================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) July 27, 1999
TEREX CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 1-10702 34-1531521
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
500 Post Road East, Suite 320, Westport, Connecticut 06880
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (203) 222-7170
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE>
As previously reported on a Current Report on Form 8-K dated July 27, 1999,
Terex Corporation (the "Registrant") announced that its offer to shareholders of
Powerscreen International plc ("Powerscreen") to acquire all of the ordinary
share capital of Powerscreen for consideration of 195.0 pence per share had been
declared unconditional in all respects, all conditions having been waived or
satisfied, with respect to all valid acceptances received. As of September 30,
1999, the Registrant owned over 95% of Powerscreen's issued share capital and
had taken management and operational control of Powerscreen.
The Registrant hereby amends Item 7 of its Current Report on Form 8-K dated July
27, 1999 as follows:
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Consolidated Financial Statements of Businesses Acquired:
Audited Consolidated Financial Statements of Powerscreen International PLC
Report of Independent Public Accountants............................... 4
Group profit and loss account.......................................... 6
Movements on the group profit and loss account......................... 6
Group balance sheet.................................................... 7
Group cash flow statement.............................................. 8
Reconciliation of net cash flow to movement in net debt................ 8
Group statement of total recognised gains and losses................... 8
Statement of historical cost profits................................... 8
Movement in group equity shareholders' funds........................... 9
Notes to the Financial Statements...................................... 10
(b) Pro Forma Financial Information........................................ 38
Unaudited Pro Forma Condensed Consolidated Statement of Operations
of Terex Corporation and subsidiaries for the year ended
December 31, 1998..................................................... 39
Unaudited Pro Forma Condensed Consolidated Balance Sheet of Terex
Corporation and Subsidiaries as of December 31, 1998.................. 40
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Information........................................................... 41
(c) Exhibits
10.1 Amendment No. 4 to Credit Agreement dated as of March 6, 1998 among
Terex Corporation, certain of its subsidiaries, the lenders named
therein, and Credit Suisse First Boston, as Administrative and
Collateral Agent.*
10.2 Amendment No. 5 to Credit Agreement dated as of March 6, 1998 among
Terex Corporation, certain of its subsidiaries, the lenders named
therein, and Credit Suisse First Boston, as Administrative and
Collateral Agent.*
10.3 Tranche C Credit Agreement dated as of July 2, 1999, as amended and
restated as of July 12, 1999, among Terex Corporation, the lenders
named therein and Credit Suisse First Boston, as Administrative and
Collateral Agent.*
10.4 Amendment No. 1 to Tranche C Credit Agreement dated as of July 2,
1999, as amended and restated as of July 12, 1999, among Terex
Corporation, the lenders named therein and Credit Suisse First Boston,
as Administrative and Collateral Agent.*
23.1 Consent of Independent Public Accountants' Consent of Arthur Andersen,
London, England.**
23.2 Consent of Independent Public Accountants' Consent of KPMG, Belfast,
Northern Ireland.**
* Previously filed
** Filed herewith,
2
<PAGE>
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.
Date: October 8, 1999
TEREX CORPORATION
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
Title: Vice President - Corporate Finance
(Principal Financial Officer)
3
<PAGE>
Report of Independent Public Accountants
To the Shareholders of Powerscreen International PLC:
We have audited the accompanying consolidated balance sheet of Powerscreen
International PLC as of March 31, 1999, and the related statements of income,
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United Kingdom, which are substantially consistent with auditing
standards generally accepted in the United States and for which purpose our
report is dual dated with respect to Notes 28 and 30. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Powerscreen International PLC as of March 31, 1999, and the consolidated results
of its operations and its consolidated cash flows for the year then ended in
conformity with generally accepted accounting principles in the United Kingdom.
Accounting practices used by the Company in preparing the accompanying financial
statements conform with generally accepted accounting principles in the United
Kingdom, but do not conform with accounting principles generally accepted in the
United States. A description of these differences and a reconciliation of
consolidated net income and shareholders' equity to U.S.generally accepted
accounting principles is set forth in Note 30.
Arthur Andersen
Chartered Accountants
London, England
July 1, 1999 (except with respect
to the matters discussed in Note 28 and Note
30, as to which the date is September 30, 1999)
4
<PAGE>
Report of Independent Public Accountants
To the Shareholders of Powerscreen International PLC:
We have audited the accompanying consolidated balance sheet of Powerscreen
International PLC as of March 31, 1998, and the related statements of income,
shareholders' equity and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the directors of Powerscreen
International PLC. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United Kingdom, which are substantially consistent with auditing
standards generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying consolidated financial statements of Powerscreen International
PLC for the year ended March 31, 1998 have been restated to reflect the
implementation of Financial Reporting Standard No. 12 "Provisions, Contingent
Liabilities and Contingent Assets", which only became effective for accounting
periods ended on or after 23 March 1999, details of which are set out in Note 4
to the consolidated financial statements.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Powerscreen International PLC as of March 31, 1998, and the consolidated results
of its operations and its consolidated cash flows for the year then ended in
conformity with generally accepted accounting principles in the United Kingdom.
Accounting principles generally accepted in the United Kingdom vary in certain
significant respects from accounting principles generally accepted in the United
States. Accounting principles generally accepted in the United States would have
affected the consolidated results of operations for the year ended March 31,
1998 and the consolidated shareholders' equity as of March 31, 1998 to the
extent summarised in note 30 to the consolidated financial statements.
KPMG
Chartered Accountants
Belfast, Northern Ireland September 21, 1998
(except with respect to the matters discussed
in Note 30 as to which the date is September 30, 1999)
5
<PAGE>
FINANCIAL STATEMENTS
Group profit and loss account
Year ended 31 March
1999 1998
Restated
(note 4)
Note GBP'000 GBP'000
Turnover 2
Continuing operations 225,144 206,746
Discontinued operations 40,816 103,872
------ -------
265,960 310,618
Operating profit/(loss) 2
Continuing operations 25,227 (5,330)
Discontinued operations 570 (37,340)
--- --------
25,797 (42,670)
Profit/(loss) on disposal or termination
of subsidiary undertakings 3 16,320 (184)
------ -----
Profit/(loss) on ordinary activities before interest 42,117 (42,854)
Interest receivable 897 357
Interest payable and similar charges 6 (4,644) (4,903)
------- -------
Profit/(loss) on ordinary activities before taxation 38,370 (47,400)
Tax on profit/(loss) on ordinary activities 7 (14,421) (1,530)
-------- -------
Profit/(loss) on ordinary activities after taxation 23,949 (48,930)
Minority interest - equity 29 - (41)
- ----
Profit/(loss) for the financial year 23,949 (48,971)
Dividends on equity shares 8 - (2,796)
- -------
Retained profit/(loss) for the financial year 23,949 (51,767)
------ --------
Earnings/(loss) per share
- basic 8 25.77p (53.97)p
- diluted 25.76p (53.97)p
Movements on the group profit and loss account
Year ended 31 March
1999 1998
<TABLE>
<CAPTION>
Year ended 31 March
1999 1998
Restated
(note 4)
Note GBP'000 GBP'000
<S> <C> <C> <C>
At 1 April (as previously reported) (16,854) 54,541
Prior year adjustments 4 (4,175) -
------- -
At 1 April (as restated) (21,029) 54,541
Retained profit/(loss) for the financial year 23,949 (51,767)
Premium arising on scrip dividend shares issued
credited to the profit and loss account - 957
Goodwill in the year:
eliminated on the acquisition of subsidiary undertakings - (20,793)
on the disposal of subsidiary undertakings 3 11,496 689
on reassessment of goodwill previously eliminated 19 - 164
Transfer to capital reserve 18 - (345)
Net translation adjustment on foreign currency net assets
and borrowings (net of tax credit of GBPl12,000;1998:GBP nil) 420 (4,475)
--- -------
At 31 March 14,836 (21,029)
------ --------
</TABLE>
The accompanying notes form part of these financial statements.
6
<PAGE>
FINANCIAL STATEMENTS continued
Group balance sheet
At 31 March
1999 1998
Restated
(note 4)
Note GBP'000 GBP'000
Fixed assets
Tangible assets 9 37,999 52,410
Fixed asset investments 10 504 4
------ ------
38,503 52,414
Current assets
Stocks 11 45,928 70,836
Debtors 12 56,917 69,630
Cash at bank and in hand 22 13,400 15,852
------ ------
116,245 156,318
Creditors: amounts falling due within one year 13 (61,491) (142,643)
-------- --------
Net current assets 54,754 13,675
------ ------
Total assets less current liabilities 93,257 66,089
Creditors: amounts falling due after
more than one year 13 (15,107) (18,179)
Provisions for liabilities and charges 15 (19,658) (25,241)
-------- --------
Net assets 58,492 22,669
------ ------
Represented by:
Capital and reserves
Called up share capital 17 9,295 9,295
Share premium account 18 32,210 32,210
Revaluation reserve 18 688 688
Capital reserve 18 1,463 1,463
Profit and loss account 19 14,836 (21,029)
------ --------
Equity shareholders' funds 58,492 22,627
Minority interest - equity 29 - 42
- -
------- -------
58,492 22,669
------- -------
On behalf of the board
JE Craig
Chairman
JFW Kennerley
Group Finance Director
1 July 1999
The accompanying notes form part of these financial statements.
7
<PAGE>
FINANCIAL STATEMENTS continued
Group cash flow statement
Year ended 31 March
1999 1998
Note GBP'000 GBP'000
Cash inflow from operating activities 21 21,966 225
Returns on investment and servicing of finance 23a (3,447) (4,985)
Taxation 23b (12,803) (8,255)
Capital expenditure 23c (4,085) (3,675)
------- -------
1,631 (16,690)
Acquisitions and disposals 23d 48,945 (27,458)
Equity dividends paid - (8,479)
- -------
Cashflow before management of liquid resources
and financing 50,576 (52,627)
Management of liquid resources 23e (1,861) -
Financing 23f (19,124) 15,392
-------- ------
Increase/(decrease) in cash in the year 22 29,591 (37,235)
------ --------
Reconciliation of net cash flow to movement in net debt
1999 1998
Note GBP'000 GBP'000
Cash movements
Increase/(decrease) in cash in the year 29,591 (37,235)
Decrease in debt and lease financing in the year 23f 19,124 3,545
Increase in short-term cash deposits 23e 1,861 -
Non-cash movements
Debt transferred on disposals/(acquisitions) 2,182 (6,554)
New finance leases taken out - (1,176)
Translation adjustment (571) 1,224
----- -----
Movement in net debt in the year 52,187 (40,196)
Net debt at 1 April (56,599) (16,403)
-------- --------
Net debt at 31 March 22 (4,412) (56,599)
-------- ---------
Group statement of total recognised gains and losses
Year ended 31 March
1999 1998
Restated
(note 4)
Note GBP'000 GBP'000
Retained profit/(loss) for the financial year 23,949 (51,767)
Translation adjustment on net foreign
currency investments 669 (4,896)
Translation adjustment in respect of borrowings
taken out to hedge net foreign currency
investments (249) 421
----- ---
Total recognised gains and losses for the year 24,369 (56,242)
Prior year adjustments 4 (4,175) -
------- -------
Total gains and losses recognised since the
last annual report 20,194 (56,242)
-------- --------
Statement of historical cost profits
Year ended 31 March
There is no material difference between the group's results as reported and on
an historical cost basis for the year and the previous year. Accordingly no note
of historical cost profits and losses has been prepared.
