SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Intertek Testing Services Ltd · 20-F · For 12/31/98
Filed On 3/26/99 · SEC File 33-06200-01 · Accession Number 1047469-99-11592
As Of Filer Filing On/For/As Docs:Pgs Issuer
Agent
3/26/99 Intertek Testing Services Ltd 20-F 12/31/98 1:123
Merrill Corp/New/- FA
Annual Report of a Foreign Private Issuer · Form 20-F
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 20-F Annual Report of a Foreign Private Issuer 123 712K
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2 Item 7
5 Item 1: Description of Business
7 Caleb Brett
11 Item 2: Description of Property
12 Item 3: Legal Proceedings
14 Item 4: Control of Registrants
" Ordinary Shares
15 Warrants
" Shareholders' Agreement
16 Item 5: Nature of Trading Market
"
Item 6: Exchange Controls and Other Limitations
Affecting Security Holders
17 Item 7:. Taxation
" Market Discount
21 Item 8: Selected Financial Data
22 Item 8:. Selected Financial Data (Continued)
25 Item 9: Management's Discussion and Analysis of
Financial Conditions and Results of Operations
42 Item 9A: Quantitative and Qualitative Disclosures about
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Market Risk
46 Item 10: Directors and Officers of Registrant
48 Item 11: Compensation of Directors and Officers
49 Item 12: Options to Purchase Securities from Registrant
or Subsidiaries
50 Item 13: Interest of Management in Certain Transactions
51 Item 14: Description of Securities to be Registered
"
Item 15: Defaults upon Senior Securities
Alternative Formats (RTF, XML, et al.)
Caleb Brett
Changes in Securities and Changes in Security
for Registered Securities
Compensation of Directors and Officers
Control of Registrants
Defaults upon Senior Securities
Description of Business
Description of Property
Description of Securities to be Registered
Directors and Officers of Registrant
Exchange Controls and Other Limitations
Affecting Security Holders
Financial Statements
Financial Statements and Exhibits
Interest of Management in Certain Transactions
Item 18 /X/
Item 7
Legal Proceedings
Management's Discussion and Analysis of
Financial Conditions and Results of Operations
Market Discount
Nature of Trading Market
Options to Purchase Securities from Registrant or
Subsidiaries
Ordinary Shares
Predecessor Company
Quantitative and Qualitative Disclosures about
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
"
Item 16: Changes in Securities and Changes in Security
for Registered Securities
Item 17: Financial Statements
Item 19: Financial Statements and Exhibits
"
"
57 Predecessor Company
" Successor Company
Market Risk
Selected Financial Data
Selected Financial Data (Continued)
Shareholders' Agreement
Successor Company
Taxation
Warrants
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As filed with the Securities and Exchange Commission on March 26, 1999
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 333-6200
INTERTEK TESTING SERVICES LIMITED
(Exact name of Registrant as specified in its charter)
ENGLAND
(Jurisdiction of incorporation or organisation)
25 SAVILE ROW, LONDON, W1X 1AA, ENGLAND
(011) 44-171-396-3400
(Address of principal executive office)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None N/A
--------------------------------------------------------------------------------
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
--------------------------------------------------------------------------------
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act.
THE REGISTRANT'S GUARANTEES OF $203 MILLION
AGGREGATE PRINCIPAL AMOUNT OF 10 1/4% SENIOR
SUBORDINATED NOTES DUE 2006,
SERIES B ISSUED BY INTERTEK FINANCE PLC ("THE ISSUER"),
A SUBSIDIARY OF THE REGISTRANT
--------------------------------------------------------------------------------
Indicate the number of outstanding shares of each of the Registrant's
classes of capital or common stock as of the close of the period
covered by the annual report.
28,434,688 Ordinary `A' Shares of 1p each
5,194,014 Ordinary `B' Shares of 1p each
86,656,531 Zero Coupon Redeemable Preference Shares of Pounds1 each
Indicate by check whether the Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark which financial statement item the registrant has
elected to follow:
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
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Item 17 / / Item 18 /X/
TABLE OF CONTENTS
· Enlarge/Download Table
Page
GENERAL INFORMATION 1
FORWARD-LOOKING STATEMENTS 2
PART I
Item 1: Description of Business 3
Item 2: Description of Property 9
Item 3: Legal Proceedings 10
Item 4: Control of Registrants 12
Item 5: Nature of Trading Market 14
Item 6: Exchange Controls and Other Limitations Affecting Security Holders 14
Item 7: Taxation 15
Item 8: Selected Financial Data 19
Item 9: Management's Discussion and Analysis of Financial Conditions and Results of Operations 23
Item 9A: Quantitative and Qualitative Disclosures about Market Risk 40
Item 10: Directors and Officers of Registrant 44
Item 11: Compensation of Directors and Officers 46
Item 12: Options to Purchase Securities from Registrant or Subsidiaries 47
Item 13: Interest of Management in Certain Transactions 48
PART II
Item 14: Description of Securities to be Registered 49
PART III
Item 15: Defaults upon Senior Securities 49
Item 16: Changes in Securities and Changes in Security for Registered Securities 49
PART IV
Item 17: Financial Statements 49
Item 18: Financial Statements 49
Item 19: Financial Statements and Exhibits 49
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GENERAL INFORMATION
As used herein, except if the context otherwise requires, the term "Company"
refers to Intertek Testing Services Limited and the terms "ITS" or "Group" refer
to Intertek Testing Services Limited and its subsidiaries.
Unless otherwise specified or unless the context otherwise requires: (1) all
references to "pounds sterling" and "pounds" are to the lawful currency of
the United Kingdom of Great Britain and Northern Ireland (the "United
Kingdom" or the "U.K.") and (2) all references to "dollars" or "$" are to the
lawful currency of the United States. The consolidated financial statements
have been prepared in pounds sterling.
Unless otherwise indicated, financial information has been prepared in
conformity with generally accepted accounting principles in the United Kingdom
("U.K. GAAP"), which differs in certain significant respects from generally
accepted accounting principles in the United States ("U.S. GAAP"). For a
discussion of the most significant relevant differences between U.K. GAAP and
U.S. GAAP, see Note 35 to the consolidated financial statements of ITS and its
predecessor included elsewhere herein.
The following table sets forth, at the periods indicated, certain information
regarding the noon buying rate in New York City for cable transfers in pounds
sterling as certified for customs purposes by the Federal Reserve Bank of New
York ("the Noon Buying Rate"), for pounds sterling expressed in U.S. dollars for
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
pounds sterling. On March 12, 1999, the Noon Buying Rate per pound sterling was
1.63.
The table below sets forth, for the periods and dates indicated, certain
information concerning the Noon Buying Rates for pounds sterling expressed in
U.S. dollars per pounds sterling.
· Enlarge/Download Table
Year ended December 31, High Low Period Average (1) Period End
------------------ ------------------ ------------------- ------------------
1994 1.64 1.46 1.54 1.57
1995 1.64 1.53 1.58 1.55
1996 1.71 1.49 1.56 1.71
1997 1.71 1.58 1.64 1.65
1998 1.70 1.63 1.66 1.66
1999 (through March 12, 1999) 1.65 1.60 1.63 1.63
(1) The rate was calculated from the average of the Noon Buying Rate for
pounds sterling on the last business day of each full month during the
period and where the period is less than one full month, the last day of
the period.
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FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements within the meaning of U.S.
securities laws. These statements are subject to a number of risks and
uncertainties and actual results and events could differ materially from
those currently anticipated as reflected in such forward-looking statements.
The terms "expect", "should", "will", "may", "anticipate" and similar
expressions identify forward-looking statements. Factors which may cause
future outcomes to differ from those foreseen in forward-looking statements
include, but are not limited to, general economic conditions and business
conditions in ITS's markets, customers' acceptance of its services and the
actions of competitors.
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PART I
ITEM 1: DESCRIPTION OF BUSINESS
GENERAL
Intertek Testing Services ("ITS") is a leading international group engaged in
the testing, inspection and certification of manufactured goods and
commodities. At December 31, 1998, ITS had 223 testing laboratories and 486
inspection offices in 83 countries.
ITS is comprised of five divisions, each focusing on the testing, inspection
and certification of different manufactured goods and commodities. The five
divisions are organised as follows: (1) Consumer Goods: which tests and
inspects textiles, fabrics, footwear, toys and consumer products; (2)
Conformity Assessment: which tests and certifies electrical and electronic
products, building products, heating and ventilation and air conditioning
equipment and which also certifies management systems to standards such as
ISO 9000; (3) Caleb Brett: which tests and inspects petroleum, chemical and
agricultural products; (4) Foreign Trade Supervision ("FTS"): which focuses
on inspection work for governments and (5) Minerals: which carries out metals
analysis. The Environmental Testing Division ("Environmental"), which is now
discontinued, previously focused on the analysis of water, soil and air
samples for toxic substances. Overhead costs for the central head office and
non-operating holding companies ("Central Costs") are allocated to operating
divisions in proportion to their share of revenues.
Prior to January 1, 1998, the Quality Systems Division was sub-divided into
Consumer Goods and Conformity Assessment. Prior period figures for Quality
Systems have been reanalysed to show the approximate allocation between
Consumer Goods and Conformity Assessment.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
In a press release dated July 17, 1998, ITS announced its decision to close
its Environmental Testing Division. This decision was taken because the
returns from this division have been unsatisfactory. In August 1998, ITS
Environmental sold its operations in Burlington, Vermont and St. Helens, U.K.
and stopped commercial operations at the laboratory in Dallas, U.S. These
actions resulted in the discontinuation of business at ITS Environmental.
Previously, FTS, Minerals and Environmental Testing were included within
Other Divisions. Environmental Testing is now shown as Discontinued
Operations, and FTS and Minerals are shown separately. The divisional
analyses for prior periods have been restated to allow a meaningful
comparison.
The following table shows the number of laboratories and offices in each
division at December 31, 1998 together with the revenues for each division
and their percentage share of total revenues for the year ended December 31,
1998.
· Enlarge/Download Table
Number of Number of Revenues Sales Revenue
laboratories offices Pounds in millions %
-- - - -- - - -- ---- - ---- - ---- -- --- --- -- --- --- -- --- --- -- --- --- -- --- -
Consumer Goods 29 50 65 18
Conformity Assessment 27 41 85 24
Caleb Brett 143 299 123 34
Foreign Trade Supervision - 63 65 18
Minerals 23 31 16 4
Central - 1 - -
-- - - -- - - -- ---- - ---- - ---- -- --- --- -- --- --- -- --- --- -- --- --- -- --- -
Total Continuing operations 222 485 354 98
Discontinued operation 1 1 6 2
-- - - -- - - -- ---- - ---- - ---- -- --- --- -- --- --- -- --- --- -- --- --- -- --- -
Total 223 486 360 100
-- - - -- - - -- ---- - ---- - ---- -- --- --- -- --- --- -- --- --- -- --- --- -- --- -
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HISTORY
Most of the ITS activities have a long history. For example, Conformity
Assessment's U.S. business can trace its origins back to Thomas Edison and
the Caleb Brett business was founded in 1885.
The Company and certain of its subsidiaries were formed in 1996 in connection
with the acquisition (the "Acquisition") of the testing and inspection
business of Inchcape plc which was completed in November 1996. The purchase
was funded by a combination of debt and equity, with the equity investment
made by funds managed by an affiliate of Charterhouse Development Capital
Holdings Limited ("Charterhouse"), by other co-investors and by members of
management.
CONSUMER GOODS ("CG")
CG, which trades under the brand name Labtest, is one of the largest
international providers of testing and inspection services of textiles, toys
and other consumer products.
BUSINESS OVERVIEW. The CG division works for clothing retailers in North
America and Europe and manufacturers worldwide, testing textiles to ensure
that they meet the retailers' specifications regarding sizing, colour
retention, resistance to flammability and other standards. Management
believes that it is the clear leader in textile testing in Asia. Similarly,
CG tests and inspects toys and giftware produced in Asia and other areas.
Manufacturers operating in developing countries routinely seek such testing
and inspection of consumer goods to assist them in selling their products to
developed markets, such as North America and Europe.
CG provides value-added consultancy and risk management services. For
example, a specialised business unit works closely with McDonald's toy
manufacturers and the medical community to improve design and production
methods of McDonald's "Happy Meal Toys" to reduce the risk of injury to
children.
CUSTOMERS. CG's customers are retailers, mainly in North America and Europe
and manufacturers mainly in Asia. Customers include retailers such as JC
Penney, the GAP and Marks & Spencer.
SALES AND MARKETING. CG provides a full range of testing services near the
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
points of manufacture and retailers' buying offices. CG is able to ensure
that the goods tested may be sold in all the major markets in the world
because it has the safety labels, accreditations and testing capabilities to
meet the requirements of the different markets.
With its global sales force and network of testing centres, CG benefits from
the migration of manufacturing centres from North America and Europe to Asia
and other parts of the developing world. For example, ITS's testing
laboratory in Turkey offers American and European textile and garment
importers a local testing service in the country of production.
COMPETITION. CG competitors include ACTS Testing Labs, Inc. (part of Bureau
Veritas) - mainly in toys, Merchandise Testing Laboratories (" MTL") - mainly
in textiles, and Societe Generale de Surveillance ("SGS") - mainly in
inspection.
CONFORMITY ASSESSMENT ("CA")
CA tests and certifies electrical and electronic products, building products,
heating and ventilation and air conditioning equipment. CA also certifies the
quality of management systems to standards such as ISO 9000.
BUSINESS OVERVIEW. Safety marks owned and issued by this division include:
"ETL" (U.S.), "cETL" (Canada), "S" (Sweden) and "WH" (U.S. and Canada). CA is
also authorised to apply the "GS" mark (Germany) and the "NOM" mark (Mexico),
it has Notified Body status in the European Union ("EU") and it has
electro-magnetic compatibility, telephone and other accreditations required
for products it tests and certifies. These safety marks are widely relied
upon by manufacturers, retailers and consumers to ensure that products
conform with the applicable standards. Even when not required by governmental
regulation, many manufacturers, partly in response to consumer demand and
partly to ensure that products are safe, continue to use ITS's safety marks.
For example, the "S" mark, which has not been mandatory in Sweden since 1990,
continues to be widely used throughout that country as evidence that a
product has met the applicable safety standards.
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CA provides testing services demanded by industry associations to guard
against products which might damage consumer confidence in a particular
industry. For example, CA has been nominated by the Air Conditioning and
Refrigeration Institute ("ARI") and the Gas Appliance Manufacturers
Association in the United States to verify the accuracy of information
provided in the yellow "Energy Guide" labels found on many appliances. CA
also tests individual manufacturers' products to provide independent
competitive performance data which can then be used for marketing.
Testing companies currently conduct safety standard and performance
evaluation on a wide variety of manufactured goods, including electrical
goods, appliances, lighting fixtures, building materials, toys, and
telecommunication, electronic and industrial equipment. Manufacturers are
sometimes required by law, mainly in North America, to obtain safety or
performance certification from independent testing companies, but even when
this is not required, industrial users, retailers and distributors often
require testing and certification by an independent testing company. Similar
forces are driving the growth of assessment and certification of
manufacturing processes and systems, primarily to the ISO 9000 standards.
Although manufacturers wishing to sell products in Europe can self-certify
their products under the "CE" safety mark, they often outsource the
supporting tests in order to demonstrate independent verification and to
reduce expenses. Retailers and distributors buying the products will
sometimes insist on this, however, there can be no guarantee that companies
will not increasingly self-certify their products and governmental
authorities may allow manufacturers to self-certify more products in the
future. In addition, the Group's revenues could be negatively affected if
governmental authorities in different jurisdictions further harmonise their
standards which will reduce the overall amount of testing work.
CUSTOMERS. CA customers include industrial companies such as General
Electric, Ericsson, Electrolux, Matsushita and Samsung. CA also has a number
of long standing relationships with various industry organisations, such as
the ARI, which has been a customer of ITS since 1956.
SALES AND MARKETING. CA provides a wide range of testing services near points
of manufacture worldwide, and the goods tested by CA may be sold in all the
major markets of the world because it has the safety labels and
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
accreditations needed to meet the requirements of these markets.
With its global sales force and its network of testing centres, CA benefits
from the migration of manufacturing centres from North America and Europe to
Asia and other parts of the developing world. For example, telephones
manufactured in China for export to the United States are primarily tested in
China to ensure compliance with the U.S. Federal Communications Commission
standards.
COMPETITION. CA's competitors include Underwriters Laboratories ("UL"), a
U.S. not-for-profit company which is engaged primarily in safety mark
testing, and the German Technischer Uberwachungs Verein ("TUVs"). They have
both started to expand their presence internationally. CA has benefited from
being one of the few companies that offers global one stop safety and
performance testing of products for markets worldwide, but there can be no
assurance that the Group's business, financial condition and results of
operations will not suffer from an increase in the global presence of some of
its competitors.
Management believes that CA will continue to increase its market share
because of its range of accreditations, the importance of brand name
recognition, its global presence and the high start-up costs and barriers to
entry in the product testing and certification market.
CALEB BRETT
Caleb Brett is a joint leader in the market for testing and inspecting
petroleum and chemicals. Caleb Brett's primary business is providing
independent verification of the quantity and quality of crude oil, petroleum
products and chemicals and, to a lesser extent, agricultural produce.
BUSINESS OVERVIEW. Petroleum and chemical companies and traders require
independent testing services to verify the quality and quantity of petroleum
and chemical cargoes at the point of shipment. Management believes that the
market has benefited from more complex and rigorous environmental regulations
in North America and Europe, which require a greater amount of testing. Also,
multinational oil companies are increasingly outsourcing their testing
activities to testing companies, such as Caleb Brett.
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Caleb Brett's certificates are internationally recognised as evidence of the
quality and quantity of commodity shipments. Caleb Brett's activities in
petroleum and chemical testing are divided into three sub-divisions:
Inspection, Inspection Related Testing and Free Standing Testing. Inspection
of cargoes involves the physical checking, sampling and measurements of the
quantity of a commodity at points of loading and unloading, such as seaports,
storage tanker terminals and the ends of transportation pipelines. Inspection
Related Testing is laboratory testing of samples taken to assess their
composition and whether they comply with specifications demanded by customers
or by legislation. Free Standing Testing involves the analysis of samples
unrelated to cargo shipments, including situations where an oil company or
trader outsources its laboratory testing work to Caleb Brett.
Caleb Brett also performs marine surveying and agricultural inspection.
Marine surveying is the evaluation of cargo damage, primarily for insurance
purposes. Agricultural inspection and testing is the physical sampling,
quantification, inspection and testing of commodities, such as vegetable oils
and cotton.
CUSTOMERS. Caleb Brett's customers include oil and chemical companies and
traders with whom Caleb Brett has well established long-term relationships.
The majority of Caleb Brett's oil company customers purchase services from
Caleb Brett on a job by job, port by port basis.
SALES AND MARKETING. Management believes that Caleb Brett has been able to
increase its market share through its strong reputation for service, its
extensive network of facilities, its strong international coordination which
leads to close contact with customers and its well equipped and quality
controlled laboratories.
COMPETITION. Multinational oil companies typically split inspection and
testing contracts between two or more suppliers to sustain competition.
Management believes Caleb Brett and the Redwood division of SGS, are regarded
as market leaders in this industry, sharing over 50% of the market in 1998.
Management believes that competition in this market will continue to be
relatively stable, due primarily to the high start-up and fixed costs, as
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
well as the importance of brand name recognition.
FOREIGN TRADE SUPERVISION
FTS provides independent pre-shipment inspection ("PSI") services to the
governments of developing countries to assist them in the enforcement of
customs duties and exchange controls. FTS also provides inspection and
testing services to government standards organisations to ensure that imports
on specified products meet their safety and other national standards. In
providing these services, FTS inspects, tests and reviews at source the
quantity, quality and price of goods to be shipped, to check that import
duties are correctly calculated and that such goods comply with the laws,
standards and relevant customs regulations in the importing country. PSI work
is contracted directly with the governments and standards organisations of
developing countries.
FTS has experienced delays in the past in collecting payment for work
performed on behalf of the Nigerian Government but has recently taken action
to cap those debts. Furthermore, ITS has been advised that its PSI programmes
in Nigeria will end on March 31, 1999. See " Management's Discussion and
Analysis of Financial Conditions and Results of Operations". In addition to
PSI work, FTS also provides services to companies, inspecting the materials,
plant and equipment that they buy.
MINERALS
The Minerals division is operated under the name Bondar Clegg, which provides
a laboratory testing service for samples from exploration and producing
mines, principally of gold but also of copper, zinc and other metals. This
business is suffering because of the current low level of expenditure in the
minerals exploration market and its future in the Group is under review.
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ENVIRONMENTAL LIABILITIES
ITS is subject to worldwide laws and regulations that govern activities or
operations that may have adverse environmental effects, such as discharges to
air and water, as well as handling and disposal of solid and hazardous
wastes. In many jurisdictions these laws have tended to become more stringent
and change frequently.
Such laws and regulations may impose obligations to investigate and remediate
environmental conditions and to compensate public and private parties for
related damages. In jurisdictions such as the United States, such
obligations, including those under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA" or "Superfund"), may be joint and
several and may apply to conditions at properties presently or formerly owned
by ITS or to properties where ITS has sent waste or other contamination.
ITS has been notified by governmental authorities and others that it is
potentially liable for the cleanup of hazardous substances at properties that
ITS owns or has owned, or where waste attributable to it has been located.
ITS's liability, if any, has not been resolved and is difficult to predict.
No assurance can be given that these liabilities will not have a material
adverse impact on ITS. In connection with the Acquisition, ITS and certain of
its subsidiaries obtained rights to indemnification, in certain
circumstances, from Inchcape plc for breaches of Inchcape plc's environmental
representations and warranties in the related acquisition agreements. Those
rights to recover for breach of warranty are subject to limitations, however,
including the necessity that amounts sought from Inchcape plc exceed Pounds
250,000, and the requirement that notice to be given to Inchcape plc prior to
the fifth anniversary of the closing of the Acquisition, depending on the
issue involved. ITS can give no assurance that any material environmental
liability will be covered by such indemnification rights.
ORGANISATION
ITS has a strong corporate culture worldwide to maximise synergy and ensure
that business is developed globally in all divisions. When the Acquisition
was completed in 1996, a new Board of Directors was established, which
includes non-executive Directors from Charterhouse. In addition to the Board,
there is an Executive Committee, which includes the Executive Board Members
plus the Vice-Presidents in charge of the operations in the different
divisions.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
EMPLOYEES
At December 31, 1998, ITS had a total of approximately 9,284 employees in the
following divisions:
Consumer Goods 1,970
Conformity Assessment 1,299
Caleb Brett 3,658
Foreign Trade Supervision 1,262
Minerals 1,028
Central 28
------------
Total continuing operations 9,245
Discontinued operation 39
------------
Total 9,284
------------
There are 17 U.S. employees of Caleb Brett who are covered by a collective
bargaining agreement with Oil, Chemical and Atomic Workers International
Union, AFL-CIO which expires on July 14, 2001 and approximately 48 employees
in Canada are covered by a collective bargaining agreement with the
International Long Shoreman's and Warehouseman's Union. All ITS employees in
Ghana, South Africa, Belgium, Germany, the Netherlands, Norway, Singapore and
Korea are covered by various union agreements. Management are not aware of
any significant union disputes.
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GEOGRAPHICAL COVERAGE
ITS is a global business. The different divisions have geographical profiles
that reflect the nature of their operations. The table below shows revenues
in thousands of pounds sterling for each major division and analysed into
geographic regions. For a more complete discussion of how the Group has
performed in various regions, see " Management's Discussion and Analysis of
Financial Conditions and Results of Operations".
· Download Table
Supplemental Year ended Year ended
Period December 31, December 31,
1996 1997 1998
----------------------------------------
Revenues by division:
Consumer Goods 44,880 56,768 64,575
Conformity Assessment 82,651 81,816 84,920
Caleb Brett 103,748 108,837 122,972
Foreign Trade Supervision 48,869 55,792 65,299
Minerals 22,212 25,601 16,530
-----------------------------------
Continuing operations 302,360 328,814 354,296
Discontinued operation 21,389 15,169 5,517
===================================
Total 323,749 343,983 359,813
===================================
Revenues by geographical area
Americas 147,708 143,531 150,046
Europe, Africa and Middle East 92,309 112,409 124,657
Asia and Far East 62,343 72,874 79,593
-----------------------------------
Continuing operations 302,360 328,814 354,296
Discontinued operation 21,389 15,169 5,517
===================================
Total 323,749 343,983 359,813
===================================
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ITEM 2: DESCRIPTION OF PROPERTY
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
REAL PROPERTY AND LEASEHOLDS
At December 31, 1998, the Company had approximately 486 offices and 223
laboratories in over 83 countries. Almost all of ITS's properties are leased.
The majority of laboratories have approximately 10,000 -- 20,000 square feet
of space. Approximately 82% of ITS's leases expire in less than five years. A
small number of sites are owned by ITS. In total, ITS's fixed assets include
property with a book value of Pounds 8.9 million at December 31, 1998. The
Conformity Assessment Semko AB facility in Stockholm, Sweden accounts for
Pounds 5.0 million of that total. Other large sites include facilities in
Rotterdam, the Netherlands, owned by ITS Caleb Brett Nederland BV and in
Cortland, New York, owned by Intertek Testing Services NA, Inc. ITS's
principal executive office is located in London, England and is occupied
under a lease expiring in 8 years. The other leased premises have remaining
terms generally ranging from 1 to 24 years. Many of the leases contain
renewal options, pursuant to which ITS may extend the lease terms. ITS does
not anticipate any difficulties in renewing its leases as they expire.
Management believes that its facilities are suitable for their present and
intended purposes and are adequate for ITS's current and expected levels of
operations.
INTELLECTUAL PROPERTY
The Company owns or has the right to use various patents, copyrights,
trademarks, service marks and certification marks in the United States and
worldwide. ITS uses its well-known and valuable certification marks to
signify to consumers that a product bearing such a mark meets various
nationally and/or internationally recognised safety standards. Conformity
Assessment issues the proprietary "ETL" (U.S.), "cETL" (Canada), "S"
(Northern Europe), and "WH" (U.S. and Canada) safety marks, and is accredited
to authorise the application of the "GS" mark in Germany and the "NOM" mark
in Mexico. ITS also has valuable trade names, registered and unregistered,
such as "Caleb Brett", "Bondar Clegg", "Semko", "Intertek", "ITS", "Labtest"
and "Warnock Hersey ".
Management believes ITS's brand and trade names provide ITS with a
significant competitive advantage in marketing its services. Invalidation of
several of these marks, through a lawsuit or governmental proceeding, could
have a materially adverse effect on the business of ITS. In addition,
invalidation of a mark with great commercial importance in a particular
country could have a materially adverse effect on ITS's business in that
country.
ITS believes that its use of intellectual property does not infringe the
intellectual property rights of third parties. However, there can be no
assurance that competitors or other third parties will not in the future
assert infringement or royalty claims against, or otherwise seek to
invalidate the intellectual property rights of ITS. ITS knows of third
parties in Venezuela, Germany and Former Soviet Union countries that are
currently using company names similar to those owned by ITS. It is unclear
whether litigation or government proceedings will ensue from this situation.
In addition, ITS is currently resolving claims that its subsidiaries have
brought against certain third parties for trademark infringement in the
United States.
Several agreements currently exist under which ITS is either a licensor or
licensee of intellectual property. ITS has no reason to anticipate the loss
or invalidation of these licenses, and otherwise believes that such a loss
would not have a materially adverse effect on the business of ITS. ITS
protects its intellectual property by registering its trade marks, patents
and trade names with the appropriate governmental authorities and through
litigation defends such intellectual property from infringement.
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ITEM 3: LEGAL PROCEEDINGS
ITS is involved from time to time in various claims and lawsuits incidental
to the ordinary course of business, including claims for damages, negligence,
and commercial disputes regarding inspection and testing. ITS currently is
not party to any legal proceedings other than ordinary litigation incidental
to the conduct of its business and the investigations described below. On the
basis of currently available information, Management considers that the
outcome of any claims and lawsuits is unlikely to have a material effect on
the financial position of ITS.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
ITS holds a professional indemnity insurance policy which provides coverage
for claims from customers. Management deems this policy adequate for normal
commercial purposes.
INVESTIGATIONS BY THE U.S. ENVIRONMENTAL PROTECTION AGENCY
Two of ITS's subsidiary corporations are currently involved in investigations
by the U.S. Environmental Protection Agency ("EPA"). Details of each
investigation are given below:
CALEB BRETT USA, INC.
In February 1997, Caleb Brett through its routine quality assurance and
quality control procedures, discovered evidence of false testing results at
the Caleb Brett laboratory in Linden, New Jersey which involved testing of
gasoline to certain standards set by the EPA.
Caleb Brett promptly reported its findings to the EPA. This matter has been
referred to the U.S. Department of Justice by the EPA, and civil and criminal
investigations are underway.
Caleb Brett requested inclusion in the EPA's Voluntary Disclosure Program.
Under this program it may be possible to foreclose criminal, but not civil
penalties.
As part of the co-operation with the EPA, Caleb Brett has appointed a
Compliance Director and has introduced more stringent compliance protocols
which have been presented to the EPA. These compliance procedures are now
fully implemented.
It is not yet possible to estimate the cost of any civil or criminal
penalties arising from this matter, however, on the basis of currently
available information, the directors consider that the outcome is unlikely to
have a material effect on the financial position of ITS. Possible rights of
recovery against Inchcape plc, under the Share Purchase Deed are being
pursued.
INTERTEK TESTING SERVICES ENVIRONMENTAL LABORATORIES, INC.
In December 1997, Intertek Testing Services Environmental Laboratories, Inc.
("ITS Environmental") discovered certain discrepancies in reported testing
results at its facility in Richardson, near Dallas, Texas ("Dallas"). A
further investigation by the Quality Assurance/Quality Control department of
ITS Environmental revealed that technicians at the Dallas facility had at
various times manually integrated data and improperly calibrated test
equipment in a way that may have skewed the accuracy of the test results that
have been reported, but not necessarily the basic data recorded in the
testing equipment.
ITS Environmental promptly reported these discrepancies to the EPA and to
clients. Civil and criminal investigations are under way. A government
investigation at the ITS Environmental facility uncovered evidence of false
reporting beyond that initially discovered and disclosed by ITS Environmental.
ITS Environmental has requested inclusion in the EPA's Voluntary Disclosure
Program. Under this program it may be possible to foreclose criminal but not
civil penalties. If the actions of ITS Environmental that were disclosed to
the EPA are found to qualify for the immunities available under its Voluntary
Disclosure Program, the protection of this program may not extend to improper
actions subsequently discovered.
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In August 1998, ITS Environmental sold its laboratory business in Burlington,
Vermont U.S.A. and St. Helens, U.K. and stopped commercial operations at the
laboratory in Dallas. These actions resulted in the discontinuation of
business at ITS Environmental. This sale has not relieved ITS of any
liability it may face as a result of these investigations or otherwise.
Although commercial operations have been discontinued in Dallas, the facility
is being used to reprocess the original data. During the past few months, ITS
Environmental has developed an effective data screening and reprocessing
method. The reprocessing effort is aimed at providing clients with data of
known quality.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
ITS Environmental continues to co-operate fully with the government
investigation. To date, no action has been brought against ITS Environmental
by the EPA or any other party. At this time, it is not possible to estimate
the cost of any civil or criminal penalties arising from this matter.
However, on the basis of currently available information, the directors
consider that the outcome is unlikely to have a material effect on the
financial position of ITS. Possible rights of recovery against Inchcape plc,
under the Share Purchase Deed are being pursued.
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ITEM 4: CONTROL OF REGISTRANTS
At March 12, 1999, the share capital of the Company (the "Ordinary Shares")
is divided into 69,172,061 Ordinary A Shares of 1 pence each (the "A
shares"), 11,578,635 Ordinary B Shares of 1 pence each (the "B Shares"),
2,951,417 Ordinary C Shares of 1 pence each (the "C Shares"), and 7,110,713
Ordinary D Shares of 1 pence each (the "D Shares"). 28,434,688 of the A
Shares and 5,194,014 of the B Shares have been allotted, called up, fully
paid and outstanding. None of the C Shares nor the D Shares have been issued.
In addition, the Company has 105,478,482 Zero Coupon Redeemable Preference
Shares of Pounds1 each (the "Preference Shares"), of which 86,656,531 have
been allotted, called up, fully paid and outstanding.
ORDINARY SHARES
The A Shares, B Shares, C Shares and D Shares rank pari passu in all respects
except that: (i) the holders of A Shares and D Shares have a right in the
event of a winding-up to receive the subscription price of those shares in
preference to the holders of B Shares and C Shares, but rank pari passu with
the holders of B Shares and C Shares in the event of a distribution of any
surplus assets available after repayment to the holders of B Shares and C
Shares of the subscription price on those shares; (ii) the C Shares confer no
right to receive notice of, attend or vote at general meetings of the
Company; and (iii) the D Shares confer on the holders the right to receive
notice of and to attend, but not to vote at, general meetings of the Company.
Those shareholders who hold more than 10% of the Ordinary Shares in the
Company as of March 12, 1999 are shown in the table below:
· Enlarge/Download Table
Number of Number of % of Total
Name and Address A Shares Held B Shares Held Share Capital(a)
Charterhouse General Partners Limited (b)
85 Watling Street,
London EC4M 9BX
United Kingdom 13,459,143 - 40.02
Charter Intertek LLC (b)
C/o Charterhouse Group International, Inc.
535 Madison Avenue
New York, NY 10022
USA 5,047,578 - 15.01
Directors and Officers as a group 88,653 4,481,111 13.59
- -- ---- - ---- -- --- -- --- --- -- --- --- -- --- --- -- --- --- -- --- ---
18,595,374 4,481,111 68.62
- -- ---- - ---- -- --- -- --- --- -- --- --- -- --- --- -- --- --- -- --- ---
(a) This table does not reflect the issuance of C Shares (which are reserved
for issue to employees) upon the exercise of options granted to management or
the issuance of D Shares upon the exercise of the Warrants issued to certain
financial institutions, including BT Investment Partners, Inc., in connection
with its purchase of the Parent Subordinated PIK Debentures. Upon the
exercise of the Warrants and the share options, directors and officers as a
group will own 14.15% and the Warrant holders as a group will own 14.2% of
the fully diluted ordinary shares of Parent. See "Warrants" below.
In addition, the table does not reflect the issuance of 86,656,531 Preference
Shares of the Parent purchased by Charterhouse and other financial
institutions as described below.
(b) Charterhouse General Partners Limited is a wholly owned subsidiary of
Charterhouse Development Capital Holdings Limited, which is the sole owner of
Charterhouse Development Capital Limited.
Other wholly owned subsidiaries and managed funds of Charterhouse Development
Capital Holdings Limited as a group own 48.28% of the total share capital.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
A substantial portion of the membership interests in Charter Intertek LLC are
owned by Charterhouse Equity Partners II, L.P. ("CEPII"). The general partner
of CEPII is CHUSA Equity Investors II, L.P., whose general partner is
Charterhouse Equity II, Inc., a wholly-owned subsidiary of Charterhouse Group
International, Inc. ("CHUSA").
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ZERO COUPON REDEEMABLE PREFERENCE SHARES
The Preference Shares rank senior to the Ordinary Shares of the Company. No
dividends will be payable on the Preference Shares. The Preference Shares
will be mandatorily redeemed on November 8, 2009. The Company is required
upon the written request from holders of 30% or more of the Preference Shares
to redeem all of those shares in issue from any source of funds legally
available therefor. No redemption, however, may be made to the extent
prohibited by the terms of indebtedness under the Credit Agreement, the Notes
or the Parent Subordinated PIK Debentures, all of which contain prohibitions
or restrictions on redemptions. Holders of Preference Shares are entitled to
receive notice but not attend and vote at general meetings, except that they
can attend and vote on any resolution regarding the winding-up of the
Company, a reduction in the Company's capital or on modification of the
rights and restrictions attached to the Preference Shares.
