AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 15, 2002
REGISTRATION NO. 333-85102
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
ENODIS PLC
(Exact name of registrant as specified in its charter)
ENGLAND AND WALES NOT APPLICABLE
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3556
(Primary Standard Industrial Classification Code Number)
WASHINGTON HOUSE
40-41 CONDUIT STREET
LONDON W1S 2YQ, ENGLAND
011 44 20 7304 6000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive office)
PAMELA E. FLAHERTY, ESQ.
SHACK SIEGEL KATZ FLAHERTY & GOODMAN P.C.
530 FIFTH AVENUE
NEW YORK, NY 10036
(212) 782 0700
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
--------------------------
WITH A COPY TO:
JOHN W. CONNOLLY III, ESQ.
Clifford Chance Limited Liability Partnership
200 Aldersgate Street
London EC1A 4JJ, England
011 44 20 7600 1000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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EXCHANGE OFFER PROSPECTUS DATED , 2002
L100,000,000
[LOGO]
OFFER FOR ALL OUTSTANDING
10 3/8% SENIOR NOTES DUE 2012
IN EXCHANGE FOR
10 3/8% SENIOR EXCHANGE NOTES DUE 2012
WE ARE OFFERING 10 3/8% SENIOR EXCHANGE NOTES DUE 2012, THE EXCHANGE NOTES,
IN EXCHANGE FOR ALL THE OUTSTANDING 10 3/8% SENIOR NOTES DUE 2012, THE OLD
NOTES. THE TERMS OF THE EXCHANGE NOTES ARE SUBSTANTIALLY IDENTICAL TO THE TERMS
OF THE OLD NOTES, EXCEPT THAT THE EXCHANGE NOTES ARE INTENDED TO BE FREELY
TRADABLE. WE CALL THE EXCHANGE NOTES AND THE OLD NOTES COLLECTIVELY THE NOTES.
TERMS OF THE EXCHANGE OFFER:
- THE EXCHANGE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON ,
2002, UNLESS WE EXTEND IT.
- YOU WILL RECEIVE AN EQUAL PRINCIPAL AMOUNT OF EXCHANGE NOTES FOR ALL OLD
NOTES THAT YOU VALIDLY TENDER AND DO NOT VALIDLY WITHDRAW.
- THE EXCHANGE WILL NOT BE A TAXABLE EXCHANGE FOR U.S. FEDERAL INCOME TAX
PURPOSES.
- WHEN YOU ACCEPT THE EXCHANGE OFFER YOU MUST MAKE CERTAIN REPRESENTATIONS,
INCLUDING THAT YOU ARE NOT ENGAGING IN A DISTRIBUTION OF THE EXCHANGE NOTES.
- YOU MAY WITHDRAW A TENDER OF OLD NOTES AT ANY TIME PRIOR TO THE EXPIRATION
DATE.
TERMS OF THE NOTES:
- MATURITY DATE: April 15, 2012.
- INTEREST PAYMENT DATES: Each April 15 and each October 15, commencing on
October 15, 2002.
- REDEMPTION: We may redeem the notes at any time after April 15, 2007. Before
April 15, 2005, we may redeem up to 35% of the notes with the net proceeds
of certain sales of our common equity.
- CHANGE OF CONTROL: If we experience specific kinds of changes of control, we
must offer to repurchase the notes.
- RANKING: The exchange notes are senior unsecured obligations of Enodis plc,
which conducts all business through its subsidiaries. The exchange notes
will (1) rank equally with all our existing and future unsecured senior
indebtedness, (2) rank senior to all our existing and future subordinated
obligations, and (3) rank junior to all of the existing and future
indebtedness and other liabilities of our subsidiaries and to all of our
existing and future secured indebtedness to the extent of the value of the
collateral securing those obligations. As of March 30, 2002, Enodis plc had
no indebtedness other than the notes, and our subsidiaries had
L526.9 million of outstanding indebtedness, (including financial
indebtedness, trade payables and other liabilities, but excluding
intercompany indebtedness), all of which indebtedness effectively rank
senior to the notes. In addition, at March 30, 2002, our subsidiaries had
borrowing availability under the senior secured credit facility of an
additional L44.2 million. We concluded a series of transactions described
under "Summary--Recent Developments," which has resulted in a reduction in
our indebtedness. After giving effect to the application of the net proceeds
from these transactions, our subsidiaries' total indebtedness would have
been approximately L446.2 million (excluding intercompany indebtedness) as
of March 30, 2002.