The accompanying notes form part of these financial statements.
8
<PAGE>
FINANCIAL STATEMENTS continued
Movement in group equity shareholders' funds
For the year ended 31 March
1999 1998
Restated
(note 4)
Note GBP'1000 GBP'000
Total recognised gains and losses for the year 24,369 (56,242)
New share capital issued 17 - 322
Premium arising on shares issued during the year
credited to share premium account 18 - 18,615
Premium arising on scrip dividend shares issued
during the year credited to profit and loss account 19 - 957
Goodwill in the year:
eliminated on the acquisition of subsidiary
undertakings 19 - (20,793)
on the disposal of subsidiary undertakings 3 11,496 689
on reassessment of goodwill previously eliminated 19 - 164
- ---
Net additions/(deductions) from shareholders' funds 35,865 (56,288)
Shareholders' funds at beginning of year
(as restated) 22,627 78,915
------ ------
Shareholders' funds at end of year (prior year
restated) 58,492 22,627
------ ------
The accompanying notes form part of these financial statements.
9
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting Policies
The accompanying consolidated financial statements do not comprise "statutory
accounts" within the meaning of section 240 of the Companies Act 1985 of England
and Wales, but have been based upon the full published accounts of the Company
for the two fiscal years to 31 March 1999 which have been delivered to the
Registrar of Companies in England and Wales upon which unqualified audit reports
have been given.
The following are the accounting policies which have been applied consistently,
except for the revised accounting policy on provisions and the calculation of
earnings per share explained below, to items considered material in the
financial statements.
Basis of presentation. The consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United
Kingdom (UK GAAP). UK GAAP and accounting principles adopted by the Company
differ in certain respects from accounting principles generally accepted in the
United States (US GAAP). See Note 30 for a discussion of the principal
differences that would affect the Company's consolidated net income and
shareholders' equity if US GAAP had been applied instead of UK GAAP in the
preparation of the consolidated financial statements. The financial statements
have been prepared under the historical cost convention as modified to include
the revaluation of certain land and buildings, and comply with applicable
accounting standards.
Consolidation. The group accounts consolidate the accounts of the Company and
its subsidiaries, all drawn up to 31 March 1999. For the year to 31 March 1998,
the group accounts consist of the accounts of the Company and its subsidiaries
with the exception of Matbro (NI) Limited and Matbro Limited for whom management
accounts were consolidated and audited. The trading results of companies
acquired or disposed of are accounted for from or up to the relevant date of
acquisition or disposal.
Where appropriate, goodwill on consolidation following the purchase of companies
accounted for under the acquisition method and goodwill purchased on the
acquisition of businesses was taken directly to reserves for purchases prior to
1 April 1998. Goodwill arising on acquisitions subsequent to this date will be
capitalised and amortised on a straight-line basis over an appropriate period,
being no more than 20 years, in accordance with Financial Reporting Standard 10
(Goodwill and intangible assets). Goodwill remaining on acquisitions at the time
of their disposal continues to be charged or credited in the profit and loss
account.
Turnover. Turnover represents sale of goods and services falling within the
ordinary activities of the group, exclusive of Value Added Tax.
Research and development expenditure. Research and development costs are written
off to the profit and loss account as incurred.
Pension costs. The group operates both defined benefit and defined contribution
schemes. The pension costs in respect of defined contribution schemes are
charged to the profit and loss account in the year. The pension costs in respect
of defined benefit schemes are charged to the profit and loss account on a
systematic basis, based on actuarial calculations over the service lives of the
employees.
Taxation. Corporation tax is charged based on the profits for the year. Deferred
taxation arising as a result of timing differences between the profit as
computed for taxation purposes and that stated in the financial statements is
provided under the liability method to the extent that it is probable that the
liability will crystallise in the foreseeable future.
Earnings per share. The group has adopted Financial Reporting Standard 14
(Earnings per share) in the year. The calculation of basic earnings per ordinary
share is based on the profit or loss attributable to shareholders and on the
weighted average number of all ordinary shares outstanding during the year. The
calculation of diluted earnings per ordinary share is based on the profit or
loss attributable to shareholders and on the weighted average number of all
ordinary shares outstanding during the year, plus the weighted average number of
ordinary shares that would be issued on the exercise of all dilutive share
options into ordinary shares.
Foreign currencies. Transactions in foreign currencies are recorded at the rate
ruling at the date of the transactions or at a contracted rate. The resulting
monetary assets and liabilities are translated at the balance sheet rate or the
contracted rate and the exchange differences are dealt with in the profit and
loss account.
The group's net investments in overseas subsidiary undertakings are translated
at the rate ruling at the balance sheet date. The profits and losses of overseas
subsidiary undertakings are translated at average rates for the year. Exchange
differences resulting from the retranslation of the opening balance sheets of
overseas subsidiary undertakings at closing rates, together with the differences
on the translation of the profit and loss accounts, are dealt with through
reserves and reflected in the statement of total recognised gains and losses.
Where net investments are matched in whole or in part by foreign currency
borrowings, the exchange differences arising on the retranslation of such
borrowings are also recorded as reserve movements and reflected in the statement
of total recognised gains and losses.
10
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
1. Accounting Policies (continued)
Tangible fixed assets and depreciation. The group has adopted Financial
Reporting Standard 11 (Impairment of fixed assets and goodwill) during the year.
Tangible fixed assets are stated at cost or valuation, less accumulated
depreciation and any provision for impairment. No depreciation is charged on
freehold land. Depreciation on other fixed assets is calculated on a straight
line or reducing balance basis to write down the cost or valuation less residual
value over the expected useful lives of the assets. The periods and methods
generally applicable are as follows:
Asset Category Period Method
Freehold buildings 20-50 years straight line
Plant and equipment Mainly 5-10 years straight line
Motor vehicles 4-5 years reducing balance
Hire purchase and leased assets. Assets held under hire purchase agreements or
finance leases are capitalised and depreciated in accordance with the group
depreciation policy. Obligations under these agreements are apportioned between
finance charges and capital repayments on the annuity method.
Rentals of assets held under operating leases are charged to the profit and loss
account in the period in which they occur.
Fixed asset investments. Fixed asset investments are shown at cost less
provisions for any impairment.
Stocks. Stocks are valued at the lower of cost and net realisable value. In the
case of finished goods, cost is defined as the aggregate cost of raw materials,
direct production labour and overheads, together with an attributable proportion
of indirect overheads.
Net realisable value is based on estimated normal selling price less further
costs expected to be incurred to completion and disposal.
Commitments to repurchase equipment. Where the group has entered into
arrangements with financial institutions or other third parties to repurchase,
at some time in the future, equipment sold by the group, the liability to
re-acquire the asset is included within creditors. The estimated net residual
value of the asset to be repurchased is included within debtors.
Accounting for provisions. The group has adopted Financial Reporting Standard 12
(Provisions, contingent liabilities and contingent assets) in the year. The cost
of a present obligation is provided when a transfer of economic value is likely
to be required to settle the obligation and the group is able to make a reliable
estimate. If the group is able to avoid this expenditure by altering its future
actions then no provision for this obligation is recognised.
Warranty. The cost of warranty is provided for on the basis of known claims and
an estimate, based on past experience, of future claims expected to arise over
the period of the warranty.
Government grants. Government grants on capital expenditure are credited to
deferred revenue and are released to the profit and loss account over the
expected useful life of the relevant asset in line with the depreciation rate on
the related asset.
Revenue grants are credited on a receivable basis to the profit and loss
account.
11
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
2. Turnover, operating profit/(loss) and net assets
The turnover and operating profit/(loss) arise from the principal activities of
the manufacture and sale of screening, crushing, materials handling and
recycling equipment.