WARRANTS
The Warrants acquired in connection with the purchase by certain financial
institutions, including BT Investment Partners, Inc., of Parent Subordinated
PIK Debentures confer the right to subscribe to 14.2% of the fully diluted
ordinary share capital of the Company. The Warrants will be exercisable only
upon sale in connection with the acquisition by a person (other than a person
who has funds managed by Charterhouse or any other member of Charterhouse's
wholly-owned group) of more than 50% of the Ordinary Shares of the Company
(calculated excluding Ordinary Shares underlying the Warrants) or the
unconditional granting of permission for any of the Ordinary Shares of the
Company to be dealt in on any recognised investment exchange.
SHAREHOLDERS' AGREEMENT
The Company and the holders of A Shares, B Shares and Preference Shares are
parties to a subscription and shareholders' agreement (the "Shareholders'
Agreement"). The Shareholders' Agreement provides that, among other things,
without the consent of a certain number of Institutional Directors, the
Company or its subsidiaries may not take certain actions, including: (i) any
amendment to the memorandum or articles of association of the Company or its
subsidiaries; (ii) any variation in the authorised or issued share capital
(or the rights attaching to it or any class of it) of the Company or its
subsidiaries or the creation of any options or other rights to subscribe for
or to convert into shares in such a company or the purchase (by the Company
or its subsidiaries) of any shares in the capital of such a company; (iii)
the declaration or distribution of any dividend or other payment out of the
distributable profits or reserves of the Company or its subsidiaries or the
reduction of any other reserve of the Company or its subsidiaries; (iv) the
transfer of any shares in the capital of the Company or its subsidiaries; (v)
the sale, transfer, leasing, licensing or disposal by the Company or its
subsidiaries (otherwise than in the normal course of business) of all or a
substantial part of its business, undertaking or assets whether by a single
transaction or series of transactions, related or not; (vi) the entry into
negotiations concerning the sale of shares in the Company or its subsidiaries
or of any material part of the business or assets of the Company or its
subsidiaries, the refinancing of the Company or its subsidiaries, or the
making of any application or submission of any business plan to any person
with a view to attracting additional or substitute finance for the Company or
any part of it; (vii) anything which is of a material nature (in the context
of the Company as a whole) and not in the normal course of business; (viii)
the entry into any new borrowing facility (other than the Credit Agreement)
by the Company or its subsidiaries, the variation of the terms of any
borrowing facilities or the issue or redemption of any loan capital and (ix)
certain arrangements with affiliates.
So far as the Company is aware, the Company is not directly or indirectly
owned or controlled by any government. The Company is not aware of any
arrangements that might result in a change of control of the Company.
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Interests in Share Capital
The directors of the Company and their immediate families and executive
officers of the Group who held Shares in the Company as of March 12, 1999 are
shown below:
· Download Table
Number of Number of
Ordinary 'A' Preference
Shares Shares
Simon Drury 37,362 1,288
Stuart Simpson 51,291 1,943
Number of
Ordinary 'B'
Shares
Richard Nelson 1,629,495
William Spencer 445,536
Executive Officers 2,406,080
ITEM 5: NATURE OF TRADING MARKET
Not applicable.
ITEM 6: EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
There are no limitations under UK law, as currently in effect, on the rights
of non-UK resident shareholders, by virtue of their non-resident status, to
hold or exercise voting rights attaching to the Ordinary Shares of the
Company.
There are currently no UK laws, decrees or regulations that would affect the
transfer of capital or remittance of dividends, interest or other payments to
non-UK resident shareholders, except as set forth in "Item 7 - Taxation".
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ITEM 7: TAXATION
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material United States federal income tax
consequences of the ownership of Notes as of the date hereof. Except where
noted, it deals only with Notes held as capital assets by United States
Holders and does not deal with special situations, such as those of dealers
in securities or currencies, financial institutions, life insurance
companies, tax-exempt entities, persons holding Notes as a part of a hedging,
integrated, conversion or constructive sale transaction or a straddle or
holders of Notes whose "functional currency" is not the United States dollar.
Furthermore, the discussion below is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and regulations,
rulings and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified so as to result in United
States federal income tax consequences different from those discussed below.
Persons considering the purchase, ownership or disposition of Notes should
consult their own tax advisors concerning the United States federal income
tax consequences in light of their particular situations as well as any
consequences arising under the laws of any other taxing jurisdiction.
Payments of Interest. Except as set forth below, interest on a Note will
generally be taxable to a United States Holder as ordinary income at the time
it is paid or accrued in accordance with the United States Holder's method of
accounting for tax purposes. As used herein, a "United States Holder" of a
Note means a holder that is (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organised in or under the laws
of the United States or any political subdivision thereof, (iii) an estate
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
the income of which is subject to United States federal income taxation
regardless of its source or (iv) a trust (x) that is subject to the
supervision of a court within the United States and the control of one or
more United States persons as described in section 7701(a)(30) of the Code or
(y) that has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a United States person. A "Non-United States
Holder" is a holder that is not a United States Holder.
It is unclear whether the interest income on a Note will constitute foreign
and/or United States source income for United States federal income tax
purposes. A United States Holder of a Note should consult its own tax advisor
with respect to the source of such income.
Market Discount. If a United States Holder purchases a Note for an amount
that is less than its stated redemption price at maturity, the amount of the
difference will be treated as "market discount" for federal income tax
purposes, unless such difference is less than a specified de minimis amount.
Under the market discount rules, a United States Holder will be required to
treat any principal payment on, or any gain on the sale, exchange, retirement
or other disposition of a Note as ordinary income to the extent of the market
discount which has not previously been included in income and is treated as
having accrued on such Note at the time of such payment or disposition. In
addition, the United States Holder may be required to defer, until the
maturity of the Note or its earlier disposition in a taxable transaction, the
deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the
United States Holder elects to accrue on a constant interest method. A United
States Holder of a Note may elect to include market discount in income
currently as it accrues (on either a ratable or constant interest method), in
which case the rule described above regarding deferral of interest deductions
will not apply. This election to include market discount in income currently,
once made, applies to all market discount obligations acquired on or after
the first taxable year to which the election applies and may not be revoked
without the consent of the U.S. Internal Revenue Service.
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AMORTIZABLE BOND PREMIUM. A United States Holder that purchases a Note for an
amount in excess of the sum of all amounts payable on the Note after the
purchase date other than qualified stated interest will be considered to have
purchased the Note at a "premium". A United States Holder generally may elect
to amortize the premium over the remaining term of the Note on a constant
yield method as an offset to interest when includible under the United States
Holder's regular accounting method. In the case of instruments like the Notes
that provide for alternative payment schedules, bond premium is calculated by
assuming that (i) the holder will exercise or not exercise options in a
manner that maximises the holder's yield and (ii) the issuer will exercise or
not exercise options in a manner that minimises the holder's yield, except
with respect to call options for which the issuer is assumed to exercise such
call options in a manner that maximises the holder's yield. Bond premium on a
Note held by a United States Holder that does not make such an election will
decrease the gain or increase the loss otherwise recognized on disposition of
the Note. The election to amortize premium on a constant yield method once
made applies to all debt obligations held or subsequently acquired by the
electing United States Holder on or after the first day of the first taxable
year to which the election applies and may not be revoked without the consent
of the IRS.
SALE, EXCHANGE, RETIREMENT OR OTHER DISPOSITION OF NOTES. A United States
Holder's tax basis in a Note will, in general, be the United States Holder's
cost therefor, increased by market discount previously included in income by
the United States Holder and reduced by any amortized premium and any cash
payments on the Note other than qualified stated interest. Upon the sale,
exchange, retirement or other disposition of a Note, a United States Holder
will recognize gain or loss equal to the difference between the amount
realized upon the sale, exchange, retirement or other disposition (less any
accrued qualified stated interest, which will be taxable as such) and the
adjusted tax basis of the Note. Except as described above with respect to
market discount, such gain or loss will be capital gain or loss. Capital
gains of individuals derived in respect of capital assets held for more than
one year are eligible for reduced rates of taxation. The deductability of
capital losses is subject to limitations.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
INFORMATION REPORTING AND BACKUP WITHHOLDING. In general, information
reporting requirements will apply to certain payments of principal, interest
and premium paid on Notes and to the proceeds of sale of a Note made to
United States Holders other than certain exempt recipients (such as
corporations). A 31% backup withholding tax will apply to such payments if
the United States Holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
NON-UNITED STATES HOLDERS. As stated above, it is unclear whether the
interest income on a Note will constitute foreign and/or United States source
income for United States federal income tax purposes. Consequently, the
Issuer will withhold United States federal income tax at a rate of 30% on any
interest payment made to a Non-United States Holder unless such interest
qualifies as "portfolio interest " under the Code or is otherwise exempt from
withholding as described below. In general, interest income received by a
Non-United States Holder will qualify as "portfolio interest" if such
Non-United States Holder files Internal Revenue Service Form W-8 (or
successor form) with the Issuer or its paying agent, as the case may be, and
such Non-United States Holder (i) does not actually or constructively own 10%
or more of the total combined voting power of all classes of stock of the
Issuer or USCo entitled to vote within the meaning of section 871(h)(3) of
the Code and the regulations thereunder, (ii) is not a bank whose receipt of
interest on a Note is described in section 881(c)(3)(A) of the Code, and
(iii) is not a controlled foreign corporation that is related to the Issuer
or USCo through stock ownership.
If the interest income received by a Non-United States Holder does not
qualify as "portfolio interest," the Issuer will withhold United States
federal income tax at a rate of 30% on any interest payment to such
Non-United States Holder unless the beneficial owner of the Note provides the
Issuer or its paying agent, as the case may be, with a properly executed (1)
Internal Revenue Service Form 1001 (or successor form) claiming an exemption
or reduced rate from withholding under the benefit of a tax treaty or (2)
Internal Revenue Service Form 4224 (or successor form) stating that interest
paid on the Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States.
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If a Non-United States Holder is engaged in a trade or business in the United
States and interest on the Note (that is treated as United States source
income for United States federal income tax purposes) is effectively
connected with the conduct of such trade or business, the Non-United States
Holder, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest income on a net
income basis in the same manner as if it were a United States Holder. In
addition, if such holder is a foreign corporation, it may be subject to a
branch profits tax equal to 30% of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For this purpose, such
interest income will be included in such foreign corporation's earnings and
profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note generally will not be subject to United States federal
income tax unless (i) such gain or income is effectively connected with a
trade or business in the United States of the Non-United States Holder, or
(ii) in the case of a Non-United States Holder who is an individual, such
individual is present in the United States for 183 days or more in the
taxable year of such sale, exchange, retirement or other disposition, and
certain other conditions are met.
CERTAIN UNITED KINGDOM TAX CONSEQUENCES
The following summary describes certain U.K. tax consequences of the
ownership of the Notes as of the date hereof. Except where noted, it relates
only to the position of persons who are the absolute beneficial owners of
their Notes and may not apply to special situations, such as those of dealers
in securities. Furthermore, the discussion below is generally based upon the
provisions of the U.K. tax laws and U.K. Inland Revenue practice as of the
date hereof, and such provisions may be repealed, revoked or modified so as
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
to result in U.K. income tax consequences different from those discussed
below. Persons considering the purchase, ownership or disposition of Notes
should consult their own tax advisers concerning U.K. tax consequences in
light of their particular situations as well as any consequences arising
under the law of any other relevant tax jurisdiction. No representations with
respect to the tax consequences to any particular holder of Book-Entry
Interests are made hereby.
INTEREST ON THE GLOBAL NOTES
The Global Notes will constitute "quoted Eurobonds" within the meaning of
section 124 of the Income and Corporation Taxes Act 1988 ("the Act") as long
as they continue to be in bearer form and listed on a "recognised stock
exchange" within the meaning of section 841 of the Act. The Luxembourg Stock
Exchange is currently recognised for these purposes. Accordingly, payments of
interest on the Global Notes may be made without withholding on account of
U.K. income tax where the Global Notes are held in a recognised clearing
system (DTC, Euroclear and Cedel are recognised for these purposes) and,
where applicable, any other administrative conditions imposed by regulations
made under the Act (as amended by the Finance Act 1996) have been satisfied.
In all other cases an amount must be withheld on account of income tax at the
lower rate (currently 20%), subject to any direction to the contrary by the
Inland Revenue under an applicable double taxation treaty.
Where a U.K. collecting agent in the course of a trade carried on by him
either (a) acts as custodian of the Global Notes and receives interest on
those Notes or directs that interest on the Global Notes be paid to another
person or consents to such payment; or (b) collects or accrues payment of or
receives interest on the Global Notes for a Noteholder (except by means
solely of clearing a check or arranging for the clearing of a check), the
collecting agent will be required to withhold on account of income tax at the
lower rate unless: (i) the relevant Global Notes are held in a "recognized
clearing system" and the collecting agent either: (A) pays or accounts for
the interest directly or indirectly to the "recognized clearing system"; or
(B) is acting as depository for the "recognized clearing system"; or (ii) the
person beneficially entitled to the interest is at the time the interest is
paid either not resident in the United Kingdom and beneficially owns the
relevant Notes or is specified by regulations; or (iii) the interest arises
to trustees not resident in the United Kingdom of certain discretionary or
accumulation trusts (where, inter alia, none of the beneficiaries of the
trust is resident in the United Kingdom); or (iv) the person beneficially
entitled to the interest is eligible for certain reliefs from tax in respect
of the interest; or (v) the interest fails to be treated as the income of, or
of the government of, a sovereign power or of an international organization.
In the case of each of the above exceptions, further administrative
conditions imposed by the regulations referred to above may have to be
satisfied for the relevant exception to be available.
Interest on the Notes constitutes U.K. source income for U.K. tax purposes
and, as such, may be subject to income tax by direct assessment even where
paid without withholding. However, interest with a U.K. source received
without
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deduction or withholding on account of U.K. tax will not be chargeable to
U.K. tax in the hands of a Noteholder who is not resident for tax purposes in
the United Kingdom unless that Noteholder carries on a trade, profession or
vocation in the United Kingdom through a U.K. branch or agency in connection
with which the interest is received or to which the Notes are attributable.
There are exemptions for interest received by certain categories of agent
(such as some brokers and investment managers).
INTEREST ON THE DEFINITIVE NOTES
Payments of interest on the Definitive Notes will be made under deduction of
U.K. income tax at the lower rate by the Issuer subject to any direction to
the contrary by the Inland Revenue under an applicable double taxation treaty.
Notwithstanding that interest is received subject to a deduction of income
tax, holders of Definitive Notes who are resident in the United Kingdom for
tax purposes or holders who are non-resident and carrying on a trade,
profession or vocation in the United Kingdom through a U.K. branch or agency,
may either be liable to pay further U.K. tax on the interest received or be
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
entitled to a refund of all or part of the tax deducted depending on their
individual circumstances.
POTENTIAL APPLICATION OF APPLICABLE DOUBLE TAX TREATIES
Where interest on the Notes has been paid subject to deduction of income tax,
holders of Notes who are not resident in the United Kingdom may be able to
recover all or part of the tax deducted if there is an appropriate provision
in an applicable double tax treaty. A United States Holder who is entitled to
the benefit of the United States/United Kingdom Double Tax Treaty will
normally be eligible to recover in full any U.K. tax withheld from payments
of interest to which such holder is beneficially entitled by making a claim
under the United States/United Kingdom Double Tax Treaty on the appropriate
form. Alternatively, in certain circumstances, a claim may be made by a
United States Holder in advance of a payment of interest. If the claim is
accepted by the U.K. Inland Revenue, it will authorise subsequent payments to
that United States Holder to be made without deduction of U.K. withholding
tax. Claims for repayment must be made within six years of the end of the
U.K. year of assessment (generally April 5 in each year) to which the
interest relates and must be accompanied by the original statement provided
by the Issuer when the interest payment was made, showing the amount of U.K.
income tax deducted. Because a claim is not considered until the U.K. Inland
Revenue receives the appropriate form from the Internal Revenue Service,
forms should be sent to the Internal Revenue Service, in the case of an
advance claim well before the relevant interest payment date or, in the case
of a claim for repayment of the tax, well before the end of the appropriate
limitation period.
UNITED KINGDOM CORPORATION TAX PAYERS
In general Noteholders which are within the charge to U.K. corporation tax
will be charged to tax on all returns on and fluctuations in value of the
Notes (whether attributable to currency fluctuations or otherwise) broadly in
accordance with their statutory accounting treatment. Such Noteholders will
generally be charged to tax in each accounting period by reference to
interest accrued in that period.
OTHER UNITED KINGDOM TAX PAYERS
Taxation of Chargeable Gains. A disposal of Notes by an individual Noteholder
who is resident or ordinarily resident in the United Kingdom or who carries
on a trade, profession or vocation in the United Kingdom through a branch or
agency to which the Notes are attributable, may give rise to a chargeable
gain or allowable loss for the purposes of the U.K. taxation of chargeable
gains.
Accrued Income Scheme. On a disposal of Notes by a Noteholder, any interest
which has accrued since the last interest payment date may be chargeable to
tax as income if that Noteholder is resident or ordinarily resident in the
United Kingdom or carries on a trade, profession or vocation in the United
Kingdom through a U.K. branch or agency to which the Notes are attributable.
Based on the Issuer's understanding of the Inland Revenue's practice in this
area, it is considered that the Notes will not be treated as constituting
"relevant discounted securities" for the purposes of the Finance Act 1996.
STAMP DUTY AND SDRT
No U.K. stamp duty or stamp duty reserve tax is payable on the issue,
transfer or redemption of Exchange Notes (whether Global or Definitive)
assuming that the interest rate paid will not exceed a reasonable commercial
return.
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ITEM 8: SELECTED FINANCIAL DATA
The following table shows selected historical combined statement of income
data and balance sheet data for Inchcape Testing Services Limited (the
"Predecessor Company") and selected historical consolidated statement of
income data and balance sheet data for the Group. The selected financial data
as of and for the years ended December 31, 1994 and 1995 and for the period
from January 1 to October 7, 1996 are derived from the combined financial
statements of the Predecessor Company. The selected financial data as of
December 31, 1996, 1997 and 1998 and for the period from October 8 to
December 31, 1996 and for the years ended December 31, 1997 and 1998 are
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
derived from the audited consolidated financial statements of the Group. The
Acquisition was accounted for under the acquisition method of accounting, and
as a result of the Acquisition, financial data relating to the Predecessor
Company generally will not be comparable to that of the Company with respect
to interest expense, amortisation of debt issuance costs incurred in
connection with the Acquisition and income from other Inchcape plc companies.
In order to provide a meaningful five year history, the table includes income
data for the year ended December 31, 1996 ("Supplemental Period 1996"). This
data is derived from information reported for the Predecessor Company for the
period from January 1 to October 7, 1996 and from information reported by the
Group for the period from October 8 to December 31, 1996, adjusted to give
effect to the Acquisition and the Financing (as defined) and to reflect the
accounting policies adopted by the Group. In addition, the results have been
retranslated to reflect the cumulative average exchange rates for the year
ended December 31, 1996.
The selected financial data is prepared in accordance with U.K. GAAP, which
differs in certain significant respects from U.S. GAAP as described in Note
35 to the consolidated financial statements included elsewhere herein. This
table should be read in conjunction with "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" and the
Consolidated Financial Statements.
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ITEM 8: SELECTED FINANCIAL DATA (CONTINUED)
· Enlarge/Download Table
Amounts in Pounds '000 PREDECESSOR COMPANY ITS
------------------------------------- ------------------------------------------------
Year ended Year ended Period Period Supple- Year Year
December December from from mental ended ended
31, 1994 31, 1995 January 1 October 8 Period December December
to to 1996 31, 1997 31, 1998
October December (unaudited)
7, 1996 31, 1996
---------------------------------------------------------------------------------------
INCOME STATEMENT DATA
AMOUNTS IN CONFORMITY WITH U.K. GAAP:
REVENUES
Continuing operations 229,209 257,724 227,098 75,326 302,360 328,814 354,296
Discontinued operation 26,984 24,011 16,463 5,134 21,389 15,169 5,517
---------------------------------------------------------------------------------------
Total 256,193 281,735 243,561 80,460 323,749 343,983 359,813
---------------------------------------------------------------------------------------
Operating income before exceptional items
Continuing operations 21,934 27,691 24,945 11,609 37,054 42,081 44,701
Discontinued operation (820) (1,692) (437) (1,433) (1,832) (1,580) (2,463)
---------------------------------------------------------------------------------------
Total 21,114 25,999 24,508 10,176 35,222 40,501 42,238
---------------------------------------------------------------------------------------
OPERATING INCOME AFTER OPERATING
EXCEPTIONAL ITEMS
Continuing operations 18,651 28,472 22,123 9,231 31,854 38,214 30,650
Discontinued operation (820) (1,692) (437) (3,330) (3,941) (1,580) (7,607)
---------------------------------------------------------------------------------------
Total 17,831 26,780 21,686 5,901 27,913 36,634 23,043
---------------------------------------------------------------------------------------
Net interest expense (4,048) (5,016) (3,165) (4,063) (30,680) (29,752) (31,855)
Income/(loss) before taxes 14,972 22,556 23,938 77 (4,533) 6,882 (10,207)
Net income/(loss) 9,212 14,252 11,608 (1,438) (9,569) (1,598) (20,591)
AMOUNTS IN CONFORMITY WITH U.S. GAAP:
Operating income/(loss) 17,307 22,356 21,006 (6,499) (a) 11,993 6,065
Income/(loss)from continuing operations 14,445 18,128 23,255 (9,071) (a) (16,162) (6,834)
Net income/(loss) 6,317 10,280 3,539 (8,883) (a) (24,457) (40,344)
(a) The information is not available for the Supplemental Period 1996.
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SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
ITEM 8: SELECTED FINANCIAL DATA (CONTINUED)
· Enlarge/Download Table
Amounts in Pounds '000 PREDECESSOR COMPANY ITS
--------------------------------------- ------------------------------------------------
December December October December Supplemental December December
31, 1994 31, 1995 7, 1996 31, 1996 Period 31, 1997 31, 1998
1996
--------------------------------------- ------------------------------------------------
BALANCE SHEET DATA
AMOUNTS IN CONFORMITY WITH U.K. GAAP:
Cash 31,525 37,811 n/a 33,485 (a) 25,153 16,772
Total assets 152,857 176,948 n/a 152,786 (a) 145,279 163,795
Total debt 94,092 91,512 n/a 268,875 (a) 277,304 295,773
Shareholders' equity/(deficit) 18,175 32,890 n/a (198,881) (a) (206,766) (221,408)
AMOUNTS IN CONFORMITY WITH U.S. GAAP:
Cash (b) 31,525 (b) 37,811 n/a 33,413 (a) 24,664 17,397
Total assets (b)217,595 (b)239,870 n/a 444,932 (a) 397,188 389,451
Total debt 94,092 91,512 n/a 283,525 (a) 290,140 306,604
Shareholders' equity/(deficit) 79,014 88,845 n/a (5,263) (a) (46,465) (94,334)
(a) The information is not available for the Supplemental period 1996.
(b) December 31, 1994 and December 31, 1995 continuing and discontinued
operations have been reported as a combined total, as separate
information for the discontinued operation is not available.
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ITEM 8: SELECTED FINANCIAL DATA (CONTINUED)
· Enlarge/Download Table
Amounts in Pounds '000 PREDECESSOR COMPANY ITS
-------------------------------- -----------------------------------------------------
Year Year Period Period Supple- Year ended Year ended
ended ended from from mental December December 31,
December December January October 8 Period 31, 1997 1998
31, 1994 31, 1995 1 to to 1996
October December (unaudited)
7, 1996 31, 1996
-------------------------------- -----------------------------------------------------
OTHER FINANCIAL DATA
AMOUNTS DERIVED FROM U.K. GAAP
FINANCIAL INFORMATION:
Cash inflow from operating
activities (b) 36,113 28,332 11,334 (a) 45,646 32,445
Returns on investments and
servicing of finance (b) (3,984) 1,337 (1,341) (a) (21,889) (25,070)
Taxation (b) (5,002) (8,177) (3,292) (a) (6,145) (5,960)
Capital expenditure and (b) (12,142) (12,277) (5,605) (a) (12,995) (13,959)
financial investment
Acquisitions and disposals (b) (995) 6,712 (336,737) (a) (9,392) (11,675)
Equity dividends paid (b) - (28,329) - (a) - -
Cash inflow/(outflow)
before financing (b) 13,990 (12,402) (335,641) (a) (4,775) (24,219)
Financing (b) (8,040) 3,227 370,357 (a) (1,948) 16,014
Increase/(decrease) in cash (b) 5,950 (9,175) 34,716 (a) (6,723) (8,205)
in the period
AMOUNTS DERIVED FROM U.S. GAAP
FINANCIAL INFORMATION:
Depreciation and amortisation (c) 14,310 13,176 10,936 9,284 (a) 35,509 35,190
Capital expenditure (c) 11,414 11,078 10,133 5,330 (a) 12,939 13,945
Continuing operations
Net cash provided from
operating activities (c) 10,845 (c) 26,095 14,707 8,659 (a) 24,662 7,027
Net cash used in investing
activities (c)(23,276) (c)(13,137) (3,275) (342,009) (a) (22,089) (25,212)
Net cash provided by/(used in) (c) 27,396 (c) (7,008) (20,636) 367,994 (a) (9,713) (11,094)
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
(a) The information is not available for the Supplemental Period 1996.
(b) Cash flows for the year ended December 31, 1994 have not been restated
for FRS1 (Revised 1996).
(c) Cash flows for the years ended December 31,1994 and 1995 have not been
adjusted for continued and discontinued operations, as separate
information for the discontinued operation is not available.
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ITEM 9: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
The following paragraphs set out an overview of the Group's results, the
impact of exchange rates and the format of financial information. A detailed
discussion of the performance of the Group and of each of the divisions for
1998 compared to 1997, and 1997 compared to 1996, is given in the Operating
and Financial Review on pages 28 to 34.
OVERVIEW
ITS derives its revenues principally from the testing, inspection and
certification of products and commodities. Prior to 1998, ITS was organised
into the following five global divisions - Quality Systems, Caleb Brett,
Foreign Trade Supervision ("FTS"), Minerals and Environmental. At the start
of 1998, the two sub divisions of Quality Systems, Consumer Goods and
Conformity Assessment, became separate divisions to reflect the different
products tested, inspected and certified in each. Figures reported for
Quality Systems in prior periods have been reanalysed to show the allocation
between Consumer Goods and Conformity Assessment. The Environmental Testing
Division was closed in August 1998 and its revenues and operating income for
the eight months to August 31, 1998 and for all prior periods are disclosed
separately as a discontinued operation. Previously, FTS, Minerals and
Environmental Testing were included within Other Divisions. FTS and Minerals
are now shown separately and the divisional analyses for prior periods have
been restated.
Approximately 42% of ITS's continuing revenues are generated by operations in
the Americas, 35% in Europe, Africa and the Middle East and the remaining 23%
from Asia and the Far East.
ITS's revenue growth in the last three years has been predominantly organic.
In addition, the Caleb Brett division made eight acquisitions in 1998 costing
a total of Pounds14.9 million, principally in Europe and Asia, which will
have a positive impact on revenue growth in future.
REVENUES. Revenues from continuing operations grew by 8.7% in 1997 over 1996
and by 7.7% in 1998 over 1997. Management believes that ITS's revenue growth
has benefited from the globalisation of its markets, the expanding trade of
developing economies, the increasing trend towards the outsourcing of
testing, inspection and certification services by ITS's customers and from
acquisitions. Growth has been restricted in some ITS divisions, mainly due to
the low price of gold (Minerals) and oil (Caleb Brett) but also due to the
trend towards harmonisation of standards and self-certification (Conformity
Assessment). Despite the general economic volatility in Asia and the Far
East, ITS's revenues from this region continued to grow in 1997 over 1996 and
in 1998 over 1997.
A large proportion of the Group's business is performed for customers on a
job by job basis rather than under term contracts.
OPERATING COSTS. Approximately 50% of the Group's operating costs in 1997 and
1998 were attributable to employment costs but this varies between
laboratories and offices. Costs are measured against revenues for each
laboratory and office around the world, and the operating income to revenues
margin is closely monitored through monthly performance, annual budgets and
forecasts.
Operating costs in 1998 included Pounds 0.4 million relating to the
amortisation of goodwill on acquisitions due to a change in U.K. GAAP. Before
1998, goodwill on acquisitions was charged directly to reserves.
OPERATING INCOME BEFORE EXCEPTIONAL COSTS. Operating income for continuing
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
operations grew in 1997, increasing 13.6% over 1996 from Pounds 37.1 million
to Pounds 42.1 million. Operating income for continuing operations increased
6.2% over 1997 from Pounds 42.1 million to Pounds 44.7 million in 1998. The
operating margin for continuing operations declined slightly in 1998 to 12.6%
from 12.8% in 1997, but it was 12.2% in 1996. This decline was primarily due
to poor performance in the Minerals division which became loss making in
1998. The Minerals division was restructured in the latter part of 1998 to
reduce the cost base in line with reduced revenues. Excluding Minerals, the
operating margin for the other continuing businesses increased to 13.3% in
1998 from 12.3% in 1997, and 12.2% in 1996. Management attributes this
improvement to targeting growth in businesses with higher operating margins.
The change in U.K. GAAP in 1998 requiring the amortisation of goodwill also
reduced operating margins in 1998.
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EXCEPTIONAL COSTS: CONTINUING OPERATIONS. Due to the irregular nature of the
payments received from the Nigerian Government for the PSI programmes in the
FTS division, in April 1997 ITS adopted a policy of making full provision
against all unpaid invoices relating to this client, and income is only
recognised once invoices are paid. During 1998, invoices amounting to
approximately Pounds 20.2 million (1997: Pounds 3.9 million and 1996: Pounds
7.7 million) were issued to this client and payments of Pounds 7.9 million
(1997: Pounds 2.3 million and 1996: Pounds 11.6 million) were received in
settlement of prior year invoices, therefore a net amount of Pounds 12.3
million was charged to operating exceptional costs in 1998 (1997: Pounds 5.4
million and 1996: Pounds 3.9 million). At December 31, 1998, invoices
totalling Pounds 23.7 million were unpaid. Further payments totalling Pounds
9.1 million have been received to date in 1999 which reduced the December 31,
1998 outstanding amount to Pounds 14.6 million. Discussions are continuing
with representatives of the Nigerian Government regarding the payment of the
remaining debt. In January 1999, FTS adopted a policy of only carrying out
pre-shipment inspection work for the Nigerian Government if ITS was first
paid by the exporter of the goods, on the understanding that ITS would refund
the money to the exporter when it is paid for the pre shipment inspection
cost by the Nigerian Government. The cash flow exposure to ITS has therefore
effectively been capped due to cash receipts from exporters.
Caleb Brett also carries out inspections for the Nigerian Government which
are related to oil exports. The debt due to Caleb Brett was Pounds 1.8
million at the December 31, 1998 and this is not offset by payments from
exporters. The Nigerian Government has paid Pounds 0.4 million to date in
1999. Discussions are continuing with representatives of the Nigerian
Government regarding the payment of the remaining debt.
EXCEPTIONAL COSTS: DISCONTINUED OPERATION. An exceptional operating charge of
Pounds 5.1 million was made in 1998 for legal and reprocessing costs relating
to the ongoing investigation by the Environmental Protection Agency ("EPA"),
into the data manipulation problems at the Dallas, Texas laboratory.
Non-operating exceptional costs totalling Pounds 1.4 million were incurred in
1998 due to the closure of the Environmental division. These costs include
staff redundancies, disposals of assets and property expenses. Due to
continuing operating losses, in 1996 the Environmental Testing division was
restructured, incurring operating exceptional costs of L 1.9 million and non
operating exceptional costs of Pounds 1.8 million.
INCOME ON ORDINARY ACTIVITIES BEFORE INTEREST. Due to exceptional costs in
1998, the income on ordinary activities before interest has decreased by
Pounds 15.0 million, from Pounds 36.6 million in 1997 to Pounds 21.6 million
in 1998.
NET INTEREST EXPENSE. Net interest expense was Pounds 31.9 million in 1998
compared with Pounds 29.8 million in 1997, principally due to the additional
Parent Subordinated PIK Debentures issued during 1998 and increased usage of
the Revolving Credit Facility.
TAXATION. The 1998 tax charge on income before exceptional items was 68.9%
(1997: 56.7%). This is due largely to the inability of the Group to obtain
full potential tax relief on its interest expense in the U.K. and the U.S.
and on operating losses in other territories. The location of taxable profits
and deductible expenses has a significant impact on the tax charge year by
year and accounts for the tax increase in the tax charge in 1998 compared to
1997. Without the unrelieved interest expense, the effective tax rate of the
Group on operating income before exceptional items for 1998 would have been
36.8% (1997: 35.6%) which more closely reflects the underlying tax rate of
the territories in which the Group operates.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
IMPACT OF EXCHANGE RATES
The financial statements of ITS's operating subsidiaries are prepared mainly
in local currencies. Owing to the international nature of ITS's business, a
large proportion of invoicing is to international clients in U.S. dollars. In
contrast, most operating costs are denominated in local currencies.
Therefore, even if operating revenues stay constant, operating income may
improve due to exchange rate gains if local currencies devalue against the
U.S. dollar. However, some of this benefit may be lost due to increased local
inflation rates. Conversely, there is a risk of exchange rate losses where
local currencies appreciate against the U.S. dollar. Over 50% of ITS's
revenues are in U.S. dollars or currencies linked to the U.S. dollar. The
majority of ITS's borrowings are in U.S. dollars and Hong Kong dollars. ITS's
financial statements are prepared in pounds sterling. Because of the global
nature of ITS's
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business, exchange rate movements can have a significant effect on the
reported results of the Company which is unrelated to the Company's
underlying operational performance.
Approximately 23% of 1998 revenues from continuing operations (1997: 22% and
1996: 21%) were derived from Asia and the Far East. Almost half of these
revenues were generated in Hong Kong and the other half were mainly from
operations in Australia, China, Indonesia, Japan, Korea, Malaysia, Singapore,
Taiwan and Thailand.
The ITS business in Asia and the Far East mainly represents the testing,
inspection and certification of textiles, toys and electrical products bound
for Western markets, as well as the testing and inspection of oil cargoes and
the testing of mineral exploration samples. ITS expects some benefit from
regional currency weakness because approximately one third of its invoicing
to international clients is in U.S. dollars. Some of this benefit may be lost
due to high inflation rates in parts of the region. ITS is exposed to the
Hong Kong dollar because most of its revenues in Hong Kong are invoiced in
the local currency, but the costs are also denominated in Hong Kong dollars
so that the currency exposure is limited to the translation of operating
incomes into pounds sterling. ITS could potentially have increased exposure
to currency fluctuations if the Hong Kong dollar ceases to be linked to the
U.S. dollar.
Refer to page 27 for a summary of the Results of Operations at comparable
exchange rates.
FORMAT OF FINANCIAL INFORMATION
The results of operations are being presented on a combined basis for the
period from January 1, 1996 to October 7, 1996, during which the acquired
business was owned by Inchcape plc (the "Predecessor Period"); on a
consolidated basis for the period from October 8, 1996 to December 31, 1996
and for the years ended December 31, 1997 and December 31, 1998 (the
"Successor Period"); and also on a Supplemental basis for the year ended
December 31, 1996 (the "Supplemental 1996 Period" or "1996 Period"). The
Supplemental information for the 1996 Period consists of amounts for the
Predecessor Period, adjusted to give effect to the Acquisition and the
Financing (as defined) and to reflect the accounting policies adopted by ITS,
and amounts for the Successor Period.
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RESULTS BY OPERATION
The following table shows, for the periods indicated, revenues and operating
income by ITS's major divisions, as well as revenues by geographic area,
expressed in thousands of pounds sterling, except for percentages. The
geographical area relates to the area where the operation is located, not the
location of the clients. Overhead costs for the central head office and
non-operating holding companies ("Central Costs") are allocated to divisions
in proportion to their share of total revenues.