THIS INVESTMENT INVOLVES RISKS. SEE THE RISK FACTORS SECTION BEGINNING ON
PAGE 12.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENCE.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE
ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER
IS NOT PERMITTED.
----------------
TABLE OF CONTENTS
PAGE
SUMMARY................................ 1
RISK FACTORS........................... 12
INFORMATION REGARDING FORWARD-LOOKING
STATEMENTS........................... 21
INDUSTRY AND MARKET DATA............... 21
PRESENTATION OF FINANCIAL AND OTHER
DATA................................. 22
EXCHANGE RATES......................... 23
USE OF PROCEEDS........................ 23
THE EXCHANGE OFFER..................... 24
CAPITALIZATION......................... 30
SELECTED CONSOLIDATED FINANCIAL AND
OPERATING DATA....................... 31
OPERATING AND FINANCIAL REVIEW AND
PROSPECTS............................ 35
BUSINESS............................... 58
MANAGEMENT............................. 80
PAGE
SHAREHOLDERS........................... 86
DESCRIPTION OF OTHER INDEBTEDNESS...... 87
DESCRIPTION OF THE NOTES............... 90
BOOK-ENTRY; DELIVERY AND FORM.......... 132
TAXATION............................... 135
PLAN OF DISTRIBUTION................... 141
LEGAL MATTERS.......................... 142
EXPERTS................................ 142
SERVICE OF PROCESS AND ENFORCEMENT OF
LIABILITIES.......................... 142
WHERE YOU CAN FIND MORE INFORMATION.... 142
LUXEMBOURG LISTING AND GENERAL
INFORMATION.......................... 143
INDEX TO FINANCIAL STATEMENTS.......... F-1
----------------
UNTIL , ALL DEALERS THAT EFFECT TRANSACTIONS IN THE EXCHANGE
NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO ANY DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
i
SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS.
IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE
INVESTING IN THE NOTES. THIS PROSPECTUS CONTAINS SPECIFIC TERMS OF THE NOTES, AS
WELL AS INFORMATION ABOUT OUR BUSINESS AND DETAILED FINANCIAL DATA. YOU SHOULD
READ THIS PROSPECTUS IN ITS ENTIRETY BEFORE MAKING AN INVESTMENT DECISION.
OUR COMPANY
OVERVIEW
We believe we are one of the leading manufacturers and distributors of food
service equipment globally. We believe that we offer one of the broadest lines
of commercial food service equipment products in our industry, including both
"warm" and "cold" side products. We own a portfolio of over 30 brands, many with
leadership positions in their respective markets. We also have a technology
center at our global operations headquarters in New Port Richey, Florida, which
we believe is one of the leading research and development and technical support
facilities in the food service equipment industry. This facility enables us to
offer our customers an array of advanced product development services.
We operate our business in two principal groups:
- Global food service equipment (75.7% of total turnover from continuing
operations in fiscal 2001), which manufactures and distributes cooking,
warming, ice, storage, preparation, ventilation, dispensing and warewashing
equipment used by commercial and institutional food service operators; and
- Food retail equipment (22.5% of total turnover from continuing operations in
fiscal 2001), which manufactures and distributes equipment used to store and
display food in retail food outlets such as supermarkets, convenience and
specialty stores.
Our end-customer base includes many of the world's leading quick service
restaurant chains, restaurants, hotels and institutional customers for food
service equipment and leading supermarket chains and convenience stores for food
retail equipment. We have 28 manufacturing facilities located in eight countries
in North America, Europe and Asia. Several of our brands have been manufactured
for over 50 years. The network of third party authorized service agencies that
we have established services our global customers in over 100 countries around
the world. For a summary of revenues by segment and geographic market for each
of the last three fiscal years, see "Operating and Financial Review and
Prospects--Results of Continuing Operations."
OPERATING STRATEGY
As one of the leading manufacturers and distributors of food service
equipment globally, our objective is to establish Enodis as the world's leading
supplier of commercial food service equipment through product, distribution and
service excellence. The key elements of our strategy to achieve this goal are
to:
- exploit and develop our broad portfolio of leading food service equipment
products and strong brands;
- improve operating efficiency through, among other things, cost reduction and
restructuring;
- capitalize on technological leadership and new product development
capabilities;
- partner with dealers, distributors and sales representatives to increase
market share;
- improve the performance of our food retail equipment businesses; and
- reduce debt.