a. Turnover by destination
1999 1998
GBP'000 GBP'000
United Kingdom and Ireland 105,400 147,905
North America 101,970 98,830
Europe 42,791 37,044
Far East/Other 15,799 26,839
------ ------
265,960 310,618
------- -------
The discontinued activities had the following impact on turnover by destination
in the current year:
GBP'000
United Kingdom and Ireland 21,315
North America 19,152
Europe -
Far East/Other 349
------
40,816
------
b. Turnover by origin
<TABLE>
<CAPTION>
1999 1998
---------------------------------- --------------------------------
Inter- Turnover Inter- Turnover
Turnover segment to third Turnover segment to third
by origin turnover parties by origin turnover parties
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
<S> <C> <C> <C> <C> <C> <C>
United Kingdom and Ireland 235,853 (43,022) 192,831 282,637 (45,650) 236,987
North America 75,068 (1,939) 73,129 75,827 (2,196) 73,631
------ ------- ------ ------ ------- ------
310,921 (44,961) 265,960 358,464 (47,846) 310,618
------- -------- ------- ------- -------- -------
</TABLE>
The discontinued activities had the following impact on turnover by origin in
the current year:
GBP'000
United Kingdom and Ireland 22,770
North America 18,046
------
40,816
------
c. Operating profit and total net assets by origin
1999
Operating
profit Net assets
GBP'000 GBP'000
United Kingdom and Ireland 21,042 33,556
North America 4,755 24,936
----- ------
25,797 58,492
------ ------
12
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
2. Turnover, operating profit/(loss) and net assets (continued)
<TABLE>
<CAPTION>
1998
Operating Operating Net assets/ Net assets/
profit/(loss) Prior profit/(loss) (liabilities) Prior (liabilities)
(as previously year Restated (as previously year Restated
stated) adjustments (note 4) stated) adjustments (note 4)
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
<S> <C> <C> <C> <C> <C> <C>
United Kingdom and Ireland(47,337) 421 (46,916) (7,510) (4,175) (11,685)
North America 4,246 - 4,246 34,354 - 34,354
----- --- ----- ------ ------ ------
(43,091) 421 (42,670) 26,844 (4,175) 22,669
-------- --- -------- ------ ------- ------
</TABLE>
The discontinued activities contributed the following to the operating
profit/(loss) and net assets in the current year:
Operating
profit/(loss) Net assets
GBP'000 GBP '000
United Kingdom and Ireland (2,868) -
North America 3,438 -
----- -----
570 -
--- -----
d. Turnover, operating profit/(loss) and net assets by division
<TABLE>
<CAPTION>
1999 1998 Restated (note 4)
-------------------------------------- ----------------------------------------
Turnover Operating Net Turnover Operating Net assets/
profit/ assets/ profit/ (liabilities)
(loss) (liabilities) (loss)
GBP'000 GBP'000 GBP '000 GBP '000 GBP '000 GBP '000
Screening/recycling
division:
<S> <C> <C> <C> <C> <C> <C>
Continuing activities 97,745 13,897 34,140 104,295 8,738 55,023
Discontinued activities - - - 6,176 303 -
Crushing division 37,473 2,701 14,851 43,285 209 11,878
Materials handling:
Continuing activities 90,799 11,806 19,167 63,834 2,688 19,502
Discontinued activities 41,090 570 - 97,696 (37,643) (16,895)
------ --- - ------ -------- --------
267,107 28,974 68,158 315,286 (25,705) 69,508
Interdivisional trading (1,147) - - (4,668) - -
Head office - (3,177) (9,666) - (16,965) (46,839)
------- ------- ------- -------- -------- --------
265,960 25,797 58,492 310,618 (42,670) 22,669
------- ------ ------ ------- -------- ------
</TABLE>
e. Operating profit/(loss)
1999
---------------------------------------
Continuing Discontinued
activities activities Total
GBP '000 GBP'000 GBP'000
Turnover 225,144 40,816 265,960
Cost of sales (169,685) (33,132) (202,817)
--------- -------- ---------
Gross profit 55,459 7,684 63,143
Administrative expenses (17,414) (5,653) (23,067)
Selling and distribution expenses (13,287) (1,504) (14,791)
Other operating income 469 43 512
--- -- ---
Operating profit 25,227 570 25,797
------ --- ------
13
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
2. Turnover, operating profit/(loss) and net assets (continued)
1998 Restated (note 4)
Continuing Discontinued
activities activities Total
GBP'000 GBP '000 GBP '000
Turnover 206,746 103,872 310,618
Cost of sales (159,815) (109,323) (269,138)
--------- --------- ---------
Gross profit/(loss) 46,931 (5,451) 41,480
Administrative expenses (39,072) (25,553) (64,625)
Selling and distribution expenses (13,624) (6,469) (20,093)
Other operating income 435 133 568
--- --- ---
Operating loss (5,330) (37,340) (42,670)
------- -------- --------
The following items, exceptional because of their size, have been charged in
arriving at the operating profit/(loss):
<TABLE>
<CAPTION>
1998 Restated (note 4)
Continuing Discontinued
activities activities Total
GBP '000 GBP '000 GBP '000
Cost of sales
<S> <C> <C> <C>
Total stock provision charged in the year 4,652 3,468 8,120
Total warranty costs charged in the year 2,015 6,780 8,795
----- ----- -----
6,667 10,248 16,915
----- ------ ------
Administration expenses
Total charge for bad and doubtful
debts in the yea 8,166 14,194 22,360
Provision for legal fees and claims 10,166 - 10,166
Accrual for other professional fees 4,023 - 4,023
Provision for other claims 200 2,500 2,700
--- ----- -----
22,555 16,694 39,249
------ ------ ------
29,222 26,942 56,164
------ ------ ------
</TABLE>
Charges under certain of these headings were also incurred in 1999 and charged
against operating profits but the amounts were not exceptional in size.
Exceptional head office costs of GBP3,100,000 incurred in 1999 in connection
with the Matbro situation have been charged to operating profit under
discontinued activities within the Materials Handling segment.
14
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
2. Turnover, operating profit/(loss) and net assets (continued)
The operating profit/(loss) is stated after charging/(crediting):
1999 1998
GBP'000 GBP '000
Depreciation on owned fixed assets 3,274 3,696
Depreciation on fixed assets held under
finance leases and hire purchase 458 511
Diminution in value of land (see note 9) - 400
Amortisation of intangible assets - 57
Research and development expenditure 1,377 1,388
Capital grants released (394) (653)
Revenue grants received (222) (735)
Loss on disposal of fixed assets 29 78
Auditors' remuneration
- Arthur Andersen - audit - half year 505 -
- Arthur Andersen - audit - full year 455 -
- Arthur Andersen - non-audit fees 242 -
- Other auditors - audit - 815
- Other auditors - non-audit fees - 653
Operating leases
- plant and machinery 17 206
- property rental (prior year restated) 298 151
- other 70 6
Directors' remuneration 1,029 2,267
Directors' remuneration consists of salary/fees, performance related
bonuses, benefits in kind and payments to defined contribution pension
schemes.
3 Profit/(loss) on disposal or termination of subsidiary undertakings
The profit on disposal or termination of subsidiary undertakings of
GBP16,320,000 comprises of the following items:
Disposal of Geith International Limited
The group made a profit on the disposal of Geith International Limited of
GBP133,000. A summary of the effect of the disposal is as follows:
Net assets disposed of:
GBP '000
Tangible assets 2,932
Stocks 1,964
Debtors 1,726
Cash (net) 294
Creditors (3,415)
-------
Net assets 3,501
Goodwill previously written off (see note 19) 3,228
Minority Interest (42)
----
6,687
Cash received 6,820
-----
Profit on disposal 133
-----
The consolidated profit for the year did not include any profit relating to
Geith International Limited, as the effective date of disposal was in April
1998 when control of the company's operations was passed to the company's
management.
15
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
3 Profit/(loss) on disposal or termination of subsidiary undertakings
(continued)
Disposal of SDC Trailers Limited
The group made a loss on the disposal of SDC Trailers Limited of GBP831,000. A
summary of the effect of the disposal is as follows:
Net assets disposed of:
GBP '000
Tangible assets 6,266
Stocks 6,423
Debtors 9,059
Bank overdraft (net) (2,905)
Creditors (14,421)
Deferred tax (478)
-----
Net assets 3,944
Goodwill previously written off (see note 19) 3,742
-----
7,686
Cash received 6,355
Deferred consideration 500
---
Loss on disposal (831)
-----
The consolidated profit for the year included a profit after tax of GBP324,000
in respect of SDC Trailers Limited up to 1 September 1998, the effective date of
disposal.
In the period up to disposal SDC Trailers Limited absorbed GBP2,343,000 of the
group's net operating cashflows, paid GBPl53,000 in respect of the net returns
on investments and servicing of finance, and increased its net borrowings by
GBP1,069,000.
Disposal of Ludlow-Saylor Inc.
The group made a profit on the disposal of Ludlow-Saylor Inc. of GBP1,229,000. A
summary of the effect of the disposal is as follows:
Net assets disposed of:
GBP'000
Tangible assets 1,510
Stocks 1,418
Debtors 848
Cash 736
Creditors (554)
-----
Net assets 3,958
Goodwill previously written off (see note 19) 77
--
4,035
Cash received 5,264
-----
Profit on disposal 1,229
-----
The consolidated profit for the year included a profit after tax of GBP431,000
in respect of Ludlow-Saylor Inc. up to 9 March 1999, the effective date of
disposal.
In the period up to disposal Ludlow-Saylor Inc. contributed GBP1,005,000 to the
group's net operating cashflows, received GBP19,000 in respect of net returns on
investments and servicing of finance, paid GBP405,000 in respect of tax and made
capital expenditure payments of GBP52,000.
16
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
3 Profit/(loss) on disposal or termination of subsidiary undertakings
(continued)
Disposal of US Truck Cranes Inc
The group made a profit on the disposal of US Truck Cranes Inc. of
GBP15,941,000. A summary of the effect of the disposal is as follows
Net assets disposed of:
GBP '000
Tangible assets 1,562
Stocks 5,324
Debtors 1,960
Cash 582
Creditors (4,364)
Deferred tax (124)
-----
Net assets 4,940
Goodwill previously written off (see note 19) 4,449
-----
9,389
Cash received 25,330
------
Profit on disposal 15,941
------
The consolidated profit for the year included a profit after tax of GBP1,400,000
in respect of US Truck Cranes Inc. up to 3 November 1998, the effective date of
disposal.
In the period up to disposal US Truck Cranes Inc. contributed GBP3,188,000 to
the group's net operating cashflows, paid GBPl13,000 in respect of net returns
on investments and servicing of finance, paid tax of GBP1,136,000 and made
capital expenditure payments of GBP41,000.
Termination of Matbro manufacturing activities
On 11 May 1998, the group terminated Matbro's manufacturing activities and
disposed of certain intellectual property rights for a sum of GBP4,798,000,
which was satisfied in cash.
In connection with this termination, the directors have considered the value of
the remaining fixed assets previously used in the Matbro manufacturing
activities (and certain related capital grants) and jigs to have diminished in
value to the group. A summary of the effect of the termination is as follows:
GBP'000
Gain on sale of intellectual property rights 4,798
Impairment of tangible fixed assets and jigs (4,401)
Capital grants relating to tangible fixed assets 366
Costs relating to termination of manufacturing activities (915)
-----
Loss on termination (152)
-----
17
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
4 Prior year adjustments
The group has changed its accounting for the cost of onerous property leases,
which has resulted in a prior year adjustment of GBP4,175,000.
In prior years the cost of the obligation for onerous property leases was
charged to the profit and loss account as incurred with no provision being made
for future commitments. The prior year adjustment represents the directors' best
estimate of the present value of the cost of these future obligations. The
effect of the adjustment was to increase basic and diluted earnings per share by
0.17p for the year ended 31 March 1998. The current year effect of the change in
policy on the group profit and loss account and balance sheet is disclosed in
note 15.
The effect of this adjustment on the 1998 group profit and loss is summarised
below:
GBP'000
-------
Reduction in administrative expense 421
Increase in interest expense through unwinding of discount on provision (265)
-------
Decrease in loss on ordinary activities before taxation 156
-------
The effect of these adjustments on the group balance sheet at 31 March 1998 was
as follows:
GBP'000
-------
Increase in provisions for liabilities and charges 4,175
-------
5 Employees
a. The average number of persons employed by the group during the year is
analysed below:
1999 1998
No. No.
Production 1,322 1,474
Administration and management 355 325
Sales 122 152
--- ---
1,799 1,951
----- -----
b. Group employment costs:
1999 1998
GBP'000 GBP '000
Gross wages and salaries 30,349 33,206
Social security costs 2,620 3,069
Pension costs 608 656
--- ---
33,577 36,931
------ ------
6 Interest payable and similar charges
1999 1998
Restated
(note 4)
GBP'000 GBP'000
Amounts repayable within five years:
On bank loans, overdrafts and other loans 4,003 5,121
On loan notes 210 112
Hire purchase and finance leases 131 109
Exchange gains on foreign currency borrowings
not credited to reserves - (704)
Unwinding of discount on provision (note 15) 300 265
--- ---
4,644 4,903
----- -----
18
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
7 Taxation
1999 1998
GBP'000 GBP'000
UK corporation tax at a rate of 31% based
on the UK taxable profit for the year 1,424 (1,865)
Foreign taxation for the year 12,371 3,125
Under provision of corporation tax in
previous years - 183
Irrecoverable ACT 470 -
Deferred taxation (see note 15) 156 87
--- --
14,421 1,530
------ -----
The deferred tax charge of GBPl56,000 consists of a credit in respect of the UK
of GBP149,000 offset by an overseas charge of GBP305,000. The tax charge for the
year and the prior year have been reduced due to the effect of losses
accumulated in the group. The tax charge attributable to the exceptional profit
on disposal or termination of subsidiary undertakings in the year is
GBP10,902,000.