· Enlarge/Download Table
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Supplemental Year ended Year ended
Period 1996 December 31, December 31,
(unaudited) 1997 1998
REVENUES BY DIVISION:
Consumer Goods 48,580 56,768 64,575
Conformity Assessment 78,951 81,816 84,920
Caleb Brett 103,748 108,837 122,972
Foreign Trade Supervision 48,869 55,792 65,299
Minerals 22,212 25,601 16,530
----------------------------------------------------
Continuing operations 302,360 328,814 354,296
Discontinued operation 21,389 15,169 5,517
====================================================
Total 323,749 343,983 359,813
====================================================
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL ITEMS:
Consumer Goods 9,925 13,903 16,079
Conformity Assessment 12,298 7,860 9,796
Caleb Brett 9,199 10,891 11,881
Foreign Trade Supervision 1,920 5,056 7,223
Minerals 3,712 4,371 (278)
----------------------------------------------------
Continuing operations 37,054 42,081 44,701
Discontinued operation (1,832) (1,580) (2,463)
====================================================
Total 35,222 40,501 42,238
====================================================
REVENUES BY GEOGRAPHICAL AREA:
Americas 147,708 143,531 146,183
Europe, Africa and Middle East 92,309 112,409 130,448
Asia and Far East 62,343 72,874 77,665
----------------------------------------------------
Continuing operations 302,360 328,814 354,296
Discontinued operation 21,389 15,169 5,517
====================================================
Total 323,749 343,983 359,813
====================================================
Total Group revenues 323,749 343,983 359,813
Operating costs (296,221) (307,427) (336,757)
Share of operating income / (loss) in investments 385 78 (13)
----------------------------------------------------
Operating income 27,913 36,634 23,043
-----------------------------------------------------------------------------------------------------------
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS
Continuing operations 37,054 42,081 43,949
Acquisitions - - 752
Discontinued operation (1,832) (1,580) (2,463)
----------------------------------------------------
35,222 40,501 42,238
EXCEPTIONAL ITEMS CHARGED AGAINST OPERATING INCOME
Continuing operations (5,200) (3,867) (14,051)
Discontinued operation (2,109) - (5,144)
----------------------------------------------------
Operating income 27,913 36,634 23,043
-----------------------------------------------------------------------------------------------------------
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RESULTS OF OPERATIONS AT COMPARABLE EXCHANGE RATES
Although for the purposes of reporting obligations, the Accounts of the Group
are reported in pounds sterling, over 50% of the Group's revenues are
denominated in U.S. dollars or currencies linked to the U.S. dollar, such as
the Hong Kong dollar. The Group's borrowings, interest payments and debt
repayments are also denominated mainly in U.S. dollars and Hong Kong dollars.
Each of the Group's 150 subsidiaries worldwide prepares financial statements
in the currency most appropriate to its business, usually the currency of the
country in which such subsidiary is domiciled. Where material transaction
exposure from currency rate movements exists, appropriate forward foreign
exchange contracts are undertaken to minimise this exposure. A translation
exposure exists to the extent that the consolidated accounts of the Group are
shown in pounds sterling. It is not the Group's policy to hedge this exposure.
The results of overseas operations are translated into pounds sterling at the
cumulative average exchange rates ("CAR") for the period. Therefore, the
comparison of ITS's results between Periods can be affected by fluctuations
in exchange rates which are unrelated to the underlying operational
performance of its businesses. The following table sets forth, for the
periods indicated, the growth rates of revenues and operating income of ITS's
main business divisions at actual exchange rates for the period and at prior
year ("comparable") exchange rates for the period.
GROWTH RATES AT ACTUAL AND COMPARABLE EXCHANGE RATES
· Enlarge/Download Table
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Supplemental
Period 1996 Year ended % change Year ended % change
(unaudited) December 31, 1997 96/97 December 31, 1998 97/98
---------------- ------------------ ----------------- ----------------- -----------------
Compar- Compar-
Pounds m % Pounds m % Actual able Pounds m % Actual able
---------- ----- ---------- ------- -------- -------- ---------- ------ -------- --------
REVENUES:
Consumer Goods 48.5 15 56.7 17 16.9 27.1 64.6 18 13.8 18.8
Conformity Assessment 79.0 24 81.8 24 3.6 12.7 84.9 24 3.8 6.6
Caleb Brett 103.7 32 108.9 32 4.9 13.0 123.0 34 13.0 20.0
Foreign Trade Supervision 48.9 15 55.8 16 14.2 17.4 65.3 18 17.0 19.2
Minerals 22.2 7 25.6 7 15.3 34.0 16.5 4 (35.4) (29.9)
-------- ----- -------- ------ ------- ------- -------- ----- ------- -------
Continuing operations 302.3 93 328.8 96 8.7 17.4 354.3 98 7.7 12.4
Discontinued operation 21.4 7 15.2 4 (29.1) (26.4) 5.5 2 (63.6) (63.3)
-------- ----- -------- ------ ------- ------- -------- ----- ------- -------
Total 323.7 100 344.0 100 6.2 14.5 359.8 100 4.6 9.1
======== ===== ======== ====== ======= ======= ======== ===== ======= =======
OPERATING INCOME/(LOSS)
BEFORE EXCEPTIONAL ITEMS:
Consumer Goods 9.9 28 13.8 34 40.1 58.0 16.1 38 20.6 28.4
Conformity Assessment 12.3 35 7.9 20 (36.1) (33.8) 9.8 23 16.1 21.1
Caleb Brett 9.2 26 10.9 27 18.4 29.7 11.9 28 9.1 25.0
Foreign Trade Supervision 1.9 5 5.1 12 163.4 183.7 7.2 17 42.9 52.1
Minerals 3.7 11 4.4 11 17.8 47.7 (0.3) - (106.4) (110.5)
-------- ----- -------- ------ ------- ------- -------- ----- ------- -------
Continuing operations 37.0 105 42.1 104 13.8 26.0 44.7 106 6.2 14.5
Discontinued operation (1.8) (5) (1.6) (4) (13.8) (8.9) (2.5) (6) (55.9) (65.1)
-------- ----- -------- ------ ------- ------- -------- ----- ------- -------
Total 35.2 100 40.5 100 15.0 27.8 42.2 100 4.3 12.5
======== ===== ======== ====== ======= ======= ======== ===== ======= =======
The Actual % change represents the percentage increase or decrease of one
year over the prior year where each year is translated into pounds sterling
at the CAR applicable to each of those years.
The Comparable % change represents the percentage increase or decrease of one
year over the prior year where both years are translated into pounds sterling
at the CAR applicable to the earlier of the two years.
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OPERATING AND FINANCIAL REVIEW
A discussion of the performance of the Group for 1998 compared to 1997, and
1997 compared to 1996, is given below, followed by a detailed review of the
performance of each division.
REVENUES
GROUP Year to December 31
-------------------------------------------------
Pounds in millions 1996 1997 1998
Continuing operations 302.3 328.8 354.3
Actual growth % 8.7 7.7
Comparable growth % 17.4 12.4
Revenues from continuing operations increased by Pounds 26.5 million in 1997
over 1996 and by Pounds 25.5 million in 1998 over 1997.
All continuing divisions, apart from Minerals increased revenues in 1997 and
1998 at both actual and comparable rates. Minerals revenues, which
represented 5% of the total continuing revenues of the Group in 1998 (1997:
8% and 1996: 7%), increased by 15.3% in 1997 over 1996 but declined by 35.4%
in 1998 over 1997. At comparable rates, the deterioration was from growth of
34% in 1997 over 1996 to decline of 29.9% in 1998 over 1997. Minerals had a
poor year in 1998 due to the reduction in exploration activity resulting from
the low gold and copper price. Growth in revenues in Conformity Assessment
was just under 4% in 1997 over 1996 and also in 1998 over 1997. Growth in all
other divisions was substantial in 1997 over 1996 and in 1998 over 1997.
The Environmental Testing division ceased trading in August 1998 and its
revenues for the eight months of 1998 and prior years are shown as a
discontinued operation.
% REVENUES BY LOCATION Year to December 31
----------------------------------------------
Continuing operations 1996 1997 1998
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Americas 47.7 43.6 42.3
Europe, Africa and Middle East 31.8 34.2 35.2
Asia and Far East 20.5 22.2 22.5
----- ----- -----
100.0 100.0 100.0
----- ----- -----
The decline in revenue share in the Americas was attributable to the FTS and
Conformity Assessment divisions. Revenues in FTS decreased in the United
States in 1997 over 1996 and increased in the United Kingdom. This trend
continued in 1998. Over 65% of Conformity Assessment's revenues were
generated in North America and since growth in this division was slower than
the other divisions this caused a shift in the geographical mix.
Operating Costs before exceptional costs
Group Year to December 31
--------------------------------------------
Pounds in millions 1996 1997 1998
Continuing operations 265.3 286.7 309.6
Actual growth % 8.1 8.0
Comparable growth % 16.2 12.1
Operating costs in continuing operations increased by Pounds 21.4 million in
1997 over 1996 and by Pounds 22.9 million in 1998 over 1997.
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Operating costs before exceptionals grew at a lower rate than revenues in
1997 over 1996, due to improvements in operating margins caused by the
relatively fast growth of the high operating margin businesses such as
Consumer Goods. Costs grew at a slightly higher rate than revenues in 1998
over 1997. This was due to the operating margin in minerals declining because
costs fell at a lower rate then revenues, partly due to restructuring costs
in 1998.
As set out in the Financial Statements, from January 1, 1998, ITS adopted
Financial Reporting Standard 10 in relation to goodwill arising on
acquisitions. This has resulted in an increase in operating costs of Pounds
0.4 million in 1998 for goodwill amortisation which was wholly attributable
to Caleb Brett.
OPERATING INCOME BEFORE EXCEPTIONAL COSTS
Year to December 31
----------------------------------------------
Pounds in millions 1996 1997 1998
Continuing operations 37.0 42.1 44.7
Actual growth % 13.8 6.2
Comparable growth % 16.2 12.1
Operating margin % 12.2 12.8 12.6
Operating income from continuing operations increased by Pounds 5.1 million
in 1997 over 1996 and by Pounds 2.6 million in 1998 over 1997.
Operating income in 1997 increased over 1996 in all divisions apart from
Conformity Assessment. The apparent decline in Conformity Assessment in 1997
was due to an unusually high operating income in 1996 because of increased
demand for electro-magnetic compatibility ("EMC") testing caused by the
introduction of a European Union directive which became effective on January
1, 1996. This surge in activity was not sustained throughout 1997 and the
cost base was reduced late in the year.
Operating income in 1998 increased over 1997 in all divisions other than
Minerals where the decline in revenues and the action taken to reduce costs
resulted in an operating loss for 1998 of Pounds(0.3) million.
The operating margin for continuing businesses suffered in 1998 due to the
loss sustained by Minerals. Excluding Minerals, the operating margin was
11.9%, 12.4% and 13.3% in 1996, 1997 and 1998, respectively.
The Environmental Testing division generated operating losses in 1996, 1997
and 1998 and these are shown as a discontinued operation.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
EXCEPTIONAL COSTS
Year to December 31
----------------------------------------------
Pounds in millions 1996 1997 1998
Continuing operations
FTS invoices 7.7 15.5 20.2
FTS payments (2.3) (11.6) (7.9)
----------------------------------------------
FTS total 5.4 3.9 12.3
Caleb Brett invoices - - 1.8
----------------------------------------------
Total 5.4 3.9 14.1
----------------------------------------------
Discontinued operation
Operating 1.9 - 5.1
Non operating 1.8 - 1.4
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CONTINUING OPERATIONS. Due to the irregular nature of the payments received
from the Nigerian Government for the PSI programmes in the FTS division, in
April 1997 ITS adopted a policy of making full provision against all unpaid
invoices relating to this client, and income is only recognised once invoices
are paid. During 1998, invoices amounting to approximately Pounds 20.2
million (1997: Pounds 3.9 million and 1996: Pounds 7.7 million) were issued
to this client and payments of Pounds 7.9 million (1997: L 2.3 million and
1996: Pounds 11.6 million) were received in settlement of prior year
invoices, therefore a net amount of Pounds 12.3 million was charged to
operating exceptional costs in 1998 (1997: Pounds 5.4 million and 1996:
Pounds 3.9 million). At December 31, 1998, invoices totalling Pounds 23.7
million were unpaid. Further payments totalling Pounds 9.1 million have been
received to date in 1999 which reduced the December 31, 1998 outstanding
amount to Pounds 14.6 million. Discussions are continuing with
representatives of the Nigerian Government regarding the payment of the
remaining debt. In January 1999, FTS adopted a policy of only carrying out
pre-shipment inspection work for the Nigerian Government if ITS was first
paid by the exporter of the goods, on the understanding that ITS would refund
the money to the exporter when it is paid for the pre shipment inspection
cost by the Nigerian Government. The cash flow exposure to ITS has therefore
effectively been capped due to cash receipts from exporters.
Caleb Brett also carries out inspections for the Nigerian Government which
are related to oil exports. The debt due to Caleb Brett was Pounds 1.8
million at the December 31, 1998 and this is not offset by payments from
exporters. The Nigerian Government has paid Pounds 0.4 million to date in
1999. Discussions are continuing with representatives of the Nigerian
Government regarding the payment of the remaining debt.
DISCONTINUED OPERATION. An exceptional operating charge of Pounds 5.1 million
was made in 1998 for legal and reprocessing costs relating to the ongoing
investigation by the Environmental Protection Agency ("EPA"), into the data
manipulation problems at the Dallas, Texas laboratory. Non-operating
exceptional costs totalling Pounds 1.4 million were incurred in 1998 due to
the closure of the Environmental division. These costs include staff
redundancies, disposals of assets, and property expenses. Due to continuing
operating losses, in 1996 the Environmental Testing division was
restructured, incurring operating exceptional costs of Pounds 1.9 million and
non operating exceptional costs of Pounds 1.8 million.
NET INTEREST EXPENSE
Year to December 31
----------------------------------------------
Pounds in millions 1996 1997 1998
Net interest expense 30.7 29.8 31.9
Net interest expense decreased by Pounds 0.9 million in 1997 over 1996 due to
the translation effect of converting interest on foreign currency borrowings
into pounds sterling rather than a decrease in the underlying interest
charge. The majority of ITS's borrowings are in U.S. Dollars. Net interest
expense increased by Pounds 2.1 million in 1998 over 1997, principally due to
the additional Parent Subordinated PIK Debentures issued during 1998 and
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
increased usage of the Revolving Credit Facility.
INCOME TAXES
Year to December 31
----------------------------------------------
Pounds in millions 1996 1997 1998
Income tax charge 3.5 4.9 7.2
The 1998 tax charge on income before exceptional items was 68.9% (1997:
56.7%). This is due largely to the inability of the Group to obtain full
potential tax relief on its interest expense in the U.K. and the U.S. and on
operating losses in other territories. The location of taxable profits and
deductible expenses has a significant impact on the tax charge year by year
and accounts for the tax increase in the tax charge in 1998 compared to 1997.
Without the unrelieved interest expense, the effective tax rate of the Group
on operating income before exceptional items for 1998 would have been 36.8%
(1997: 35.6%) which more closely reflects the underlying tax rate of the
territories in which the Group operates.
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OPERATING AND FINANCIAL REVIEW BY DIVISION
CONSUMER GOODS
OPERATING RESULTS Year to December 31
----------------------------------------------
Pounds in millions 1996 1997 1998
REVENUES 48.5 56.7 64.6
Actual growth % 16.9 13.8
Comparable growth % 27.1 18.8
OPERATING INCOME 9.9 13.8 16.1
Actual growth % 40.1 20.6
Comparable growth % 58.0 28.4
Operating margin % 20.4 24.4 24.9
At actual rates, revenues from Consumer Goods increased by Pounds 8.2 million
in 1997 over 1996 and by Pounds 7.9 million in 1998 over 1997. Operating
income increased by Pounds 3.9 million in 1997 over 1996 and by Pounds 2.3
million in 1998 over 1997. Management believes that the increased revenues
were due to growth in the market caused by the increased demand from American
and European retailers for consumer goods testing and inspection, especially
textiles and the continued expansion of manufacturing markets in China and
other Asian and developing countries where consumer goods has been expanding
its presence. The growth in operating margins in 1998 was assisted by
improvements in productivity following the introduction of a shift system to
operate the Hong Kong laboratory for 24 hours per day.
Although over 65% of Consumer Goods revenues are generated by businesses
located in Asia and the Far East, the Asian crisis has not had an adverse
impact on the business because the division primarily tests and inspects
exports from Asian manufacturers to Western retailers, and these have
continued to increase.
CONFORMITY ASSESSMENT
OPERATING RESULTS Year to December 31
----------------------------------------------
Pounds in millions 1996 1997 1998
REVENUES 79.0 81.8 84.9
Actual growth % 3.6 3.8
Comparable growth % 12.7 6.6
OPERATING INCOME 12.3 7.9 9.8
Actual growth % (36.1) 16.1
Comparable growth % (33.8) 21.1
Operating margin % 15.6 9.7 11.5
At actual rates, revenues from Conformity Assessment increased by Pounds 2.8
million in 1997 over 1996 and by Pounds 3.1 million in 1998 over 1997.
Operating income decreased by Pounds 4.4 million in 1997 over 1996 and
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
increased by Pounds 1.9 million in 1998 over 1997. Operating income and
margins were unusually high in 1996 due to an increase in demand for EMC
testing caused by the introduction of a European Union directive which became
effective on January 1, 1996. This surge in activity was not sustained
throughout 1997 but EMC testing appears to have stabilised in 1998. In 1998,
there was growth in the electrical safety, telecom and building materials
testing sectors, partly due to the strong economy in the United States, but
this growth was negatively impacted by increased harmonisation of standards
globally and by a further move towards self-certification in place of third
party testing,
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especially in Europe. In Europe, there was growth in ISO 9000 registration
which has expanded well in Germany and Sweden. The increase in operating
margin in 1998 over 1997 followed cost reductions implemented at the end of
1997 in response to the reduced volume of EMC testing work.
CALEB BRETT
OPERATING RESULTS Year to December 31
----------------------------------------------
Pounds in millions 1996 1997 1998
REVENUES 103.7 108.9 123.0
Actual growth % 4.9 13.0
Comparable growth % 13.0 20.0
OPERATING INCOME 9.2 10.9 11.9
Actual growth % 18.4 9.1
Comparable growth % 29.7 25.0
Operating margin % 8.9 10.0 9.7
At actual rates, revenues from Caleb Brett increased by Pounds 5.2 million in
1997 over 1996 and by Pounds 14.1 million in 1998 over 1997. Operating income
increased by Pounds 1.7 million in 1997 over 1996 and Pounds 1.0 million in
1998 over 1997.
Approximately 50% of Caleb Brett's revenues are generated by businesses
located in the Americas, principally the United States. Revenues in the
Americas grew by 10.7% in 1997 over 1996 and by 11.8% in 1998 over 1997.
Market conditions in petroleum inspection and testing benefited from oil
companies increasing their inventories because of the low oil price, and
Caleb Brett gained market share. Operating income in the Americas grew by
34.1% in 1997 over 1996 and by 23.5% in 1998 over 1997, assisted by improved
results in Latin America where American and European oil traders are
increasingly demanding professional and independent inspection and testing
services, which has resulted in higher revenues and improved operating
margins.
Revenues from the Asia Pacific region grew by 9.3% in 1997 over 1996 and
declined by 10.9% in 1998 over 1997. Operating income grew by 150.1% in 1997
over 1996 and declined by 34.6% in 1998 over 1997. Management believes that
the decline in 1998 was due to the Asian crisis which resulted in an overall
contraction in petroleum consumption and lower refining activity in Asia.
There was also less work in Hong Kong where most transhipment activity to
China stopped. Despite the volatility in this region, operations in Australia
performed well benefiting from two small acquisitions during 1998 and from
new outsourcing contracts, where oil companies have handed over the
management of their laboratories or subcontracted oil sample testing to Caleb
Brett.
In the Europe, Africa and Middle East region, revenues fell by 5.3% in 1997
over 1996 and grew by 28.6% in 1998 over 1997. Operating income fell by 43.4%
in 1997 over 1996 and grew by 60.4% in 1998 over 1997. The decline in 1997
over 1996 was caused by competitive pressures in Continental Europe. The
growth in this region in 1998 was attributable to acquisitions made during
the year, to gaining market share and also to new outsourcing contracts.
Caleb Brett completed eight acquisitions during 1998 for a total
consideration of approximately Pounds 14.9 million. These acquisitions
contributed Pounds 6.8 million to revenues and Pounds 0.8 million to
operating income in 1998. These businesses were acquired to establish Caleb
Brett in new territories, which expanded the global network and increased
market share.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
ACQUISITIONS
Pounds in millions Americas Europe Asia Pacific
Revenues 0.2 6.2 0.4
Operating income 0.1 0.6 0.1
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Operating costs in Caleb Brett included Pounds 0.4 million in 1998 for
goodwill amortisation which was mostly attributable to Europe.
FOREIGN TRADE SUPERVISION
OPERATING RESULTS Year to December 31
----------------------------------------------
Pounds in millions 1996 1997 1998
REVENUES 48.9 55.8 65.3
Actual growth % 14.2 17.0
Comparable growth % 17.4 19.2
OPERATING INCOME 1.9 5.1 7.2
Actual growth % 163.4 42.9
Comparable growth % 183.7 52.1
Operating margin % 3.9 9.1 11.0
At actual rates, revenues from FTS increased by Pounds 6.9 million in 1997
over 1996 and by Pounds 9.5 million in 1998 over 1997. Operating income
increased by Pounds 2.1 million in 1997 over 1996 and by Pounds 3.1 million
in 1998 over 1997.
The increases in revenues and operating margins in 1997 over 1996 and in 1998
over 1997, were due to the expansion of existing operations in Nigeria and
the impact of new business in Mozambique and Saudi Arabia, which commenced
during 1996.
On January 4, 1999 the President of Nigeria announced that the Government of
Nigeria would terminate all pre-shipment inspection programmes on March 31,
1999. If these programmes are terminated, ITS will lose annual revenues of
approximately Pounds 21.5 million and the FTS division will be restructured
in 1999 at an estimated cost of Pounds 2.3 million.
MINERALS
OPERATING RESULTS Year to December 31
----------------------------------------------
Pounds in millions 1996 1997 1998
REVENUES 22.2 25.6 16.5
Actual growth % 15.3 (35.4)
Comparable growth % 34.0 (29.9)
OPERATING INCOME/(LOSS) 3.7 4.4 (0.3)
Actual growth % 17.8 (106.4)
Comparable growth % 47.7 (110.5)
Operating margin % 16.7 17.2 (1.8)
At actual rates, revenues from Minerals increased by Pounds 3.4 million in
1997 over 1996 and decreased by Pounds 9.1 million in 1998 over 1997.
Operating income increased by Pounds 0.7 million in 1997 over 1996 and
decreased by Pounds 4.7 million in 1998 over 1997.
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The decline in Minerals revenues in 1998 over 1997 was due to reduced
exploration activity caused mainly by the gold price which was at a 17 year
low and the reduced investment in mining stocks which has been attributed to
the discovery of alleged fraudulent practices by Bre-X. Restructuring costs
of approximately Pounds 1.0 million were incurred in 1998 which have resulted
in a net loss for the year. The cost base has been reduced.
DISCONTINUED OPERATION
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
OPERATING RESULTS Year to December 31
----------------------------------------------
Pounds in millions 1996 1997 1998 (8 months)
Revenues 21.4 15.2 5.5
Operating loss (1.8) (1.6) (2.5)
The Environmental Testing division ceased trading in August 1998 following
the sale of the laboratory businesses in Burlington, Vermont and St. Helens,
U.K. and the cessation of commercial operations in other locations. The
facility in Dallas, Texas remains open to assist in the EPA investigation.
Costs associated with the closure of the division and the ongoing EPA
investigation are included within exceptional costs.
EFFECTS OF U.S. GAAP ADJUSTMENTS ON OPERATING INCOME
As described in Note 35 to the consolidated financial statements, ITS's
results of operations would be different under U.S. GAAP. The primary U.S.
GAAP adjustments affecting the results of operations relate to goodwill
amortisation, a covenant not to compete amortisation and the change in
accounting policy in respect of the FTS division. Operating income would be
(reduced)/increased for such items, as follows:
· Enlarge/Download Table
Pounds in millions Predecessor ITS
Company
- -- - - -- - --- - ---- - --- --- --- -- --- -- --- --- --- -- --- -- --- --- --- ------
Period from Period from Year ended Year ended
January 1, to October 8, to December 31, December 31,
October 7, 1996 December 1997 1998
31,1996
- -- - - -- - --- - ---- - --- --- --- -- --- -- --- --- --- -- --- -- --- --- --- ------
Consumer Goods (0.8) (0.5) (2.2) (2.2)
Conformity Assessment (0.4) (3.2) (10.1) (10.1)
Caleb Brett (0.5) (2.4) (9.4) (9.6)
Foreign Trade Supervision 1.4 (6.5) (2.5) (1.5)
Minerals (0.2) (0.2) (0.8) (0.6)
- -- - - -- - --- - ---- - --- --- --- -- --- -- --- --- --- -- --- -- --- --- --- ------
Total continuing operating income (0.5) (12.8) (25.0) (24.0)
================ ================================================
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FINANCIAL CONDITION AND LIQUIDITY
The statements of cash flow are presented for the periods from January 1,
1996 to October 7, 1996 and October 8,1996 to December 31, 1996, for the year
ended December 31, 1997 ("1997") and for the year ended December 31, 1998
("1998".) For the purposes of the following discussion on financial condition
and liquidity, the period "1996" refers to the sum total of the periods from
January 1, 1996 to October 7, 1996 and October 8, 1996 to December 31, 1996.
The net cash inflow from operating activities is normally more than adequate
to cover ITS's requirements to finance working capital and investments in
tangible fixed assets.
At December 31, 1998, ITS had cash and cash equivalents of Pounds 16.8
million and net borrowings of Pounds 295.8 million compared to cash and cash
equivalents of Pounds 25.2 million and net borrowings of Pounds 277.3 million
at December 31, 1997.
ITS reported net cash inflow from operating activities of Pounds 32.4
million, Pounds 45.6 million and Pounds 39.7 million for 1998, 1997 and 1996
respectively. In each of these periods, ITS's net cash inflow from operating
activities exceeded operating income. Net cash inflow from operating
activities includes operating income after operating exceptionals, before
depreciation and other non-cash items, as well as working capital movements.
The decline in operating cash flow in 1998 over 1997 is caused principally by
the high exceptional costs - Pounds 19.2 million in 1998 compared to Pounds
3.9 million and Pounds 7.1 million in 1997 and 1996.
Expenditure on tangible fixed assets amounted to Pounds 14.0 million, Pounds
13.7 million and Pounds 18.1 million for 1998, 1997, and 1996 respectively.
ITS's investment in tangible fixed assets was primarily in laboratory
equipment and information technology. ITS incurred losses on the disposal of
plant and equipment of Pounds 0.2 million in 1998, Pounds 1.7 million in 1997
and Pounds 1.7 million in 1996 mainly due to the restructuring of
Environmental which resulted in the disposal of six laboratories in the US
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
and the UK in the period 1996 to 1998.
During 1998, ITS incurred expenditure of Pounds 0.6 million for professional
fees connected to the Acquisition. In 1997 fees of L 4.9 million were paid
together with a payment of Pounds 4.5 million to Inchcape plc to reimburse a
temporary loan and to repay cash owed by ITS to the Inchcape cash pooling
scheme in Hong Kong.
During 1998, the cash outflow on acquisitions was Pounds 10.8 million,
including professional fees of Pounds 0.5 million. An additional Pounds 3.5
million of consideration is deferred until certain financial targets are
achieved. The majority of the deferred consideration was paid in early 1999.
In August 1998, ITS received Pounds 2.1 million for the sale of part of
Environmental Testing. Costs of Pounds 2.5 million were incurred in 1998 in
connection with the closure of the remainder of this division.
At December 31, 1998, ITS had total borrowings of Pounds 306.6 million (1997:
Pounds 290.1 million) less unamortised debt issuance costs of Pounds 10.8
million (1997: Pounds 12.8 million). An analysis of borrowings is given in
the table below.
BORROWINGS December 31, December 31,
1997 1998
Pounds in millions
Senior Subordinated Notes 121.5 120.9
Senior Term Loan A 79.5 73.7
Senior Term Loan B 35.7 35.1
Senior Revolving Credit Facility -- 16.3
Parent Subordinated PIK Debentures 52.5 59.2
Other Borrowings 0.9 1.4
-------------------------
TOTAL BORROWINGS 290.1 306.6
Debt Issuance costs (12.8) (10.8)
-------------------------
NET BORROWINGS 277.3 295.8
-------------------------
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Apart from a small amount of the Revolving Credit Facility, all the
borrowings are denominated in currencies other than pounds sterling so the
outstanding amount in pounds sterling is affected by exchange rate
fluctuations. There were no movements in either the Senior Subordinated Notes
or the Senior Term B loans in 1998. ITS made repayments totalling Pounds 5.3
million in 1998 (1997: Pounds 2.9 million) in accordance with the terms of
the Senior Term A Loans. ITS drew down Pounds 16.3 million on its Revolving
Credit Facility to finance acquisitions and working capital in 1998, leaving
Pounds 5.7 million of facility available at December 31, 1998. The increase
in Other Borrowings arose as a result of the companies acquired during 1998,
some of which had external loans. Additional Parent Subordinated PIK
Debentures totalling Pounds 7.1 million were issued in lieu of cash for
interest due on the Parent Subordinated PIK Debentures for the periods set
out below.
ISSUE OF PARENT SUBORDINATED PIK DEBENTURES
PERIODS OF INTEREST
Pounds IN MILLIONS
November 2, 1997 to February 1, 1998 1.7
February 2, 1998 to May 1, 1998 1.7
May 2, 1998 to August 1, 1998 1.8
August 2, 1998 to November 1, 1998 1.9
--------
Total 7.1
--------
A detailed description of the borrowings is given below.
In 1998, ITS paid interest of Pounds 23.4 million (1997: Pounds 21.7 million)
on these borrowings and received interest of Pounds 0.8 million (1997: Pounds
1.5 million) on bank balances. These figures exclude interest relating to the
Parent Subordinated PIK Debentures which was funded by further issues of such
securities debentures on the interest due dates as shown above.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
ITS paid dividends of Pounds 2.4 million to minority shareholders in 1998 and
received Pounds 0.03 million (1997: Pounds 0.4 million) for cash subscribed
by minority investors. In 1997 and 1996, ITS paid dividends of Pounds 1.7 and
Pounds 0.8 million respectively to minority shareholders.
At December 31, 1998, ITS was owed Pounds 25.5 million for inspection work
carried out for the Nigerian Government. The non payment of this debt,
together with the cost of the acquisitions undertaken in 1998, put a strain
on the operating cash flow of the Group. The Group is presently at an
advanced stage of refinancing its operations through the amendment of banking
arrangements and plans to raise an additional Pounds 20.0 million of new
equity to finance working capital and prospective acquisitions. Management
expects that the above refinancing and equity issue will be completed and
effective before the end of April 1999. It is currently expected that
Management will take up the shares offered to them and a major shareholder
has agreed to purchase shares offered to but not taken up by the other
shareholders and warrantholders. The proposed amended banking arrangements
principally provide for delayed repayment of the Senior Term A Loans, but
some of the repayments from the Nigerian Government and some of the proceeds
from future disposals will result in earlier repayments. In addition to the
cash generated by this refinancing, ITS has received Pounds 9.5 million from
the Nigerian Government in the first quarter 1999, reducing the Pounds 25.5
million debt to Pounds 16.0 million. Discussions are continuing with
representatives of the Nigerian Government regarding the payment of the
remaining debt. Management believes the Group will have sufficient funds to
meet the Group's cash requirements for the foreseeable future (the period to
December 31, 1999).
ITS's ability to meet its debt targets in the longer term will depend upon
the achievement of its business plan. There can be no assurance that ITS will
generate sufficient cash flow from operations or that future working capital
will be available in an amount sufficient to enable ITS to service its
indebtedness, or make necessary capital expenditures.
Subject to the provisions of the agreement under which the Loans (as defined)
to finance the acquisition of the business were made, and subject to certain
exceptions and applicable law, there are no restrictions on the ability of:
(a) the Company or any of its direct and indirect subsidiaries from paying
dividends or making any other distributions or loans or advances to Intertek
Finance plc (the "Issuer") or (b) the direct and indirect subsidiaries of the
Company from paying dividends or making any other
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distributions or loans or advances to the Company.
DESCRIPTION OF BORROWINGS
(a) LOANS
To finance a portion of the costs of the Acquisition, in November 1996, the
Company entered into a credit agreement (the "Credit Agreement") comprising a
Pounds 125.0 million Term Loan Facility (the "Term Loan Facility"), split
into a Pounds 85.0 million multicurrency Term A Facility (the "Term A
Facility") and a Pounds 40.0 million multicurrency Term B Facility (the "Term
B Facility"), and a $48.8 million multicurrency revolving credit facility
(the "Revolving Credit Facility"). The Term A Facility amortises over seven
years with the final repayment on December 15, 2003 and the Term B Facility
is repayable in two equal instalments in June and December 2004. The
commitments under the Revolving Credit Facility terminate on December 15,
2003.
Borrowings under the Credit Agreement are secured on substantially all the
tangible and intangible assets of the Company.
Term A Loans and advances under the Revolving Credit Facility initially bear
interest at a rate equal to LIBOR (as adjusted) plus 2.00%. The margin over
LIBOR may be reduced, initially to 1.75%, following satisfaction of certain
financial performance tests.
Term B Loans bear interest at a rate equal to LIBOR (as adjusted) plus 2.75%.
Overdue amounts on either the Term A Loans, the Term B Loans or Revolving
Credit Facility will bear interest at the applicable interest rate plus 1.00%
per annum.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
At December 31, 1998, Pounds 5.7 million (1997: Pounds 18.8 million) was
available under the Revolving Credit Facility.
(b) NOTES
In November 1996, the Company issued US $203 million principal amount of
Senior Subordinated Notes (the "Notes"). The cash consideration received at
the date of issue was Pounds 123,547,000. The Notes mature at par on November
1, 2006. Interest on the Notes accrues at the rate of 10.25% per annum and is
payable semi annually in cash on each May 1, and November 1. The Notes are
redeemable, in whole, or in part, at the Company's option at any time on or
after November 1, 2001 at the redemption price of 105.125% of the principal
amount, during the year commencing November 1, 2001, 103.417% of the
principal amount, during the year commencing November 1, 2002, 101.708% of
the principal amount during the year commencing November 1, 2003 and,
thereafter, at 100% of the principal amount plus accrued and unpaid interest.
(c) PIK DEBENTURES
As part of the financing of the Acquisition, the Company issued Pounds 50.0
million of units (the "Units") consisting of 12.0% Subordinated Debentures
due November 1, 2007 (the "Parent Subordinated PIK Debentures") and warrants
to purchase 14.2% of the fully diluted share capital of the Company
("Warrants") pursuant to a securities purchase agreement (the "Securities
Purchase Agreement"). The Warrants will be exercisable only upon sale in
connection with the acquisition by a person (other than a person who has
funds managed by Charterhouse or any other member of Charterhouse's
wholly-owned group) of more that 50% of the Ordinary Shares of the Company
(calculated excluding the ordinary Shares underlying the Warrant) or the
unconditional granting of permission for any of the ordinary Shares of the
Company to be dealt on any recognised investment exchange.
Interest on the Parent Subordinated PIK Debentures is accrued quarterly at a
rate of 12.0% per annum, subject, upon, and during the continuation of
certain events of default, to an increase to the lesser of (i) 24.0% per
annum or (ii) the highest rate of interest then allowed under applicable law.
In lieu of cash, interest on the Parent Subordinated PIK Debentures may, at
the option of the Company, be paid by issuing additional Parent Subordinated
PIK Debentures on any interest payment date (i) on or prior to February 1,
2002, (ii) after February 1, 2002, to the extent the Company's pro-forma
total fixed charge coverage ratio would be less than 1.10 to 1.00 or (iii) if
(a) at the time of any such payment, there exists a payment default in
respect of certain senior indebtedness (including the Notes and indebtedness
incurred under the Credit Agreement noted above) or (b) after giving effect
to any such payment an event of default pursuant to which such indebtedness
under the indenture governing the Notes (the "Indenture") or Credit Agreement
may be accelerated shall occur and be continuing and the Company is prevented
by the holders under the Indenture or the creditors under the Credit
Agreement from paying such cash interest.