1
NEW FINANCING ARRANGEMENTS
The old notes were offered as part of our new financing arrangements, which
include the refinancing of our former L600 million credit facility, under which
we had L389.3 million outstanding on February 20, 2002. These bank facilities
and their predecessors were established initially to finance our acquisition in
1999 of Scotsman Industries, Inc. We were in compliance with the financial and
other covenants under our former credit facility at the time of the refinancing.
The new financing arrangements include:
- approximately L70.3 million of net proceeds from an offering of rights to
purchase 150,861,463 of our ordinary shares;
- approximately L320 million of U.S. dollar-denominated credit available to
our subsidiaries under new senior secured credit facilities, consisting of:
- term loans drawn in the amount of approximately L260 million; and
- a revolving credit facility in the amount of approximately
L60 million; and
- L100 million of old notes.
We entered into the new senior secured credit facilities on February 20,
2002. In order to create the structural subordination of the notes required by
the lenders under our new senior secured credit facilities, on February 19,
2002, Enodis plc transferred substantially all of its assets and liabilities to
its direct wholly-owned subsidiary, Enodis Holdings Limited. On the same day,
Enodis Holdings Limited transferred all of its assets and its liabilities
(including those transferred to it by Enodis plc) to its direct wholly-owned
subsidiary, Enodis Group Limited.
Pending completion of the rights offering and the sale of the old notes, we
borrowed L150 million of bridge loans under a bridge loan facility on
February 20, 2002. We repaid a portion of the bridge loans with the net proceeds
of the old notes, and the balance was repaid with a portion of the net proceeds
of the rights offering. We have used L16 million of net proceeds of the rights
offering to repay indebtedness under our new senior secured credit facilities
and the remainder is available for general corporate purposes. See "Use of
Proceeds," and "Description of Other Indebtedness."
The following table presents a summary of the sources and uses of funds for
the new financing arrangements:
SOURCES OF FUNDS USES OF FUNDS
------------------------------------------------------------- -------------------------------------------------------------
(IN MILLIONS)
Senior secured credit facilities(1).......... L244.0 Refinance existing debt...................... L389.3
Offering of the old notes.................... 100.0 Fees and expenses(2)......................... 20.2
Rights offering(3)........................... 70.3 Excess cash.................................. 4.8
-------------- --------------
TOTAL SOURCES.............................. L414.3 TOTAL USES................................... L414.3
============== ==============
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(1) Amount of new senior term debt after application of L16 million of proceeds
of the rights offering.
(2) Excluding fees and expenses of the rights offering.
(3) Net of fees and expenses of L4.8 million.
RECENT DEVELOPMENTS
After March 30, 2002, the following material events have occurred:
We completed a rights offering on April 9, 2002, pursuant to which
qualifying existing shareholders subscribed for 139,551,567 of our ordinary
shares at a price of L0.50 per share. In addition, institutional and other
investors subscribed for 10,623,028 ordinary shares not purchased by
shareholders in the rights offering at a price of L0.92 per share. In accordance
with the terms of the rights offering, the premium over the rights offering
price (after deducting the expenses of the procuring subscribers) has been
distributed pro rata to the shareholders entitled thereto. The gross proceeds of
the rights offering were L75.1 million and were used principally to repay debt.
2
On April 24, 2002, we sold Belshaw Bros., a subsidiary that manufactures
automated donut cooking systems, for net cash consideration of L15.4 million.
The expected loss on the disposal of Belshaw Bros., after write-off of goodwill
of L25.0 million and costs will be L15.9 million.
On May 21, 2002, we sold our Austral subsidiaries, which manufacture
refrigeration equipment, for net cash consideration of L6.7 million. The
expected loss on disposal of Austral, after costs, will be L6.8 million.
On May 23, 2002, we announced the sale of our Aladdin Temp-Rite
subsidiaries, which manufacture meal delivery systems, for net cash
consideration of L25.7 million. The expected loss on disposal of our Aladdin
Temp-Rite subsidiaries, after costs and the write-off of goodwill of
L29.7 million, will be L15.7 million.