8 Dividends and earnings per share
Dividends 1999 1998
GBP'000 GBP'000
Interim dividend: nil (1998: 3.1 p) - 2,796
Final dividend: nil (1998: nil) - -
----- ------
Total dividend: nil (1998: 3.1 p) - 2,796
----- -----
The Company in paying the interim dividend for the year ended 31 March 1998 made
an unlawful distribution of GBP44,000 and the directors obtained shareholders'
approval to regularise the unlawful distribution at the Annual General Meeting
in October 1998.
Earnings per share
The calculation of basic earnings per ordinary share is based on profit
attributable to shareholders of GBP23,949,000 (1998: loss attributable to
shareholders of GBP48,971,000) and on 92,945,475 (1998: 90,734,753) shares, this
being the weighted average number of ordinary shares in issue and ranking for
dividend during the year.
The calculation of diluted earnings per ordinary share is based on profit
attributable to shareholders of GBP23,949,000 (1998: loss attributable to
shareholders of GBP48,971,000) and on the weighted average number of all
ordinary shares outstanding during the year, plus the weighted average number of
ordinary shares that would be issued on the exercise of all the dilutive share
options into ordinary shares of 40,585 (1998: nil), giving a total of 92,986,060
(1998: 90,734,753).
The group has adopted Financial Reporting Standard 14 in the year and as a
result the comparative figures for the year to 31 March 1998 have been presented
on a comparable basis.
19
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
9 Tangible assets
Freehold
land and Plant and
buildings equipment Total
GBP '000 GBP '000 GBP '000
Cost or valuation
At 1 April 1998 37,257 42,418 79,675
Additions 339 5,576 5,915
Disposals - on sale of (7,249) (7,283) (14,532)
subsidiaries
- other - (1,307) (1,307)
Translation adjustment 463 503 966
--- --- ---
At 31 March 1999 30,810 39,907 70,717
------ ------ ------
Cost 26,380 39,907 66,287
Valuation 4,430 - 4,430
----- - -----
At 31 March 1999 30,810 39,907 70,717
------ ------ ------
Depreciation
At 1 April 1998 5,540 21,725 27,265
Charge for the year 849 2,883 3,732
Impairment losses (note 3) 1,552 2,849 4,401
Disposals - on sale of (574) (1,688) (2,262)
subsidiaries
- other - (711) (711)
Translation adjustment 77 216 293
-- --- ---
At 31 March 1999 7,444 25,274 32,718
----- ------ ------
Net book value
At 31 March 1999 23,366 14,633 37,999
------ ------ ------
At 31 March 1998 31,717 20,693 52,410
------ ------ ------
The net book value of plant and equipment includes an amount of GBP2,670,000
(1998: GBP2,547,000) in respect of assets held under hire purchase and finance
leases by the group.
In connection with the termination of the Matbro manufacturing activities, the
directors have considered the value of the remaining fixed assets used in these
activities. This resulted in the diminution of fixed assets by GBP4,401,000 (see
note 3).
Fixed assets are included at cost except for:
(i) GBP1,000,000 in respect of a property valued at open market value at 31
March 1987, GBP1,330,000 in respect of a property valued at open market
value at 22 March 1990 and GBP1,500,000 in respect of freehold property
valued at open market value at 31 December 1993. The historic cost of
these land and buildings which have been revalued is GBP3,142,000 (1998:
GBP3,142,000) with accumulated depreciation of GBPl,143,000 (1998:
GBPl,127,000) provided thereon.
(ii) At 31 March 1998 the directors valued land, which is no longer used in
the business, on an open market value basis of GBP600,000. The historic
cost of the land was GBP1,000,000 with accumulated depreciation thereon
of GBPnil. The diminution in value of the land of GBP400,000 was written
off to the profit and loss account in that year (see note 2).
The cost of land which is not depreciated is GBP6,478,000 (1998: GBP6,894,000).
10 Fixed asset investments
Listed Other
investments investments Total
GBP'000 GBP'000 GBP'000
Cost
At 1 April 1998 4 - 4
Additions - 500 500
- --- ---
At 31 March 1999 4 500 504
- --- ---
The market value of the listed investments was GBP5,000 at 31 March 1999.
20
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
10 Fixed asset investments (continued)
The principal operating subsidiaries of the group at 31 March 1999 were:
<TABLE>
<CAPTION>
Country of
operation and
Company incorporation Principal activities
<S> <C> <C>
Benford Limited* England & Wales Manufacture and sale of compaction and
construction equipment
Benford America Inc USA Sale and distribution of compaction and
construction equipment
Brown Lenox & Co Limited England & Wales Manufacture and sale of crushing equipment
Containers and Pressure Vessels Limited Republic of Ireland Manufacture and sale of stainless steel
pressure vessels
CPV (UK) Limited England & Wales Sale and distribution of stainless steel
pressure vessels
Finlay Hydrascreens (Omagh) Limited* Northern Ireland Manufacture and sale of screening and
recycling units
Finlay Hydrascreen USA Inc USA Sales and distribution in the United States
Matbro Limited* England & Wales Sale of spares for telescopic handlers
Moffett Engineering Limited* Republic of Ireland Manufacture and sale of truck-mounted forklifts
BL Pegson Limited England & Wales Manufacture and sale of crushing, screening
and pumping equipment
BL Pegson USA Inc USA Sale and distribution of crushing, screening
and pumping equipment
Powerscreen International (Canada) ULC Canada Manufacture of screening and conveyor equipment
Powerscreen International Distribution Limited Northern Ireland Manufacture, assembly and sale of
screening/recycling equipment
Powerscreen Limited* Republic of Ireland Manufacture and sale of screen units and
recycling equipment
Powerscreen of America USA Sales, distribution and services in the United
States
Royer Industries Inc USA Manufacture and sale of shredder equipment and
contract fabrications
Simplicity Engineering USA Manufacture and sale of static screens and
feeders
</TABLE>
*Represents investments held directly by Powerscreen International PLC.
A complete list of all subsidiaries is attached to the Annual Return. All
investments comprise ordinary shares except Powerscreen Limited, which includes
an investment in preference shares. All subsidiaries are 100% owned.
Disposals
During the period the Company disposed of the entire share capital in Geith
International Ltd for a consideration of GBP6,820,000.
On 1 September 1998 the Company disposed of the entire share capital of SDC
Trailers Ltd for cash consideration of GBP6,355,000 and deferred consideration
in the form of preference shares of GBP500,000 which is included in other
investments above.
On 9 March 1999 the Company disposed of the entire share capital in
Ludlow-Saylor Inc. for a cash consideration of GBP5,264,000.
On 3 November 1998 the Company disposed of the entire share capital in US Truck
Cranes Inc for a cash consideration of GBP25,330,000.
21
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
11 Stocks
1999 1998
GBP'000 GBP'000
Raw materials and consumables 15,318 29,698
Work in progress 11,441 10,945
Finished goods 19,169 30,193
------ ------
45,928 70,836
------ ------
The replacement cost of stocks does not differ materially from the carrying
value disclosed above.
12 Debtors
1999 1998
GBP'000 GBP'000
Trade debtors 50,275 56,939
Other debtors 2,561 4,788
ACT recoverable 584 3,637
Prepayments and accrued income 2,429 2,559
Net residual value of assets recoverable under
repurchase commitments 1,068 1,707
------ ------
56,917 69,630
------ ------
Debtors include amounts due after more than one year as
follows:
Trade debtors 37 1,311
ACT recoverable - 3,637
Net residual value of assets recoverable
under repurchase commitments 1,068 1,707
----- -----
1,105 6,655
----- -----
Included in debtors are amounts due of GBPnil (1998: GBP2,600,000) subject to an
invoice discounting facility of which GBPnil (1998: GBP185,000) had been drawn
down at the year end.
13 Creditors
1999 1998
Amounts falling due within one year: GBP'000 GBP'000
------- -------
Bank loans and other borrowings
Bank overdrafts - 33,739
Bank loans 300 22,404
Bills of exchange discounted - 2,522
Obligations under finance leases and hire purchase contracts 736 1,790
Other loans 147 66
Invoice discounting - 185
Loan notes 8,502 1,661
----- -----
9,685 62,367
Other creditors
Trade creditors 33,588 55,572
Bills of exchange issued 108 164
Corporation tax 5,666 6,087
Other taxes and social security 1,789 1,481
Other creditors 556 1,140
Accruals and deferred income 10,099 14,893
ACT payable - 939
------- -------
61,491 142,643
------- -------
22
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
13 Creditors (continued)
1999 1998
Amounts falling due after more than one year: GBP'000 GBP'000
Bank loans and other borrowings Bank loans 7,172 -
Obligations under finance leases and hire
purchase contracts 620 1,362
Other loans 335 2,242
Loan notes - 6,480
----- -----
8,127 10,084
Other creditors
Other creditors 1,287 530
Accruals and deferred income 3,978 5,448
Commitments to repurchase equipment 1,715 2,117
----- -----
15,107 18,179
------ ------
Accruals and deferred income include government grants to be credited to the
profit and loss account in future years (see note 16). Included in group
creditors due within one year are government grants of GBP394,000 (1998:
GBP542,000) and in group creditors after one year GBP3,978,000 (1998:
GBP5,448,000).
The maturity of bank loans and other borrowings is as follows:
<TABLE>
<CAPTION>
Between Between Greater
Less than one and two and than five
one year two years five years years Total
GBP'000 GBP'000 GBP '000 GBP'000 GBP'000
<S> <C> <C> <C> <C> <C>
Repayable other than by instalments
Bank loans - 6,579 - - 6,579
Loan notes 8,502 - - - 8,502
Other loans 15 74 58 193 340
Repayable by instalments
Bank loans 300 128 254 211 893
Finance leases and hire purchase contracts 736 581 31 8 1,356
Other loans 132 10 - - 142
--- -- - - -------
9,685 7,372 343 412 17,812
----- ----- --- --- ------
</TABLE>
Under the terms of the current banking arrangements the group's bankers have
taken fixed and floating charges over the assets of the group and shares in
subsidiary undertakings.
Bank borrowings attract differing rates of interest depending on the structure
and types of borrowing. In the majority of cases, the current rate of interest
being paid on the group borrowings under its present banking arrangements is a
margin of 1 1/8% p.a.
over variable bank base rates.
23
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
13 Creditors (continued)
Loan notes comprise the following guaranteed unsecured loan notes denominated in
Irish Pounds:
2% loan notes dated 2001 IRGBP8,000,000
4% loan notes dated 2001 IRGBP2,054,000
The sterling equivalent of the loan notes at 31 March 1999 was GBP8,502,000.