The Parent Subordinated PIK Debentures may be redeemed at any time at the
option of the Company in whole or in part (provided that, at any such time,
the Company redeems a minimum of US $5.0 million in aggregate principal
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amount of the Parent Subordinated PIK Debentures) at a redemption price equal
to 100% of the principal amount thereof, plus accrued and unpaid interest
thereon to the redemption date.
The Parent Subordinated PIK Debentures are unsecured liabilities of the
Company.
EURO
On January 1, 1999, eleven of the European Union member states, including
seven countries where ITS operations are located, established fixed
conversion rates between their existing countries and adopted one common
currency, the Euro. The conversion to the Euro eliminates currency exchange
rate risk among the eleven member countries.
The currencies of the eleven member states remain legal tender in the
participating countries during a three year transition period from January 1,
1999 through January 1, 2002. Effective January 1, 1999 the Euro is traded on
currency exchanges and is available for non cash transactions during the
three year transitional period. Beginning on January 1, 2002, the European
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Central Bank will issue Euro-denominated bills and coins for use in cash
transactions. On or before July 1, 2002 the participating countries will
withdraw all bills and coins and use the Euro as their legal currency.
ITS's operating units affected by the Euro have established plans to address
the issues raised by the conversion. These issues, amongst others, include
such matters as pricing, continuity of contracts, accounting and financial
reporting, taxation, treasury activities and computer systems. ITS
anticipates that the operating units will convert their local records to the
Euro during the three year transition period.
At this time, although no immediate problems have been identified, there can
be no assurance that the harmonisation of currencies in Europe will not have
a material adverse impact on the results of operations, financial position or
liquidity of its European businesses.
INFORMATION TECHNOLOGY
Each division of ITS is responsible for the information technology needed to
serve its clients including laboratory information management systems,
inspection reporting systems, and order processing and ledger accounting
systems. Other systems requiring global co-ordination, such as accounting
consolidation and E-mail, are managed through ITS's head office.
STATE OF READINESS. The date change from 1999 to 2000 may impair the function
of the Group's internal computer network and related systems, its testing
equipment and any other system or device in which the year is represented by
two digits rather than by four. A full review has been undertaken for all
major IT systems to ensure they will operate effectively in the Year 2000. It
is expected that the modifications identified in that review will have been
completed by September 1999.
ITS has established a Year 2000 team made up of the members of ITS's IT
Steering Committee to cover (i) internal systems, (ii) test equipment and
facilities, (iii) suppliers and (iv) legal issues. ITS's IT Steering
Committee reports regularly to the ITS Board.
To date, ITS has sent Year 2000 information to approximately 3,000 of its
customers. All key subcontractors and suppliers are being audited under ITS's
Year 2000 program. ITS has also implemented procedures to access the Year
2000 readiness of its key suppliers. These procedures include testing of
critical components and obtaining confirmation from key suppliers. ITS
currently expects its key subcontractors and suppliers will be Year 2000
compliant in all material respects by mid-year 1999.
COSTS. The total cost (both revenue and capital) of remedial and replacement
work for both IT systems and non-IT systems was Pounds 1.4 million in 1998
and is currently estimated at Pounds 2.8 million in 1999. These estimates
have been calculated in accordance with SEC Guidelines, which require the
full cost of projects to be disclosed as estimated Year 2000 costs, where the
replacement of a non-compliant system has been accelerated.
RISKS. There can be no assurance that the Group's efforts (or the efforts of
its customers and suppliers) will be successful in limiting the vulnerability
of the Group's systems and equipment to the problems associated with the
transition to the Year 2000, or that, if such problems occur, they will not
have a material adverse effect on the Group before they can be resolved.
However, management presently believes that it is unlikely that the failure
of any
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individual system will have a material effect on the operation of the ITS
group. In the event of a systems breakdown at a particular site, work can
usually be transferred to another site in ITS.
CONTINGENCY PLANS. ITS currently believes that the most reasonably likely
worst case scenario is that there will be some localised disruptions of
systems that will affect individual business processes, facilities or
supplies for a short time rather than systemic or long-term problems
affecting its business operations as a whole. Through its contingency
planning, ITS will continue to identify systems, or other aspects of its
business or that of its suppliers, that it believes would be most likely to
experience Year 2000 problems, as well as those business operations in which
a localised disruption could have the potential for causing a wider problem
by interrupting the flow of products, materials or data to other operations.
ITS's contingency planning will focus on minimising the scope and duration of
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
any disruptions by having sufficient personnel, inventory and other resources
in place to permit a flexible, real-time response to specific problems as
they may arise at individual locations around the world.
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ITEM 9A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
DISCLOSURES ABOUT MARKET RISKS
The Company's primary market risk exposures are interest rate risk and
foreign currency risk. The Company's exposure to market risk for changes in
interest rates relates primarily to its Senior debt obligations (Senior
secured long-term debt and revolving credit facility) upon which interest is
paid at variable rates. The Company uses interest rate swap and interest rate
cap agreements to hedge fluctuations in these variable rates. The Company is
also exposed to changes in foreign currency as all of its long-term debt is
denominated in foreign currencies, most significantly the U.S. dollar. The
Company has sales denominated in various foreign currencies, also
predominantly the U.S. dollar. These foreign currency income streams are
matched with the foreign currency debt and interest repayments to minimize
the foreign currency exposure. The Company has entered into foreign exchange
contracts to hedge (into U.K. pounds) firmly committed foreign currency
purchases and forein currency receipts. In certain circumstances, hedges are
in other currencies where, for example, a subsidiary that earns revenue in
U.S. dollars has to buy its supplies in Australian dollars. This is
reflective of the geographical diversity of the Company. The purpose of the
foreign currency exchange contracts is to lock in the exchange rates.
Increases or decreases in the Company's foreign currency firm commitments are
partially offset by gains and losses on the hedging instrument. The Company
does not use foreign exchange contracts for trading purposes.
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INTEREST RATE SENSITIVITY
The table below provides information about the Company's derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates, including interest rate swaps, interest rate cap agreements
and debt obligations. For debt obligations, the table presents principal cash
flows and related weighted average interest rates by expected maturity dates.
For interest rate swaps and caps, the table presents notional amounts and
weighted average interest rates by expected (contractual) maturity dates.
Notional amounts are used to calculate the contractual payments to be
exchanged under the contract. Weighted average variable rates are based on
implied forward rates in the yield curve at the reporting date. The
information is presented in Sterling equivalents, which is the Company's
reporting currency. The instrument's actual cash flows are denominated in US
dollar (USD), Swedish Kroner (SEK), German Marks (DEM) and Hong Kong Dollars
(HKD) as indicated in parentheses.
· Enlarge/Download Table
Expected Maturity Date
----------------------
Fair
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Thereafter Total Value
------ ------ ------ ------ ------ ------ ---------- ----- -----
(Pounds Equivalent in Thousands)
LIABILITIES
REVOLVING ADVANCES SHORT -TERM
Floating Rate (GBP) 2,200 - - - - - - 2,200 2,200
Average Interest Rate (2) 8.97% - - - - - -
Floating Rate (USD) 6,845 - - - - - - 6,845 6,845
Average Interest Rate (2) 7.20% - - - - - -
Floating Rate (DEM) 3,823 - - - - - - 3,823 3,823
Average Interest Rate (2) 5.31% - - - - - -
Floating Rate (NOK) 3,308 - - - - - - 3,308 3,308
Average Interest Rate (2) 10.40% - - - - - -
Underlying Long Term Debt (1)
Fixed Rate (USD) - - - - - - 120,833 120,833 123,746
Average Interest Rate - - - - - - 10.25%
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Fixed Rate (USD) (4) - - - - - - 182,468 182,468 67,962
Average Interest Rate - - - - - - 12.00%
Floating Rate (USD) 3,214 3,881 5,215 7,064 8,095 13,693 - 41,162 41,162
Average Interest Rate (2) 7.31% 7.38% 7.51% 7.66% 7.77% 8.12% -
Floating Rate (SEK) 683 825 1,108 1,501 1,720 16,107 - 21,945 21,945
Average Interest Rate (2) 6.50% 6.46% 6.59% 6.92% 7.13% 7.33% -
Floating Rate (DEM) 472 570 766 1,037 1,189 5,343 - 9,377 9,377
Average Interest Rate (2) 5.74% 5.95% 5.98% 5.93% 6.14% 6.41% -
Floating Rate (HKD) 4,247 5,128 6,891 9,335 10,698 - - 36,300 36,300
Average Interest Rate (2) 8.25% 8.35% 8.35% 8.35% 8.35% - -
-------- ---------
TOTAL 428,261 316,668
======== =========
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· Enlarge/Download Table
Expected Maturity Date
----------------------
Fair
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Thereafter Total Value
------ ------ ------ ------ ------ ------ ---------- ----- -----
(Pounds Equivalent in Thousands)
INTEREST RATE SWAPS
Pay Fixed to Receive - - 13,690 - - - - 13,690 (436)
Variable (USD)
Average Pay Rate - - 6.25% - - - -
Average Receive Rate (3) 5.20% 5.25% 5.33% - - - -
-
Pay Fixed to Receive - - 8,054 - - - - 8,054 (641)
Variable (SEK)
Average Pay Rate - - 6.80% - - - -
Average Receive Rate (3) 3.95% 3.89% 4.00% - - - -
Pay Fixed to Receive - - 5,343 - - - - 5,343 (269)
Variable (DEM)
Average Pay Rate - - 5.09% - - - -
Average Receive Rate (3) 3.31% 3.50% 3.50% - - - -
Pay Fixed to Receive 21,499 - - - - - - 21,499 (26)
Variable (HKD)
Average Pay Rate 6.59% - - - - - -
Average Receive Rate (3) 6.25% - - - - - -
INTEREST RATE CAPS
Notional Amount 26,407 - - - - - - 26,407 -
USD Strike (cap) 7.00% - - - - - -
Forward Rate 5.20% - - - - - -
Notional Amount 10,470 - - - - - - 10,470 -
SEK Strike (cap) 7.00% - - - - - -
Forward Rate 3.95% - - - - - -
Notional Amount 4,886 - - - - - - 4,886 14
HKD Strike (cap) 7.00% - - - - - -
Forward Rate 6.25% - - - - - -
(1) Including current portion.
(2) The interest rate applicable to the relevant currency is determined based
on the inter-bank offering rate plus a spread (not in excess of 2.75% nor
lower that 0.35% per year) based on the ratio of total net indebtedness
of the Group as defined in the Credit Agreement. Rates included in the
table represent average rates in effect at December 31, 1998.
(3) The receive rates consist of the implied forward borrowing rates in the
yield curve at the reporting date.
(4) This debt is separately itemised due to the fact that interest is
capitalised over the life of the debt.
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EXCHANGE RATE SENSITIVITY
The table below provides information about the Company's derivative financial
instruments and other financial instruments by functional currency and
presents such information in Sterling pound equivalents. The table summarizes
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
information on instruments and transactions that are sensitive to foreign
currency exchange rates, including foreign currency forward exchange
agreements and foreign currency denominated debt obligations. For debt
obligations, the table presents principal cash flows and related weighted
average interest rates by expected maturity dates. For foreign currency
forward exchange agreements, the table presents the notional amounts and
weighted average exchange rates by expected (contractual) maturity dates.
These notional amounts generally are used to calculate the contractual
payments to be exchanged under the contract.
· Enlarge/Download Table
Expected Maturity Date
----------------------
Fair
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Thereafter Total Value
------ ------ ------ ------ ------ ------ ---------- ----- -----
(Pounds Equivalent in Thousands)
LIABILITIES
Revolving advances
Floating Rate (USD) 6,845 - - - - - - 6,845 6,845
Average Interest Rate 7.20% - - - - - -
Floating Rate (DEM) 3,823 - - - - - - 3,823 3,823
Average Interest Rate 5.31% - - - - - -
Floating Rate (NOK) 3,308 - - - - - - 3,308 3,308
Average Interest Rate 10.40% - - - - - -
Underlying Long Term Debt
Fixed Rate (USD) - - - - - 120,833 120,833 123,746
Average Interest Rate - - - - - 10.25%
Fixed Rate (USD) 182,468 182,468 67,962
Average Interest Rate 12.00%
Floating Rate (USD) 3,214 3,881 5,215 7,064 8,095 13,693 41,162 41,162
Average Interest Rate 7.31% 7.38% 7.51% 7.66% 7.77% 8.12%
Floating Rate (SEK) 683 825 1,108 1,501 1,720 16,107 21,945 21,945
Average Interest Rate 6.50% 6.46% 6.59% 6.92% 7.13% 97.33%
Floating Rate (DEM) 472 570 766 1,037 1,189 5,343 9,377 9,377
Average Interest Rate 5.74% 5.95% 5.98% 5.93% 6.14% 6.41%
Floating Rate (HKD) 4,247 5,128 6,891 9,355 10,698 36,300 36,300
Average Interest Rate 8.25% 8.35% 8.35% 8.35% 8.35%
FORWARD EXCHANGE AGREEMENTS
(Receive NOK pay GBP)
Contract Amount 6,207 6,207 243
Average contract Exchange 12.89
Rate
(Receive GBP pay CHF)
Contract Amount 4,082 4,082 2
Average Contract Exchange 2.27
Rate
(Receive DEM pay USD)
Contract Amount 1,636 1,636 -
Average Contract Exchange 1.67
Rate
(Receive AUD pay USD)
Contract Amount 1,546 1,546 (78)
Average Contract Exchange 0.64
Rate
(Receive CAD pay USD)
Contract Amount 1,488 1,488 (7)
Average Contract Exchange 1.54
Rate
(Receive INR pay USD)
Contract Amount 298 298 -
Average Contract Exchange 8,400
Rate
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ITEM 10: DIRECTORS AND OFFICERS OF REGISTRANT
DIRECTORS OF THE COMPANY
Set out below are the names, ages and positions of the directors of the
Company at March 12, 1999.
The Articles of Association of the Company ("the Articles") confer on
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Charterhouse the right to appoint two non-executive directors (one as deputy
chairman) of the Company, so long as any person who has funds managed by
Charterhouse (or any member of Charterhouse's wholly-owned group) holds
shares in the Company. If Charterhouse's right lapses it is exercisable by
holders of a majority of the A Shares. Charter Intertek LLC also has a right
to appoint a non-executive director while it is a shareholder in the Company.
If this right lapses it is exercisable by the holders of a majority of the A
Shares. The holders of a majority of the A Shares have a right to appoint one
non-executive director.
Name Age Position
---- --- --------
Richard Nelson 56 Executive Chairman
William Spencer 39 Senior Vice President and Chief Financial Officer
Stuart Simpson 42 Non-executive Director
Simon Drury 41 Non-executive Director
Mr. Richard Nelson became a director and executive chairman of the Company in
1996. Prior to the Acquisition, Mr. Nelson had been the President and Chief
Executive Officer of Inchcape Testing Services Limited since 1987. Prior to
this, he was a director of Transcontinental Services from 1972 and Chief
Executive from 1982 to the date of its acquisition by Inchcape in 1984. Mr.
Nelson was retained as Chief Executive of Transcontinental by Inchcape and
was nominated to the same position in 1987 when Inchcape combined
Transcontinental with its consumer goods testing and minerals testing
businesses to form ITS. He was educated at Rugby School and Sorbonne
University. He qualified as a Chartered Accountant and then attended the
London Business School, where he graduated in 1969 with a Master of Science
in Economics.
Mr. William Spencer became a director of the Company in 1996. Mr. Spencer
joined the Group in 1992 and was appointed Finance Director of Inchcape
Testing Services Ltd in 1995 after serving as Chief Financial Officer of
Caleb Brett Eastern Hemisphere. Prior to joining ITS, he spent four years at
Nacanco Ltd. where he was promoted to Company Treasurer, and two years at
Olivetti Office U.K. where he was Financial Controller. He was educated at
the University of Manchester Institute of Science and Technology, where he
graduated with a Bachelor of Science with honors in Management Science. He
qualified as a Chartered Management Accountant in 1985 and as a Corporate
Treasurer in 1989.
Mr. Stuart Simpson became a non-executive director of the Company in 1996.
Mr. Simpson earned a Masters in Business from the London Business School and
is also a Chartered Engineer. He worked in civil engineering project
management for five years before joining 3i, the U.K. venture capital house.
He joined Charterhouse in 1985 and became a director in 1988. He has been
responsible for many investments in large management buyout and development
capital transactions.
Mr. Simon Drury became a non-executive director of the Company in 1998. Mr.
Drury earned a Masters in Business from Cranfield University. He worked as a
senior engineer in the Chemical industry for 7 years before joining CIN
Industrial Investments as an Investment Manager. He joined Charterhouse in
1988 and became a director in 1994.
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OTHER KEY OFFICERS OF THE GROUP
Shown below are the names, ages and positions of those who are key officers of
the Group at March 12, 1999.
Name Age Position
---- --- --------
Raymond Kong 51 Executive Vice President
Gary Butts 53 Executive Vice President
Gosta Fredriksson 52 Vice President
John Hannaway 44 Vice President
John Hodson 37 Vice President
Albert Lo 46 Vice President
Mark Loughead 39 Vice President
Jag Sisodia 47 Vice President
Henry Yeung 41 Vice President
Brian Pitzer 46 Vice President and Human Resources Director
Jeremy Coombe 30 Acting Treasurer
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
David Turner 38 Secretary
Mr. Raymond Kong became an Executive Vice President of the Group in January 1998
and Chief Operating Officer of Consumer Goods. He has 30 years of work
experience in testing services with 25 years at the Group. He was one of the
founders of Labtest operations which specialised in consumer goods quality
certification services. Mr. Kong was responsible for creating the global Labtest
networks and service diversification. He was appointed Regional Director
responsible for Quality Systems East in 1991. He also serves in a number of
advisory committees for The Government of The Hong Kong Special Administrative
Region.
Mr. Gary Butts became Vice President of the Group in January 1998, with
responsibility for Minerals Testing (Bondar Clegg) and Environmental Testing. He
has held various positions with Cyprus Mines, Duval, Hazen Research, Sindor &
Pincock, and Allen & Holt. He also spent several years with SCMRI as President
and Chief Executive. Mr Butts joined the Group in 1992 as Regional Manager for
Mineral Testing. He was promoted to Executive Vice President during 1998.
Mr. Gosta Fredriksson became Vice President of the Group in January 1998 with
responsibility for Conformity Assessment in Europe and Asia. Mr. Fredriksson was
head of Safety Testing in Semko when it was acquired by the Group in 1994. He
joined Semko in 1962. He has participated in the development of European
certificate schemes such as CCA, Key-mark, LOVAG, IECEE-CCB and CCB-FCS.
Mr. John Hannaway became Vice President of the Group in January 1998 with
responsibility for Caleb Brett in Asia. He joined ITS in 1992 as Marketing
Manager of Caleb Brett Australia and became General Manager in 1993. Prior to
joining the Group, Mr. Hannaway spent three years as divisional manager for SGS
Redwood Australia.
Mr. John Hodson became Vice President of the Group in January 1998 with
responsibility for Caleb Brett in the Americas. Mr. Hodson joined the Group in
1986 as Regional Manager in West Africa, and having spent time working in the
U.K., Dubai and Singapore, was promoted to Vice President of Caleb Brett Asia in
1995. He moved to Houston to run operations in the Americas in 1998. Prior to
joining the Group, Mr. Hodson spent four years with Core Laboratories in West
Africa, establishing laboratory testing facilities for the oil exploration
sector.
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Mr. Albert Lo became Vice President of the Group in January 1998 with
responsibility for Consumer Goods in South East Asia and Textile Testing in
China. Mr. Lo joined the Group in 1988 as head of the Textile Laboratory in Hong
Kong. Mr. Lo was educated at the University of Leeds in the U.K. for a Master of
Science. Before joining the Group, Mr. Lo had worked in quality assurance for a
buying office based in the Asia Pacific region.
Mr. Mark Loughead became Vice President of the Group in January 1998 with
responsibility for Caleb Brett in Europe, Africa and the Middle East. Mr.
Loughead joined the Group in 1988 as Operations Manager of Caleb Brett in
Aberdeen. He was promoted to his present position following a period as Scottish
Regional Manager. Prior to joining the Group, Mr. Loughead spent 13 years at
Inspectorate including six years in the Middle East.
Mr. Jag Sisodia became Vice President of the Group in January 1998 with
responsibility for Conformity Assessment in the Americas. Mr. Sisodia joined the
Group in 1987 as Chief Financial Officer of the FTS division, after which he
became Chief Financial Officer of the business he is presently running. Prior to
joining the Group, Mr. Sisodia had accounting positions in MCI Communications,
Laventhal & Horwath, and Seidman & Seidman. He holds a Bachelor of Arts and a
Masters in Business Administration from The American University, Washington DC
and is a Maryland Certified Public Accountant.
Mr. Henry Yeung became Vice President of the Group in January 1998 with
responsibility for Consumer Goods in the Pacific Region. Mr. Yeung joined the
Group in 1977 and has worked in Hong Kong, Taiwan and China. Mr. Yeung is a
Chartered Colourist, a Fellow of the Society of Dyers and Colourist and a
Licentiate of the Textile Institute. He has a Masters in Business Administration
from the University of East Asia and a Master of Science from the University of
Warwick
Mr. Brian Pitzer became Vice President and Human Resources Director of the Group
in January 1998. Mr. Pitzer joined the Group in March 1990 and developed the
human resources function in the Americas region. He also addressed the human
resources issues of acquisitions and organic growth in the region through the
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
mid 1990's. He is responsible for worldwide human resource programs. Prior to
joining the Group, he spent 14 years at NCR Corporation in a variety of
management positions in both field and corporate settings.
Mr. Jeremy Coombe is Acting Group Treasurer of the Group with responsibility for
Treasury. Mr Coombe joined the Group in May 1998. Prior to joining the Group, he
has been employed in various finance functions, including 4 years in the
treasury department at Normandy Mining in Australia.
Mr. David Turner is Group Company Secretary with responsibility for company
secretarial and legal matters throughout the Group. Mr. Turner joined the Group
in September 1997 prior to which he was Assistant Company Secretary of The
Mercantile and General Reinsurance Company for 7 years. Mr. Turner graduated
from Reading University in 1981 with a Bachelor of Science (Honours) degree and
has been a Chartered Secretary since 1991.
ITEM 11: COMPENSATION OF DIRECTORS AND OFFICERS
SERVICE AGREEMENTS
There are no service contracts for directors requiring notice periods from the
Company greater than 12 months and no director is therefore entitled to more
than 12 months remuneration in lieu of notice.
REMUNERATION COMMITTEE
The members of the Remuneration Committee are Mr. Stuart Simpson and Mr. Simon
Drury. The Committee meets at least twice a year and the Executive Chairman and
Vice President and Human Resource Director are invited to attend. The
Committee's responsibilities include consideration of service agreements and all
aspects of remuneration for all employees and directors earning more than
Pounds 60,000 per annum (or local currency equivalent), and the operation of the
Company's Share Option Scheme.
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COMPENSATION OF DIRECTORS
The aggregate compensation paid to all directors of the Company (5 persons
during the 1998 fiscal year), for services in such capacities for the year
ended December 31, 1998 was approximately Pounds 778,500, which included
contributions made to the pension plans in respect of such directors of the
Company of approximately Pounds 94,000. For the year ended December 31, 1998,
the highest paid director received approximately Pounds 373,900 and pension
plan contributions of approximately Pounds 85,400.
NON-EXECUTIVE DIRECTORS' FEES
Each director who is not an employee of the Company received an aggregate
annual fee of Pounds 20,900, payable in quarterly instalments to their
employer, for the year ended December 31, 1998. Directors who are also
employees of the Company receive no remuneration for serving as directors.
COMPENSATION OF EXECUTIVE OFFICERS
The aggregate compensation paid to all executive officers (other than
directors) of the Group (13 persons during the 1998 fiscal year) for services
in such capacities for the year ended December 31, 1998 was approximately
Pounds 1,914,000 with contributions made to the pension plans in respect of
such officers of the Group of approximately Pounds 177,000.
Executive officers are also entitled to receive annual bonuses of up to 50%
of their base salary if various ITS divisions achieve certain operating
profit and cash flow targets and working capital target ratios.
ITEM 12: OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
SHARE OPTION SCHEME
On March 1, 1997, the Company adopted a Share Option Scheme for senior
management to encourage the involvement of employees in the goals and
development of the Company.
The following table shows options for C Shares in the Company outstanding at
March 12, 1999.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
· Enlarge/Download Table
NUMBER OF OPTIONS SUBSCRIPTION EXERCISABLE BETWEEN
OUTSTANDING PRICE PER SHARE
1,043,271 10p March 1, 2000 March 1, 2004
10,592 10p September 1, 2000 September 1, 2004
172,116 10p December 31, 2000 December 31, 2004
23,831 10p June 1, 2001 June 1, 2005
55,606 10p December 31, 2001 December 31, 2005
At March 12, 1999, none of the directors of the Company held any options to
subscribe for Ordinary Shares of the Company. At that date, officers of the
Group held 111,211 options to subscribe for Ordinary Shares of the Company.
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ITEM 13: INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
In connection with the Acquisition, Charterhouse will receive an acquisition
advisory fee of Pounds 3.8 million from the Company payable on demand when
cash reserves permit. Charterhouse or funds managed by it may, from time to
time, provide financial advisory services for which it will receive customary
fees and expenses. In addition, each director appointed by Charterhouse will
receive a fee of Pounds 20,900 per year, which will be remitted to
Charterhouse.
Except as discussed above, since January 1, 1997, the Company has not been,
and is not now, a party to any material transaction or proposed transaction
in which any director, any executive office or any spouse or relative of any
of the foregoing or any relative of any such spouse has or was to have a
direct or indirect material interest. No loans are outstanding from any
member of the Group to any of the directors or officers and there are no
guarantees provided by any member of the Group for the benefit of any
director or officer.
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PART II
ITEM 14: DESCRIPTION OF SECURITIES TO BE REGISTERED
Not applicable.
PART III
ITEM 15: DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 16: CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
Not applicable.
PART IV
ITEM 17: FINANCIAL STATEMENTS
Not applicable.
ITEM 18: FINANCIAL STATEMENTS
Reference is made to Item 19(a) for a full list of consolidated financial
statements filed as part of this Annual Report.
ITEM 19: FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
The following financial statements and related schedules, together with
the report of independent auditors thereon, are filed as part of this
Report.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
PAGE
Report of Independent Auditors F-1
Consolidated Statements of Operations F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Cash Flows F-4
Consolidated Statements of Total Recognised Gains and Losses F-5
Consolidated Statements of Changes in Shareholders' Equity/(Deficit) F-6
Notes to the Consolidated Financial Statements F-7
(b) EXHIBITS FILED AS PART OF THIS REPORT NONE.
The Company agrees to furnish to the Securities and Exchange Commission upon
its request a list or diagram of its subsidiaries indicating as to each
subsidiary named: (a) its country or other jurisdiction of incorporation or
organisation, (b) its relationship to the Company and (c) the percentage of
voting securities owned or other basis of control by its immediate parent, if
any.
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REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of Intertek Testing Services Limited
We have audited the accompanying consolidated balance sheets of Intertek
Testing Services Limited (the "Company") at December 31, 1997 and 1998 and
the related consolidated statements of operations, cash flows, changes in
shareholders' deficit and total recognised gains and losses for the period
from October 8, 1996 to December 31, 1996 and the years ended December 31,
1997 and 1998 and the related combined statements of income, cash flows,
changes in shareholders' equity and total recognised gains and losses for the
period from January 1, 1996 to October 7, 1996. These financial statements
are set out on pages F- 2 to F-70 and are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United Kingdom generally accepted
auditing standards, which do not differ in any significant respect from
United States generally accepted auditing standards. These standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from 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 the
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Company at December 31, 1997 and 1998 and the consolidated results of
its operations and its cash flows for the period from October 8, 1996 to
December 31, 1996 and the years ended December 31, 1997 and 1998 in
conformity with accounting principles generally accepted in the United
Kingdom. In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined results of operations
and cash flows for the period from January 1, 1996 to October 7, 1996 of
Inchcape Testing Services Limited in conformity with accounting principles
generally accepted in the United Kingdom.
As discussed in Note 2 to the consolidated financial statements, effective
October 8, 1996, the Company acquired Inchcape Testing Services Limited in a
business combination accounted for as a purchase. As a result of this
acquisition, the consolidated financial information for the period after the
acquisition is presented on a different basis from that for the combined
financial information for the periods before the acquisition and, therefore,
is not comparable in all respects.
Accounting principles generally accepted in the United Kingdom vary in
certain significant respects from accounting principles generally accepted in
the United States. Application of accounting principles generally accepted in
the United States would have affected the combined results of operations for
the period from January 1, 1996 to October 7, 1996 and the consolidated
results of operations for the period from October 8, 1996 to December 31,
1996 and for the years ended December 31, 1997 and 1998 and consolidated
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
shareholders' deficit at December 31, 1997 and 1998 to the extent summarised
in Note 35 to the consolidated financial statements.
KPMG
Chartered Accountants
London, England
March 26, 1999
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INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Pounds '000)
· Enlarge/Download Table
Predecessor Successor Company
Company
-------------- ----------------------------------------
Notes Period Period from Year ended Year ended
from October 8, December December
January 1, 1996 31, 31,
1996 to 1997 1998
to December 31,
October 7, 1996
1996
-------------- ----------------------------------------
Revenue 4
Continuing operations 227,098 75,326 328,814 347,526
Acquisitions - - - 6,770
Discontinued operation 16,463 5,134 15,169 5,517
-------------- ----------------------------------------
Group revenue 243,561 80,460 343,983 359,813
Operating costs 5 (222,249) (74,628) (307,427) (336,757)
-------------- ----------------------------------------
Group operating income 21,312 5,832 36,556 23,056
Share of operating profit/(loss) in associates 374 69 78 (13)
-------------- ----------------------------------------
Total operating income 7 21,686 5,901 36,634 23,043
---------------------------------------------------------------------------- ----------------------------------------
Operating income before exceptional items
Continuing operations 24,945 11,609 42,081 43,949
Acquisitions - - - 752
Discontinued operation (437) (1,433) (1,580) (2,463)
-------------- ----------------------------------------
4 24,508 10,176 40,501 42,238
Exceptional items charged against operating income 5,6
Continuing operations (2,822) (2,378) (3,867) (14,051)
Discontinued operation - (1,897) - (5,144)
-------------- ----------------------------------------
Total operating income 21,686 5,901 36,634 23,043
---------------------------------------------------------------------------- ----------------------------------------
Non-operating exceptional items 6 - (1,761) - (1,395)
-------------- ----------------------------------------
Income on ordinary activities before net interest 21,686 4,140 36,634 21,648
Net interest expense 8 (3,165) (4,063) (29,752) (31,855)
Income from other Inchcape plc companies 5,417 - - -
-------------- ----------------------------------------
Income/(loss) before taxation 23,938 77 6,882 (10,207)
Taxation 9 (11,883) (411) (4,876) (7,156)
-------------- ----------------------------------------
Income/(loss) after taxation 12,055 (334) 2,006 (17,363)
Minority interests (447) (1,104) (3,604) (3,228)
-------------- ----------------------------------------
Net income/(loss) for the group and its share of 22 11,608 (1,438) (1,598) (20,591)
associates
============== ========================================
The accompanying notes on pages F-7 to F-70 are an integral part
of these financial statements.
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INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED BALANCE SHEETS
(Pounds '000)
· Enlarge/Download Table
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Notes December December
31, 31,
1997 1998
--- -- --- --- --- -- --- -- --- --- --- -- --- --
ASSETS
Current assets
Cash 25,153 16,772
Trade receivables 13 60,483 67,516
Inventories 15 2,650 3,662
Other current assets 14 12,063 15,241
Deferred taxation asset 19 286 1,348
--- -- --- --- --- -- --- --- -----
Total current assets 100,635 104,539
Goodwill 10 - 13,074
Property, plant and equipment, net 11 44,460 45,951
Investments 12 184 231
--- -- --- --- --- -- --- --- -----
Total assets 145,279 163,795
============== =============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Borrowings (including current portion of long term 16 5,268 22,209
borrowings)
Accounts payable, accrued liabilities and deferred 17 60,019 70,952
income
Income taxes payable 3,323 5,368
--- -- --- --- --- -- --- --- -----
Total current liabilities 68,610 98,529
Long term borrowings 16 272,036 273,564
Provisions for liabilities and charges 18 7,095 8,518
Minority interests 4,304 4,592
Commitments and contingencies 29, 30
SHAREHOLDERS' DEFICIT
Ordinary shares 20 318 336
Redeemable preference shares 20 81,815 86,657
Shares to be issued 20 2,793 2,793
Premium in excess of par value 20 2,857 3,018
Retained deficit 22 (294,549) (314,212)
--- -- --- --- --- -- --- --- -----
TOTAL SHAREHOLDERS' DEFICIT 23 (206,766) (221,408)
============== =============
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT 145,279 163,795
============== =============
The accompanying notes on pages F-7 to F-70 are an integral part
of these financial statements.
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INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Pounds '000)
· Enlarge/Download Table
Predecessor Successor Company
Company
------------- -------------------------------------
Notes Period Period Year ended Year ended
from from December December
January 1, October 8, 31, 31,
1996 1996 1997 1998
to to
October 7, December
1996 31, 1996
------------- -------------------------------------
Total operating cash inflow 24 28,332 11,334 45,646 32,445
Returns on investments and servicing of finance 25 1,337 (1,341) (21,889) (25,070)
Taxation (8,177) (3,292) (6,145) (5,960)
Capital expenditure and financial investment 25 (12,277) (5,605) (12,995) (13,959)
Acquisitions and disposals 25 6,712 (336,737) (9,392) (11,675)
Equity dividends paid (28,329) - - -
------------- -------------------------------------
Cash outflow before financing (12,402) (335,641) (4,775) (24,219)
Financing 25 3,227 370,357 (1,948) 16,014
------------- -------------------------------------
(Decrease)/ increase in cash in the period (9,175) 34,716 (6,723) (8,205)
------------- -------------------------------------
Reconciliation of net cash flow
to movement in net debt 26
(Decrease)/increase in cash in the period (9,175) 34,716 (6,723) (8,205)
Cash inflow/(outflow) from increase in debt 310 (269,001) - -
Debt issued in lieu of interest payment - - (6,138) (7,088)
Acquisitions - - - (356)
Change in net debt resulting from cash flows - - 2,378 (10,968)
Other non-cash movements - - (2,112) (1,919)
Exchange adjustments (499) (1,105) (4,166) 1,686
------------- -------------------------------------
Movement in net debt in the period (9,364) (235,390) (16,761) (26,850)
Net debt at the start of the period (54,139) - (235,390) (252,151)
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
------------- -------------------------------------
Net debt at the end of the period (63,503) (235,390) (252,151) (279,001)
============= =====================================
The accompanying notes on pages F-7 to F-70 are an integral part
of these financial statements.
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INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
(Pounds '000)
· Enlarge/Download Table
Predecessor Successor Company
Company
- ---- -- ---- - - -- -- --- --- --- -- --- -- --- --- --- -- --- -- -
Period Period Year ended Year ended
from from December December
January 1, October 8, 31, 31,
1996 1996 1997 1998
to to
October 7, December
1996 31, 1996
- ---- -- ---- - - -- -- --- --- --- -- --- -- --- --- --- -- --- -- -
Net income/(loss) 11,608 (1,438) (1,598) (20,591)
Dividends (28,329) - - -
Exchange adjustments (443) 4,093 (7,611) 928
===================================================
Total recognised gains and losses (17,164) 2,655 (9,209) (19,663)
===================================================
There is no material difference between income before taxation, and net income
for the financial periods, as stated in the statements of operations and their
historical cost equivalents.