On June 14, 2002, we sold the assets of Prolon, a subsidiary that
manufactures plastic tableware and other plastic wares, for net cash
consideration of L1.0 million. The expected loss on the disposal of Prolon,
after costs, will be L0.8 million.
In total, net proceeds raised by these divestitures amount to some
L47.8 million, and exceptional net losses are estimated to be L38.4 million
after L54.7 million of goodwill are written off. The aggregate operating profits
for these companies for the last financial year were L9.2 million. During the
six months ended March 30, 2002, the aggregate operating profit contribution for
these businesses was L4.0 million. The net proceeds of these divestitures were
used to repay outstanding indebtedness. The divestitures described above
complete our current program of non-core disposals.
On June 25, 2002, we received approximately L3.9 million from the sale of
our 750,000 shares in Nobia AB, which we had held previously in the form of
warrants. On June 27, 2002, we received repayment of the L20 million loan issued
by us to Nobia together with an early redemption penalty of L400,000 and
interest accrued from the last interest payment date. The amounts received from
these transactions were used to repay indebtedness.
After giving effect to the application of the net proceeds from the
transactions mentioned above, our net debt (total financial indebtedness less
cash and cash equivalents) at March 30, 2002 would have been below
L250.0 million.
Although the disposals dilute our earnings per share, they decrease our
level of debt and enable us to focus on our core food service equipment business
where we believe we have a significant competitive advantage.
On May 23, 2002, we also announced the following Board and senior management
changes:
- David McCulloch was appointed Chief Operating Officer of our Group;
- W. David Wrench was appointed Chief Financial Officer of our Group and
joined the Board immediately; and
- Robert Eimers was appointed Executive Vice President, Global Human
Resources and joined the Board immediately.
In addition, David Odum, former President of our Food Retail Equipment
division, and Stuart Miller, former Chief Financial Officer of our Group,
resigned from their positions with us at the end of May 2002.
LEVERAGE POSITION
We continue to be highly leveraged. As of March 30, 2002, our total
indebtedness (including financial indebtedness, trade payables and other
liabilities) was L626.9 million. As of the same date, our net debt was L380.5
million. After giving effect to the application of the net proceeds from the
transactions mentioned above, our net debt would have been below L250.0 million
at March 30, 2002. All our operations are conducted through our subsidiaries. As
of March 30, 2002, the total indebtedness of our subsidiaries was L526.9 million
(including financial indebtedness, trade payables and other liabilities, but
excluding intercompany indebtedness), all of which indebtedness effectively rank
senior to the exchange notes. As of the same date, our subsidiaries were
entitled to borrow an additional L44.2 million under our senior secured credit
facility. After giving effect to the application of the net proceeds from the
transactions mentioned above, our subsidiaries' total indebtedness would have
been approximately L446.2 million (excluding intercompany indebtedness) as of
March 30, 2002, and our subsidiaries would have been entitled to borrow an
additional L44.2 million under our senior secured credit facility. See "Risk
Factors--Our substantial leverage and debt service obligations could adversely
affect our business".
3
THE EXCHANGE OFFER
ON MARCH 26, 2002, WE ISSUED L100,000,000 AGGREGATE PRINCIPAL AMOUNT OF
10 3/8% SENIOR NOTES DUE 2012, OR THE OLD NOTES. THE EXCHANGE OFFER RELATES TO
THE EXCHANGE OF UP TO L100,000,000 PRINCIPAL AMOUNT OF OUR OUTSTANDING OLD NOTES
FOR AN EQUAL PRINCIPAL AMOUNT OF EXCHANGE NOTES. THE FORM AND TERMS OF THE
EXCHANGE NOTES ARE IDENTICAL IN ALL MATERIAL RESPECTS TO THE FORM AND TERMS OF
THE CORRESPONDING OUTSTANDING OLD NOTES, EXCEPT THAT THE EXCHANGE NOTES HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEREFORE WILL NOT BEAR
LEGENDS RESTRICTING THEIR TRANSFER.
The Exchange Offer........................ We are offering to exchange each L1,000 principal amount of
our exchange notes which have been registered under the
Securities Act of 1933 for each L1,000 principal amount of
outstanding old notes. To be exchanged, an outstanding old
note must be properly tendered by you and accepted by us.
All outstanding old notes that are validly tendered and not
validly withdrawn will be exchanged. If you wish to tender
your old notes for exchange in the exchange offer, you must
send your response to the exchange agent on or prior to the
expiration date. We will issue registered notes on or
promptly after the expiration of the exchange offer.
