago Products Limited
17 Called up share capital
31 OCTOBER 1996, 1995 AND 1994
NUMBER (POUND)000
ORDINARY SHARES OF (POUND)1 EACH:
Authorised 133,000 133
Allotted, called up and fully paid 112,604 113
======= ===
18 Other reserves
CAPITAL
REDEMPTION
(POUND)000
At 31 October 1996, 1995 and 1994 3
===
19 CASH AND CASH EQUIVALENTS
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
CHANGES DURING THE YEAR
At 1 November (17) 307 290
Net cash (outflow)/inflow (6) (324) 17
----- ----- -----
AT 31 OCTOBER (23) (17) 307
===== ===== =====
<TABLE>
<CAPTION>
1996 1995 1994
CHANGE CHANGE CHANGE
1996 IN YEAR 1995 IN YEAR 1994 IN YEAR 1993
(POUND)000 (POUND)000 (POUND)000 (POUND)000 (POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C> <C> <C> <C> <C>
ANALYSIS OF
BALANCES
Cash at bank and
in hand - - - (307) 307 17 290
Bank overdrafts (23) (6) (17) (17) - - -
----- ----- ----- ----- ----- ----- -----
At 31 October (23) (6) (17) (324) 307 17 290
===== ===== ===== ===== ===== ===== =====
</TABLE>
20 Contingent liabilities
Losses which might arise from litigation in the normal course of business are
not expected to be material to the context of these accounts.
<PAGE> 23
21
Hago Products Limited
21 RECONCILIATION OF RESULTS AND SHAREHOLDERS' FUNDS FROM
UK GAAP TO US GAAP
<TABLE>
<CAPTION>
31 OCTOBER
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
(Loss)/profit on ordinary activities after taxation in
accordance with UK GAAP (468) (689) 161
Amortisation of goodwill (40) (40) (40)
----- ----- -----
Net (loss)/income, in accordance with US GAAP (508) (729) 121
===== ===== =====
Per share amounts from continuing operations (POUND)(4.50) (POUND)(6.45) (POUND)1.07
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
31 OCTOBER
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
Shareholders' funds, as stated in accordance with
UK GAAP 677 1,145 1,834
Dividends - - 150
Goodwill 27 67 107
----- ----- -----
Shareholders' funds in accordance with US GAAP 704 1,212 2,091
===== ===== =====
</TABLE>
22 RECONCILIATION OF CASH AND CASH EQUIVALENTS FROM UK GAAP TO
US GAAP
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C>
Cash and cash equivalents as reported in
accordance with UK GAAP (23) (17) 307
Add back bank overdraft 23 17 -
----- ----- -----
Cash and cash equivalents as reported in
accordance with US GAAP - - 307
===== ===== =====
</TABLE>
<PAGE> 24
22
Hago Products Limited
23 DIFFERENCES BETWEEN UK AND US GAAP
The accounting policies and accounting standards under which the financial
statements of the company are prepared are in accordance with UK GAAP. The major
differences between UK GAAP and US GAAP, as they affect the financial statements
of Hago Products Limited, are:
(a) Goodwill
Under UK GAAP, goodwill arising on an acquisition may be eliminated
from the financial statements by immediate write off against reserves
which is the policy adopted by the company. Under US GAAP goodwill must
be amortised to income over a period up to a maximum of 40 years. For
this purpose the directors regard 5 years as appropriate in connection
with goodwill of (POUND)200,000 arising in 1992.
(b) Dividends
Under UK GAAP, provision is made in the financial statements for
dividends recommended by the directors. Under US GAAP such dividends
are not recognised until they are formally declared.
(c) Cash flow
Under US GAAP bank overdrafts are not considered to be part of the net
cash equivalents and so changes in bank overdrafts (net) are included
in cash flows financing activities. Under UK GAAP, bank overdrafts form
part of cash equivalents.
24 Events occurring on balance sheet date
On 31 October 1996, the entire issued share capital of Hago Products Limited was
acquired by Beldray Limited, a subsidiary of Krug International Corporation.
<PAGE> 25
23
Hago Products Limited
Statement of cash flows (UK (POUND) - sterling) For the years ended 31 October
1996, 1995 and 1994
The cash flow statement presented below is prepared in accordance with US GAAP.
<TABLE>
<CAPTION>
1996 1995 1994
(POUND)'000 (POUND)'000 (POUND)'000
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)/income (508) (729) 121
Adjustments to reconcile net (loss)/income to net cash
provided by/(used in)
operating activities:
Depreciation 128 128 119
Amortisation of goodwill 40 40 40
(Profit)/loss on disposal of assets (1) - 2
Changes in assets and liabilities:
Increase in accounts receivable, net (212) (73) (173)
Decrease in accounts receivable, group 41 234 164
(Increase)/decrease in inventories 98 121 (196)
(Increase)/decrease in other current assets (204) 81 9
Increase/(decrease) in accounts payable, trade 106 311 (43)
Increase/(decrease) in accrued liabilities 68 (164) 125
Increase/(decrease) in accounts payable, group 647 (9) 36
---- ---- ----
Net cash provided by (used in) operating activities (203) (60) 204
---- ---- ----
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (210) (114) (193)
Proceeds from sale of assets 1 - 6
---- ---- ----
Net cash used by investing activities (209) (114) (187)
---- ---- ----
Cash flows from fund activities:
Net increase in short term debt - bank overdrafts 6 17 -
Payment of dividends - (150) -
---- ---- ----
Net cash provided by (used in) financing activities 6 (133) -
---- ---- ----
Net (decrease)/increase in cash and cash equivalents - (307) 17
Cash and cash equivalents at beginning of year - 307 290
---- ---- ----
CASH AND CASH EQUIVALENTS AT END OF YEAR - - 307
==== ==== ====
</TABLE>
<PAGE> 26
EXHIBIT INDEX
Exhibit 23 -- Consent of Coopers & Lybrand
<PAGE> 1
EXHIBIT 23
[COOPERS & LYBRAND LETTERHEAD]
We consent to the inclusion in this Current Report on Form 8-K, which is
incorporated by reference into Registration Statements on Form S-8 (file nos.
33-22847, 33-67920 and 333-06129) and Form S-3 (file no. 33-88190) of KRUG
International Corp., of our report dated March 21 1997, on our audits of the
financial statements of Hago Products Limited. We also consent to the reference
to our firm under the caption "Experts".
/s/ COOPERS & LYBRAND
Coopers & Lybrand
Southampton
England
March 26 1997
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