The accompanying notes on pages F-7 to F-70 are an integral part
of these financial statements.
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INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY/( DEFICIT)
(Pounds '000)
· Enlarge/Download Table
--------------------------------------------------------------------------------------
Ordinary Redeemable Shares to Premium in Other Retained Total
shares preference be issued excess of capital equity/
shares par value (deficit)
--------------------------------------------------------------------------------------
PREDECESSOR COMPANY
BALANCE AT DECEMBER 31, 1995 34,372 - - - 899 (2,381) 32,890
Net income - - - - 371 11,237 11,608
Dividends - - - - - (28,329) (28,329)
Capitalisation of
indebtedness to - - - - - 41,542 41,542
other Inchcape plc
companies
Exchange adjustments - - - - (91) (352) (443)
--------------------------------------------------------------------------------------
BALANCE AT OCTOBER 7, 1996 34,372 - - - 1,179 21,717 57,268
======================================================================================
SUCCESSOR COMPANY
BALANCE AT OCTOBER 8, 1996 - - - - - - -
Issue of shares 318 81,815 - 2,857 - - 84,990
Issue of warrants - - 2,793 - - - 2,793
Net loss - - - - - (1,438) (1,438)
Goodwill written off on
acquisitions - - - - - (289,319) (289,319)
Exchange adjustments - - - - - 4,093 4,093
--------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 318 81,815 2,793 2,857 - (286,664) (198,881)
Goodwill adjustments - - - - - 1,324 1,324
Net loss - - - - - (1,598) (1,598)
Exchange adjustments - - - - - (7,611) (7,611)
--------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 318 81,815 2,793 2,857 - (294,549) (206,766)
Net loss - - - - - (20,591) (20,591)
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Issue of shares 18 4,842 - 161 - - 5,021
Exchange adjustments - - - - - 928 928
======================================================================================
BALANCE AT DECEMBER 31, 1998 336 86,657 2,793 3,018 - (314,212) (221,408)
======================================================================================
Included in Retained deficit is Pounds 270.6 million which represents
goodwill written off to reserves prior to December 1997 (at December 31, 1996
and 1997: Pounds 284.7 million and Pounds 275.0 million, respectively).
The accompanying notes on pages F-7 to F-70 are an integral part
of these financial statements.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
1. ACCOUNTING POLICIES
The significant accounting policies adopted by both the Successor and
Predecessor Companies are as follows:
Financial Reporting Standards 9, 10, 11 and 12 have been adopted and no prior
year adjustments are required.
BASIS OF CONSOLIDATION AND COMBINATION
The consolidated financial statements of the Successor Company include the
financial statements of the Successor Company and its subsidiaries.
The combined financial statements of the Predecessor Company include the
financial statements of the Predecessor Company and its subsidiaries plus the
combination of other operations.
The acquisition method of accounting has been adopted. Under this method, the
results of subsidiaries acquired or sold are included in the consolidated
statement of income of the Successor Company and the combined statements of
income of the Predecessor Company from, or up to, the date control passes.
The consolidated and combined statements of income of the Successor and
Predecessor Companies include their respective shares of income from associated
undertakings. The consolidated balance sheets of the Successor Company includes
interests in associates at their respective shares of the net tangible assets.
USE OF ESTIMATES
Preparation of financial statements in conformity with U.K. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses for an accounting period. Such estimates and assumptions could change
in the future as more information becomes known or circumstances alter, such
that the group's actual results may differ from the amounts reported and
disclosed in the financial statements.
FOREIGN CURRENCIES
The results of operations and cash flows of overseas subsidiaries and associated
undertakings are translated into sterling at the average of the month end rates
of exchange for the period. Assets and liabilities in foreign currencies are
translated into sterling at closing rates of exchange except where rates are
fixed under contractual arrangements.
The difference between net income/(loss) translated at average and at closing
rates of exchange is included in the statement of total recognised gains and
losses as a movement in shareholders' equity/(deficit). Exchange differences
arising from the retranslation to closing rates of exchange of opening
shareholders' equity, long-term foreign currency borrowings used to finance
foreign currency investments, and foreign currency borrowings that provide a
hedge against shareholders' equity are also reflected as movements in
shareholders' equity/(deficit). All other exchange differences are dealt with in
operations.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Property, plant and equipment are stated at cost less depreciation, which is
provided, except for freehold land, on a straight line basis over the estimated
useful lives of the assets, mainly at the following annual rates:
· Enlarge/Download Table
Freehold buildings and long leasehold land and buildings....................... 2%
Short leasehold land and buildings............................................. term of lease
Plant, machinery and equipment................................................. 10% - 33.3%
Permanent diminutions in value of individual properties below cost are charged
to operations; however deficits which the Directors consider to be temporary in
nature, are recognised in the revaluation reserve and may be offset against
other surpluses.
LEASES
Assets held under capital leases are treated as if they had been purchased at
the present value of the minimum lease payments. This cost is included in
property, plant and equipment, and depreciation is provided over the shorter of
the lease term or the estimated useful life. The corresponding obligations under
these leases are included within borrowings. The finance charge element of
rentals payable is charged to operations to produce a constant rate of interest.
Operating lease rentals are charged to operations on a straight line basis over
the periods of the leases.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
1. ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or net realisable value. Cost
comprises expenditure incurred in the normal course of business in bringing
inventories and work in progress to their present location and condition.
REVENUES
Revenues represent the total amount receivable for services provided and goods
sold, excluding sales-related taxes and intra-group transactions. Revenue is
recognised when the relevant service is completed or goods delivered.
TAXATION
Deferred taxation is provided using the liability method at current taxation
rates on timing differences to the extent that the directors consider that it is
probable that a liability or asset will crystallise.
PENSION BENEFITS
Liabilities under defined contribution pension schemes are charged to operations
when incurred. ITS has a number of defined benefit pension schemes for which
contributions are based on triennial actuarial valuations. Pension charges in
operations have been calculated at a substantially level percentage of current
and expected future pensionable payroll, with variations from regular cost
spread over the expected remaining service lives of employees. Other
post-retirement benefits are accounted for on a similar basis to defined benefit
pension schemes.
GOODWILL
Purchased goodwill in respect of acquisitions before January 1, 1998 was written
off to reserves in the year of acquisition. When a subsequent disposal occurs
any goodwill previously written off to reserves is written back through the
profit and loss account. Purchased goodwill in respect of acquisitions since
January 1, 1998 is capitalised in accordance with the requirements of FRS 10,
Goodwill and intangible assets. Such purchased goodwill is amortised to nil over
equal instalments over its estimated useful life, generally not exceeding 20
years.
DERIVATIVE FINANCIAL INSTRUMENTS
ITS uses various derivative financial instruments to manage its exposure to
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
foreign exchange and interest rate risks. Derivative financial instruments are
considered hedges if they meet certain criteria. A forward exchange contract is
considered a hedge of an identifiable foreign currency commitment if such
contract is designated as, and is effective as, a hedge of a firm foreign
currency commitment. An interest rate swap agreement is considered a "synthetic
alteration" (and accounted for like a hedge) when the agreement is designated
with a specific liability and it alters the interest rate characteristics of
such liability. An Interest rate cap agreement must also meet the same criteria
as an interest rate swap to be considered hedges of a specific liability.
Derivative financial instruments failing to meet the aforementioned criteria are
accounted for at fair value with the resulting unrealised gains and losses
included in the statement of operations.
FORWARD EXCHANGE CONTRACTS
Forward exchange contracts are designated as hedges of firm foreign currency
commitments. Gains and losses on such contracts are deferred and recognised in
income or as an adjustment of the carrying amount when the hedged transaction
occurs.
INTEREST RATE CAP AGREEMENTS
Interest rate cap agreements are accounted for under the accruals basis. Amounts
receivable under the agreement are accrued when due as a reduction of interest
charges. Premiums paid for purchased interest rate cap agreements are amortised
to interest charges over the term of the caps.
INTEREST RATE SWAPS
Interest rate swap agreements are designated to change the interest rate
characteristics of floating-rate borrowings. Accordingly, these agreements are
accounted for under the settlement basis. The interest differential between the
amounts received and amount paid is recognised as an adjustment to interest
charges over the term of the swap.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
2. ACQUISITION OF INCHCAPE TESTING SERVICES
Intertek Testing Services Limited (incorporated on July 19, 1996) and its wholly
owned subsidiaries, Testing Holdings Sweden AB, ITS Holding Limited, Testing
Holdings USA Inc, Torton Limited, Testing Holdings France EURL, Kite Overseas
Holdings BV, Testing Holdings Germany GmbH and Intertek Testing Services UK
Limited (collectively the "Company", the "Successor Company" or "ITS"), were
established for the purpose of acquiring from Inchcape plc the whole of its
Inchcape Testing Services division (collectively "Inchcape Testing Services" or
"Predecessor Company"). The acquisition ("the Acquisition") was effected on
October 8, 1996 when the Company and its wholly owned subsidiaries signed a
share purchase agreement and an option agreement with Inchcape plc to acquire
Inchcape Testing Services through the separate acquisition of its regional
holding companies and the direct acquisition of certain operating companies.
Financial details of the Acquisition are set out in Note 27 to these
consolidated financial statements.
As a result of the Acquisition, the capital structure of and the basis of
accounting for the Company differ from those of Inchcape Testing Services prior
to the Acquisition. Financial data of the Company in respect of the periods from
October 8, 1996 to December 31, 1998 (the "Successor Period") reflect the
Acquisition under the acquisition method of accounting. Financial data in
respect of Inchcape Testing Services prior to the Acquisition (the "Predecessor
Period") generally will not be comparable with that of the Company with respect
to the interest expense, amortisation of debt issuance costs incurred in
connection with the Acquisition and income from other Inchcape plc companies.
The net other effects on the Statement of Operations of purchase accounting in
the Successor Period are not significant.
3. BASIS OF PREPARATION
(a) SUCCESSOR AND PREDECESSOR COMPANIES
The accompanying consolidated financial statements of the Company and its
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
subsidiaries and the combined financial statements of the Predecessor Company
and its subsidiaries have been prepared in conformity with accounting principles
generally accepted in the United Kingdom ("U.K. GAAP") and are presented under
the historical cost convention. These principles differ in certain material
respects from generally accepted accounting principles in the United States
("U.S. GAAP") - see Note 35.
The accompanying financial statements do not represent the U.K. statutory
financial statements of the Company or the Predecessor Company, as certain
reclassifications and changes in presentation and disclosure have been made to
conform more closely with accounting presentation and disclosure requirements
applicable in the United States.
(b) PREDECESSOR COMPANY
All undertakings over which the Predecessor Company exercised control or a
dominant influence, being the right to direct the operating and financial
policies, are combined in the accompanying combined financial statements.
However the following companies have not been combined.
S.S. Acquisition Corporation
Atkins Kroll Inc.
Microl Corporation
The above companies are stated at cost to the Predecessor Company in the
combined balance sheet. The combined statements of income include dividends
receivable from these companies which are recognised when declared.
This treatment represents a departure from the requirement of FRS 2 to combine
all entities that are legally owned by the Predecessor Company. The Directors
consider that, for the following reasons, compliance with this requirement would
fail to present fairly the financial positions, results of operations and cash
flows of the Predecessor Company for each of the relevant periods covered in
this report.
o the above companies, while legally owned by a subsidiary of the Predecessor
Company, did not form part of the testing operations of Inchcape plc that
were acquired by the Successor Company on October 8, 1996. The above
companies were engaged in dissimilar businesses: shipping and brokerage and
motor distribution and retail;
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
3. BASIS OF PREPARATION (CONTINUED)
o the above companies were historically managed and financed as if they
were autonomous from the Predecessor Company. The Predecessor Company had
no involvement in and did not control the operating and financial
policies of these companies;
o the above companies are now operated and financed autonomously from the
Predecessor and Successor Companies;
o the above companies had no costs or facilities in common with the
Predecessor Company; and
o the above companies had no financial commitments, guarantees or
contingent liabilities related to the Predecessor Company.
It is not possible for the Directors to quantify the effects of this departure
from the requirements of FRS 2 because there are no publicly filed financial
statements for the above companies and management has no access to the financial
records of the above companies.
The following companies which, although not legally owned by the Predecessor
Company formed part of the Testing operations of Inchcape plc, are combined in
the financial statements during the periods noted:
· Download Table
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Company Period
Inchcape Testing Holdings (France) S.A. December 23, 1994 to October 7, 1996
Inchcape Testing Services (France) S.A.R.L. December 23, 1994 to October 7, 1996
Caleb Brett (Peru) S.A. January 1, 1995 to October 7, 1996
Inchcape Testing Services Colombia S.A. January 1, 1995 to October 7, 1996
Gibbs y cia S.A.C. January 1, 1995 to October 7, 1996
Gibbs y cia Ltd January 1, 1995 to October 7, 1996
Prior to December 23, 1994 Inchcape Testing Holdings (France) S.A. and Inchcape
Testing Services (France) S.A.R.L. were legally owned by the Predecessor
Company. Caleb Brett (Peru) S.A., Inchcape Testing Services Colombia S.A., Gibbs
y cia S.A.C. and Gibbs y cia Ltda, while forming part of the Testing operations
of Inchcape plc, did not trade in 1993 and Gibbs y cia S.A.C and Gibbs y cia
Ltda. did not carry out testing business in 1994. While Caleb Brett (Peru) S.A.
and Inchcape Testing Services Colombia S.A. commenced trading in 1994 their
operations were minimal and their results were combined from January 1, 1995.
This treatment represents a departure from the requirement of FRS 2 to combine
only those entities that are legally owned by ITS. The Directors assert that,
for the following reasons, compliance with this requirement would fail to
present fairly the financial positions, results of operations and cash flows of
the Predecessor Company for each of the relevant periods covered by this report.
o these companies formed part of the testing operations of Inchcape plc
that were acquired by the Successor Company on October 8, 1996; and
o these companies have been historically managed and financed as if they
were part of the Predecessor Company. The Predecessor Company exercised a
dominant influence over these companies such that the operating and
financial policies of these companies were controlled directly by the
Predecessor Company.
The effects of combining total revenues, operating income and shareholders'
equity of companies which, while not legally owned by the Predecessor Company,
formed part of the Testing operations of Inchcape plc, were:
Period from January 1, 1996 to
October 7, 1996
------------------------------
Total operating revenues 6,852
Operating income 511
Shareholders' equity at the end of the period 1,179
------------------------------
The share capital and reserves of these companies have been separately shown as
"Other capital" within total shareholders' equity in the combined financial
statements of the Predecessor Company.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
4. SEGMENT INFORMATION
ITS comprises five divisions which are organised as follows: (1) Consumer Goods,
which tests textiles, fabrics, footwear, toys and consumer products; (2)
Conformity Assessment, which tests and certifies electrical and electronic
products, building products, heating and ventilation and air conditioning
equipment; (3) Caleb Brett, which tests crude oil, petroleum, chemical and
agricultural products; (4) Foreign Trade Supervision, which provides preshipment
inspection work to governments and (5) Minerals, which analyses metals. The
Environmental Testing division which operated principally in the US and UK was
closed in August 1998 and is now disclosed as a discontinued operation. The
accounting policies of the divisions are the same as those described in the
summary of accounting policies.
The revenues and operating income for the companies acquired during the year
ended December 31, 1998 are included solely in the Caleb Brett division.
· Enlarge/Download Table
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
BY DIVISION Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, 1996 December 31,
1996
----------------- --------------- ---------------- ---------------
REVENUES
Consumer Goods 36,039 12,528 56,768 64,575
Conformity Assessment 60,422 18,632 81,816 84,920
Caleb Brett 79,043 24,695 108,837 122,972
Foreign Trade Supervision 36,347 12,429 55,792 65,299
Minerals 15,247 7,042 25,601 16,530
----------------- --------------- ---------------- ---------------
Total continuing operations 227,098 75,326 328,814 354,296
Discontinued operation 16,463 5,134 15,169 5,517
----------------- --------------- ---------------- ---------------
Total 243,561 80,460 343,983 359,813
----------------- --------------- ---------------- ---------------
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL ITEMS
Consumer Goods 7,013 2,386 13,903 16,079
Conformity Assessment 8,795 3,816 7,860 9,796
Caleb Brett 6,370 2,654 10,891 11,881
Foreign Trade Supervision 494 1,347 5,056 7,223
Minerals 2,273 1,406 4,371 (278)
----------------- --------------- ---------------- ---------------
Total continuing operations 24,945 11,609 42,081 44,701
Discontinued operation (437) (1,433) (1,580) (2,463)
----------------- --------------- ---------------- ---------------
Total 24,508 10,176 40,501 42,238
----------------- --------------- ---------------- ---------------
OPERATING EXCEPTIONAL ITEMS
Foreign Trade Supervision 2,822 2,378 3,867 12,267
Caleb Brett - - - 1,784
----------------- --------------- ---------------- ---------------
Total continuing operations 2,822 2,378 3,867 14,051
Discontinued operation - 1,897 - 5,144
----------------- --------------- ---------------- ---------------
Total 2,822 4,275 3,867 19,195
----------------- --------------- ---------------- ---------------
Non - operating exceptional items
Discontinued operation - 1,761 - 1,395
----------------- --------------- ---------------- ---------------
UNALLOCATED COSTS
Cash, borrowings and income tax are managed centrally and are therefore not
allocated to the divisions. Interest expense and income and income tax expense
are therefore not allocated to the divisions.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
4. SEGMENT INFORMATION (CONTINUED)
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, December 31,
1996 1996
--------------- --------------- --------------- ---------------
DEPRECIATION AND AMORTISATION
Consumer Goods 1,040 265 1,543 1,543
Conformity Assessment 2,590 571 3,260 3,127
Caleb Brett 2,582 1,309 3,691 4,118
Foreign Trade Supervision 611 67 902 1,095
Minerals 664 178 1,093 1,150
--------------- --------------- --------------- ---------------
Total continuing operations 7,487 2,390 10,489 11,033
Discontinued operation 1,266 290 1,645 497
--------------- --------------- --------------- ---------------
Total 8,753 2,680 12,134 11,530
--------------- --------------- --------------- ---------------
CAPITAL EXPENDITURE
Consumer Goods 1,446 752 1,926 3,945
Conformity Assessment 3,196 1,914 3,853 4,166
Caleb Brett 3,811 1,351 4,200 3,895
Foreign Trade Supervision 741 351 1,445 680
Minerals 939 962 2,010 1,259
--------------- --------------- --------------- ---------------
Total continuing operations 10,133 5,330 13,434 13,945
Discontinued operation 2,306 333 298 81
--------------- --------------- --------------- ---------------
Total 12,439 5,663 13,732 14,026
--------------- --------------- --------------- ---------------
December 31, December 31,
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
1997 1998
--------------- ---------------
TOTAL ASSETS
Consumer Goods 17,994 25,752
Conformity Assessment 35,269 35,292
Caleb Brett 51,765 73,528
Foreign Trade Supervision 32,221 55,459
Minerals 13,883 15,740
--------------- ---------------
Sub total 151,132 205,771
Central 31,329 36,483
Trading balances with other ITS group companies (46,625) (82,259)
--------------- ---------------
Total continuing operations 135,836 159,995
Discontinued operation 9,443 3,800
--------------- ---------------
Total 145,279 163,795
--------------- ---------------
The Central division comprises assets not attributable to the trading divisions,
principally cash.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
4. SEGMENT INFORMATION (CONTINUED)
· Download Table
December 31, December 31,
1997 1998
------------ ------------
CAPITAL EMPLOYED
Consumer Goods 6,964 10,672
Conformity Assessment 22,905 19,886
Caleb Brett 19,161 38,941
Foreign Trade Supervision 1,631 1,306
Minerals 6,039 4,243
Central 16,768 12,306
-------- --------
Total continuing operations 73,468 87,354
Discontinued operation 4,697 (3,029)
-------- --------
Total 78,165 84,325
-------- --------
RECONCILIATION OF CAPITAL EMPLOYED TO CONSOLIDATED
SHAREHOLDERS' DEFICIT
Capital employed 78,165 84,325
Taxation (3,323) (5,368)
Net borrowings (277,304) (295,773)
Minority interest (4,304) (4,592)
-------- --------
Consolidated shareholders' deficit (206,766) (221,408)
-------- --------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
4. SEGMENT INFORMATION (CONTINUED)
· Download Table
BY GEOGRAPHIC AREA December 31, December 31,
1997 1998
------------ ------------
TOTAL ASSETS
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Americas 73,355 81,565
Europe, Africa and Middle East 70,768 127,036
Asia and Far East 37,849 33,653
Trading balances due from other ITS group companies (46,625) (82,259)
-------- --------
Total continuing operations 135,347 159,995
Discontinued operation 9,932 3,800
-------- --------
Total 145,279 163,795
-------- --------
TOTAL ASSETS IN SIGNIFICANT COUNTRIES
United States 49,383 64,080
United Kingdom 24,600 51,834
Others (each under 10% of total) 107,989 126,340
Trading balances due from other ITS group companies (46,625) (82,259)
-------- --------
Total continuing operations 135,347 159,995
Discontinued operation 9,932 3,800
-------- --------
Total 145,279 163,795
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Americas 20,328 20,475
Europe, Africa and Middle East 16,963 18,147
Asia and Far East 5,282 7,329
-------- --------
Total continuing operations 42,573 45,951
Discontinued operation 1,887 --
-------- --------
Total 44,460 45,951
-------- --------
PROPERTY, PLANT AND EQUIPMENT IN SIGNIFICANT COUNTRIES
United States 15,887 16,617
United Kingdom 4,854 4,260
Sweden 6,329 5,766
Others (each under 10% of total) 15,503 19,308
-------- --------
Total continuing operations 42,573 45,951
Discontinued operation 1,887 --
-------- --------
Total 44,460 45,951
-------- --------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
4. SEGMENT INFORMATION (CONTINUED)
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, 1996 December 31,
1996
----------------- --------------- ---------------- ---------------
REVENUES BY GEOGRAPHIC ORIGIN
Americas 111,091 36,681 143,531 146,183
Europe, Africa and Middle East 69,395 22,914 112,409 130,448
Asia and Far East 46,612 15,731 72,874 77,665
----------------- --------------- ---------------- ---------------
Total continuing operations 227,098 75,326 328,814 354,296
Discontinued operation 16,463 5,134 15,169 5,517
----------------- --------------- ---------------- ---------------
Total 243,561 80,460 343,983 359,813
----------------- --------------- ---------------- ---------------
REVENUES FROM SIGNIFICANT COUNTRIES OF ORIGIN
United States 85,635 27,588 107,790 114,993
United Kingdom 27,878 10,011 47,031 65,229
Hong Kong 21,326 7,109 32,456 39,002
Others (each under 10% of total) 92,259 30,618 141,537 135,072
----------------- --------------- ---------------- ---------------
Total continuing operations 227,098 75,326 328,814 354,296
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Discontinued operation 16,463 5,134 15,169 5,517
----------------- --------------- ---------------- ---------------
Total 243,561 80,460 343,983 359,813
----------------- --------------- ---------------- ---------------
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL ITEMS
Americas 9,909 6,735 13,249 10,628
Europe, Africa and Middle East 4,724 1,746 8,291 10,643
Asia and Far East 10,312 3,128 20,541 23,430
----------------- --------------- ---------------- ---------------
Total continuing operations 24,945 11,609 42,081 44,701
Discontinued operation (437) (1,433) (1,580) (2,463)
----------------- --------------- ---------------- ---------------
Total 24,508 10,176 40,501 42,238
----------------- --------------- ---------------- ---------------
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL ITEMS
FROM SIGNIFICANT COUNTRIES
United States 8,014 6,122 11,585 8,810
Hong Kong 5,588 1,271 8,409 10,687
United Kingdom (1,907) 178 4,452 2,637
Others (each under 10% of total) 13,250 4,038 17,635 22,567
----------------- --------------- ---------------- ---------------
Total continuing operations 24,945 11,609 42,081 44,701
Discontinued operation (437) (1,433) (1,580) (2,463)
----------------- --------------- ---------------- ---------------
Total 24,508 10,176 40,501 42,238
----------------- --------------- ---------------- ---------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
4. SEGMENT INFORMATION (CONTINUED)
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, 1996 December 31,
1996
----------------- --------------- ---------------- ---------------
REVENUES BY GEOGRAPHIC AREA OF DESTINATION
Americas 108,750 35,332 149,536 150,045
Europe, Africa and Middle East 71,736 24,263 106,399 124,658
Asia and Far East 46,612 15,731 72,879 79,593
----------------- --------------- ---------------- ---------------
Total continuing operations 227,098 75,326 328,814 354,296
Discontinued operation 16,463 5,134 15,169 5,517
----------------- --------------- ---------------- ---------------
Total 243,561 80,460 343,983 359,813
----------------- --------------- ---------------- ---------------
REVENUES FROM SIGNIFICANT DESTINATION COUNTRIES
United States 77,008 23,990 107,790 112,146
Others (each under 10% of total) 150,090 51,336 221,024 242,150
----------------- --------------- ---------------- ---------------
Total continuing operations 227,098 75,326 328,814 354,296
Discontinued operation 16,463 5,134 15,169 5,517
----------------- --------------- ---------------- ---------------
Total 243,561 80,460 343,983 359,813
----------------- --------------- ---------------- ---------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
5. OPERATING COSTS AND GROSS PROFITS
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, December 31,
1996 1996
---------------- ---------------- --------------- ----------------
Costs of sales 194,727 61,279 268,177 292,059
Net operating expenses 27,522 13,349 39,250 44,698
---------------- ---------------- --------------- ----------------
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Total operating costs 222,249 74,628 307,427 336,757
---------------- ---------------- --------------- ----------------
Gross profit 48,834 19,181 75,806 67,754
---------------- ---------------- --------------- ----------------
Net operating expenses comprise administrative costs in respect of operations
throughout each period and exceptional items charged against operating income as
follows:
Administrative costs before exceptional items 24,700 9,074 35,383 25,503
Exceptional items (Note 6) 2,822 4,275 3,867 19,195
---------------- ---------------- -------------- -----------------
Total administrative costs 27,522 13,349 39,250 44,698
---------------- ---------------- -------------- -----------------
Administrative costs comprise expenses incurred at the head office and
divisional regional offices. All other expenses incurred at other trading
locations are included in cost of goods sold.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
6. EXCEPTIONAL ITEMS
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, 1996 December 31,
1996
----------------- --------------- -------------- -----------------
EXCEPTIONAL CHARGES TO OPERATING PROFIT:
Continuing operations:
Foreign Trade Supervision 2,822 2,378 3,867 12,267
Caleb Brett - - - 1,784
----------------- --------------- -------------- -----------------
Continuing operations 2,822 2,378 3,867 14,051
Discontinued operation:
Environmental - restructuring - 1,897 - -
Environmental - legal and reprocessing - - - 5,144
----------------- --------------- -------------- -----------------
Discontinued operation - 1,897 - 5,144
----------------- --------------- -------------- -----------------
Total operating exceptional charges 2,822 4,275 3,867 19,195
----------------- --------------- -------------- -----------------
NON-OPERATING EXCEPTIONAL CHARGES:
Discontinued operation:
Loss on closure - 1,761 - 1,395
----------------- --------------- -------------- -----------------
Total non-operating exceptional charges - 1,761 - 1,395
----------------- --------------- -------------- -----------------
ITS provides foreign trade supervision services to a major client in West
Africa. At a meeting of the board of directors held on April 27, 1997, a
decision was taken to provide against all unpaid invoices relating to this
client. The exceptional charges to operating income in respect of Foreign
Trade Supervision relate to this West African client. The tax effect of the
exceptional charges to income is a credit of Pounds 1.9 million (1997: Pounds
1.2 million; period from October 8, 1996 to December 31, 1996: Pounds 1.0
million; period from January 1, 1996 to October 7, 1996: Pounds 1.1 million).
ITS also provides testing services in its Caleb Brett division to this major
client in West Africa. In view of the accounting policy followed for this client
in the Foreign Trade Supervision division, all unpaid invoices relating to this
client in the Caleb Brett division have also been provided against. The tax
effect of this exceptional item to income is nil.
The exceptional charges to operating and non-operating income in 1996 in respect
of Environmental Testing related to the restructuring and loss on disposals of
fixed assets which was implemented by the Company following the Acquisition. The
related tax impact in respect of the operating exceptional charge is a tax
credit of Pounds 0.8 million. There is no related tax impact in respect of the
non-operating exceptional charges in respect of Environmental Testing.
The exceptional charge to operating income of Pounds 5.1 million relates to
the legal and reprocessing costs which are expected to be incurred by
Environmental Testing, as a result of the ongoing investigation by the
Environmental Protection Agency. (See note 29)
On August 20, 1998 substantially all the business and assets of the
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Environmental operation in the United States and St. Helen's in the United
Kingdom were sold at their book value of Pounds 1.9 million. Exceptional
costs of Pounds 0.4 million arose on the disposal of fixed assets and a
further Pounds 1.0 million includes the cost of staff redundancies, future
expected facility costs following the completion of reprocessing, as well as
the cost of continuing to store data for clients, making a total
non-operating exceptional charge of Pounds 1.4 million.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
7. OPERATING INCOME
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, December 31,
1996 1996
--------------- ---------------- --------------- ----------------
OPERATING INCOME IS STATED AFTER CHARGING:
Depreciation of tangible assets 8,753 2,680 12,134 11,153
Amortisation of intangible goodwill - - - 377
Directors' emoluments:
Borne by Predecessor/Successor Company 334 85 574 779
Bonus borne by Inchcape plc - 731 - -
Staff costs 104,322 33,764 143,678 155,061
Leasing and hire charges 8,962 2,562 14,431 15,856
Auditors' remuneration:
Group - as auditors 173 57 392 533
Group - other services 187 236 243 120
Company - as auditors - - 1 1
In addition to the amounts included above for auditors' remuneration for
other services, Pounds 1.8 million has been charged to goodwill and Pounds
0.7 million has been charged against the carrying value of borrowings in the
three months ended December 31, 1996.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
8. NET INTEREST EXPENSE
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, 1996 October 8, December 31, December 31,
to October 1996 to 1997 1998
7, 1996 December
31, 1996
----------------- --------------- --------------- --------------
INTEREST EXPENSE AND OTHER CHARGES
On loans from other Inchcape plc companies 5,007 - - -
Senior Subordinated Notes - 1,868 12,719 12,393
Parent Subordinated PIK Debentures - 885 6,469 7,232
Senior Term Loan A - 1,001 6,453 6,681
Senior Term Loan B - 476 3,158 3,108
Senior Revolver - - - 576
Other borrowings 138 75 206 793
Amortisation of debt issuance costs - 255 2,238 1,919
----------------- --------------- --------------- --------------
Interest expense 5,145 4,560 31,243 32,702
INTEREST INCOME:
On loans to other Inchcape plc companies (660) - - -
On bank balances (1,320) (497) (1,491) (847)
----------------- --------------- --------------- --------------
3,165 4,063 29,752 31,855
----------------- --------------- --------------- --------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
9. TAXATION
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, 1996 December 31,
1996
----------------- --------------- --------------- --------------
U.K. Corporation tax on profit on
ordinary activities 4,611 - 268 477
Double taxation relief (4,440) - (268) (429)
----------------- --------------- --------------- --------------
171 - - 48
Overseas taxes 13,356 (1,163) 5,433 8,140
Transfer (from)/to deferred taxation (2,179) 1,480 (1,108) (1,062)
Adjustments to prior year liabilities 433 - 537 -
----------------- --------------- --------------- --------------
11,781 317 4,862 7,126
Associated companies 102 94 14 30
----------------- --------------- --------------- --------------
11,883 411 4,876 7,156
----------------- --------------- --------------- --------------
The following table sets out the reconciliation of the notional tax charge at
U.K. standard rate to the actual tax charge.
Income/(loss) before taxes 23,938 77 6,882 (10,207)
---------------- ---------------- --------------- --------------
Notional tax charge at U.K. standard
rate 31.0% (1997: 31.5% and 1996: 33%) 7,900 25 2,168 (3,164)
Differences in overseas tax rates (192) (171) 112 (1,778)
U.K. tax on dividends, less FTC's 1,126 - 318 385
Permanent differences - disallowables 415 1,205 713 1,241
Permanent differences - untaxed income (151) (11) (39) (889)
Unprovided deferred tax 1,238 (619) 808 10,332
Other 1,547 (18) 796 1,029
---------------- ---------------- --------------- --------------
11,883 411 4,876 7,156
---------------- ---------------- --------------- --------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
10. GOODWILL
Total
Cost
At beginning of year --
Additions (Note 27c) 13,655
Exchange adjustments (208)
-------
At December 31, 1998 13,447
-------
Amortisation
At beginning of year --
Charged in year 377
Exchange adjustments (4)
-------
At December 31, 1998 373
-------
Net book value
At December 31, 1997 --
-------
At December 31, 1998 13,074
-------
Such purchased goodwill is amortised to nil over equal instalments over its
estimated useful life, generally not exceeding 20 years.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
11. PROPERTY, PLANT AND EQUIPMENT
· Download Table
Land and Plant and Total
buildings machinery
COST
At December 31, 1996 10,596 38,649 49,245
Exchange adjustments (648) (1,817) (2,465)
Additions 86 13,646 13,732
Disposals (65) (2,104) (2,169)
---------------------------------------
At December 31, 1997 9,969 48,374 58,343
---------------------------------------
Exchange adjustments (222) (1,354) (1,576)
Acquisitions 722 2,479 3,201
Additions 98 13,928 14,026
Transfers (953) 654 (299)
Disposals (79) (6,286) (6,365)
---------------------------------------
At December 31, 1998 9,535 57,795 67,330
---------------------------------------
ACCUMULATED DEPRECIATION
At December 31, 1996 (144) (2,536) (2,680)
Exchange adjustments 22 710 732
Charged for the year (308) (11,826) (12,134)
Disposals 1 198 199
---------------------------------------
At December 31, 1997 (429) (13,454) (13,883)
---------------------------------------
Exchange adjustments 14 683 697
Charged for the year (264) (10,889) (11,153)
Acquisitions -- (1,514) (1,514)
Transfers 86 (69) 17
Disposals -- 4,457 4,457
---------------------------------------
At December 31, 1998 (593) (20,786) (21,379)
---------------------------------------
NET BOOK VALUE
---------------------------------------
At December 31, 1996 10,452 36,113 46,565
---------------------------------------
At December 31, 1997 9,540 34,920 44,460
---------------------------------------
At December 31, 1998 8,942 37,009 45,951
---------------------------------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
12. INVESTMENTS
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Investments consist of investments in associated undertakings and comprises the
following:
Total
-------------
At December 31, 1996 1,418
Exchange adjustment (4)
Transfer to subsidiaries (1,243)
Dividends received (51)
Retained profit for the year 64
-------------
At December 31, 1997 184
Exchange adjustment (71)
Transfer from Minority Interests 215
Dividends received (84)
Retained loss for the year (13)
-------------
At December 31, 1998 231
-------------
13. TRADE RECEIVABLES
Trade receivables are shown net of the following allowances for doubtful
receivables:
· Enlarge/Download Table
Balance at Cost and Deductions Balance at
beginning expenses end of
of period period
-------------- --------------- --------------- ---------------
Period from January 1, 1996 to October 7, 1996
Allowance for doubtful receivables 5,418 2,999 (382) 8,035
Period from October 8, 1996 to December 31, 1996
Allowance for doubtful receivables 8,035 2,268 (127) 10,176
Year ended December 31, 1997
Allowance for doubtful receivables 10,176 18,363 (14,030) 14,509
Year ended December 31, 1998
Allowance for doubtful receivables 14,509 16,601 (1,016) 30,094
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
14. OTHER CURRENT ASSETS
· Download Table
December 31, December 31,
1997 1998
--------------- ----------------
Assets held for resale 406 294
Other receivables 4,475 7,005
Prepayments and accrued income 7,182 7,942
--------------- ----------------
12,063 15,241
--------------- ----------------
Within other receivables is Pounds 1.4 million due in more than one year
(1997: Pounds 1.7 million).