Interest is payable quarterly on the nominal value of the loan notes. The 2%
loan notes dated 2001 are redeemable at the option of the loan note holders at
any time from 22 March 2000 up to the final repayment date of 22 September 2001.
The 4% loan notes dated 2001 are redeemable at the option of the loan note
holders at any time up to the final repayment date of 22 September 2001. The
holders of the loan notes may require repayment immediately if:
- an administration or winding up order has been made, or a secured
creditor takes possession of any part of property or assets of the
Company, or
- the Company becomes unable to pay its debts under the Insolvency Act,
1986, or
- any fixed or floating charge taken over the Company's property becomes
enforceable.
The loan notes are bank guaranteed. This guarantee falls within the facilities
covered by the group's present banking arrangements and attracts a commission
charge of 1 1/8% per annum.
14 Derivatives and other financial instruments
The group's policy in relation to foreign exchange transaction exposures is
that, wherever possible, definite (i.e. contracted) exposures will be hedged.
Natural hedges are used in order to maximise the efficiency of the group's
foreign exchange banking facilities and to minimise the cost of hedging. Irish
membership of EMU has assisted the group in its desire to eliminate transaction
exposures.
The numerical disclosures in this note deal with financial assets and financial
liabilities as defined in Financial Reporting Standard 13 (Derivatives and other
financial instruments: Disclosures) (FRS13). Certain financial assets such as
investments in subsidiary and associate companies are excluded from the scope of
these disclosures.
As permitted by FRS13, short-term debtors and creditors have been excluded from
the disclosures, other than the currency disclosures.
a. Interest rate profile
The group's floating rate liabilities relate to bank borrowings with fixed rate
liabilities being the loan notes and finance lease obligations. No financial
instruments have been acquired to alter the nature of these liabilities.
The group has no financial assets other than cash deposits of GBP13,400,000,
external investments of GBP504,000 (see note 10) and trade debtors due after
more than one year of GBP37,000 (see note 12) which relate to balances being
paid by instalments.
The interest rate profile of the group's financial liabilities at 31 March 1999
was as follows:
Floating Fixed Interest
Total rate rate free
1999 1999 1999 1999
GBP'000 GBP'000 GBP'000 GBP'000
Currency
Sterling 7,287 6,579 708 -
Euro 9,649 - 9,446 203
US Dollar 597 166 431 -
Canadian Dollar 279 - 279 -
--- ----- --- -----
Total 17,812 6,745 10,864 203
------ ----- ------ -----
24
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
14 Derivatives and other financial instruments (continued)
Further analysis of the interest rate profile at 31 March 1999 is as follows:
Fixed rate Fixed rate Interest-free
Weighted
average Weighted
Weighted period average
average for which period
interest rate rate is fixed to maturity
% Years Years
Currency
Sterling 7.6 0.9 -
Euro 3.7 1.0 1.0
US Dollar 6.8 0.8 -
Canadian Dollar 7.4 4.3 -
--- --- -
Total 4.2 1.1 1.0
--- --- ---
The interest on floating rate financial liabilities is linked to base rate in
the case of the sterling liabilities and for US Dollar liabilities the prime
rate. Further details of interest rates on long-term borrowings are given in
note 13.
b. Currency exposures
The table below shows the group's currency exposures; in other words, those
transactional (or non-structural) exposures that give rise to the net currency
gains and losses recognised in the profit and loss account. Such exposures
comprise the monetary assets and monetary liabilities of the group that are
denominated other than in the operating (or 'functional') currency of the
operating unit involved, other than certain non-sterling borrowings treated as
hedges of net investments in overseas operations. As at 31 March 1999 these
exposures were as follows:
<TABLE>
<CAPTION>
Functional currency of group operation
Canadian
Sterling Euro US Dollar Dollar Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net foreign currency monetary
assets/(liabilities)
<S> <C> <C> <C> <C> <C>
Sterling - (1,817) (9,616) (700) (12,133)
US Dollar 6,673 (155) - 74 6,592
Euro 1,926 816 - - 2,742
Japanese Yen (22) (1) - - (23)
Danish Kroner - (15) - - (15)
Swedish Kroner (55) - - - (55)
Canadian Dollar - - (89) - (89)
----- ------- ------- ----- -----
Total 8,522 (1,172) (9,705) (626) (2,981)
----- ------- ------- ----- -------
</TABLE>
Also at 31 March 1999, the group held open various forward contracts that the
group had taken out to hedge expected future foreign currency sales. These can
be detailed as follows (in each case expressed as exchange rates against
sterling):
Average Average
time period exchange
Amount (months) rates
Currency
Euro (buy) EU 1,551,938 5 1.460
US Dollar (sell) USD 9,423,400 4 1.7038
Canadian Dollar (sell) AD 959,915 2 2.4097
Swedish Kroner (buy) SEK 133,537 2 12.87
25
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
14 Derivatives and other financial instruments (continued)
c. Maturity of financial liabilities
The group's maturity profile beyond one year comprises obligations under its
main banking facility, which matures on 31 December 2000, the loan notes and
finance leases. The group has an objective to extend the maturity of its banking
facilities.
The maturity profile of the group's financial liabilities at 31 March 1999 was
as follows:
GBP'000
In one year or less 9,685
In more than one year but not more than two years 7,372
In more than two years but not more than five years 343
In more than five years 412
---
Total 17,812
------
d. Borrowing facilities
The group had undrawn committed borrowing facilities at 31 March 1999, in
respect of which all conditions precedent had been met, as follows:
1999
GBP'000
Expiring in one year or less -
Expiring in more than one year but not more than two years 5,616
Expiring in more than two years -
-
Total 5,616
-----
e. Fair values
Set out below is a comparison by category of book values and fair values of the
group's financial assets and liabilities at 31 March 1999.
Book Fair
value value
GBP'000 GBP'000
Primary financial instruments held or
issued to finance the group's operations
Short-term financial liabilities and current
portion of long-term borrowings (9,685) (9,685)
Long-term borrowings (8,127) (8,127)
Financial assets 13,941 13,942
------ ------
Derivative financial instruments held to
manage the interest rate and currency profile
Forward foreign currency contracts - (343)
- -----
The directors have reviewed the fair values and consider there to be no material
difference from the book values.
f. Gains and losses on hedges
Where possible the group enters into forward foreign exchange currency contracts
to eliminate the currency exposures that arise on sales denominated in foreign
currencies immediately those sales are transacted. Changes in fair value of
instruments used as hedges are not recognised in the financial statements until
the hedged position matures. An analysis of these unrecognised gains and losses
is as follows:
<TABLE>
<CAPTION>
1999
-------------------------
Gains Losses Net
GBP'000 GBP'000 GBP'000
------- ------- --------
<S> <C> <C> <C>
Unrecognised gains and losses on hedges at 31 March 1999 44 (387) (343)
Of which: --- ----- -----
Gains and losses expected to be recognised in the year to 31 March 2000 44 (383) (339)
--- ----- -----
Gains and losses expected to be recognised in the year to 31 March 2001 - (4) (4)
or later --- ----- -----
</TABLE>
26
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
15 Provisions for liabilities and charges
Provisions for liabilities and charges comprise the following:
1999 1998
Restated
(note 4)
GBP'000 GBP'000
Deferred taxation (see below) 472 1,850
Warranty provisions 3,688 5,928
Legal costs and provisions 10,279 10,166
` Onerous property lease provision (note 4) 4,084 4,175
Provision for other claims 1,135 3,122
----- -----
19,658 25,241
------ ------
The movements were as follows in the group provisions for liabilities and
charges:
<TABLE>
<CAPTION>
At
31 March Adjustment
1998 arising from At
Restated Provided On Utilised discounting Exchange 31 March
(note 4) in the year disposals in the year in the year adjustment 1999
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
<S> <C> <C> <C> <C> <C> <C> <C>
Deferred tax 1,850 156 (602) (946) - 14 472
Warranty provisions 5,928 1,843 (701) (3,571) - 189 3,688
Legal costs and
provisions 10,166 373 (65) (207) - 12 10,279
Onerous property lease
provision (note 4) 4,175 - - (391) 300 - 4,084
Provision for other claims 3,122 - - (1,987) - - 1,135
----- ----- ------ ------- ---- --- -----
25,241 2,372 (1,368) (7,102) 300 215 19,658
------ ----- ------- ------- --- --- ------
</TABLE>
<TABLE>
<CAPTION>
Deferred taxation
Total potential
Provided liability/(asset)
1999 1998 1999 1998
GBP'000 GBP'000 GBP'000 GBP'000
Tax effect of timing differences due to:
<S> <C> <C> <C> <C>
Accelerated capital allowances 1,005 1,668 1,005 1,668
Deferred income/(expenditure) 44 182 44 182
Property revaluation - - 82 82
Provisions not yet claimed - - (5,000) (5,000)
Short-term timing differences 33 - 33 -
ACT recoverable (610) - (610) -
----- ------ ----- ------
472 1,850 (4,446) (3,068)
--- ----- ------- -------
</TABLE>
27
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
16 Government grants
1999 1998
GBP'000 GBP'000
At 1 April 5,990 4,812
On acquisitions and disposals (1,562) 1,780
Received during the year 639 974
Transfer to profit and loss account (760) (653)
Transferred to creditors as grant is repayable - (764)
Translation adjustment 65 (159)
-- -----
At 31 March (see note 13) 4,372 5,990
----- -----
17 Share capital
Allotted, Allotted,
called up and called up and
fully paid fully paid
Authorised 1999 1998
GBP'000 GBP'000 GBP'000
Ordinary shares of 10p each:
At 1 April 11,500 9,295 8,973
Shares issued during the year - - 322
------ ----- ---
At 31 March 11,500 9,295 9,295
------ ----- -----
The authorised share capital at the year end was 115,000,000 (1998: 115,000,000)
ordinary shares of 10p each. There were 92,945,475 (1998: 92,945,475) ordinary
shares of 10p each in issue at the year end. No shares were issued during the
year.
Options to purchase ordinary shares of 10p each held by executive directors and
employees at 31 March 1999, together with the date of grant and exercise were:
<TABLE>
<CAPTION>
Outstanding
Granted Prices options Exercise dates
1987 Executive Share Option Scheme
<S> <C> <C> <C> <C>
28 June 1994 255.0p 25,000 Between 28 June 1997 and 28 June 2004
17 July 1996 466.0p 66,000 Between 17 July 1999 and 17 July 2006
28 November 1996 585.0p 10,000 Between 28 November 1999 and 28 November 2006
1997 Approved Share Option Scheme
28 September 1998 78.5p 280,000 Between 28 September 2001 and 28 September 2008
</TABLE>
18 Reserves
Share
premium Revaluation Capital
account reserve reserve
GBP'000 GBP'000 GBP'000
At 1 April 1998 32,210 688 1,463
Transfer from/(to) profit and loss account - - -
------ ----- -----
At 31 March 1999 32,210 688 1,463
------ ----- -----
The capital reserve represents reserves required to be established in a
subsidiary undertaking under the conditions of a letter of offer from a grant
authority. The capital reserve will be transferred to profit and loss account
when the letter of offer ceases to be effective.