Resale of the Exchange Notes.............. Based on an interpretation by the staff of the Securities
and Exchange Commission set forth in no-action letters
issued to third parties, we believe that the exchange notes
may be offered for resale, resold and otherwise transferred
by you without compliance with the registration and
prospectus delivery provisions of the Securities Act of
1933 if you are not our affiliate and the exchange notes
issued in the exchange offer are being acquired by you in
the ordinary course of your business.
You must also represent to us that you are not
participating, do not intend to participate, and have no
arrangement or understanding with any person to participate
in the distribution of the exchange notes issued to you in
the exchange offer.
Each broker-dealer that is issued exchange notes in the
exchange offer for its own account in exchange for old
notes that were acquired by such broker-dealer as a result
of market-making or other trading activities must
acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act of 1933, in connection
with any resale of the exchange notes issued in the
exchange offer. If you are a broker-dealer who purchased
old notes directly from us for resale pursuant to Rule 144A
or any other available exemption under the Securities Act
of 1933, you may not participate in the exchange offer.
Registration Rights Agreement............. We sold the old notes on March 26, 2002, in a private
placement. In connection with the sale, we executed a
registration rights agreement for the benefit of the
purchasers under which we agreed to effect the exchange
offer.
4
Expiration Date........................... The exchange offer will expire at 5:00 p.m., New York City
time, , 2002, unless we decide to extend the
expiration date. You will have certain rights against us
under the registration rights agreement executed as part of
the offering of the outstanding old notes if we fail to
consummate the exchange offer.
Tenders and Withdrawals................... YOU MUST COMPLY WITH THE PROCEDURES ESTABLISHED BY
EUROCLEAR AND/OR CLEARSTREAM, LUXEMBOURG, AS THE CASE MAY
BE, PRIOR TO THE EXPIRATION DATE.
If you tender the old notes, you must acknowledge that you
are not engaging in, nor intend to engage in, a
distribution of the exchange notes. You may withdraw your
tender of old notes pursuant to the exchange offer at any
time before the expiration date. If we do not accept any
old notes for exchange notes for any reason, we will return
them to you without expense as promptly as practicable
after the expiration or termination of the exchange offer.
Special Procedures for Beneficial
Owners.................................. If you are the beneficial owner of old notes and your notes
are registered in the name of a broker or other
institution, and you wish to participate in the exchange,
you should promptly contact the person in whose name your
old notes are registered and instruct such person to tender
on your behalf. If you wish to tender on your own behalf,
you must make appropriate arrangements to register
ownership of the outstanding old notes in your name or
obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take
considerable time.
Withdrawal Rights......................... You may withdraw the tender of your old notes at any time
before 5:00 p.m., New York City time, on , 2002.
Material U.S. Federal Income Tax
Consequences............................ An exchange of old notes for exchange notes will not be
taxable to you under U.S. federal income tax laws. See
"Taxation--United States Taxation--Exchange Offer."
Use of Proceeds........................... We will not receive any proceeds from the issuance of
exchange notes pursuant to the exchange offer. We will pay
all expenses incident to the exchange offer.
Exchange Agent............................ The Bank of New York can be reached by telephone at
011 44 20 7964 6582 for more information about the exchange
offer.
Effect of Not Tendering................... If you choose not to tender your old notes, or if they are
not accepted, they will continue to be subject to the
existing transfer restrictions. We do not have any further
obligation to provide for the registration of the old notes
under the Securities Act of 1933.
5
DESCRIPTION OF THE EXCHANGE NOTES
THE EXCHANGE NOTES WILL BE REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
ACCORDINGLY WILL NOT BE SUBJECT TO THE RESTRICTIONS ON TRANSFER APPLICABLE TO
THE OLD NOTES. EXCEPT AS PROVIDED IN THE PREVIOUS SENTENCE, THE EXCHANGE NOTES
HAVE TERMS AND CONDITIONS IDENTICAL IN ALL MATERIAL RESPECTS TO THOSE OF THE OLD
NOTES. ACCORDINGLY, UNLESS SPECIFICALLY STATED TO THE CONTRARY, THE FOLLOWING
DESCRIPTION APPLIES EQUALLY TO THE OLD NOTES AND EXCHANGE NOTES.