15. INVENTORIES
· Download Table
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
December 31, December 31,
1997 1998
--------------- ----------------
Raw materials 1,531 1,966
Work in progress 500 951
Finished goods 619 745
--------------- ----------------
2,650 3,662
--------------- ----------------
16. BORROWINGS
· Download Table
December 31, December 31,
1997 1998
--------------- ----------------
Due in less than one year:
Senior Term Loan A 4,438 4,821
Senior Revolver - 16,333
Other borrowings 830 1,055
---------------------------------
5,268 22,209
---------------------------------
Due in more than one year:
Senior Subordinated Notes 116,517 116,257
Senior Term Loan A 70,547 65,302
Senior Term Loan B 34,136 34,053
Parent Subordinated PIK Debentures 50,791 57,568
Other borrowings 45 384
---------------------------------
272,036 273,564
---------------------------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
16. BORROWINGS (CONTINUED)
MATURITY OF BORROWINGS:
· Enlarge/Download Table
Senior Senior Senior Senior Parent Other Total
Subordinated Term Term Revolver Subordinated borrowings borrowings
Notes Loan A Loan B PIK
Debentures
---------------------------------------------------------------------------------------
Due in less than one year - 5,673 - 16,333 - 1,055 23,061
Due in one to two years - 19,800 - - - 208 20,008
Due in 2 and 5 years - 48,170 - - - 165 48,335
Due in over 5 years 120,833 - 35,142 - 59,214 11 215,200
---------------------------------------------------------------------------------------
120,833 73,643 35,142 16,333 59,214 1,439 306,604
Debt issuance costs (4,576) (3,520) (1,089) - (1,646) - (10,831)
---------------------------------------------------------------------------------------
116,257 70,123 34,053 16,333 57,568 1,439 295,773
---------------------------------------------------------------------------------------
DESCRIPTION OF BORROWINGS
(a) SENIOR SUBORDINATED NOTES
In November 1996, the Company issued US $203.0 million principal amount of
Senior Subordinated Notes (the "Notes"). The cash consideration received at
the date of issue was Pounds 123,547,000. The Notes mature at par on November
1, 2006. Interest on the Notes accrues at the rate of 10.25% per annum and is
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
payable semi annually in cash on each May 1 and November 1. The Notes are
redeemable, in whole, or in part, at the Company's option at any time on or
after November 1, 2001 at the redemption price of 105.125% of the principal
amount, during the year commencing November 1, 2001, 103.417% of the
principal amount, during the year commencing November 1, 2002, 101.708% of
the principal amount during the year commencing November 1, 2003 and,
thereafter, at 100% of the principal amount plus accrued and unpaid interest.
The Notes were issued to finance the Acquisition (see Note 27).
(b) SENIOR TERM LOANS
In November 1996, the Company entered into a credit agreement (the "Credit
Agreement") comprising a Pounds 125.0 million Term Loan Facility (the "Term
Loan Facility"), split into a Pounds 85.0 million multicurrency Term A
Facility (the "Term A Facility") and a Pounds 40.0 million multicurrency Term
B Facility (the "Term B Facility"), and a $48.8 million multicurrency
Revolving Credit Facility. The Term A Facility amortises over seven years
with the final repayment on 15 December 2003 and the Term B Facility is
repayable in two equal instalments in June and December 2004. The commitments
under the Revolving Credit Facility terminate on December 15, 2003.
Borrowings under the Credit Agreement are secured on substantially all the
tangible and intangible assets of the Company.
Term A Loans and advances under the Revolving Credit Facility initially bear
interest at a rate equal to LIBOR (as adjusted) plus 2.00%. The margin over
LIBOR may be reduced, initially to 1.75%, following satisfaction of certain
financial performance tests.
Term B Loans bear interest at a rate equal to LIBOR (as adjusted) plus 2.75%.
Overdue amounts on the Term A Loans, the Term B Loans and the Revolving Credit
Facility will bear interest at the applicable interest rate plus 1.00% per annum
(see Note 34).
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
16. BORROWINGS (continued)
DESCRIPTION OF BORROWINGS (continued)
(c) PARENT SUBORDINATED PIK DEBENTURES
In November 1996, the Company issued Pounds 50.0 million of units (the "Units")
consisting of 12.0% Subordinated Debentures due November 1, 2007 (the "Parent
Subordinated PIK Debentures") and warrants to purchase 14.2% of the fully
diluted share capital of the Company ("Warrants") pursuant to a securities
purchase agreement (the "Securities Purchase Agreement"). The Warrants will be
exercisable only upon sale in connection with the acquisition by a person (other
than a person who has funds managed by Charterhouse or any other member of
Charterhouse's wholly-owned group) of more that 50% of the Ordinary Shares of
the Parent (calculated excluding the Ordinary Shares underlying the Warrant) or
the unconditional granting of permission for any of the Ordinary Shares of the
Parent to be dealt on any recognised investment exchange.
Interest on the Parent Subordinated PIK Debentures is accrued quarterly at a
rate of 12.0% per annum, subject, upon, and during the continuation of certain
events of default, to an increase to the lesser of (i) 24.0% per annum or (ii)
the highest rate of interest then allowed under applicable law. In lieu of cash,
interest on the Parent Subordinated PIK Debentures may, at the option of the
Company, be paid by issuing additional Parent Subordinated PIK Debentures on any
interest payment date (i) on or prior to February 1, 2002, (ii) after February
1, 2002, to the extent the Company's pro-forma total fixed charge coverage ratio
would be less than 1.10 to 1.00 or (iii) if (a) at the time of any such payment,
there exists a payment default in respect of certain senior indebtedness
(including the Notes and indebtedness incurred under the Credit Agreement noted
above) or (b) after giving effect to any such payment an event of default
pursuant to which such indebtedness under the Indenture or Credit Agreement may
be accelerated shall occur and be continuing and the Company is prevented by the
holders under the Indenture or the creditors under the Credit Agreement from
paying such cash interest.
The Parent Subordinated PIK Debentures may be redeemed at any time at the option
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
of the Company in whole or in part (provided that, at any such time, the Company
redeems a minimum of US $5.0 million in aggregate principal amount of the Parent
Subordinated PIK Debentures) at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date.
The Parent Subordinated PIK Debentures are unsecured liabilities of the Company.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
17. ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND DEFERRED INCOME
· Download Table
December 31, December 31,
1997 1998
---------------- -----------------
Trade accounts payable 18,580 20,257
Other taxation and social security 3,690 4,565
Other creditors 4,587 7,309
Accruals and deferred income 33,162 38,821
---------------- -----------------
60,019 70,952
---------------- -----------------
Within accruals and deferred income is Pounds 0.2 million due in more than
one year (1997: Pounds 0.6 million).
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
18. PROVISIONS FOR LIABILITIES AND CHARGES
· Enlarge/Download Table
Pension Fair value Other Total
benefits
--------------------------------------------------------------------
At January 1, 1996 90 1,228 2,498 3,816
Transfers from accruals and deferred income - - 1,026 1,026
Charged to operations 766 - 1,249 2,015
Utilised during the period (823) (99) (418) (1,340)
--------------------------------------------------------------------
At October 7, 1996 33 1,129 4,355 5,517
--------------------------------------------------------------------
At October 8, 1996 701 2,703 5,484 8,888
Charged to operations 225 - 2,233 2,458
Utilised during the period (229) (70) (426) (725)
--------------------------------------------------------------------
At December 31, 1996 697 2,633 7,291 10,621
--------------------------------------------------------------------
Exchange adjustments (2) 71 (69) --
Charged to operations 22 -- 763 785
Utilised during the year (160) (866) (3,285) (4,311)
--------------------------------------------------------------------
At December 31, 1997 557 1,838 4,700 7,095
--------------------------------------------------------------------
Exchange adjustments 10 (17) (5) (12)
Charged/(released) to operations 348 (1,497) 4,013 2,864
Utilised during the year (398) (324) (707) (1,429)
--------------------------------------------------------------------
At December 31, 1998 517 - 8,001 8,518
--------------------------------------------------------------------
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Other provisions at December 31, 1998 includes an amount for claims of Pounds
4.0 million (including Pounds 1.1 million of claims in respect of retirement
benefits) and closure and reprocessing costs for the Environmental division
of Pounds 4.0 million. See note 6.
19. DEFERRED TAXATION
· Download Table
December 31, December 31,
1997 1998
-------------- ----------------
Total potential deferred taxation:
Accelerated capital allowances 1,218 (93)
Losses carried forward (3,633) (7,782)
Other timing differences (3,441) (9,370)
--------------- ----------------
(5,856) (17,245)
--------------- ----------------
Asset recorded (286) (1,348)
--------------- ----------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
20. SHARE CAPITAL
· Enlarge/Download Table
December 31, December 31,
1997 1998
-- --- --- -- --- -- --- --- ----- --- --
(a) AUTHORISED SHARE CAPITAL
Equity:
Ordinary `A' shares of 1p each 269 284
Ordinary `B' shares of 1p each 49 52
Ordinary `C' shares of 1p each 12 13
Ordinary `D' shares of 1p each 55 58
Non equity: Zero coupon redeemable preference shares of Pounds 1 each 81,815 86,657
-- --- --- -- --- -- --- --- ----- --- --
82,200 87,064
-- --- --- -- --- -- --- --- ----- --- --
(b) ISSUED SHARE CAPITAL EQUITY:
Ordinary 'A' shares of 1p each 269 284
Ordinary 'B' shares of 1p each 49 52
Ordinary 'C' shares of 1p each - -
Ordinary 'D' shares of 1p each - -
Non equity: Zero coupon redeemable preference shares of Pounds 1 each 81,815 86,657
-- --- --- -- --- -- --- --- ----- --- --
82,133 86,993
-- --- --- -- --- -- --- --- ----- --- --
ORDINARY SHARES
The A Shares, B Shares, C Shares and D Shares rank pari passu in all respects
except that: (i) the holders of A Shares and D Shares have a right on a
winding-up to receive the subscription price of those shares in preference to
the holders of B Shares and C Shares, but rank pari passu with the holders of B
Shares and C Shares on the distribution of any surplus assets available after
repayment to the holders of B Shares and C Shares of the subscription price on
those shares; (ii) the C Shares confer no right to receive notice of, attend or
vote at general meetings of the Company; and (iii) D Shares confer on the
holders the right to receive notice of and to attend, but not to vote at,
general meetings of the Company.
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SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
20. SHARE CAPITAL (continued)
ZERO COUPON REDEEMABLE PREFERENCE SHARES
The Preference Shares rank senior on a return of capital to the Ordinary Shares
of the Company on a winding up but not otherwise. No dividends will be payable
on the Preference Shares. The Preference Shares will be mandatorily redeemed on
November 8, 2009 at par value. The Company is required upon the written request
from holders of 30% or more of the Preference Shares to redeem all of those
shares in issue from any source of funds legally available therefor. Holders of
Preference Shares are entitled to receive notice but not to attend and vote at
general meetings, except that they can attend and vote on any resolution
regarding the winding-up of the Company, a reduction in the Company's capital or
a modification of the rights and restrictions attached to the Preference Shares.
· Download Table
December 31, December 31,
1997 1998
--------------- ----------------
(c) PREMIUM IN EXCESS OF PAR VALUE -
Ordinary 'A' shares of 1p each 2,416 2,552
Ordinary 'B' shares of 1p each 441 466
--------------- ----------------
2,857 3,018
--------------- ----------------
--------------- ----------------
(d) Shares to be issued 2,793 2,793
--------------- ----------------
During the period ended December 31, 1996 the Company issued warrants to
subscribe for ordinary `D' shares of 1p each. The shareholder warrants can only
be exercised on November 1, 2007 unless certain events occur beforehand. The
shareholder warrants, if exercised in full, would represent 14.2% of the fully
diluted share capital of the Company. In accordance with FRS 4, the net proceeds
of issue of these warrants (Pounds 2.8 million) have been included within
shareholders' funds as shares to be issued.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
21. SHARE OPTION SCHEME
The Company established a share option scheme for senior management on March
1, 1997. The board of directors has allocated options to purchase a maximum
of 1,305,416 Ordinary `C' shares under the scheme. 90,029 (1997: 1,340,000)
options were granted and 106,641 (1997: 90,000) were forfeited during the
year. The options may not be exercised before the later of (i) three years
from the grant date and (ii) the sale of the entire issued share capital of
the Company to a single person or the admission to listing on a securities
market of the shares of the Company. The options may not be exercised after
seven years from grant date. The board of directors of the Company has set
the exercise price at Pounds 0.10 per share, being the director's estimate of
the fair value of the underlying shares at the grant date. Accordingly, no
compensation cost has been recorded in the accompanying consolidated
statement of income.
· Enlarge/Download Table
Number Exercise price Exercisable between
(Pounds)
-- - - -- - - -- - - -- - --- -- ---- -- -- --- -- --- --- -- --- --- -- --- --- -- --- --- -----------
The outstanding options are
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
exercisable as follows:
1,043,271 0.10 March 1, 2000 March 1, 2004
10,592 0.10 September 1, 2000 September 1, 2004
172,116 0.10 December 31, 2000 December 31, 2004
23,831 0.10 June 1, 2001 June 1, 2005
55,606 0.10 December 31, 2001 December 31, 2005
-- - - -- - - -- - --
1,305,416
-- - - -- - - -- - --
No options are exercisable at December 31, 1998 and the weighted average
remaining contractual life is 5.0 (1997: 6.3) years.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
22. RETAINED EARNINGS/(DEFICIT)
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, 1996 December 31,
1996
---------------- ---------------- ---------------- ----------------
At beginning of period (2,381) - (286,664) (294,549)
Exchange adjustments (352) 4,093 (7,611) 928
Net income/(loss) 11,237 (1,438) (1,598) (20,591)
Goodwill written off on acquisition - (289,319) - -
Goodwill adjustments - - 1,324 -
Dividends (28,329) - - -
Capitalisation of indebtedness to other 41,542 - - -
Inchcape plc companies
---------------- ---------------- ---------------- ----------------
At end of period 21,717 (286,664) (294,549) (314,212)
---------------- ---------------- ---------------- ----------------
Included in Retained deficit is Pounds 270.6 million which represents
goodwill written off to reserves prior to December 31, 1997 (at December 31,
1996 and 1997: Pounds 284.7 million and Pounds 275.1 million, respectively).
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
23. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' EQUITY/(DEFICIT)
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, 1996 December 31,
1996
---------------- ---------------- ---------------- --------------
Total recognised gains and losses for the period (17,164) 2,655 (9,209) (19,663)
Issue of Successor Company ordinary share capital -- 3,175 -- 179
Issue of Successor Company ordinary share warrants -- 2,793 -- --
Issue of Successor Company redeemable preference shares -- 81,815 -- 4,842
Goodwill movements -- (289,319) 1,324 --
Capitalisation of indebtedness to other Inchcape plc companies 41,542 -- -- --
---------------- ---------------- ---------------- --------------
24,378 (198,881) (7,885) (14,642)
Opening shareholders' equity/(deficit) 32,890 -- (198,881) (206,766)
---------------- ---------------- ---------------- --------------
Closing shareholders' equity/(deficit) 57,268 (198,881) (206,766) (221,408)
---------------- ---------------- ---------------- --------------
December 31, December 31,
1997 1998
---------------- --------------
Analysis of closing shareholders' deficit
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Equity interests (288,581) (308,065)
Non-equity interests 81,815 86,657
---------------- --------------
(206,766) (221,408)
---------------- --------------
24. RECONCILIATION OF OPERATING INCOME TO OPERATING CASH FLOWS
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, 1996 October 8, 1996 December 31, December 31,
to October 7, to December 31, 1997 1998
1996 1996
---------------------------------------------------------------------
Operating income 21,686 5,901 36,634 23,043
Depreciation charge 8,753 2,680 12,134 11,153
Goodwill amortisation - - - 377
Loss on sale of fixed assets 347 1,345 1,697 157
(Increase)/decrease in inventories (651) 120 (725) (1,075)
Increase in receivables and prepayments (6,148) (2,746) (7,408) (11,380)
Increase in payables 3,018 2,329 6,918 5,720
Discontinued operating exceptional provisions - - - 5,144
Increase/(decrease) in other provisions 1,701 1,733 (3,526) (728)
---------------------------------------------------------------------
28,706 11,362 45,724 32,411
Equity income of associates (374) (69) (78) 13
Less dividends received from associates - 41 - 21
---------------------------------------------------------------------
Total operating cash inflow 28,332 11,334 45,646 32,445
---------------------------------------------------------------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
25. ANALYSIS OF CASH FLOWS
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, 1996 October 8, 1996 December 31, December 31,
to October 7, to December 31, 1997 1998
1996 1996
--------------------------------------------------------------------
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Net interest paid (3,419) (1,196) (20,176) (22,631)
Dividends paid to minorities (661) (145) (1,713) (2,439)
Dividends received from other Inchcape plc 5,417 - - -
companies
--------------------------------------------------------------------
1,337 (1,341) (21,889) (25,070)
--------------------------------------------------------------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of property, plant and equipment (12,439) (5,663) (13,732) (14,026)
Sale of property, plant and equipment 162 58 737 67
--------------------------------------------------------------------
(12,277) (5,605) (12,995) (13,959)
--------------------------------------------------------------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings (834) (336,737) - (10,734)
Acquisition provision payments - - (9,392) (600)
Sale of subsidiary undertakings 7,546 - - (341)
--------------------------------------------------------------------
6,712 (336,737) (9,392) (11,675)
--------------------------------------------------------------------
FINANCING
Issue of ordinary shares and shares to be - 5,968 - 179
issued
Issue of redeemable preference shares - 81,815 - 4,842
Issue of short term debt - - - 16,440
Issue of long term debt - 283,210 - -
Increase in net funding from other Inchcape
plc companies 3,230 - - -
Repayment of other loans (3) (636) (2,378) (5,472)
Cash subscribed by minorities - - 430 25
--------------------------------------------------------------------
3,227 370,357 (1,948) 16,014
--------------------------------------------------------------------
26. ANALYSIS OF NET DEBT
· Enlarge/Download Table
At Cash flow Acquisitions Debt issued Other Exchange At
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
December in lieu of non-cash adjustments December
31, 1997 interest changes 31, 1998
payment
-------------------------------------------------------------------------------------------
Net cash
Cash in hand and at bank 25,153 (8,205) 313 -- -- (489) 16,772
-------------------------------------------------------------------------------------------
Debt
Debt due within one year (5,268) (10,968) (669) -- (5,263) (41) (22,209)
Debt due after one year (272,036) -- -- (7,088) 3,344 2,216 (273,564)
-------------------------------------------------------------------------------------------
(277,304) (10,968) (669) (7,088) (1,919) 2,175 (295,773)
-------------------------------------------------------------------------------------------
Total net debt (252,151) (19,173) (356) (7,088) (1,919) 1,686 (279,001)
-------------------------------------------------------------------------------------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
27. ACQUISITIONS
(a) SUCCESSOR COMPANY
On October 8, 1996, the Company acquired from Inchcape plc the whole of its
Inchcape Testing Services Division. The acquisition method of accounting has
been adopted. The analysis of net assets acquired and the fair value to the
Company is set out below. The resulting goodwill of Pounds 289.3 million has
been eliminated against shareholders' equity.
· Enlarge/Download Table
Book value Revaluation Accounting Other fair value Total
policy
------------------------------------------------------------------------------------
Cash 28,009 - - - 28,009
Receivables 60,094 - - - 60,094
Stock 2,866 - (461) - 2,405
Other current assets 10,092 - (457) 1,900 11,535
Property, plant and equipment 48,910 308 - - 49,218
Associate undertakings 1,660 - - - 1,660
Borrowings (1,397) - - - (1,397)
Accounts payable (45,125) - - (389) (45,514)
Income tax (9,332) - - - (9,332)
Deferred tax 2,963 - - (2,379) 584
Provisions (2,078) - - (3,371) (5,449)
Net balance with Inchcape plc (39,394) - - - (39,394)
------------------------------------------------------------------------------------
57,268 308 (918) (4,239) 52,419
------------------------------------------------------------------------------------
Minority interests (2,301)
-----------------
Fair value of net assets acquired: 50,118
=================
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
27. ACQUISITIONS (continued)
· Enlarge/Download Table
Provisional Goodwill Final
adjustments
------------------------------------------------
FAIR VALUE OF CONSIDERATION:
Initial cash consideration (including fees of Pounds 7.5 million) 386,786 (1,324) 385,462
Post closing purchase price adjustments (7,955) - (7,955)
------------------------------------------------
378,831 (1,324) 377,507
Settlement of net indebtedness of Predecessor Company to (39,394) - (39,394)
Inchcape plc
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
------------------------------------------------
339,437 (1,324) 338,113
Less fair value of net assets acquired (50,118) - (50,118)
------------------------------------------------
Goodwill arising on acquisition 289,319 (1,324) 287,995
------------------------------------------------
The goodwill adjustments reflect a reduction in consideration in respect of
the Indian operations of Pounds 1.0 million and a reduction in professional
fees of Pounds 0.3 million.
The revaluation of Pounds 0.3 million comprises an upward adjustment of
Pounds 1.2 million in respect of freehold properties and a downward
adjustment of Pounds 0.9 million in respect of plant and equipment.
The accounting policy adjustments of Pounds 0.9 million comprise the write
down of property deposits to landlords to align with the Company's policy of
not recognising such assets on the balance sheet and the write down of work
in progress to align with the Company's policy on the recognition of work in
progress.
The other fair value adjustments principally comprise:
o Pounds 1.9 million prepayment in respect of surpluses in funded pension
schemes assessed on an actuarial basis as at the effective date of
acquisition;
o Pounds 0.7 million provision in respect of deficits in funded pension
schemes assessed on an actuarial basis as at the effective date of
acquisition;
o Pounds 2.1 million discounted provision in respect of the excess of
contracted property rental charges over market rentals at the effective
date assessed by an independent valuer;
o Pounds 0.6 million provision for the costs of changes to the Company's
signage to remove references to Inchcape plc as contractually required by
the share purchase agreement; and
o Pounds 2.4 million reduction in deferred tax amounts in compliance with
the requirements of Statement of Standard Accounting Practice 15
("Accounting for deferred tax").
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
27. ACQUISITIONS (continued)
(b) PREDECESSOR COMPANY
Acquisitions during the period ended October 7, 1996 were not material to
revenues, operating profit and the net assets, either individually or in
aggregate.
(c) SUCCESSOR COMPANY
During 1998, the Company acquired eight companies in its Caleb Brett
division. The provisional analysis of net assets acquired and the fair value
to the Company is set out below. The resulting provisional goodwill of Pounds
13.7 million has been capitalised and is being amortised over 20 years.
· Enlarge/Download Table
Book value Revaluation Accounting Other fair Total
policy value
adjustments
----------------------------------------------------------------------
Trade receivables 2,091 - (80) - 2,011
Stock 90 - (90) - -
Other current assets 528 - - (38) 490
Property, plant and equipment 1,953 (156) (51) - 1,746
Investments 164 (162) - (2) -
Accounts payable (2,744) - - (235) (2,979)
Taxation 50 - - - 50
Provisions (55) - - - (55)
----------------------------------------------------------------------
2,077 (318) (221) (275) 1,263
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
----------------------------------------------------------------------
Minority interests -
--------------
Provisional Fair value of net assets acquired: 1,263
==============
FAIR VALUE OF CONSIDERATION:
Initial cash consideration (including fees of Pounds 0.5 million) 10,735
Deferred consideration payable 3,490
Overdraft acquired 32
Loans acquired 661
--------------
14,918
Less fair value of net assets acquired (1,263)
--------------
Provisional goodwill arising on acquisition 13,655
--------------
Approximately 75% of the goodwill arose on the purchase of two companies. In
April 1998, Caleb Brett acquired the business of Van Sluys and Bayet Group
("VSB") in Belgium for a purchase consideration of approximately Pounds 4.2
million resulting in goodwill of Pounds 3.9 million. In June 1998, Caleb
Brett acquired a Norwegian company - West Lab Services AS ("West Lab"), for
approximately Pounds 6.9 million resulting in goodwill of Pounds 6.2 million.
The other fair value adjustments principally comprise a Pounds 0.2 million
provision in respect of unprovided liabilities, namely provisions for a claim
and unprovided holiday pay.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
27. ACQUISITIONS (continued)
(d) NET CASH OUTFLOW ON PURCHASE OF SUBSIDIARIES AND ASSOCIATES
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, December 31,
1996 1996
--------------- --------------- --------------- ---------------
Fair value of consideration 885 378,831 - 14,918
Net deferred consideration payable - - - (3,490)
Cash and cash equivalents acquired (51) (28,009) - (32)
Loans acquired - - - (661)
Contingent consideration recoverable received - (2,850) - -
Excess consideration recoverable received - (4,570) - -
Fees payable - (6,665) - 599
--------------- --------------- --------------- ---------------
Net cash outflow in respect of acquisition made
during the period and prior period adjustments 834 336,737 - 11,334
--------------- --------------- --------------- ---------------
The results of operations for the period from October 8, 1996 to December 31,
1996 were generated entirely from the acquisition in that period.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
28. PENSION PLANS
The Group operates a number of pension plans throughout the world. In most
locations, these are defined contribution arrangements. There are significant
defined benefit plans in the U.K., U.S.A., Hong Kong and Taiwan. These are all
funded plans, with assets held in separate trustee administered funds.
The total pension cost for the group was:
· Enlarge/Download Table
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Period from Period from Year ended Year ended
January 1, October 8, December 31, December 31,
1996 to 1996 to 1997 1998
October 7, December 31,
1996 1996
- - - -- - -- - - ---- - ---- - ---- -- --- - - --- -- --- --- --- -- -- --- --- -- --
Defined benefit plans 766 225 1,318 1,638
Defined contribution plans 2,916 914 5,648 5,025
- - - -- - -- - - ---- - ---- - ---- -- --- - - --- -- --- --- --- -- -- --- --- -- --
3,682 1,139 6,966 6,663
- - - -- - -- - - ---- - ---- - ---- -- --- - - --- -- --- --- --- -- -- --- --- -- --
The pension cost for the defined benefit plans was assessed in accordance with
the advice of qualified actuaries based on actuarial valuations conducted during
the year using appropriate methods and assumptions. The projected unit method
was used and the principal assumption was that, on average, annual investment
returns would exceed salary increases by 1.9%.
The pension cost for the defined contribution plans is the contribution payable
by the group during the year.
At December 31, 1998 the aggregate market value of the main defined benefit
plans was Pounds 23.0 million. The benefits accrued to members of the UK plan
(allowing for expected future salary and pension increases) were 131% funded.
The accrued benefits in the other plans were between 70% and 90% funded,
reflecting differences in local funding practice. Actual contributions to the
plans were determined on the basis of separate actuarial advice and were
Pounds 1.3 million (1997: Pounds 1.1 million; period from October 8, 1996 to
December 31, 1996: Pounds 0.2 million; period from January 1, 1996 to October
7, 1996: Pounds 0.6 million). A prepayment of Pounds 0.4 million (1997:
Pounds 0.8 million; at December 31, 1996: Pounds 1.2 million; at October 7,
1996: Pounds 1.3 million) is included in debtors, this being the value of
surplus assets in the defined benefit plans as at September 30, 1996, and the
accumulated differences between the actual contributions paid and the pension
cost since that date.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
29. CONTINGENT LIABILITIES
· Download Table
December 31, December 31,
1997 1998
--------------- --------------
Performance bonds 1,916 2,086
Other guarantees 3,053 2,551
--------------- --------------
4,969 4,637
--------------- --------------
The Company is a defendant in various lawsuits and has been named in a number
of claims. The Company is defending these matters vigorously and
investigations and discovery are in progress. The Company has been fully and
partially indemnified by Inchcape plc, the previous owner of Inchcape Testing
Services, in respect of specified litigation and claims outstanding at the
date of the Acquisition.
The ultimate outcome and cost of litigation and claims cannot presently be
determined. However, the directors do not consider that the ultimate outcome
of these matters will have a material adverse impact on the Company's
financial position or results of operations.
The Company has been fully indemnified by Inchcape plc in respect of any
actual or contingent taxation liabilities of the Predecessor Company that may
arise in respect of all previous accounting periods up to September 30, 1996.
ENVIRONMENTAL PROTECTION AGENCY
In December 1997, Intertek Testing Services Environmental Laboratories, Inc.
("ITS Environmental") discovered certain discrepancies in reported testing
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
results at its facility in Richardson, near Dallas, Texas ("Dallas"). A
further investigation by the Quality Assurance/Quality Control department of
ITS Environmental revealed that technicians at the Dallas facility had at
various times, manually integrated data and improperly calibrated test
equipment in a way that may have skewed the accuracy of the test results that
have been reported but not necessarily the basic data recorded in the testing
equipment.
ITS Environmental promptly reported these discrepancies to the EPA and to
clients. Civil and criminal investigations are under way. A government
investigation at the ITS Environmental facility uncovered evidence of false
reporting beyond that initially discovered and disclosed by ITS Environmental.
ITS Environmental has requested inclusion in the EPA's Voluntary Disclosure
Program. Under this program it may be possible to foreclose criminal but not
civil penalties. If the actions of ITS Environmental that were disclosed to
the EPA are found to qualify for the immunities available under its Voluntary
Disclosure Program, the protection of this program may not extend to improper
actions subsequently discovered.
In August 1998, ITS Environmental sold its laboratory business in Burlington,
Vermont U.S.A. and St. Helens, U.K. and stopped commercial operations at the
laboratory in Dallas. These actions effectively resulted in the
discontinuation of business at ITS Environmental.
Although commercial operations have been discontinued in Dallas, the facility
will be used to reprocess the original data. During the past few months, ITS
Environmental has developed an effective data screening and reprocessing
method. The reprocessing effort is aimed at providing clients with data of
known quality. To date the screening and reprocessing, which is at an
advanced stage, has shown no evidence of discrepancies in test results which
had an impact on health and safety.
As of December 31, 1998 Pounds 2.3 million has been spent and a provision of
approximately Pounds 2.8 million has been made to cover estimated future
reprocessing costs and associated legal costs which are currently expected to
continue until July 1999.
ITS Environmental continues to co-operate fully with the government
investigation. No action has been brought against ITS Environmental to date.
At this time, it is not possible to estimate the cost of any civil or
criminal penalties arising from this matter. However, on the basis of
currently available information, the directors consider that the outcome is
unlikely to have a material effect on the financial state of the ITS group.
Rights of recovery against Inchcape plc, under the Share Purchase Deed are
being pursued.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
30. OTHER COMMITMENTS
ITS had annual commitments under non-cancellable operating leases as follows:
· Download Table
December 31, December 31,
1997 1998
--------------- --------------
Payable in one year:
Expiring within one year 3,280 2,638
Expiring within two to five years inclusive 7,795 7,629
Expiring in more than five years 1,655 1,185
--------------- --------------
12,730 11,452
--------------- --------------
Being in respect of:
Land and buildings 10,254 9,124
Other 2,476 2,328
--------------- --------------
12,730 11,452
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
--------------- --------------
31. DIVIDENDS
Dividends of Pounds 28.3 million were paid out of capital during the period
January 1, 1996 to October 7, 1996. There is no related tax effect.
32. RELATED PARTY TRANSACTIONS
Inchcape plc provided treasury, tax, and other services and corporate office
space to the Predecessor Company for which it charged a management fee. The
fee charged for the period from January 1, 1996 to October 7, 1996 was Pounds
0.7 million. Additionally, Inchcape plc arranged for third-party services,
including insurance and external audit, on behalf of the Predecessor Company.
These costs were paid directly by the Predecessor Company.
33. SUBSEQUENT EVENTS
OPERATIONS
In a press release dated January 12, 1999, ITS announced that pre-shipment
inspection on Nigerian imports and inspection services on petroleum exports
in the Foreign Trade Supervision division will terminate. On January 4, 1999,
the President of Nigeria announced in a speech concerning the Nigerian budget
that the Government of Nigeria will terminate all such contracts on March 31,
1999. If these programmes are terminated, ITS will lose annual revenues of
approximately Pounds 21.5 million and the FTS division will be restructuring
accordingly in 1999 at an estimated cost of Pounds 2.3 million.
As of March 12, 1999, ITS has received from the Government of Nigeria
payments totally Pounds 9.5 million in respect of the debt outstanding at
December 31, 1998. Discussions are continuing with representatives of the
Nigerian Government regarding payment of the remaining debt.
FINANCING
The Group is presently at an advanced stage of refinancing its operations
through the amendment of banking arrangements and plans to raise an
additional Pounds 20.0 million of new equity. Management expects that the
above refinancing and equity issue will be completed and effective before the
end of April 1999. The new equity issue will be fully underwritten.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
34. FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments to manage interest rate and
foreign currency risks. Whilst these hedging instruments are subject to
fluctuations in value, such fluctuations are generally offset by the value of
the underlying exposures being hedged. The Company is not a party to any
leverage derivatives and does not hold derivative financial instruments for
trading purposes.
The notional amount of derivatives summarised in this footnote does not
represent amounts exchanged by parties and, thus, are not a measure of the
exposure of the Company through its use of derivatives. The amounts exchanged
are calculated on the basis of the notional amount and the other terms of the
derivatives, which relate to interest rate or exchange rates.
Counterparties to financial instruments expose the Company to credit-related
losses in the event of non-performance, but it does not expect any
counterparties to fail to meet their obligations given their high credit
ratings. The Company does not demand collateral when entering into derivative
financial instruments. The credit exposure of interest rate and foreign
currency contracts is represented by the fair value of contracts with a
positive fair value at the end of each period.
FOREIGN EXCHANGE RISK MANAGEMENT
A substantial portion of the Company's sales is derived from customers
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
located outside the United Kingdom. In addition the net assets of foreign
subsidiaries represent a significant portion of the Company's shareholders'
funds. The Company's administrative operations are conducted in several
countries outside of the United Kingdom and operating costs are incurred in
currencies other than the pound sterling. Because of the high proportion of
international activity, the Company's income is exposed to exchange rate
fluctuations. Risk of two kinds arise as a result: a "transaction risk," that
is, the risk that currency fluctuations will have a negative effect on the
value of the Company's commercial cash flows in various currencies, and a
"translation risk," that is, the risk of adverse currency fluctuations in the
translation of foreign currency operations and foreign assets and liabilities
into pound sterling.
The Company enters into forward exchange contracts to hedge certain firm
commitments denominated in foreign currencies. Some of the contracts involve
the exchange of two foreign currencies, according to local needs in foreign
subsidiaries. The term of the currency derivatives generally do not exceed
one year.
The table below summarises by major currency the contractual amounts of the
Company's forward exchange contracts in pound sterling. The "buy" amounts
represent the pound sterling equivalent of commitments to purchase foreign
currency, and the "sell" amounts represent the pound sterling equivalent of
commitment to sell foreign currencies.
· Enlarge/Download Table
December 31, 1997 December 31, 1998
----- - -- - - -- - - -- ---- - ---- - ---- -- -- - -- --- -- --- --- --- -- --- -- --- --- --- -
Buy Sell Buy Sell
----- - -- - - -- - - -- --- -- --- -- ---- -- - - --- -- --- --- -- -- - -- --- -- --- --- ---
United States dollar - 2,096 - 4,968
Swiss franc - 4,452 - 4,082
Canadian Dollar 2,054 - 1,488 -
Norwegian Kroner - - 6,207 -
Indonesian Rupiah - - 298 -
Australian Dollar - - 1,546 -
German Deutschemark - - 1,636 -
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
34. FINANCIAL INSTRUMENTS (continued)
The following table presents information regarding the forward exchange
contract amounts in pound sterling equivalent and the estimated fair value of
the Company's forward contracts with a positive fair value (assets) and a
negative fair value (liabilities):
· Download Table
December 31, 1997 December 31, 1998
---------------------------------- ----------------------------------
Contract amount Fair value Contract amount Fair value
---------------- ----------------- ---------------- -----------------
Assets 4,478 26 12,223 245
Liabilities 2,054 (41) 3,034 (85)
INTEREST RATE RISK MANAGEMENT
The Company has a significant amount of borrowing bearing interest at
variable rates. To reduce its expose to interest rate fluctuations, the
Company enters into interest rate cap and swap agreements.