Cumulative goodwill arising from acquisitions to date, net of goodwill
attributable to subsidiaries disposed of, eliminated to the group merger
reserves amounts to GBP10,265,000 (1998: GBP10,265,000).
28
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
19 Profit and loss account
1999 1998
Restated
(note 4)
GBP'000 GBP'000
At beginning of year (21,029) 54,541
Retained profit/(loss) for the year 23,949 (51,767)
Premium arising on scrip dividend issue - 957
Goodwill
on acquisitions - (20,793)
on disposals 11,496 689
on reassessment of previous periods - 164
Transfer to capital reserve - (345)
Translation adjustment 420 (4,475)
----- -------
At end of year 14,836 (21,029)
------ --------
Cumulative goodwill resulting from acquisitions to date, net of goodwill
attributable to subsidiary undertakings disposed of, has been eliminated in the
profit and loss account amounting to GBP35,648,000 (1998: GBP47,144,000).
The goodwill relating to prior year periods of GBP164,000 was debited to the
profit and loss account in the year ended 31 March 1998 in respect of a
reassessment of the goodwill in Brown Lenox & Co Limited.
Of the Company's profit and loss account GBP5,597,000 is considered to be
distributable.
20 Pension schemes
The group operates a number of defined benefit and defined contribution pension
schemes in the UK, the Republic of Ireland and the United States. The UK and
Republic of Ireland schemes are all defined contribution schemes and the US
schemes for employees of Royer Industries Inc and Simplicity Engineering Inc are
defined benefit. The assets of the schemes are held in separate trustee
administered funds.
The total pension cost for the group was GBP608,000 (1998: GBP656,000) of which
GBP598,000 (1998: GBP509,000) relates to the defined contribution schemes and
GBP10,000 (1998: GBP147,000) to the defined benefit schemes.
The pension cost of the defined benefit schemes is assessed on an annual basis
in accordance with the advice of qualified actuaries using the projected unit
method. The funding policy for these schemes is to make the maximum annual
contributions deductible for income tax purposes.
The results of the most recent actuarial valuations for the defined benefit
schemes which were conducted as at 31 December 1998 were as follows:
<TABLE>
<CAPTION>
Royer Simplicity
Industries Inc Engineering Inc
Scheme Scheme
GBP GBP
<S> <C> <C>
Market value of schemes' assets 1,176,708 2,206,305
Level of funding being the actuarial value of assets expressed
as a percentage of the projected benefit obligation (%) 122.0 102.6
Main assumptions
Expected long-term rate of return (%) 8.0 8.0
Discount rate (%) 7.0 7.2
Expected rate of increase in future compensation levels (%) 5.0 5.0
</TABLE>
29
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
21 Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from
operating activities
<TABLE>
<CAPTION>
1999 1998
-----------------------------------
Continuing Discontinued Restated
activities activities Total (note 4)
GBP'000 GBP'000 GBP'000 GBP'000
<S> <C> <C> <C> <C>
Operating profit/(loss) 25,227 570 25,797 (42,670)
Depreciation, amortisation and
impairment of fixed assets 3,245 487 3,732 4,664
Loss on disposal of fixed assets 29 - 29 78
Grants released (363) (31) (394) (653)
Decrease/(increase) in stocks 11,032 (639) 10,393 19,117
(Increase)/decrease in debtors (4,193) 854 (3,339) 17,735
(Decrease)/increase in creditors and provisions (11,710) (2,542) (14,252) 1,954
-------- ------- -------- -----
Cash inflow/(outflow) from operating activities 23,267 (1,301) 21,966 225
------ ------- ------ -----
</TABLE>
22 Analysis of changes in net debt during the year
<TABLE>
<CAPTION>
At Other At
31 March Net Disposals non-cash 31 March
1998 cash flow excl. cash movements 1999
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
<S> <C> <C> <C> <C> <C>
Cash 15,852 (4,200) - (113) 11,539
Bank overdraft (33,739) 33,791 - (52) -
-------- ------ ----- ------ -----
(17,887) 29,591 - (165) 11,539
Short-term cash deposits - 1,861 - - 1,861
------ ----- ----- ----- -----
(17,887) 31,452 - (165) 13,400
-------- ------ ----- ----- ------
Loans due within one year (22,470) 15,420 79 6,524 (447)
Loans due after one year (2,242) 56 1,274 (6,595) (7,507)
Finance leases (3,152) 979 829 (12) (1,356)
Bills of exchange discounted (2,522) 2,525 - (3) -
Invoice discounting (185) 185 - - -
Loan notes (8,141) (41) - (320) (8,502)
------- ---- ----- --------- -------
(38,712) 19,124 2,182 (406) (17,812)
-------- ------ ----- ----- --------
Total (56,599) 50,576 2,182 (571) (4,412)
-------- ------ ----- ----- -------
</TABLE>
23 Analysis of cash flows for headings netted in the consolidated cash flow
statement
1999 1998
GBP'000 GBP'000
a. Returns on investments and servicing of finance
Bank interest received 897 357
Bank interest paid (4,003) (5,121)
Loan note interest paid (210) (112)
Hire purchase and finance lease interest paid (131) (109)
----- -----
Net cash outflow from returns on investments
and servicing of finance (3,447) (4,985)
------- -------
b. Taxation
UK corporation taxation paid (3,557) (7,092)
Overseas taxation paid (9,246) (1,163)
------- -------
(12,803) (8,255)
------- -------
30
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
23 Analysis of cash flows for headings netted in the consolidated cash flow
statement (continued)
<TABLE>
<CAPTION>
1999 1998
GBP'000 GBP'000
c. Capital expenditure
<S> <C> <C>
Payments to acquire tangible fixed assets (5,291) (5,428)
Receipts from sales of tangible fixed assets 567 779
Capital grants received 639 974
--- ---
Net cash outflow for capital expenditure (4,085) (3,675)
------- -------
d. Acquisitions and disposals Purchase of subsidiary undertakings:
Consideration for Moffett Engineering Limited - (18,881)
Net cash acquired with Moffett Engineering Limited - 1,736
Consideration for SDC Trailers Limited - (7,068)
Net overdraft acquired with SDC Trailers Limited - (3,551)
Disposal or termination of subsidiary undertakings (see note 3)
Consideration for Geith International Ltd. 6,820 -
Net cash disposed with Geith International Ltd (294) -
Consideration for SDC Trailers Ltd 6,355 -
Net overdraft disposed with SDC Trailers Ltd 2,905 -
Consideration for Matbro intellectual property 4,798 -
Termination costs of manufacturing activities (915) -
Consideration for Ludlow-Saylor Inc 5,264 -
Net cash disposed with Ludlow-Saylor Inc (736) -
Consideration for US Truck Cranes Inc 25,330 -
Net cash disposed with US Truck Cranes Inc (582) -
Consideration for Universal Conveyor Co. Ltd - 990
Net cash disposed with Universal Conveyor Co. Ltd - (684)
- -----
Net cash inflow/(outflow) for acquisitions and disposals 48,945 (27,458)
------ --------
e. Management of liquid resources
Increase in short-term deposits (1,861) -
------- ----------
(1,861) -
------- ----------
f. Financing
Issue of loan notes 41 9,267
Debt due within a year:
decrease in invoice discounting (185) -
decrease in bills of exchange discounted (2,525) (14,887)
increase in other short-term borrowings (15,420) 2,374
Debt due beyond a year:
repayment long-term bank and other loans (56) -
Capital element of finance lease rentals (979) (299)
----- -----
(19,124) (3,545)
Issue of ordinary share capital - 18,937
-------- ------
Net cash (outflow)/inflow from financing (19,124) 15,392
-------- ------
</TABLE>
31
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
24 Commitments
a. Capital commitments
The directors have authorised capital expenditure which has been contracted for
at the year end of GBP1,070,000 (1998: GBP836,000).
b. Obligations under operating leases
At 31 March 1999, the group had annual commitments under non-cancellable
operating leases (before provisions for onerous property leases - note 4 and 15)
of:
Property Other leases
1999 1998 1999 1998
GBP'000 GBP'000 GBP'000 GBP'000
Leases which expire:
in less than one year 22 93 57 37
between one and two years 10 65 64 91
between two and five years 36 - 39 39
after five years 464 464 13 -
--- --- -- -
532 622 173 167
--- --- --- ---
c. Other commitments
Under the sale and purchase agreement drawn up on the disposal of Universal
Conveyor Company Limited on 27 March 1998 the group is committed to purchase
goods from that company to the value of GBP1,500,000 in the second year after
disposal.
32
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
25 Contingent liabilities
The group had the following contingent liabilities at 31 March 1999:
a. Legal contingencies
A number of claims have been made against the group, the most significant of
which related to:
i) alleged patent infringements. The directors have received expert opinion that
no infringement of valid patents has taken place.
ii) product liability claims involving personal injuries allegedly sustained
from the use of the products manufactured by certain group companies.
iii) general commercial disputes.
Notwithstanding the intention of the directors to defend vigorously these
claims, some of which are substantial, a provision of GBP10,279,000 has been
made in respect of these claims and associated costs. Having obtained legal
advice and on the basis of the information available, the directors believe that
the provision made represents their best estimate of the outcome of the claims
and associated costs.
b. Trade related contingencies
i) The group has provided guarantees to third parties who have provided finance
to customers of the group to acquire the group's products. A guarantee may be
called upon if a customer does not fulfil certain conditions under a finance
agreement. The amount of such guarantees outstanding at 31 March 1999 was
GBP36,000 (1998:GBP310,000). Where a guarantee has already crystallised, the
liability has been recognised in the balance sheet.
ii) The group has a contingent liability to repurchase in certain circumstances,
equipment sold to customers by way of financing arrangements where a customer
does not fulfil certain conditions under the finance agreements. Where the
directors believe that it is likely a liability will crystallise, the asset and
related liability are recognised. The unprovided contingent liability at 31
March 1999 is GBP5,175,000 (1998: GBP7,281,000).
iii) The group provides for warranty claims on its products, depending on the
type of product and the expectations of the specific market which it serves. The
period of warranty can extend up to five years. However the majority of sales
have warranty periods of one year. Provision has been made for warranty based on
actual claims and anticipated claims.
c. Banking contingencies
i) Under the current Facilities Agreement, dated 26 January 1999, the Company
and its subsidiary undertakings are party to circular and cross guarantees in
respect of the group's borrowings. The facilities subject to the agreement at 31
March 1999 were GBP29,835,000 of cash facilities and GBP6,415,000 of non cash
facilities.
ii) The group has entered into performance guarantees and tender bonds of
GBP147,000 (1998:GBP128,000) which were outstanding at the year end.
d. Tax
The group is subject to a number of material uncertainties in relation to the
tax consequences of certain past events, which represent both contingent assets
and liabilities. The directors believe that they have provided for their best
estimate of the amount of tax arising, however the settlement of such
uncertainties could ultimately result in a material difference, either positive
or negative, between the amount of tax provided at year end and the amount
ultimately determined.
e. Other
Under the terms of certain government grant agreements, a liability may arise to
repay, in whole or part, grants received if certain conditions in the grant
agreements are not complied with. Provision has been made for such claims which
have already crystallised or are expected to crystallise within the foreseeable
future.