Issuer......................................... Enodis plc, a public limited company formed
under the laws of England and Wales.
Notes.......................................... L100 million aggregate principal amount of
10 3/8% senior notes due April 15, 2012.
Maturity....................................... April 15, 2012.
Interest Payment Dates......................... We will pay interest on the notes at a rate of
10 3/8% per year, on April 15 and October 15 of
each year, beginning on October 15, 2002.
Ranking........................................ The notes will be our unsecured senior
obligations. Accordingly, they will:
- rank equally with all our other existing
and future unsecured senior indebtedness;
- rank senior to all of our existing and
future subordinated obligations; and
- effectively rank junior to (a) all of the
existing and future indebtedness and other
liabilities (including trade payables) of
our subsidiaries, including borrowings made
under the senior secured credit facilities
of our subsidiary Enodis Holdings Limited
and (b) all of our existing and future
secured indebtedness to the extent of the
value of the collateral securing those
obligations.
We are a holding company and conduct our
operations entirely through our subsidiaries.
As of March 30, 2002, after giving effect to
the application of the net proceeds from the
transactions described under "Summary--Recent
Developments," our subsidiaries' total
indebtedness would have been approximately
L446.2 million (excluding intercompany
indebtedness), all of which indebtedness
effectively rank senior to the notes. The
indenture governing the notes restricts but
does not prohibit the incurrence by our
subsidiaries of additional indebtedness.
Optional Redemption............................ Prior to April 15, 2005, we may redeem up to
35% of the notes with the proceeds of certain
equity offerings at the price listed under
"Description of the Notes--Optional
Redemption."
6
On or after April 15, 2007, we may redeem some
or all of the notes at any time at the
redemption prices listed under "Description of
the Notes--Optional Redemption."
Tax Redemption................................. We may also redeem all but not part of the
notes at 100% of their principal amount plus
accrued interest if we become obligated to pay
additional amounts due to certain developments
affecting taxation. See "Description of the
Notes--Redemption for Changes in Withholding
Taxes."
Change of Control.............................. If we experience specific kinds of changes of
control, you will have the right to require us
to repurchase all or part of your notes at 101%
of their principal amount, plus accrued
interest and additional amounts, if any. See
"Description of the Notes--Change of Control."
Restrictive Covenants.......................... The indenture governing the notes will, among
other things, restrict our ability and the
ability of our restricted subsidiaries to:
- borrow additional money;
- pay dividends on our stock or repurchase
our stock;
- make payments on or redeem or repurchase
indebtedness junior to the notes;
- make investments;
- create liens;
- engage in sale and leaseback transactions;
- create restrictions on the payment of
dividends or other amounts to us from our
subsidiaries;
- enter into transactions with affiliates;
- sell assets or consolidate or merge with or
into other companies;
- in the case of our subsidiaries, guarantee
our other indebtedness;
- issue or sell capital stock of our
subsidiaries; and
- expand into unrelated businesses.
All of these restrictions will be subject to a
number of important exceptions and
qualifications. See "Description of the
Notes--Certain Covenants."
7
Listing........................................ The old notes have been listed and the exchange
notes have been accepted for listing on the
Luxembourg Stock Exchange.
Governing Law.................................. Your rights under the notes are governed by New
York law.
Trustee, Registrar and Principal Paying
Agent........................................ The Bank of New York.
Luxembourg Paying Agent and Transfer Agent..... The Bank of New York (Luxembourg) S.A.
RISK FACTORS
Investing in the exchange notes involves substantial risks. See the "Risk
Factors" section of this prospectus for a description of certain of the risks
that you should consider carefully before investing in the exchange notes.
--------------------------
Our principal corporate office is located at Washington House, 40-41 Conduit
Street, London, W1S 2YQ, U.K., telephone number: 011 44 207-304-6000. Our global
operational headquarters are located at 2227 Welbilt Boulevard, New Port Richey,
Florida 34655, telephone number: (727) 376-8600. We maintain an Internet web
site at www.enodis.com.
8
SUMMARY FINANCIAL AND OPERATING DATA
Our audited historical consolidated financial statements are presented in
British pounds sterling and are prepared in accordance with accounting
principles generally accepted in the United Kingdom, which we call U.K. GAAP.