The Company utilises interest rate cap agreements to limit the impact of
increases in interest rates on its floating-rate debt. Interest rate cap
agreements require premium payments to counterparties based upon a notional
principal amount. Interest rate cap agreements entitle the Company to receive
from the counterparties the amount, if any, by which the selected market
interest rate exceeds the strike rate stated in the agreements. At December
31, 1998, the notional amount in pound sterling of interest rate cap
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
agreements amounted to Pounds 41.8 million (1997: Pounds 42.4 million) with
the interest rate cap set at 7% (1997: 7%). Unamortised premiums included in
other current assets amount to Pounds 0.1 million at December 31, 1998 (1997:
Pounds 0.2 million).
The Company also enters into interest rate swap agreements to convert certain
long-term borrowing at floating rates (based on inter-bank borrowing rates in
various countries) to fixed rates, that are lower than those available to the
Company if the fixed-rate borrowing were made directly. Under the interest
rate swap agreements, the Company agrees with other parties to exchange, at
specified intervals, the difference between fixed-rate and floating-rate
interest amounts calculated by reference to an agreed notional principal
amount.
The following table summarises the Company's interest rate swaps at December
31, 1997 and 1998:
· Enlarge/Download Table
December 31, 1997
----------------------- ---------------------- ---------------------- ---------------------- ----------------------
Notional amount Receive rate Pay rate (fixed) Maturity Fair Value
(floating)
----------------------- ---------------------- ---------------------- ---------------------- ----------------------
13,774 5.94% 6.25% Dec-2001 (114)
27,082 11.21% 6.59% Dec-1999 1,732
8,428 5.03% 6.80% Dec-2001 (293)
5,071 3.87% 5.09% Dec-2001 (69)
· Enlarge/Download Table
December 31, 1998
----------------------- ---------------------- ---------------------- ---------------------- ----------------------
Notional amount Receive rate Pay rate (fixed) Maturity Fair Value
(floating)
----------------------- ---------------------- ---------------------- ---------------------- ----------------------
13,690 5.04% 6.25% Dec-2001 (436)
21,499 6.19% 6.59% Dec-1999 (26)
8,054 3.64% 6.80% Dec-2001 (641)
5,343 3.26% 5.09% Dec-2001 (269)
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
34. FINANCIAL INSTRUMENTS (continued)
CONCENTRATION OF CREDIT RISK
At December 31, 1998 the Company did not consider there to be any significant
concentration of credit risk. Potential concentrations of credit risk to the
Company comprise principally cash and cash equivalents and trade receivables.
The Company maintains cash deposits with several major banks which at times
may exceed insured limits. Management periodically assesses the financial
condition of the institutions and believes that any possible credit risk is
minimal. Concentration of credit risk with respect to trade receivables is
limited due to the large number of customers comprising the Company's
customer base and their dispersion across many different geographic locations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's on-balance sheet financial instruments, with the exception of
borrowings, are generally short term in nature. Accordingly, the fair value
of such instruments approximates their carrying value. Borrowings include
fixed-rate loans for which their fair value differs from their carrying
value. The fair value of fixed-rate borrowings was calculated based on
discounted cash flows using the current rates offered to the Company for debt
of the same maturities. The fair value of variable rate borrowings
approximates carrying value because such loans reprice at market rate
periodically. The fair value of long-term borrowings, including current
portion, was approximately Pounds 300.5 million and Pounds 287.1 million
(carrying value Pounds 292.9 million and Pounds 277.3 million) at December
31, 1998 and 1997, respectively. The fair value of off-balance sheet
financial instruments are as follows:
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
· Download Table
Year ended December Year ended December
31, 1997 31, 1998
--------------------- ----------------------
Forward exchange contracts (15) 159
Interest rate caps 364 14
Interest rate swaps 1,257 (1,372)
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
35. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP
The consolidated financial statements are prepared in conformity with U.K.
GAAP. These accounting principles differ in certain material respects from
U.S. GAAP. Described below are the material differences between U.K. GAAP and
U.S. GAAP affecting the net income/(loss) and shareholders' equity/(deficit)
which are set forth in the tables that follow.
GOODWILL AND OTHER INTANGIBLE ASSETS
Under U.K. GAAP, purchased goodwill in respect of acquisitions before January
1, 1998 was written off to reserves in the year of acquisition. Purchased
goodwill in respect of acquisitions since January 1, 1998 is capitalised in
accordance with the requirements of FRS 10, Goodwill and intangible assets.
Positive goodwill is amortised to nil over equal instalments over its
estimated useful life, generally not exceeding 20 years. Under U.S. GAAP,
goodwill and identifiable intangibles are capitalised and are written off
over their estimated useful lives, generally not exceeding 40 years. U.S.
GAAP goodwill and identifiable intangibles are being written off over periods
not exceeding 20 years.
The gross cost under U.S. GAAP as of December 31, 1998 of goodwill is Pounds
230.6 million (1997: Pounds 234.7 million) and identifiable intangibles
related to the covenants not to compete is Pounds 37.1 million (1997: Pounds
37.3 million). Accumulated amortisation under U.S. GAAP as of December 31,
1998 of goodwill is Pounds 26.5 million (1997: Pounds 15.2 million) and of
identifiable intangibles is Pounds 27.9 million (1997: Pounds 15.6 million).
REDEEMABLE PREFERENCE SHARES
Under U.K. GAAP, preference shares with mandatory redemption features or
redeemable at the option of the security holders would be classified as a
component of shareholders' equity. U.S. GAAP requires such redeemable
preference shares not to be classified as shareholders' equity.
CHANGE IN ACCOUNTING POLICY
Under U.K. GAAP, the change in accounting policy in 1996 on certain foreign
trade supervision business has been accounted for on a retrospective basis by
restating financial statements for the prior periods. Under U.S. GAAP, such
adjustments would be considered a change in accounting estimate that would
result in an expense being recorded in the period of change.
PENSION COSTS -- DEFINED BENEFIT PLANS
Under U.K. GAAP, the cost of providing pension benefits is expensed over the
average expected service lives of eligible employees on the basis of a
constant percentage of current and estimated future earnings. Under U.S.
GAAP, Statement of Financial Accounting Standards (SFAS) No. 87, "Employers'
Accounting for Pensions", requires that pension costs be determined based on
a comparison of the projected benefit obligation with the market value of the
underlying plan assets and other unrecognised gains and losses assessed on an
actuarial basis.
As a result of this difference in methodology, the U.S. GAAP pension expense
can be significantly different from that determined under U.K. GAAP and tends
to be more sensitive to changing economic conditions.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
COMPENSATED ABSENCES
Under U.S. GAAP, compensated absences, being an employee's paid holiday
entitlements, are accrued as earned. For companies that do not allow
employees to carry compensated absences over from one year to the next, no
accrual is required. U.K. GAAP does not require provision to be made.
FIXED ASSET REVALUATIONS
U.S. GAAP requires that fixed assets be recorded at historical cost and
depreciated over their estimated useful lives. U.K. GAAP, including the
Companies Act, permits regular revaluation of certain assets, primarily land
and buildings, at the amount of an independent professional valuation.
INVESTMENTS IN OTHER INCHCAPE PLC COMPANIES
As discussed in Note 2, certain subsidiaries of the Predecessor Company have
not been combined but are stated at cost in the combined balance sheets. As
these entities were not acquired by Intertek Testing Services Limited in
October 1996 (Note 2), under U.S. GAAP the investment in these entities, and
related dividends received, have been retroactively eliminated from the
financial statements.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
35. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (continued)
DEFERRED TAXATION
Under U.K. GAAP, deferred taxation is accounted for using the liability
method to the extent that it is considered probable that a liability or asset
will crystallise in the foreseeable future. Under U.S. GAAP, deferred
taxation is provided on all temporary differences and carryforwards. Deferred
tax assets are recognised to the extent that it is more likely than not that
they will be realised. Where doubt exists as to whether a deferred tax asset
will be realised, an appropriate valuation allowance is established. In
addition, deferred taxes on other U.S. GAAP differences is provided.
EFFECT OF MATERIAL DIFFERENCES BETWEEN U.K. AND U.S. GAAP AND ADDITIONAL
DISCLOSURES
(a) NET INCOME/(LOSS)
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, 1996 October 8, December 31, December 31,
to October 7, 1996 to 1997 1998
1996 December 31,
1996
----------------- ---------------- ----------------- -----------------
Net income/(loss) reported under U.K. GAAP 11,608 (1,438) (1,598) (20,591)
Goodwill amortisation (2,927) (3,723) (12,337) (11,627)
Covenants not to compete amortisation (522) (3,171) (12,683) (12,530)
Change in accounting policy 2,822 (5,948) - -
Pensions 111 37 (130) (213)
Compensated absences (324) 327 526 (278)
Fixed asset revaluations (280) - - -
Dividends from other Inchcape plc companies (5,417) - - -
Deferred taxes (1,239) 620 185 -
Tax effect of U.S. GAAP reconciling adjustments (886) 1,976 - -
----------------- ---------------- ----------------- -----------------
Net income/(loss) in conformity with U.S.
GAAP 2,946 (11,320) (26,037) (45,239)
----------------- ---------------- ----------------- -----------------
Continuing operations 3,539 (8,883) (24,457) (40,344)
Discontinued operation (593) (2,437) (1,580) (4,895)
----------------- ---------------- ----------------- -----------------
Net income/(loss) in conformity with U.S.
GAAP 2,946 (11,320) (26,037) (45,239)
----------------- ---------------- ----------------- -----------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
35. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (continued)
(b) SHAREHOLDERS' DEFICIT
The approximate effects on shareholders' deficit of material differences between
U.K. and U.S. GAAP are as follows:
· Enlarge/Download Table
Year ended Year ended
December 31, December 31,
1997 1998
----------------- -----------------
Shareholders' deficit reported under U.K. GAAP (206,766) (221,408)
Goodwill 219,521 204,136
Covenants not to compete 21,796 9,286
Redeemable preference shares (81,815) (86,656)
Pensions 1,207 994
Compensated absences (408) (686)
----------------- -----------------
Shareholders' deficit in conformity with U.S. GAAP (46,465) (94,334)
----------------- -----------------
The following table reconciles shareholders' deficit under U.S. GAAP:
Shareholders' deficit at beginning of period (5,263) (46,465)
Issue of shares - 179
Net loss for the period (26,037) (45,239)
Exchange adjustments (15,165) (2,809)
----------------- -----------------
Shareholders' deficit at end of period (46,465) (94,334)
----------------- -----------------
(c) CASH FLOWS
The statements of cash flows prepared in accordance with U.K. GAAP present
substantially the same information as that required under U.S. GAAP. Under
U.S. GAAP however, there are certain differences from U.K. GAAP with regard
to classification of items within the cash flow statement and with regard to
the definition of cash.
Under U.K. GAAP, cash flows are presented separately for operating
activities, returns on investments and servicing of finance, taxation,
capital expenditure and financial investment, acquisitions and disposals,
equity dividends paid, management of liquid resources and financing. Under
U.S. GAAP, three categories of cash flow activity are reported, those being
operating activities, investing activities and financing activities. Cash
flows from taxation and returns on investments and servicing of finance
would, with the exception of dividends paid, be included as operating
activities under U.S. GAAP. Capital expenditure and financial investment,
acquisitions and disposals and management of liquid resources would be
included as investing activities. The payment of dividends would be included
under financing activities under U.S. GAAP.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
35. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (continued)
Set out below is a summary of the statements of cash flows under U.S. GAAP.
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, 1996 December 31, December 31,
1996 to to December 31, 1997 1998
October 7, 1996 1996
---------------- ----------------- ----------------- ----------------
Net cash provided by operating activities 14,707 8,659 24,662 7,027
Net cash used in investing activities (3,275) (342,009) (22,089) (24,899)
Net cash (used in)/provided by financing (20,636) 367,994 (9,713) 11,094
activities
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
---------------- ----------------- ----------------- ----------------
(9,204) 34,644 (7,140) (6,778)
Effect of exchange rate changes (499) (1,231) (1,609) (489)
---------------- ----------------- ----------------- ----------------
Net (decrease)/increase in cash by continuing
operations (9,703) 33,413 (8,749) (7,267)
---------------- ----------------- ----------------- ----------------
(Decrease)/increase in cash by continuing (9,703) 33,413 (8,749) (7,267)
operations
Increase/(decrease) in cash by discontinued 29 72 417 (1,114)
operation
---------------- ----------------- ----------------- ----------------
Cash at beginning of period 37,811 - 33,485 25,153
Cash at end of period 28,137 33,485 25,153 16,772
---------------- ----------------- ----------------- ----------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
35. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (CONTINUED)
(d) PENSIONS
The disclosures below detail the additional information required by SFAS No.
132 "Employers' Disclosures About Pensions and Other Postretirement Benefits"
in respect of the Company's funded defined benefit plans.
The Company's principal defined benefits pension plans are located in the
U.K., U.S., Taiwan and Hong Kong. The following is a summary of the funded
status and the net periodic benefit costs for the defined benefit pension
plans:
· Enlarge/Download Table
December 31, December 31,
1997 1998
---------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year 16,282 19,164
Service cost 1,748 2,151
Interest cost 1,348 1,478
Plan participants' contributions 204 277
Actuarial loss 568 1,286
Benefits paid (1,004) (1,187)
Exchange rate effects 18 (53)
------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year 19,164 23,116
------------------------------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year 19,061 20,372
Actual return on plan assets 994 2,314
Employer contributions 1,066 1,283
Plan participants' contribution 204 277
Benefits paid (1,004) (1,187)
Exchange rate effects 51 (47)
------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year 20,372 23,012
------------------------------------------------------------------------------------------------------------------
Funded status 1,208 (104)
Unrecognised actuarial loss 909 1,653
------------------------------------------------------------------------------------------------------------------
Net amount recognised 2,117 1,549
------------------------------------------------------------------------------------------------------------------
AMOUNTS RECOGNISED IN THE STATEMENT OF FINANCIAL POSITION CONSIST OF:
Prepaid benefit cost 2,241 1,824
Accrued benefit liability (258) (537)
Shareholders' deficit * 134 262
------------------------------------------------------------------------------------------------------------------
Net amount recognised 2,117 1,549
------------------------------------------------------------------------------------------------------------------
* Amount charged directly to Shareholders' deficit to record the additional
minimum liability.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Pounds '000)
35. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (continued)
(d) PENSIONS (CONTINUED)
The weighted average assumptions as of December 31:
· Download Table
1996 1997 1998
---------------- ---------------- -----------------
Discount Rate 8.7% 7.8% 6.4%
Expected return on plan assets 8.7% 8.7% 7.9%
Rate of compensation increase 7.7% 6.6% 4.8%
· Enlarge/Download Table
Period from Period from Year ended Year ended
January 1, October 8, 1996 December 31, December 31,
1996 to to December 31, 1997 1998
October 7, 1996 1996
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost 1,038 332 1,748 2,151
Interest cost 965 324 1,348 1,478
Expected return on plan assets (1,278) (403) (1,647) (1,781)
Amortisation of prior service costs - - - -
Recognised actuarial loss - - (1) 3
---------------- ----------------- ----------------- ----------------
Net periodic benefit cost 725 253 1,448 1,851
---------------- ----------------- ----------------- ----------------
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit
obligations in excess of plan assets were Pounds 1.1 million, Pounds 1.1
million and Pounds 0.7 million, respectively, as of December 31, 1998 and
Pounds 1.1 million, Pounds 1.1 million and Pounds 0.8 million respectively,
as of December 31, 1997.
The U.S. plan has one plan asset, an insurance company fixed income fund.
The Taiwan plan covers all full-time employees. There is only one type of
asset held, a pension trust fund. This fund is a discretionary trust fund
which guarantees the capital amount and a two year deposit rate of return.
(e) IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews impairment of long-lived assets and certain identifiable
intangibles whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognised is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.
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35. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (continued)
(f) SHARE OPTION SCHEME
The Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation,"
which permits entities to recognise as expense over the vesting period the
fair value of all stock-based awards on the date of grant. Alternatively,
SFAS No. 123 allows entities to continue to apply the provisions of APB
Opinion No. 25 and provide pro forma net loss disclosures for share options
granted as if the fair value-based method defined in SFAS No. 123 had been
applied. Management has elected to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123.
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
The weighted-average fair value of the share options granted by the Company
during 1998 was estimated at Pounds 0.02 (1997: Pounds 0.02) using the
minimum value method with the following assumptions: expected dividend yield
of 0%, risk free rate of 6.0%, expected volatility of 0% and average expected
lives of 3 years. Had compensation cost for the share options granted during
the year, for purposes of the U.S. GAAP reconciliation, been determined
consistent with the methodology described by SFAS No. 123, the Company's net
loss would have not been significantly different than the actual net loss.
(g) COMPREHENSIVE INCOME
The company has adopted SFAS No. 130, "Reporting Comprehensive Income", which
established standards for the reporting and presentation of comprehensive
income/(loss) and its components in a full set of financial statements. The
Company's comprehensive income/(loss) differs from net income only by the
amount of the foreign currency exchange adjustments charged to shareholders'
deficit for the period. Comprehensive income for the period from October 8,
1996 to December 31, 1996 and for each of the years ended December 31, 1997
and 1998 is equal to the total recognised gains and losses shown on the
consolidated statement of total recognised gains and losses. For the period
from January 1, 1996 to October 7, 1996, comprehensive income amounted to
Pounds 11.2 million which differs from the total recognised gains and losses
by dividends of Pounds 23.3 million. Accumulated other comprehensive
income/(loss) was Pounds 4.1 million, Pounds (3.5 million) and
Pounds (2.6 million) at December 31, 1996, 1997 and 1998, respectively.
(h) NEW ACCOUNTING STANDARDS
In June 1998, The Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities". This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognise all derivatives as either
assets or liabilities in the statement of financial position and measure
those instruments at fair value. This statement is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. Management has not
determined the effect of the adoption of SFAS 133.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUNDS)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES
Intertek Finance plc ("the Issuer") is a wholly owned direct subsidiary of
the Company and the Issuer has issued the Notes which are fully and
unconditionally guaranteed on a senior subordinated basis by the Company and
certain of its wholly owned direct subsidiaries: Intertek Testing Services UK
Limited, Testing Holdings USA Inc., Yickson Enterprises Limited, Kite
Overseas Holdings BV, ITS Holding Limited, formerly 3260771 Canada Limited,
Testing Holdings Sweden AB, Testing Holdings France EURL, Testing Holdings
Germany GmbH (collectively, the "Guarantor subsidiaries" and, together with
the Company, the "Guarantors"). In addition, each of the Guarantor's
guarantee is itself guaranteed by each other Guarantor, fully and
unconditionally, on a senior subordinated basis. Subject to the provisions of
the agreement under which the loans to finance the acquisition of the
business were made, certain exceptions and applicable law, there are no
restrictions on the ability of: (a) the Company or any of its direct and
indirect subsidiaries from paying dividends or making any other distributions
or loans or advances to the Issuer or (b) the direct and indirect
subsidiaries of the Company from paying dividends or making any other
distribution or loans or advances to the Company.
Separate financial statements and other disclosures concerning the Issuer and
the Guarantors are not presented because management has determined that they
are not material to the investors. In lieu of the separate guarantor
financial statements, management has presented audited consolidating
financial information. The audited consolidating financial information
presented below has been segregated between (a) the Issuer, (b) the
Guarantors and (c) the non-Guarantor subsidiaries.
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
----------------------------------------------------------------------------------
TOTAL GROUP REVENUE -- -- 425,388 (65,575) 359,813
Operating income/(costs) 80 (22) (402,390) 65,575 (336,757)
Equity loss of associated companies -- -- (13) -- (13)
----------------------------------------------------------------------------------
OPERATING INCOME/(LOSS) 80 (22) 22,985 -- 23,043
Non-operating exceptional items -- -- (1,395) -- (1,395)
----------------------------------------------------------------------------------
INCOME/(LOSS) BEFORE INTEREST 80 (22) 21,590 -- 21,648
Net interest receivable/(payable) 43 (3,393) (28,505) -- (31,855)
----------------------------------------------------------------------------------
INCOME/(LOSS) BEFORE TAXATION 123 (3,415) (6,915) -- (10,207)
Taxation 176 1,786 (9,118) -- (7,156)
----------------------------------------------------------------------------------
INCOME/(LOSS) AFTER TAXATION 299 (1,629) (16,033) -- (17,363)
Minority interests -- -- (3,228) -- (3,228)
Dividends from/(to) group companies -- 2,979 (2,979) -- --
----------------------------------------------------------------------------------
NET INCOME/(LOSS) 299 1,350 (22,240) -- (20,591)
==================================================================================
· Enlarge/Download Table
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
----------------------------------------------------------------------------------
TOTAL GROUP REVENUE -- -- 343,983 -- 343,983
Operating income/(costs) 3 3,389 (310,819) -- (307,427)
Equity income of associated companies -- -- 78 -- 78
----------------------------------------------------------------------------------
OPERATING INCOME 3 3,389 33,242 -- 36,634
Net interest receivable/(payable) 329 (23,602) (6,479) -- (29,752)
----------------------------------------------------------------------------------
INCOME/(LOSS) BEFORE TAXATION 332 (20,213) 26,763 -- 6,882
Taxation (303) 2,604 (7,177) -- (4,876)
----------------------------------------------------------------------------------
INCOME/(LOSS) AFTER TAXATION 29 (17,609) 19,586 -- 2,006
Minority interests -- -- (3,604) -- (3,604)
Dividends from/(to) group companies -- 2,562 (2,562) -- --
----------------------------------------------------------------------------------
NET INCOME/(LOSS) 29 (15,047) 13,420 -- (1,598)
==================================================================================
· Enlarge/Download Table
STATEMENTS OF OPERATIONS
PERIOD FROM OCTOBER 8, TO DECEMBER 31, 1996
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
----------------------------------------------------------------------------------
TOTAL GROUP REVENUE -- -- 80,460 -- 80,460
Operating costs -- (256) (74,372) -- (74,628)
Equity income of associated companies -- -- 69 -- 69
----------------------------------------------------------------------------------
OPERATING (LOSS)/INCOME -- (256) 6,157 -- 5,901
Non-operating exceptional items -- -- (1,761) -- (1,761)
--------
(LOSS)/INCOME ON ORDINARY ACTIVITIES
BEFORE NET INTEREST -- (256) 4,396 -- 4,140
Net interest expense (334) (1,953) (1,776) -- (4,063)
----------------------------------------------------------------------------------
(LOSS)/INCOME BEFORE TAXATION (334) (2,209) 2,620 -- 77
Taxation 61 805 (1,277) -- (411)
----------------------------------------------------------------------------------
(LOSS)/INCOME AFTER TAXATION (273) (1,404) 1,343 -- (334)
Minority interests -- -- (1,104) -- (1,104)
----------------------------------------------------------------------------------
NET (LOSS)/INCOME (273) (1,404) 239 -- (1,438)
==================================================================================
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
BALANCE SHEETS
DECEMBER 31, 1998
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
--------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash 6 (6,691) 23,457 -- 16,772
Trade receivables -- -- 67,516 -- 67,516
Inventories -- -- 3,662 -- 3,662
Other current assets 122,087 257,595 216,069 (580,510) 15,241
Deferred taxation asset -- -- 1,348 -- 1,348
--------------------------------------------------------------------------
TOTAL CURRENT ASSETS 122,093 250,904 312,052 (580,510) 104,539
Goodwill -- -- 13,074 -- 13,074
Property, plant and equipment, net -- -- 45,951 -- 45,951
Investments in subsidiary undertakings -- 332,581 71,226 (403,807) --
Other investments -- -- 231 -- 231
--------------------------------------------------------------------------
TOTAL ASSETS 122,093 583,485 442,534 (984,317) 163,795
==========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
CURRENT LIABILITIES
Borrowings (including current portion of long term -- 21,154 1,055 -- 22,209
borrowings)
Accounts payable, accrued liabilities and deferred income 5,723 204,430 441,309 (580,510) 70,952
Income taxes payable (83) (3,119) 8,570 -- 5,368
--------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 5,640 222,465 450,934 (580,510) 98,529
Long term borrowings 116,257 159,205 (1,898) -- 273,564
Provisions for liabilities and charges -- -- 8,518 -- 8,518
Minority interests -- -- 4,592 -- 4,592
SHAREHOLDERS' EQUITY/(DEFICIT)
Ordinary shares 50 100,944 196,398 (297,074) 318
Redeemable preference shares -- 86,675 -- -- 86,675
Shares to be issued -- 2,793 -- -- 2,793
Premium in excess of par value -- 26,702 761 (24,445) 3,018
Retained earnings/(deficit) 146 (15,299) (216,771) (82,288) (314,212)
--------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 196 201,815 (19,612) (403,807) (221,408)
--------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) 122,093 583,485 442,534 (984,317) 163,795
==========================================================================
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
BALANCE SHEETS
DECEMBER 31, 1997
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash 15 (537) 25,675 -- 25,153
Trade receivables -- -- 60,483 -- 60,483
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Inventories -- -- 2,650 -- 2,650
Other current assets 120,006 228,622 193,466 (530,031) 12,063
Deferred taxation asset -- -- 286 -- 286
------------------------------------------------------------------------
TOTAL CURRENT ASSETS 120,021 228,085 282,560 (530,031) 100,635
Property, plant and equipment, net -- -- 44,460 -- 44,460
Investments in subsidiary undertakings -- 389,550 311,978 (701,528) --
Other investments -- -- 184 -- 184
------------------------------------------------------------------------
TOTAL ASSETS 120,021 617,635 639,182 (1,231,559) 145,279
========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
CURRENT LIABILITIES
Borrowings (including current portion of long term
borrowings) -- 4,438 830 -- 5,268
Accounts payable, accrued liabilities and deferred income 3,389 264,755 321,906 (530,031) 60,019
Income taxes payable 242 (3,628) 6,709 -- 3,323
------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,631 265,565 329,445 (530,031) 68,610
Long term borrowings 116,517 155,474 45 -- 272,036
Provisions for liabilities and charges -- -- 7,095 -- 7,095
Minority interests -- -- 4,304 -- 4,304
SHAREHOLDERS' (DEFICIT)/EQUITY
Ordinary shares 50 101,739 267,499 (368,970) 318
Redeemable preference shares -- 81,815 -- -- 81,815
Shares to be issued -- 2,793 -- -- 2,793
Premium in excess of par value -- 26,494 8,456 (32,093) 2,857
Retained (deficit)/earnings (177) (16,245) 22,338 (300,465) (294,549)
------------------------------------------------------------------------
TOTAL SHAREHOLDERS' (DEFICIT)/EQUITY (127) 196,596 298,293 (701,528) (206,766)
------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) 120,021 617,635 639,182 (1,231,559) 145,279
========================================================================
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF CASH FLOWS
DECEMBER 31, 1998
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
------------------------------------------------------------------------
Total operating cash inflow 290 2,098 30,057 -- 32,445
Returns on investments and servicing of finance (2,321) (1,261) (18,847) (2,641) (25,070)
Taxation (149) 2,270 (8,081) -- (5,960)
Capital expenditure and financial investment -- -- (13,959) -- (13,959)
Acquisitions and disposals -- 1,908 (13,583) -- (11,675)
------------------------------------------------------------------------
CASH (OUTFLOW)/INFLOW BEFORE FINANCING (2,180) 5,015 (24,413) (2,641) (24,219)
Financing 2,171 (11,175) 25,018 -- 16,014
------------------------------------------------------------------------
(DECREASE)/INCREASE IN CASH IN THE PERIOD (9) (6,160) 605 (2,641) (8,205)
------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
(DECREASE)/INCREASE IN CASH IN THE PERIOD (9) (6,160) 605 (2,641) (8,205)
Debt issued in lieu of interest payment -- (7,088) -- -- (7,088)
Change in net debt resulting from cash flows -- (16,333) 5,365 -- (10,968)
Acquisitions -- -- (356) -- (356)
Other non-cash movements (464) 1,464 (2,919) -- (1,919)
Exchange movements 724 1,516 (554) -- 1,686
------------------------------------------------------------------------
MOVEMENT IN NET DEBT IN THE PERIOD 251 (26,601) 2,141 (2,641) (26,850)
NET DEBT AT THE START OF THE PERIOD (116,502) (160,449) 24,800 -- (252,151)
------------------------------------------------------------------------
NET DEBT AT THE END OF THE PERIOD (116,251) (187,050) 26,941 (2,641) (279,001)
========================================================================
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF CASH FLOWS
DECEMBER 31, 1997
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
------------------------------------------------------------------------
Total operating cash inflow/(outflow) 966 (234) 44,914 -- 45,646
Returns on investments and servicing of finance 329 (14,902) (4,754) (2,562) (21,889)
Taxation -- -- (6,145) -- (6,145)
Capital expenditure and financial investment -- -- (12,995) -- (12,995)
Acquisitions and disposals -- (9,186) -- (206) (9,392)
------------------------------------------------------------------------
CASH INFLOW/(OUTFLOW) BEFORE FINANCING 1,295 (24,322) 21,020 (2,768) (4,775)
Financing (1,280) 21,413 (22,081) -- (1,948)
------------------------------------------------------------------------
INCREASE/(DECREASE) IN CASH IN THE PERIOD 15 (2,909) (1,061) (2,768) (6,723)
------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
INCREASE/(DECREASE) IN CASH IN THE PERIOD 15 (2,909) (1,061) (2,768) (6,723)
Debt issued in lieu of interest payment -- (6,138) -- -- (6,138)
Change in net debt resulting from cash flows -- 2,252 126 -- 2,378
Other non-cash movements (2,217) 4,073 (3,968) -- (2,112)
Exchange movements (2,843) (344) (979) -- (4,166)
------------------------------------------------------------------------
MOVEMENT IN NET DEBT IN THE PERIOD (5,045) (3,066) (5,882) (2,768) (16,761)
NET DEBT AT THE START OF THE PERIOD (111,457) (157,383) (259,247) 292,697 (235,390)
------------------------------------------------------------------------
NET DEBT AT THE END OF THE PERIOD (116,502) (160,449) (265,129) 289,929 (252,151)
========================================================================
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
------------------------------------------------------------------------
RECONCILIATION OF OPERATING PROFIT TO OPERATING
CASH INFLOW:
Operating profit 80 (22) 22,985 -- 23,043
Depreciation charge -- -- 11,153 -- 11,153
Goodwill amortisation -- -- 377 -- 377
Loss on sale of fixed assets -- -- 157 -- 157
Increase in inventories -- -- (1,075) -- (1,075)
Increase in receivables and prepayments -- (321) (11,059) -- (11,380)
Increase in payables 210 2,441 3,069 -- 5,720
Discontinued operating exceptional provisions -- -- 5,144 -- 5,144
Decrease in other provisions -- -- (728) -- (728)
------------------------------------------------------------------------
290 2,098 30,023 -- 32,411
Equity income of associates and joint ventures -- -- 13 -- 13
Less dividends received from associates -- -- 21 -- 21
------------------------------------------------------------------------
TOTAL OPERATING CASH INFLOW 290 2,098 30,057 -- 32,445
------------------------------------------------------------------------
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Net interest paid (2,321) (4,240) (16,070) -- (22,631)
Dividends paid to minorities -- 2,979 (2,777) (2,641) (2,439)
------------------------------------------------------------------------
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
(2,321) (1,261) (18,847) (2,641) (25,070)
------------------------------------------------------------------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of property, plant and equipment -- -- (14,026) -- (14,026)
Sale of property, plant and equipment -- -- 67 -- 67
------------------------------------------------------------------------
-- -- (13,959) -- (13,959)
------------------------------------------------------------------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiaries -- 2,508 (13,242) -- (10,734)
Acquisition provision payments -- (600) -- -- (600)
Sale of subsidiaries -- -- (341) -- (341)
------------------------------------------------------------------------
-- 1,908 (13,583) -- (11,675)
------------------------------------------------------------------------
FINANCING
Ordinary shares issued and to be issued -- 179 -- -- 179
Issue of redeemable preference shares -- 4,842 -- -- 4,842
Issue of short term debt -- 16,440 -- -- 16,440
Increase/(decrease) in net funding 2,171 (32,636) 24,993 -- (5,472)
Cash subscribed by minorities -- -- 25 -- 25
------------------------------------------------------------------------
2,171 (11,175) 25,018 -- 16,014
------------------------------------------------------------------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
------------------------------------------------------------------------
RECONCILIATION OF OPERATING PROFIT TO OPERATING
CASH INFLOW:
Operating profit 3 3,389 33,242 -- 36,634
Depreciation charge -- -- 12,134 -- 12,134
Loss on sale of fixed assets -- -- 1,697 -- 1,697
Increase in inventories -- -- (725) -- (725)
Decrease/ (increase) in receivables and prepayments 819 395 (8,622) -- (7,408)
Increase/(decrease) in payables 144 (4,018) 10,792 -- 6,918
Decrease in other provisions -- -- (3,526) -- (3,526)
------------------------------------------------------------------------
966 (234) 44,992 -- 45,724
Equity income of associates -- -- (78) -- (78)
------------------------------------------------------------------------
TOTAL OPERATING CASH INFLOW 966 (234) 44,914 -- 45,646
------------------------------------------------------------------------
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Net interest paid 329 (17,464) (3,041) -- (20,176)
Dividends received -- 2,562 -- (2,562) --
Dividends paid to minorities -- -- (1,713) -- (1,713)
------------------------------------------------------------------------
329 (14,902) (4,754) (2,562) (21,889)
------------------------------------------------------------------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of property, plant and equipment -- -- (13,732) -- (13,732)
Sale of property, plant and equipment -- -- 737 -- 737
------------------------------------------------------------------------
-- -- (12,995) -- (12,995)
------------------------------------------------------------------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiaries -- 206 -- (206) --
Acquisition provision payments -- (9,392) -- -- (9,392)
------------------------------------------------------------------------
-- (9,186) -- (206) (9,392)
------------------------------------------------------------------------
FINANCING
Repayment of other loans (1,280) 21,413 (22,511) -- (2,378)
Cash subscribed by minorities -- -- 430 -- 430
------------------------------------------------------------------------
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
(1,280) 21,413 (22,081) -- (1,948)
------------------------------------------------------------------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
------------------------------------------------------------------------
ANALYSIS OF CHANGES IN NET DEBT
CASH AT BANK AT DECEMBER 31, 1997 15 (537) 25,675 -- 25,153
Cash flow (9) (6,160) (2,036) -- (8,205)
Acquisitions -- -- 313 -- 313