33
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS continued
26 Major non-cash transactions
There were no major non-cash transactions during the year.
27 Related party transactions
There were no disclosable related party transactions during the year.
28 Post balance sheet events
On 15 June 1999 the directors of the Company recommended an offer for the entire
issued share capital of the Company from a wholly owned subsidiary of Terex
Corporation, a company incorporated in the United States of America. On 6 August
1999, Terex Corporation announced that as of the close of business in London on
5 August 1999, it then owned over 80 percent of the issued share capital of the
Company and had assumed effective control.
On 28 July 1999 a judgement was entered against one of the group's subsidiary
undertakings in respect of one of the claims for patent infringement (see note
25a). The amount of this judgement exceeded the amount provided at 31 March 1999
by some GBP500,000. The directors intend to appeal on a matter of law against
this judgement and aggressively defend the case. It is therefore not possible to
determine what the outcome will be with reasonable certainty.
29 Minority interest
The minority interest charge in the profit and loss account relates to equity
shares held in Wrathmaiden Inc, a subsidiary of Geith International Limited. The
movement in minority interest is as follows:
1999 1998
GBP'000 GBP'000
At 1 April 42 -
Profits attributable to minority interest - 41
Disposals (42) -
Translation adjustment - 1
--- ---
At 31 March - 42
--- --
30 Summary of relevant differences between United Kingdom and United States
generally accepted accounting principles
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the UK (UK GAAP)
which differ in certain significant respects from those generally accepted in
the United States (US GAAP). Set forth below is a summary of certain significant
differences between US and UK GAAP which management believe are relevant to the
Company.
Deferred income tax
Under UK GAAP, deferred taxation is calculated under the liability method to the
extent that it is probable that the liabilities will crystallise in the
foreseeable future. Under US GAAP, deferred taxation is provided for all
temporary differences using the asset and liability method. Valuation allowances
are provided for to the extent that the realisation of deferred tax assets is
not more likely than not.
Revaluation of fixed assets
In the Company's consolidated financial statements, certain properties have been
revalued to open market value as permitted under UK GAAP. The revaluation of
tangible fixed assets in excess of historical cost is not permitted under US
GAAP. The depreciation charge has not been adjusted as any difference would be
immaterial.
Pension costs
Under UK GAAP, pension costs are accounted for in accordance with Statement of
Standard Accounting Practice 24. As a result, such costs are charged against
profits over employees' working lives. Under US GAAP, pension costs are
determined in accordance with the requirements of Statement of Financial
Accounting Standards No. 87. Differences between the UK and US GAAP figures
arise from the requirement to use different actuarial methods and assumptions
and a different method of amortising surpluses or deficits. Such differences are
immaterial for Powerscreen and so have been excluded from the reconciliation of
net income and shareholders' equity.
Goodwill
UK Financial Reporting Standard 10 was adopted in the Company's consolidated
financial statements with effect from 1 April 1998. Goodwill arising on
acquisition is now capitalised and amortised through the profit & loss account
over its useful economic life which is usually expected not to exceed 20 years.
Goodwill arising on acquisitions made on or before 31 March 1998 was charged
directly to reserves in accordance with UK accounting standards then in effect.
Under US GAAP goodwill must be capitalised and amortised through the profit &
loss account over its estimated useful life, not to exceed 40 years. An
estimated useful life of 40 years has been adopted by the company under US GAAP.
Under UK GAAP the profit or loss on disposal of all or part of a previously
acquired business is calculated after taking account of the gross amount of any
goodwill previously eliminated directly against reserves and not already charged
to profit. Under US GAAP an adjustment to profit or loss on disposal is required
in respect of the unamortised portion of goodwill.
34
<PAGE>
NOTES TO THE FINANICAL STATEMENTS continued
30 Summary of relevant differences between United Kingdom and United States
generally accepted accounting principles (continued)
Share options
In the Company's consolidated financial statements options exercised by
employees under the various share option schemes during the year are credited to
shareholders' funds at the option price. Under US GAAP, for fixed awards, the
intrinsic value of options granted (measured as the surplus between the price of
the option at the grant date and the exercise price) is written off in the
profit & loss account over the vesting period. For options which have been
granted and remain subject to the satisfaction of relevant performance
conditions, the number of options for which compensation expense is recognized
is based on the extent to which the performance conditions have been met and is
measured by the intrinsic value, updated for the current market price of the
shares, as of the end of the period.
Discontinued operations
Discontinued operations, are separately categorised in the profit and
loss/income statements under UK and US GAAP, may relate only to significant
business segments.
Under US GAAP, net income from discontinued operations includes all operating
results of the discontinued operations and the gain or loss on sale. Under UK
GAAP, operating results from discontinued activities are disclosed as a separate
element within operating profit and the gain or loss on sale is disclosed as an
exceptional item.
Commitments to repurchase equipment
Under UK GAAP, sales of equipment with an obligation to repurchase the equipment
at a future date are recognised as a sale in the period in which the agreement
was made. The obligation to repurchase the equipment is recorded as a liability
and the estimated net realisable value of the equipment at the end of the
agreement is capitalised. The excess of the obligation over the estimated net
realisable value is included as part of the cost of sales.
Under US GAAP, sales recognition for these transactions is not allowed and would
be treated as either a capital or operating lease in accordance with SFAS 13.
The difference between the net proceeds received and the guaranteed residual
value of the equipment under the agreement would recorded as deferred lease
income and amortised to the income statement over the lease term. The related
carrying value of the equipment would be capitalised and depreciated in line
with the Company's depreciation policy on similar equipment.
Such differences in accounting principles are not considered to have a material
effect on the Company's consolidated income statement or balance sheet.
Accordingly, no reconciling items have been included in the reconciliation of
net income and shareholders' equity.
Capitalisation of interest
Under UK GAAP, interest on external financing of assets constructed or otherwise
produced for its own use is charged to the income statement as incurred. US GAAP
requires that interest must be capitalised if certain conditions are met as part
of the historical cost of acquiring the asset and making ready for their
intended use, certain qualifying assets.
Foreign currency hedging
The group enters into various forward contracts which hedge expected foreign
currency sales and expenditure. Under UK GAAP they are treated as hedges of
future income and expenditure. The matching principle is used to match the gain
or loss under these hedging contracts to the foreign currency transaction or
profits to which they relate. Under US GAAP, these instruments do not qualify as
hedges under SFAS 52. Such instruments are valued at the year end at market
rates and any unrealized gains and losses are recognised in the net income of
the year in which changes in fair value occur.
Cash flow statement
Under UK GAAP, the consolidated cash flow statements are presented in accordance
with UK Financial Reporting Standard No. 1 (FRS 1). The Statements prepared
under FRS 1 present substantially the same information as that required under
SFAS No. 95. Under US GAAP, however, there are certain differences from UK GAAP
with regard to classification of items within the cashflow statement and with
regard to the definition of cash.
Under SFAS No. 95 cash and cash equivalents include cash and short-term
investments with original maturities of three months or less. Under FRS 1 cash
comprises cash in hand and at bank and overnight deposits, net of bank
overdrafts.
Under FRS 1, cash flows are presented separately for operating activities;
returns on investments and servicing of finance; taxation; capital expenditure
and financial investments; acquisitions and disposals; dividends paid to the
company's shareholders; management of liquid resources and financing. SFAS No.
95 cash flows are reported as resulting from operating, investing and financing
activities.
Cash flows under FRS 1 in respect of interest received, interest paid and
taxation would be included within operating activities under SFAS No. 95. Cash
flows from purchases, sales and maturities of trading securities, while not
separately identified under UK GAAP, would be included within operating
activities under US GAAP. Dividends paid would be included within financing
activities under US GAAP. Under UK GAAP movements in bank overdrafts are
classified as movements in cash while under US GAAP they are classified as a
financing activity.
35
<PAGE>
NOTES TO THE FINANICAL STATEMENTS continued
30 Summary of relevant differences between United Kingdom and United States
generally accepted accounting principles (continued)
Reconciliation to US accounting principles
The following is a summary of the adjustments to net income and shareholders'
equity which would have been required if US GAAP had been applied instead of UK
GAAP.
<TABLE>
<CAPTION>
1999 1998
GBP'000 GBP'000
------- -------
PROFIT ATTRIBUTABLE TO SHAREHOLDERS
Profit/(loss) attributable to shareholders as reported in the
<S> <C> <C>
consolidated profit & loss account 23,949 (48,971)
Adjustments:
Goodwill amortisation (1,256) (1,237)
Goodwill in respect of subsidiary undertakings disposed 1,465 155
Share options (33) 18
Deferred income tax (4,771) 4,734
Capitalisation of interest costs (24) 35
Foreign currency hedging (369) 141
-------- --------
Net income/(loss) under US GAAP 18,961 (45,125)
-------- --------
Analysed:
Continuing operations 12,857 (4,918)
Discontinued operations - loss from operations (779) (40,178)
- gain/(loss) on disposals 6,883 (29)
-------- --------
Net income/(loss) under US GAAP 18,961 (45,125)
-------- --------
Earnings Loss
per share per share
--------- ---------
EARNINGS/(LOSS) PER SHARE:
Basic 20.40p (49.73)p
Diluted 20.39p (49.73)p
-------- --------
1999 1998
GBP'000 GBP'000
-------- -------
SHAREHOLDERS' EQUITY
Shareholders' funds as reported in the consolidated balance sheet 58,492 22,627
Adjustments:
Deferred income tax 1,089 5,860
Revaluation reserve (688) (688)
Goodwill 39,399 50,251
Cumulative amortisation of goodwill (4,273) (3,838)
Capitalisation of interest costs 351 375
Foreign currency hedging (228) 141
-------- --------
Shareholders' equity under US GAAP 94,142 74,728
-------- --------
</TABLE>
36
<PAGE>
NOTES TO THE FINANICAL STATEMENTS continued
30 Summary of relevant differences between United Kingdom and United States
generally accepted accounting principles (continued)
The following table summarises the statements of cash flows as if they had been
presented in accordance with US GAAP.