U.K. GAAP differs in certain respects from accounting principles generally
accepted in the United States, which we call U.S. GAAP. A reconciliation of
certain amounts from U.K. GAAP to U.S. GAAP, as well as a summary of principal
differences between U.K. GAAP and U.S. GAAP applicable to us, are presented in
Note 29 to our audited historical consolidated financial statements included
elsewhere in this prospectus.
The following summary financial data should be read in conjunction with
"Operating and Financial Review and Prospects" and our historical consolidated
financial statements, including the notes thereto. The summary statement of
income data set forth below for the fiscal years ended October 2, 1999,
September 30, 2000 and September 29, 2001, and the balance sheet data at
September 30, 2000, and September 29, 2001, have been derived from our audited
historical consolidated financial statements filed with the SEC on Form 20-F and
included elsewhere in this prospectus, but do not, however, constitute our
statutory accounts within the meaning of section 240 of the Companies Act 1985
in the United Kingdom. The balance sheet data at October 2, 1999, have been
derived from our audited historical annual reports as filed with the United
Kingdom Listing Authority, or other Enodis plc information, which are not
included in this prospectus. The summary financial data set forth below as of
and for the 26 week periods ended March 31, 2001, and March 30, 2002, have been
derived from our unaudited historical consolidated financial statements included
elsewhere in this prospectus and, in our opinion, include all adjustments
(consisting of normal recurring accruals) necessary for the fair presentation of
the financial data for such periods. The results for the 26 week period ended
March 30, 2002 may not be indicative of the results to be expected for the
entire fiscal year.
We adopted FRS 19, "Deferred tax" ("FRS 19") with effect from September 30,
2001. FRS 19, which replaces Statement of Standard Practice 15, "Accounting for
Deferred Tax" ("SSAP 15"), requires full provision to be made for deferred tax
assets and liabilities arising from timing differences between the recognition
of gains and losses in the financial statements and their recognition in a tax
computation. The summary financial data as of and for the 26 week period ended
March 30, 2002 reflects the adoption of FRS 19 and should be read in conjunction
with the unaudited historical consolidated financial statements included
elsewhere in this prospectus. The summary financial data as of and for the 26
week period ended March 31, 2001 has also been restated for the adoption of
FRS 19, in accordance with the guidance provided by FRS 3, "Reporting financial
performance" ("FRS 3"). This guidance requires that comparative financial
information be restated to reflect the adoption of a new accounting standard
only when such financial information is reported as the comparative for a period
ending after the implementation date of a new standard. The summary financial
data as of and for the fiscal years ended October 2, 1999, September 30, 2000
and September 29, 2001, has not been restated to reflect the adoption of
FRS 19.
9
FISCAL YEAR ENDED
-------------------------------------------------------------------
OCT. 2, SEPT. 30, SEPT. 29,
1999 2000 2001
----------------------- ----------------------- ---------------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS)
U.K. GAAP
PROFIT AND LOSS ACCOUNT DATA:
Turnover (net sales):
Continuing operations............................ L490.7 L904.4 L903.8
Discontinued operations(1)....................... 265.6 275.7 177.3
----------------------- ----------------------- ---------------
Total turnover................................. 756.3 1,180.1 1,081.1
Operating profit/(loss):
Continuing operations, before goodwill
amortization and exceptional items............. 60.6 112.6 90.8
Operating exceptional items(2)(3)................ (6.0) -- (167.5)
Goodwill amortization(3)......................... (2.7) (21.4) (23.0)
Discontinued operations(1)....................... 24.0 27.1 9.1
----------------------- ----------------------- ---------------
Total operating profit/(loss).................. L75.9 L118.3 L(90.6)
Profit on disposal of businesses and property fixed
assets........................................... L4.1 L3.0 L23.5
Net interest payable and similar charges(4)........ (13.3) (37.5) (41.9)(5)
Profit/(loss) for the period(6).................... 60.8 69.3 (115.9)
BALANCE SHEET DATA:
Total assets(6).................................... L921.1 L994.4 L773.5
Net assets(6)...................................... 85.9 214.9 88.0
Intangible fixed assets, net....................... 371.0 412.7 310.2
Cash in bank and in hand........................... 26.7 28.5 39.4
Net current assets/(liabilities)(6)................ 25.6 35.4 118.2
Total long term debt(7)............................ 445.8 371.1 401.8