Exchange adjustments -- 6 (495) -- (489)
------------------------------------------------------------------------
CASH AT BANK AT DECEMBER 31, 1998 6 (6,691) 23,457 -- 16,772
------------------------------------------------------------------------
DEBT DUE WITHIN ONE YEAR AT DECEMBER 31, 1997 -- (4,438) (830) -- (5,268)
Cash flow -- (16,333) 5,365 -- (10,968)
Other non-cash changes -- (401) (4,862) -- (5,263)
Acquisitions -- -- (669) -- (669)
Exchange adjustments -- 18 (59) -- (41)
------------------------------------------------------------------------
DEBT DUE WITHIN ONE YEAR AT DECEMBER 31, 1998 -- (21,154) (1,055) -- (22,209)
------------------------------------------------------------------------
DEBT DUE AFTER ONE YEAR AT DECEMBER 31, 1997 (116,517) (155,474) (45) -- (272,036)
Debt issued in lieu of interest payment -- (7,088) -- -- (7,088)
Other non-cash changes (464) 1,865 1,943 -- 3,344
Exchange adjustments 724 1,492 -- -- 2,216
------------------------------------------------------------------------
DEBT DUE AFTER ONE YEAR AT DECEMBER 31, 1998 (116,257) (159,205) 1,898 -- (273,564)
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL NET DEBT AT DECEMBER 31, 1998 (116,251) (187,050) 24,300 -- (279,001)
------------------------------------------------------------------------
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF CASH FLOWS
PERIOD FROM OCTOBER 8, TO DECEMBER 31, 1996
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
------------------------------------------------------------------------
Total operating cash inflow/(outflow) -- 13,934 (2,600) -- 11,334
Returns on investments and servicing of finance 1,462 (1,666) (1,137) -- (1,341)
Taxation -- 50 (3,342) -- (3,292)
Capital expenditure and financial investment -- -- (5,605) -- (5,605)
Acquisitions and disposals -- (395,133) (374,573) 432,969 (336,737)
------------------------------------------------------------------------
CASH INFLOW/(OUTFLOW) BEFORE FINANCING 1,462 (382,815) (387,257) 432,969 (335,641)
Financing (1,462) 385,187 126,904 (140,272) 370,357
------------------------------------------------------------------------
INCREASE/(DECREASE) IN CASH IN THE PERIOD -- 2,372 (260,353) 292,697 34,716
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET DEBT
INCREASE/(DECREASE) IN CASH IN THE PERIOD -- 2,372 (260,353) 292,697 34,716
Cash inflow from increase in debt (116,291) (167,606) 14,896 -- (269,001)
Change in net debt resulting from cash flows -- -- -- -- --
Other non-cash movements -- -- -- -- --
Exchange adjustments 4,834 7,851 (13,790) -- (1,105)
------------------------------------------------------------------------
MOVEMENT IN NET DEBT IN THE PERIOD (111,457) (157,383) (259,247) 292,697 (235,390)
NET DEBT AT THE START OF THE PERIOD -- -- -- -- --
------------------------------------------------------------------------
NET DEBT AT THE END OF THE PERIOD (111,457) (157,383) (259,247) 292,697 (235,390)
========================================================================
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF CASH FLOWS
PERIOD FROM OCTOBER 8, TO DECEMBER 31, 1996
Intertek Guarantors Non -Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
------------------------------------------------------------------------
RECONCILIATION OF OPERATING PROFIT TO OPERATING
CASH INFLOW:
Operating (loss)/profit -- (256) 6,157 -- 5,901
Depreciation of fixed assets -- -- 2,680 -- 2,680
Loss on sale of fixed assets -- -- 1,345 -- 1,345
Decrease in inventories -- -- 120 -- 120
Increase in receivables and prepayments -- (983) (1,763) -- (2,746)
Increase/(decrease) in payables -- 15,173 (12,844) -- 2,329
Increase in other provisions -- -- 1,733 -- 1,733
------------------------------------------------------------------------
-- 13,934 (2,572) -- 11,362
Equity loss of associates -- -- (69) -- (69)
Dividends received from associates -- -- 41 -- 41
------------------------------------------------------------------------
TOTAL OPERATING CASH INFLOW/(OUTFLOW) -- 13,934 (2,600) -- 11,334
------------------------------------------------------------------------
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Net interest paid/(received) 1,462 (1,666) (992) -- (1,196)
Dividends paid to minorities -- -- (145) -- (145)
------------------------------------------------------------------------
1,462 (1,666) (1,137) -- (1,341)
------------------------------------------------------------------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of property, plant and equipment -- -- (5,663) -- (5,663)
Sale of property, plant and equipment -- -- 58 -- 58
------------------------------------------------------------------------
-- -- (5,605) -- (5,605)
------------------------------------------------------------------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiaries and associates -- (395,133) (374,573) 432,969 (336,737)
------------------------------------------------------------------------
-- (395,133) (374,573) 432,969 (336,737)
------------------------------------------------------------------------
FINANCING
Ordinary shares issued and to be issued 50 -- 12,493 (6,575) 5,968
Issue of redeemable preference shares -- 211,026 -- (129,211) 81,815
Issue of long term debt 115,848 164,361 3,001 -- 283,210
(Decrease)/increase in net funding (113,120) 13,751 99,369 -- --
Repayment of other loans -- -- (636) -- (636)
Exchange adjustments (4,240) (3,951) 12,677 (4,486) --
------------------------------------------------------------------------
(1,462) 385,187 126,904 (140,272) 370,357
========================================================================
F-63
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
Intertek Testing Kite ITS Intertek Testing Yickson
Testing Holdings Overseas Holding Testing Holdings Enterprises
Services USA Holdings Limited Services Sweden AB Limited
Ltd Inc BV UK Limited
--------------------------------------------------------------------------------------
REVENUES FROM CONTINUING OPERATIONS -- -- -- -- -- -- --
Operating (costs)/income (31) 12 5 (7) 20 (5) (10)
--------------------------------------------------------------------------------------
OPERATING (INCOME)/INCOME FROM CONTINUING (31) 12 5 (7) 20 (5) (10)
OPERATIONS
Net interest (payable)/receivable (7,549) 11,030 (319) (76) (3,631) (2,144) (25)
--------------------------------------------------------------------------------------
(LOSS)/INCOME BEFORE TAXATION (7,580) 11,042 (314) (83) (3,611) (2,149) (35)
Taxation 527 -- (44) -- 982 -- --
--------------------------------------------------------------------------------------
(LOSS)/INCOME AFTER TAXATION (7,053) 11,042 (358) (83) (2,629) (2,149) (35)
Dividends from group companies -- 169 52 -- -- 2,148 --
--------------------------------------------------------------------------------------
NET (LOSS)/INCOME (7,053) 11,211 (306) (83) (2,629) (1) (35)
======================================================================================
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
Testing Testing Guarantor
Holdings Holdings subsidiaries
France Germany Total
EURL GmbH
----------------------------------
REVENUES FROM CONTINUING OPERATIONS -- -- --
Operating (costs)/income (3) (3) (22)
----------------------------------
OPERATING (INCOME)/INCOME FROM CONTINUING (3) (3) (22)
OPERATIONS
Net interest (payable)/receivable (145) (534) (3,393)
----------------------------------
(LOSS)/INCOME BEFORE TAXATION (148) (537) (3,415)
Taxation 160 161 1,786
----------------------------------
(LOSS)/INCOME AFTER TAXATION 12 (376) (1,629)
Dividends from group companies 610 -- 2,979
----------------------------------
NET (LOSS)/INCOME 622 (376) 1,350
==================================
· Enlarge/Download Table
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
Intertek Testing Kite ITS Intertek Testing Yickson
Testing Holdings Overseas Holding Testing Holdings Enterprises
Services USA Holdings Limited Services Sweden AB Limited
Ltd Inc BV UK Limited
--------------------------------------------------------------------------------------
REVENUES FROM CONTINUING OPERATIONS -- -- -- -- -- -- --
Operating income/(costs) 561 598 (37) -- -- 2,287 (5)
--------------------------------------------------------------------------------------
OPERATING INCOME/(LOSS) FROM CONTINUING
OPERATIONS 561 598 (37) -- -- 2,287 (5)
Net interest (payable)/receivable (5,981) (10,961) (290) (51) (3,813) (1,997) 71
--------------------------------------------------------------------------------------
(LOSS)/INCOME BEFORE TAXATION (5,420) (10,363) (327) (51) (3,813) 290 66
Taxation 1,713 -- -- -- 844 -- (11)
--------------------------------------------------------------------------------------
(LOSS)/INCOME AFTER TAXATION (3,707) (10,363) (327) (51) (2,969) 290 55
Dividends from group companies -- -- 2 -- -- 2,560 --
--------------------------------------------------------------------------------------
NET (LOSS)/INCOME (3,707) (10,363) (325) (51) (2,969) 2,850 55
======================================================================================
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Testing Testing Guarantor
Holdings Holdings subsidiaries
France Germany Total
EURL GmbH
----------------------------------
REVENUES FROM CONTINUING OPERATIONS -- -- --
Operating income/(costs) (11) (4) 3,389
----------------------------------
OPERATING INCOME/(LOSS) FROM CONTINUING
OPERATIONS (11) (4) 3,389
Net interest (payable)/receivable (86) (494) (23,602)
----------------------------------
(LOSS)/INCOME BEFORE TAXATION (97) (498) (20,213)
Taxation 58 -- 2,604
----------------------------------
(LOSS)/INCOME AFTER TAXATION (39) (498) (17,609)
Dividends from group companies -- -- 2,562
----------------------------------
NET (LOSS)/INCOME (39) (498) (15,047)
==================================
· Enlarge/Download Table
STATEMENTS OF OPERATIONS
PERIOD FROM OCTOBER 8, TO DECEMBER 31, 1996
Intertek Testing Kite ITS Intertek Testing Yickson
Testing Holdings Overseas Holding Testing Holdings Enterprises
Services USA Holdings Limited Services Sweden AB Limited
Ltd Inc BV UK Limited
--------------------------------------------------------------------------------------
REVENUES FROM CONTINUING OPERATIONS -- -- -- -- -- -- --
Operating (costs)/income (105) (211) (6) 117 (31) (14) --
--------------------------------------------------------------------------------------
OPERATING (LOSS)/INCOME FROM CONTINUING
OPERATIONS (105) (211) (6) 117 (31) (14) --
Net interest receivable/(payable) 54 (1,133) (43) 3 (460) (321) 9
--------------------------------------------------------------------------------------
(LOSS)/INCOME BEFORE TAXATION (51) (1,344) (49) 120 (491) (335) 9
Taxation -- 618 -- (7) 195 -- (1)
--------------------------------------------------------------------------------------
NET INCOME/(LOSS) (51) (726) (49) 113 (296) (335) 8
======================================================================================
STATEMENTS OF OPERATIONS
PERIOD FROM OCTOBER 8, TO DECEMBER 31, 1996
Testing Testing Guarantor
Holdings Holdings subsidiaries
France Germany Total
EURL GmbH
----------------------------------
REVENUES FROM CONTINUING OPERATIONS -- -- --
Operating (costs)/income (2) (4) (256)
----------------------------------
OPERATING (LOSS)/INCOME FROM CONTINUING
OPERATIONS (2) (4) (256)
Net interest receivable/(payable) (2) (60) (1,953)
----------------------------------
(LOSS)/INCOME BEFORE TAXATION (4) (64) (2,209)
Taxation -- -- 805
----------------------------------
NET INCOME/(LOSS) (4) (64) (1,404)
==================================
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
BALANCE SHEETS
DECEMBER 31, 1998
--------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson
Testing Holdings Overseas Holding Testing Holdings Enterprises
Services USA Holdings Limited Services Sweden AB Limited
Ltd Inc BV UK Limited
--------------------------------------------------------------------------------------
ASSETS
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
CURRENT ASSETS
Cash (6,824) -- 123 1 3 1 5
Other current assets 72,775 92,703 1,856 4,042 576 4,342 80,514
--------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 65,951 92,703 1,979 4,043 579 4,343 80,519
Investments in subsidiary undertakings 128,624 95,617 5,983 3,510 64,418 24,466 --
--------------------------------------------------------------------------------------
TOTAL ASSETS 194,575 188,320 7,962 7,553 64,997 28,809 80,519
======================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings (including current portion of
long term borrowings) 16,333 -- 260 232 1,629 383 2,317
Accounts payable, accrued liabilities and 38,458 96,133 3,295 1,197 13,621 3,423 44,095
deferred income
Income taxes (receivable)/payable (1,148) (536) -- 4 (1,283) -- 12
--------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 53,643 95,597 3,555 1,433 13,967 3,806 46,424
Long term borrowings 57,568 -- 3,595 3,174 34,899 20,819 33,983
SHAREHOLDERS' EQUITY
Ordinary shares 318 92,913 1,463 3,476 -- 1,812 --
Redeemable preference shares 86,675 -- -- -- -- -- --
Shares to be issued 2,793 -- -- -- -- -- --
Premium in excess of par value 3,018 -- -- -- 22,709 -- 49
Retained (deficit)/earnings (9,440) (190) (651) (530) (6,578) 2,372 63
--------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 83,364 92,723 812 2,946 16,131 4,184 112
--------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 194,575 188,320 7,962 7,553 64,997 28,809 80,519
======================================================================================
BALANCE SHEETS
December 31, 1998
----------------------------------
Testing Testing Guarantor
Holdings Holdings subsidiaries
France Germany Total
EURL GmbH
----------------------------------
ASSETS
CURRENT ASSETS
Cash -- -- (6,691)
Other current assets 787 -- 257,595
----------------------------------
TOTAL CURRENT ASSETS 787 -- 250,904
Investments in subsidiary undertakings 3,652 6,311 332,581
----------------------------------
TOTAL ASSETS 4,439 6,311 583,485
==================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings (including current portion of
long term borrowings) -- -- 21,154
Accounts payable, accrued liabilities and 2,887 1,321 204,430
deferred income
Income taxes (receivable)/payable -- (168) (3,119)
----------------------------------
TOTAL CURRENT LIABILITIES 2,887 1,153 222,465
Long term borrowings -- 5,167 159,205
SHAREHOLDERS' EQUITY
Ordinary shares 944 18 100,944
Redeemable preference shares -- -- 86,675
Shares to be issued -- -- 2,793
Premium in excess of par value -- 926 26,702
Retained (deficit)/earnings 608 (953) (15,299)
----------------------------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 1,552 (9) 201,815
----------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 4,439 6,311 583,485
==================================
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
BALANCE SHEETS
DECEMBER 31, 1997
--------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson
Testing Holdings Overseas Holding Testing Holdings Enterprises
Services USA Holdings Limited Services Sweden AB Limited
Ltd Inc BV UK Limited
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
--------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash (559) -- -- 1 2 -- --
Other current assets 118,686 28,295 1,883 4,107 33 3,808 71,810
--------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 118,127 28,295 1,883 4,108 35 3,808 71,810
Investments in subsidiary undertakings 130,656 150,069 5,549 3,804 64,418 25,604 --
--------------------------------------------------------------------------------------
TOTAL ASSETS 248,783 178,364 7,432 7,912 64,453 29,412 71,810
======================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings (including current portion of
long term borrowings) -- -- 218 200 1,494 411 2,115
Accounts payable, accrued liabilities and
deferred income 116,335 96,336 2,537 732 7,325 2,661 35,276
Income taxes (receivable)/payable (1,970) (581) -- 6 (1,039) -- 12
--------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 114,365 95,755 2,755 938 7,780 3,072 37,403
Long term borrowings 50,791 -- 3,647 3,410 36,630 21,963 34,282
SHAREHOLDERS' EQUITY
Ordinary shares 318 93,469 1,376 3,767 -- 1,896 --
Redeemable preference shares 81,815 -- -- -- -- -- --
Shares to be issued 2,793 -- -- -- -- -- --
Premium in excess of par value 2,857 -- -- -- 22,709 -- 49
Retained (deficit)/earnings (4,156) (10,860) (346) (203) (2,666) 2,481 76
--------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 83,627 82,609 1,030 3,564 20,043 4,377 125
--------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 248,783 178,364 7,432 7,912 64,453 29,412 71,810
======================================================================================
BALANCE SHEETS
December 31, 1997
----------------------------------
Testing Testing Guarantor
Holdings Holdings subsidiaries
France Germany Total
EURL GmbH
----------------------------------
ASSETS
CURRENT ASSETS
Cash -- 19 (537)
Other current assets -- -- 228,622
-----------------------------------
TOTAL CURRENT ASSETS -- 19 228,085
Investments in subsidiary undertakings 3,459 5,991 389,550
-----------------------------------
TOTAL ASSETS 3,459 6,010 617,635
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings (including current portion of
long term borrowings) -- -- 4,438
Accounts payable, accrued liabilities and
deferred income 2,660 893 264,755
Income taxes (receivable)/payable (56) -- (3,628)
-----------------------------------
TOTAL CURRENT LIABILITIES 2,604 893 265,565
Long term borrowings -- 4,751 155,474
SHAREHOLDERS' EQUITY
Ordinary shares 896 17 101,739
Redeemable preference shares -- -- 81,815
Shares to be issued -- -- 2,793
Premium in excess of par value -- 879 26,494
Retained (deficit)/earnings (41) (530) (16,245)
-----------------------------------
TOTAL SHAREHOLDERS' EQUITY 855 366 196,596
-----------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,459 6,010 617,635
===================================
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INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson
Testing Holdings Overseas Holding Testing Holdings Enterprises
Services USA Holdings Limited Services Sweden AB Limited
Ltd Inc BV UK Limited
--------------------------------------------------------------------------------------
RECONCILIATION OF OPERATING PROFIT TO NET
CASH (OUTFLOW)/INFLOW FROM OPERATING
ACTIVITIES:
OPERATING PROFIT (31) 12 5 (7) 20 (5) (10)
Decrease/(increase) in receivables and
prepayments 7 137 71 7 (543) -- --
Increase/(decrease) in payables 2,552 (106) (8) 1 -- 2 (2)
--------------------------------------------------------------------------------------
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES 2,528 43 68 1 (523) (3) (12)
--------------------------------------------------------------------------------------
CASH FLOW STATEMENT
Net cash inflow/(outflow) from operating 2,528 43 68 1 (523) (3) (12)
activities
Returns on investments and servicing of
finance (note a) (7,510) 9,372 (60) (242) (3,271) 301 2
Taxation received/(paid) 1,349 (19) (12) (2) 738 -- --
Acquisitions and disposals (note a) 2,024 -- (111) -- -- -- --
--------------------------------------------------------------------------------------
(1,609) 9,396 (115) (243) (3,056) 298 (10)
Financing (note a) (4,656) (9,396) 232 243 3,057 (297) 15
--------------------------------------------------------------------------------------
(DECREASE)/INCREASE IN CASH (NOTE B) (6,265) -- 117 -- 1 1 5
--------------------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
(Decrease)/increase in cash in the period (6,265) -- 117 -- 1 1 5
Debt issued in lieu of interest payment (7,088) -- -- -- -- -- --
Cash inflow from increase in debt (16,333) -- -- -- -- -- --
Other non-cash movements (210) -- 231 186 1,366 178 (205)
Exchange adjustments 521 -- (215) 18 230 994 302
--------------------------------------------------------------------------------------
Movement in net debt in the period (29,375) -- 133 204 1,597 1,173 102
Net debt at start of year (51,350) -- (3,865) (3,609) (38,122) (22,374) (36,397)
--------------------------------------------------------------------------------------
NET DEBT AT END OF YEAR (80,725) -- (3,732) (3,405) (36,525) (21,201) (36,295)
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
---
NOTE A
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Net interest paid/(received) (7,510) 9,203 (112) (242) (3,271) (1,847) 2
Dividends received -- 169 52 -- -- 2,148 --
--------------------------------------------------------------------------------------
(7,510) 9,372 (60) (242) (3,271) 301 2
--------------------------------------------------------------------------------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiaries 2,624 -- (111) -- -- -- --
Acquisition provision payments (600) -- -- -- -- -- --
--------------------------------------------------------------------------------------
2,024 -- (111) -- -- -- --
--------------------------------------------------------------------------------------
FINANCING
Issue of ordinary shares 179 -- -- -- -- -- --
Issue of redeemable preference shares 4,842 -- -- -- -- -- --
Issue of short term debt 16,440 -- -- -- -- -- --
(Decrease)/increase in net funding (26,117) (9,396) 232 243 3,057 (297) 15
--------------------------------------------------------------------------------------
(4,656) (9,396) 232 243 3,057 (297) 15
--------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
----------------------------------
Testing Testing Guarantor
Holdings Holdings subsidiaries
France Germany Total
EURL GmbH
----------------------------------
RECONCILIATION OF OPERATING PROFIT TO NET
CASH (OUTFLOW)/INFLOW FROM OPERATING
ACTIVITIES:
OPERATING PROFIT (3) (3) (22)
Decrease/(increase) in receivables and
prepayments -- -- (321)
Increase/(decrease) in payables (2) 4 2,441
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
----------------------------------
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES (5) 1 2,098
----------------------------------
CASH FLOW STATEMENT
Net cash inflow/(outflow) from operating (5) 1 2,098
activities
Returns on investments and servicing of
finance (note a) 556 (409) (1,261)
Taxation received/(paid) 216 -- 2,270
Acquisitions and disposals (note a) (5) -- 1,908
----------------------------------
762 (408) 5,015
Financing (note a) (762) 389 (11,175)
----------------------------------
(DECREASE)/INCREASE IN CASH (NOTE B) -- (19) (6,160)
----------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
(Decrease)/increase in cash in the period -- (19) (6,160)
Debt issued in lieu of interest payment -- -- (7,088)
Cash inflow from increase in debt -- -- (16,333)
Other non-cash movements -- (82) 1,464
Exchange adjustments -- (334) 1,516
----------------------------------
Movement in net debt in the period -- (435) (26,601)
Net debt at start of year -- (4,732) (160,449)
----------------------------------
NET DEBT AT END OF YEAR -- (5,167) (187,050)
----------------------------------
--------------------------------------------------------------------------------
NOTE A
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Net interest paid/(received) (54) (409) (4,240)
Dividends received 610 -- 2,979
----------------------------------
556 (409) (1,261)
----------------------------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiaries (5) -- 2,508
Acquisition provision payments -- -- (600)
----------------------------------
(5) -- 1,908
----------------------------------
FINANCING
Issue of ordinary shares -- -- 179
Issue of redeemable preference shares -- -- 4,842
Issue of short term debt -- -- 16,440
(Decrease)/increase in net funding (762) 389 (32,636)
----------------------------------
(762) 389 (11,175)
----------------------------------
--------------------------------------------------------------------------------
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F-67
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson
Testing Holdings Overseas Holding Testing Holdings Enterprises
Services USA Holdings Limited Services Sweden AB Limited
Ltd Inc BV UK Limited
--------------------------------------------------------------------------------------
RECONCILIATION OF OPERATING PROFIT TO NET
CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES:
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
OPERATING PROFIT 561 598 (37) -- -- 2,287 (5)
Decrease/(increase) in receivables and
prepayments 155 129 (8) -- -- 119 --
(Decrease)/increase in payables (4,641) (329) 16 3 331 72 358
--------------------------------------------------------------------------------------
NET CASH (OUTFLOW)/INFLOW FROM OPERATING
ACTIVITIES (3,925) 398 (29) 3 331 2,478 353
--------------------------------------------------------------------------------------
CASH FLOW STATEMENT
Net cash (outflow)/inflow from operating
activities (3,925) 398 (29) 3 331 2,478 353
Returns on investments and servicing of
finance (note c) 157 (10,961) (288) (51) (3,813) 563 71 )
Taxation received/(paid) -- -- -- -- -- -- --
Acquisitions and disposals (note c) (6,542) (2,850) 206 -- -- -- --
--------------------------------------------------------------------------------------
(10,310) (13,413) (111) (48) (3,482) 3,041 424 )
Financing (note c) 7,446 13,413 108 (11) 3,484 (3,041) (428)
(DECREASE)/INCREASE IN CASH (2,864) -- (3) (59) 2 -- (4)
--------------------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
(Decrease)/increase in cash in the period (2,864) -- (3) (59) 2 -- (4)
Debt issued in lieu of interest payment (6,138) -- -- -- -- -- --
Cash inflow from increase in debt -- -- 117 94 777 205 1,059
Other non-cash movements 2,862 -- 4 4 (144) (187) 1,568
Exchange adjustments (1,295) -- 491 (124) (1,157) 2,414 (1,266)
Net debt at start of year (43,915) -- (4,474) (3,524) (37,600) (24,806) (37,754)
--------------------------------------------------------------------------------------
NET DEBT AT END OF YEAR (51,350) -- (3,865) (3,609) (38,122) (22,374) (36,397)
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
---
NOTE C
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Net interest paid/(received) 157 (10,961) (290) (51) (3,813) (1,997) 71)
Dividends received -- -- 2 -- -- 2,560 --
--------------------------------------------------------------------------------------
157 (10,961) (288) (51) (3,813) 563 71)
--------------------------------------------------------------------------------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiaries -- -- 206 -- -- -- --
Acquisition provision payments (6,542) (2,850) -- -- -- -- --
--------------------------------------------------------------------------------------
(6,542) (2,850) 206 -- -- -- --
--------------------------------------------------------------------------------------
FINANCING
Increase/(decrease) in net funding 7,446 13,413 108 (11) 3,484 (3,041) (428)
--------------------------------------------------------------------------------------
7,446 13,413 108 (11) 3,484 (3,041) (428)
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
----
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
----------------------------------
Testing Testing Guarantor
Holdings Holdings subsidiaries
France Germany Total
EURL GmbH
----------------------------------
RECONCILIATION OF OPERATING PROFIT TO NET
CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES:
OPERATING PROFIT (11) (4) 3,389
Decrease/(increase) in receivables and
prepayments -- -- 395
(Decrease)/increase in payables 87 85 (4,018)
----------------------------------
NET CASH (OUTFLOW)/INFLOW FROM OPERATING
ACTIVITIES 76 81 (234)
----------------------------------
CASH FLOW STATEMENT
Net cash (outflow)/inflow from operating
activities 76 81 (234)
Returns on investments and servicing of
finance (note c) (86) (494) (14,902)
Taxation received/(paid) -- -- --
Acquisitions and disposals (note c) -- -- (9,186)
----------------------------------
(10) (413) (24,322)
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
Financing (note c) 10 432 21,413
------
(DECREASE)/INCREASE IN CASH -- 19 (2,909)
----------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
(Decrease)/increase in cash in the period -- 19 (2,909)
Debt issued in lieu of interest payment -- -- (6,138)
Cash inflow from increase in debt -- -- 2,252
Other non-cash movements -- (34) 4,073
Exchange adjustments -- 593 (344)
Net debt at start of year -- (5,310) (157,383)
----------------------------------
NET DEBT AT END OF YEAR -- (4,732) (160,449)
----------------------------------
--------------------------------------------------------------------------------
NOTE C
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Net interest paid/(received) (86) (494) (17,464)
Dividends received -- -- 2,562
----------------------------------
(86) (494) (14,902)
----------------------------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiaries -- -- 206
Acquisition provision payments -- -- (9,392)
----------------------------------
-- -- (9,186)
----------------------------------
FINANCING
Increase/(decrease) in net funding 10 432 21,413
----------------------------------
10 432 21,413
----------------------------------
--------------------------------------------------------------------------------
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F-68
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson
Testing Holdings Overseas Holding Testing Holdings Enterprises
Services USA Holdings Limited Services Sweden AB Limited
Ltd Inc BV UK Limited
--------------------------------------------------------------------------------------
NOTE B - ANALYSIS OF CHANGES IN NET DEBT
CASH AT BANK AT DECEMBER 31, 1997 (559) -- -- 1 2 -- --
Exchange adjustments -- -- 6 -- -- -- --
Cash flows (6,265) -- 117 -- 1 1 5
--------------------------------------------------------------------------------------
CASH AT BANK AT DECEMBER 31, 1998 (6,824) -- 123 1 3 1 5
--------------------------------------------------------------------------------------
DEBT DUE WITHIN 1 YEAR AT DECEMBER 31, 1997 -- -- (218) (200) (1,494) (411) (2,115)
Cash flows (16,333) -- -- -- -- -- --
Other non-cash movements -- -- (29) (33) (142) 8 (205)
Exchange adjustments -- -- (13) 1 7 20 3
--------------------------------------------------------------------------------------
DEBT DUE WITHIN 1 YEAR AT DECEMBER 31, 1998 (16,333) -- (260) (232) (1,629) (383) (2,317)
--------------------------------------------------------------------------------------
DEBT DUE AFTER 1 YEAR AT DECEMBER 31, 1997 (50,791) -- (3,647) (3,410) (36,630) (21,963) (34,282)
Debt issued in lieu of interest payment (7,088) -- -- -- -- -- --
Other non-cash movements (210) -- 260 219 1,508 170 --
Exchange adjustments 521 -- (208) 17 223 974 299
--------------------------------------------------------------------------------------
DEBT DUE AFTER 1 YEAR AT DECEMBER 31, 1998 (57,568) -- (3,595) (3,174) (34,899) (20,819) (33,983)
--------------------------------------------------------------------------------------
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
--------------------------------------------------------------------------------------
TOTAL NET DEBT AT DECEMBER 31, 1998 (80,725) -- (3,732) (3,405) (36,525) (21,201) (36,295)
--------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
----------------------------------
Testing Testing Guarantor
Holdings Holdings subsidiaries
France Germany Total
EURL GmbH
----------------------------------
NOTE B - ANALYSIS OF CHANGES IN NET DEBT
CASH AT BANK AT DECEMBER 31, 1997 -- 19 (537)
Exchange adjustments -- -- 6
Cash flows -- (19) (6,160)
----------------------------------
CASH AT BANK AT DECEMBER 31, 1998 -- -- (6,691)
----------------------------------
DEBT DUE WITHIN 1 YEAR AT DECEMBER 31, 1997 -- -- (4,438)
Cash flows -- -- (16,333)
Other non-cash movements -- -- (401)
Exchange adjustments -- -- 18
----------------------------------
DEBT DUE WITHIN 1 YEAR AT DECEMBER 31, 1998 -- -- (21,154)
----------------------------------
DEBT DUE AFTER 1 YEAR AT DECEMBER 31, 1997 -- (4,751) (155,474)
Debt issued in lieu of interest payment -- -- (7,088)
Other non-cash movements -- (82) 1,865
Exchange adjustments -- (334) 1,492
----------------------------------
DEBT DUE AFTER 1 YEAR AT DECEMBER 31, 1998 -- (5,167) (159,205)
----------------------------------
----------------------------------
TOTAL NET DEBT AT DECEMBER 31, 1998 -- (5,167) (187,050)
----------------------------------
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F-69
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
((POUND)'000)
36. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (continued)
· Enlarge/Download Table
STATEMENTS OF CASH FLOWS
PERIOD FROM OCTOBER 8, TO DECEMBER 31, 1996
--------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson
Testing Holdings Overseas Holding Testing Holdings Enterprises
Services USA Holdings Limited Services Sweden AB Limited
Ltd Inc BV UK Limited
--------------------------------------------------------------------------------------
RECONCILIATION OF OPERATING PROFIT TO NET
CASH (OUTFLOW)/INFLOW FROM OPERATING
ACTIVITIES:
OPERATING (LOSS)/PROFIT (105) (211) (6) 117 (31) (14) --
Decrease in receivables and prepayments (666) (199) -- -- -- (119) --
Increase in payables 12,320 2,850 3 -- -- -- --
--------------------------------------------------------------------------------------
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES 11,549 2,440 (3) 117 (31) (133) --
--------------------------------------------------------------------------------------
CASH FLOW STATEMENT
Net cash inflow/(outflow) from operating
activities 11,549 2,440 (3) 117 (31) (133) --
Net cash outflow from returns on investments
and servicing of finance (note d) 109 (1,133) (43) 3 (460) (321) 241
Taxation received/(paid) -- 51 -- (1) -- -- --
Net cash outflow from capital expenditure
(note d) (135,489) (146,559) (5,755) (3,831) (64,709) (28,253) --
--------------------------------------------------------------------------------------
(123,831) (145,201) (5,801) (3,712) (65,200) (28,707) 241
Financing (note d) 126,136 145,201 5,804 3,772 65,200 28,707 (237)
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
--------------------------------------------------------------------------------------
INCREASE IN CASH 2,305 -- 3 60 -- -- 4
--------------------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
Increase in cash in the period 2,305 -- 3 60 -- -- 4
Cash inflow from increase in debt (48,176) -- (4,755) (3,742) (39,204) (26,786) (39,300
Exchange adjustments 1,956 -- 278 158 1,604 1,980 1,542
Net debt at October 8, 1996 -- -- -- -- -- -- --
--------------------------------------------------------------------------------------
NET DEBT AT DECEMBER 31, 1996 (43,915) -- (4,474) (3,524) (37,600) (24,806) (37,754
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
---
NOTE D
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Net interest received/(paid) 109 (1,133) (43) 3 (460) (321) 241
--------------------------------------------------------------------------------------
CAPITAL EXPENDITURE
Purchase of subsidiaries and associates (135,489) (146,559) (5,755) (3,831) (64,709) (28,253) --
--------------------------------------------------------------------------------------
FINANCING
Issue of redeemable preference shares 87,783 91,283 993 3,831 23,000 2,091 48
Issue of long term debt 46,220 -- 4,477 3,584 37,600 24,806 37,758
(Decrease)/increase in net funding (7,867) 53,918 334 (3,643) 4,600 1,810 (38,043)
--------------------------------------------------------------------------------------
126,136 145,201 5,804 3,772 65,200 28,707 (237)
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
----
STATEMENTS OF CASH FLOWS
PERIOD FROM OCTOBER 8, TO DECEMBER 31, 1996
----------------------------------
Testing Testing Guarantor
Holdings Holdings subsidiaries
France Germany Total
EURL GmbH
----------------------------------
RECONCILIATION OF OPERATING PROFIT TO NET
CASH (OUTFLOW)/INFLOW FROM OPERATING
ACTIVITIES:
OPERATING (LOSS)/PROFIT (2) (4) (256)
Decrease in receivables and prepayments -- 1 (983)
Increase in payables -- -- 15,173
----------------------------------
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES (2) (3) 13,934
----------------------------------
CASH FLOW STATEMENT
Net cash inflow/(outflow) from operating
activities (2) (3) 13,934
Net cash outflow from returns on investments
and servicing of finance (note d) (2) (60) (1,666)
Taxation received/(paid) -- -- 50
Net cash outflow from capital expenditure
(note d) (3,843) (6,694) (395,133)
----------------------------------
(3,847) (6,757) (382,815)
Financing (note d) 3,847 6,757 385,187
----------------------------------
INCREASE IN CASH -- -- 2,372
----------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
Increase in cash in the period -- -- 2,372
Cash inflow from increase in debt -- (5,643) (167,606)
Exchange adjustments -- 333 7,851
Net debt at October 8, 1996 -- -- --
----------------------------------
NET DEBT AT DECEMBER 31, 1996 -- (5,310) (157,383)
----------------------------------
--------------------------------------------------------------------------------
NOTE D
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Net interest received/(paid) (2) (60) (1,666)
----------------------------------
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
CAPITAL EXPENDITURE
Purchase of subsidiaries and associates (3,843) (6,694) (395,133)
----------------------------------
FINANCING
Issue of redeemable preference shares 996 1,001 211,026
Issue of long term debt -- 5,310 159,755
(Decrease)/increase in net funding 2,851 446 14,406
----------------------------------
3,847 6,757 385,187
----------------------------------
--------------------------------------------------------------------------------
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F-70
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this annual report to be signed on its behalf
by the undersigned, thereunto duly authorised.
INTERTEK TESTING SERVICES LIMITED
(Registrant)
By:
--------------------------------
Name: Richard Nelson
Title: Director
Date: March 26, 1999
By:
--------------------------------
Name: William Spencer
Title: Director
Date: March 26, 1999
20-F
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this annual report to be signed on its behalf
by the undersigned, thereunto duly authorised.
INTERTEK TESTING SERVICES LIMITED
(Registrant)
By: /s/ RICHARD NELSON
--------------------------------
Name: Richard Nelson
Title: Director
Date: March 26, 1999
By: /s/ WILLIAM SPENCER
--------------------------------
Name: William Spencer
Title: Director
Date: March 26, 1999
Dates Referenced Herein and Documents Incorporated By Reference
This 20-F Filing
Date
First
Last Other Filings
Referenced-On Page
SEC Info - Intertek Testing Services Ltd - 20-F - For 12/31/98
12/23/94
12/31/94
1/1/95
12/31/95
1/1/96
7/19/96
9/30/96
10/7/96
10/8/96
12/31/96
1/1/97
3/1/97
4/27/97
11/2/97
12/31/97
1/1/98
2/2/98
5/2/98
7/17/98
8/2/98
8/20/98
8/31/98
For The Period Ended 12/31/98
Filed On / Filed As Of
1/1/99
1/4/99
1/12/99
3/12/99
3/26/99
3/31/99
6/15/99
12/31/99
3/1/0
9/1/0
12/31/0
6/1/1
7/14/1
11/1/1
12/31/1
1/1/2
2/1/2
7/1/2
11/1/2
11/1/3
12/15/3
3/1/4
9/1/4
12/31/4
6/1/5
12/31/5
11/1/6
11/1/7
11/8/9
61
21
61
21
27
60
91
21
27
21
50
49
69
38
21
5
38
38
5
38
69
25
1
40
35
93
3
1
8
103
38
49
49
49
49
9
39
49
40
39
40
39
39
39
49
49
49
49
49
39
39
15
24
23
103
92
103
121
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83
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93
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77
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