<TABLE>
<CAPTION>
1999 1998
GBP'000 GBP'000
-------- --------
<S> <C> <C>
Net cash provided by (used in) operating activities 5,716 (13,015)
Net cash provided by (used in) investing activities 42,999 (31,133)
Net cash (used in) provided by financing activities (52,915) 34,604
-------- --------
Net decrease in cash and cash equivalents (4,200) (9,544)
Effect of exchange rate changes on cash (113) (276)
Cash and cash equivalents under US GAAP at beginning of year 15,852 25,672
-------- --------
Cash and cash equivalents under US GAAP at end of year 11,539 15,852
-------- --------
</TABLE>
37
<PAGE>
TEREX CORPORATION
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information of Terex
Corporation ("Terex" or the "Company") gives effect to the acquisition by the
Company of all the outstanding share capital of Powerscreen International PLC
("Powerscreen"). The pro forma information is based on the historical statement
of operations of the Company for the year ended December 31, 1998 and the
historical statement of operations of Powerscreen for the year ended March 31,
1999, adjusted for generally accepted accounting principles in the United States
("US GAAP"), as if the acquisition of Powerscreen ("Powerscreen Acquisition")
had occurred on January 1, 1998. Additionally, the pro forma balance sheet is
based on the historical balance sheet of the Company as of December 31, 1998 and
the historical balance sheet as of March 31, 1999 of Powerscreen, adjusted for
US GAAP, as if the Powerscreen Acquisition had taken place as of December 31,
1998. Both the pro forma statement of operations and balance sheet give effect
to the Powerscreen Acquisition and the $325 million bank credit facility
maturing March 2006 used to finance the transaction.
The Powerscreen Acquisition was accounted for using the purchase method, with
the purchase price of Powerscreen allocated to the assets acquired and
liabilities assumed based upon their respective estimated fair values at the
date of acquisition. The pro forma consolidated financial information reflects
the Company's initial estimates of the purchase price allocation. Management
believes that there will not be any changes which will have a material effect on
the pro forma information.
The unaudited pro forma consolidated financial information is not necessarily
indicative of what the actual results of operations of the Company would have
been for the period indicated, nor does it purport to represent the results of
operations for future periods.
38
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(in millions except per share amounts)
<TABLE>
<CAPTION>
Terex
Corporation
and Pro Forma
Subsidiaries Powerscreen Sub-Total Adjustments Pro Forma
------------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
NET SALES.......................................$ 1,233.2 $ 372.4 $ 1,605.6 $ --- $1,605.6
COST OF GOODS SOLD.............................. 1,007.4 282.8 1,290.2 3.0(2a) 1,293.2
------------- ------------ ----------- ------------- -----------
Gross Profit................................. 225.8 89.6 315.4 (3.0) 312.4
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES....
103.8 50.0 153.8 (5.8)(2b) 148.0
------------- ------------ ----------- ------------- -----------
Income from operations....................... 122.0 39.6 161.6 2.8 164.4
OTHER INCOME (EXPENSE)
Interest income.............................. 2.7 1.5 4.2 --- 4.2
Interest expense............................. (47.2) (6.9) (54.1) (21.7)(2c) (75.8)
Other income (expense) - net................. (3.0) (0.7) (3.7) (1.2)(2c) (4.9)
------------- ------------ ----------- ------------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS
74.5 33.5 108.0 (20.2) 87.8
PROVISION FOR INCOME TAXES...................... (1.7) (12.2) (13.9) 6.3(2d) (7.6)
------------- ------------ ----------- ------------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEMS.................
$ 72.8 $ 21.3 $ 94.1 $ (13.9) $ 80.2
============= ============ =========== ============= ===========
PER COMMON AND COMMON EQUIVALENT SHARE:
Basic...................................$ 3.52 $ 3.87
Diluted.................................$ 3.25 $ 3.58
AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING IN PER SHARE CALCULATION
Basic................................... 20.7 20.7
Diluted................................. 22.4 22.4
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(in millions)
<TABLE>
<CAPTION>
Terex
Corporation
and Pro Forma
Subsidiaries Powerscreen Sub-Total Adjustments Pro Forma
------------- ----------- ----------- ------------- -------------
CURRENT ASSETS
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents....................$ 25.1 $ 21.6 $ 46.7 $ --- $ 46.7
Net trade receivables........................ 249.8 81.0 330.8 --- 330.8
Net inventories.............................. 472.8 74.0 546.8 --- 546.8
Other current assets......................... 23.9 10.7 34.6 --- 34.6
------------- ----------- ----------- ------------- -----------
Total Current Assets..................... 771.6 187.3 958.9 --- 958.9
LONG-TERM ASSETS
Property, plant and equipment - net.......... 99.5 61.6 161.1 --- 161.1
Goodwill - net............................... 240.9 56.6 297.5 149.3(3a) 446.8
Other assets - net........................... 39.2 1.8 41.0 8.6(3b) 49.6
------------- ----------- ----------- ------------- ------------
TOTAL ASSETS....................................$ 1,151.2 $ 307.3 $ 1,458.5 $ 152.9 $1,611.4
============= =========== =========== ============= ============
CURRENT LIABILITIES
Notes payable and current portion of
long-term debt.............................$ 44.7 $ 15.6 $ 60.3 $ --- $ 60.3
Trade accounts payable....................... 226.9 54.1 281.0 --- 281.0
Accrued compensation and benefits............ 24.7 --- 24.7 --- 24.7
Accrued warranties and product liability..... 36.0 5.9 41.9 --- 41.9
Other current liabilities.................... 93.1 29.8 122.9 5.0(3c) 127.9
------------- ----------- ----------- ------------- ------------
Total Current Liabilities................ 425.4 105.4 530.8 --- 530.8
NON CURRENT LIABILITIES
Long-term debt, less current portion......... 586.6 13.1 599.7 304.7(3d) 904.4
Other........................................ 41.1 37.0 78.1 --- 78.1
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Warrants to purchase common stock............ 0.8 --- 0.8 --- 0.8
Equity rights................................ 3.1 --- 3.1 --- 3.1
Common Stock................................. 0.2 15.0 15.2 (15.0) 0.2
(3e)
Additional paid-in capital................... 179.0 123.6 302.6 (123.6) 179.0
(3e)
Accumulated deficit.......................... (80.9) 13.2 (67.7) (13.2) (80.9)
(3e)
Accumulated other comprehensive income....... (4.1) --- (4.1) --- (4.1)
------------- ----------- ----------- ------------- ------------
Total Stockholders' Equity .............. 98.1 151.8 249.9 (151.8) 98.1
------------- ----------- ----------- ------------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......
$ 1,151.2 $ 307.3 $ 1,458.5 $ 152.9 $1,611.4
============= =========== =========== ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(amounts in millions)
1) The unaudited pro forma condensed consolidated financial information is
presented as of and for the year ended December 31, 1998. The pro forma
statement of operations reflects the consolidated operations of the Company
combined with those of the acquired business assuming the Powerscreen
Acquisition was consummated on January 1, 1998 for the statement of
operations; the balance sheet assumes the Powerscreen Acquisition was
consummated on December 31, 1998.
2) The pro forma statement of operations adjustments are summarized as
follows:
a) Pro forma adjustments to "Cost of goods sold" represent the
elimination of goodwill amortization of the business acquired ($2.1)
and the amortization of goodwill resulting from the Powerscreen
Acquisition over 40 years ($5.1).
b) Pro forma adjustments to "Selling, General and Administrative
Expenses" represent reductions throughout Powerscreen, primarily
through the elimination of the administrative headquarters, which
initiatives have already been implemented. Liabilities related to
these employee terminations have been accrued in connection with the
Powerscreen Acquisition pursuant to EITF 95-3 "Recognition of
Liabilities in Connection with a Business Combination."
c) Borrowings under the Company's Tranche C Credit Facility were used to
finance the Powerscreen Acquisition. The Tranche C Credit Facility
loans bear interest at a rate between 2.0% and 2.5% per annum in
excess of the prime rate or at a rate between 3.0% and 3.5% per annum
in excess of the eurodollar rate, at the Company's option; the Tranche
C Credit Facility expires March 6, 2006. The pro forma adjustments to
"Interest expense" and "Other income (expense) - net" represent the
incremental effects of the Tranche C Credit Facility (interest rate of
9.0%, including fees, assumed for pro forma presentation). The effect
of a 1/8% increase in interest rates would result in an increase in
interest expense of approximately $0.7 for the year ended December 31,
1998.
d) Pro forma adjustments to "Provision for income taxes" represent the
31% statutory income tax rate applied to the pro forma adjustments.
3) The pro forma balance sheet adjustments are summarized as follows:
a) Pro forma adjustments to "Goodwill - net" represent the net increase
in goodwill at Powerscreen as a result of the Powerscreen Acquisition.
b) Pro forma adjustments to "Other assets - net" represent the increase
in debt issuance costs as a result of the Tranche C Credit Facility.
c) Pro forma adjustments to "Other current liabilities" represent
additional liabilities incurred, primarily for termination payments,
on account of the Powerscreen Acquisition. Liabilities related to
these employee terminations have been accrued in connection with the
Powerscreen Acquisition pursuant to EITF 95-3 "Recognition of
Liabilities in Connection with a Business Combination."
d) Pro forma adjustments to "Long-term debt, less current portion"
represent borrowings under the Tranche C Credit Facility in connection
with the Powerscreen Acquisition.
e) Pro forma adjustments to "Common Stock", "Additional paid-in capital"
and "Accumulated deficit" represent the elimination of the equity
accounts of Powerscreen.
4) A pro forma condensed consolidated balance sheet of Terex Corporation and
subsidiaries as of December 31, 1998 is presented herein. The estimated
fair values of assets and liabilities acquired by the Company in the
Powerscreen Acquisition are summarized as follows:
Cash............................................$ 21.6
Net trade receivables........................... 81.0
Inventories..................................... 74.0
Other current assets............................ 10.7
Property, plant and equipment................... 61.6
Other assets.................................... 1.8
Goodwill........................................ 205.9
Accounts payable and other current liabilities.. (110.4)
Other liabilities............................... (50.1)
==========
$ 296.1
==========
The Company is in the process of obtaining certain evaluations, estimations,
appraisals and actuarial and other studies for purposes of determining certain
values. The Company may revise the estimates as additional information is
obtained. Management believes that there will not be any changes which will have
a material effect on the pro forma information.
41
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated July 1, 1999 (except with respect to the matters discussed in Note
28 and Note 30, as to which the date is September 30, 1999) relating to the
consolidated financial statements of Powerscreen International PLC as of March
31, 1999 and for the year then ended, included in this Form 8-K, into Terex
Corporation's previously filed Registration Statements Form S-8 (nos. 333-03983,
333-82751, 33-65255, 33-21483, 333-00949) and Form S-3 (nos. 333-52933,
33-52297).
Arthur Andersen
Chartered Accountants
London, England
October 4, 1999
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated September 21, 1998 (except with respect to the matters discussed in
Note 30, as to which the date is September 30, 1999) relating to the
consolidated financial statements of Powerscreen International PLC as of March
31, 1998 and for the year then ended, included in this Form 8-K, into Terex
Corporation's previously filed Registration Statements Form S-8 (nos. 333-03983,
333-82751, 33-65255, 33-21483, 333-00949) and Form S-3 (nos. 333-52933,
33-52297).
KPMG
Chartered Accountants
Belfast, Northern Ireland
October 4, 1999