OTHER FINANCIAL INFORMATION:
Depreciation(3).................................... L12.9 L18.1 L18.6
Capital expenditures, net(3)....................... 20.8 20.6 19.3
Ratio of earnings to fixed charges(8).............. 3.9x 2.5x --
26 WEEKS ENDED
--------------------------------
MAR. 31, MAR. 30,
2001 2002
--------------- --------------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS)
U.K. GAAP
PROFIT AND LOSS ACCOUNT DATA:
Turnover (net sales):
Continuing operations............................ L420.6 L390.0
Discontinued operations(1)....................... 132.9 --
--------------- --------------
Total turnover................................. 553.5 390.0
Operating profit/(loss):
Continuing operations, before goodwill
amortization and exceptional items............. 32.2 26.2
Operating exceptional items(2)(3)................ (40.5) (3.7)
Goodwill amortization(3)......................... (11.7) (10.1)
Discontinued operations(1)....................... 7.6 --
--------------- --------------
Total operating profit/(loss).................. L(12.4) L12.4
Profit on disposal of businesses and property fixed
assets........................................... L-- L2.7
Net interest payable and similar charges(4)........ (26.9) (23.3)(5)
Profit/(loss) for the period(6).................... (43.2) (9.8)
BALANCE SHEET DATA:
Total assets(6).................................... L1,086.0 L792.5
Net assets(6)...................................... 199.6 112.5
Intangible fixed assets, net....................... 434.5 312.9
Cash in bank and in hand........................... 58.0 49.9
Net current assets/(liabilities)(6)................ 189.0 143.4
Total long term debt(7)............................ 550.6 409.6
OTHER FINANCIAL INFORMATION:
Depreciation(3).................................... L12.6 L8.7
Capital expenditures, net(3)....................... 5.1 5.7
Ratio of earnings to fixed charges(8).............. -- --
------------------------------
SEE ACCOMPANYING FOOTNOTES ON FOLLOWING PAGE.
10
(1) During fiscal 2001, we disposed of our building and consumer products
division. Accordingly, the data for each of the periods presented has been
restated to reflect the effects of accounting for the building and consumer
products division as a discontinued operation.
(2) According to U.K. GAAP, exceptional items are material items which derive
from events or transactions that fall within the ordinary activities of a
reporting entity and which individually or, if of a similar type in
aggregate, need to be disclosed by virtue of their size or incidence if the
financial statements are to give a true and fair view. We determined the
following items to be exceptional in accordance with U.K. GAAP for fiscal
1999 and fiscal 2001 and for the 26 weeks ended March 30, 2002:
26 WEEKS
ENDED
FISCAL YEAR ENDED -------------
----------------------------- MAR. 30,
OCT. 2, SEPT. 29, 2002
1999 2001 (UNAUDITED)
------------- ------------- -------------
(AMOUNTS IN MILLIONS)
Restructuring costs......................................... L6.0 L33.1 L3.7
Revisions to working capital provisions and other
exceptional warranty costs................................ -- 13.7 --
Litigation settlement costs................................. -- 12.2 --
Costs associated with the Board's review of strategic
options................................................... -- 8.5 --
------------- ------------- -------------
Operating exceptionals, before goodwill impairment........ 6.0 67.5 3.7
------------- ------------- -------------
Goodwill impairment......................................... -- 100.0 --
------------- ------------- -------------
Total operating exceptional items..................... L6.0 L167.5 L3.7
============= ============= =============
(3) Balances exclude amounts relating to our discontinued building and consumer
products division, which we disposed of in fiscal 2001.
(4) Net interest payable and similar charges consists of interest income,
interest expense and amortization and write-off of deferred financing costs.
(5) Net interest payable and similar charges for fiscal 2001 and the 26 weeks
ended March 30, 2002, include charges of L5.8 million and L4.2 million,
respectively, related to the write-off of unamortized costs of previous
financing arrangements that were replaced with alternate financing.
(6) The summary financial data as of and for the 26 week period ended March 30,
2002 reflects the adoption of FRS 19 and should be read in conjunction with
the unaudited historical consolidated financial statements included
elsewhere in this prospectus. The summary financial data as of and for the
26 week period ended March 31, 2001 has also been restated for the adoption
of FRS 19, in accordance with the guidance provided by FRS 3.
The fiscal year end results presented within this prospectus have not been
adjusted for the adoption of FRS 19 to the financial data as of and for each
period is set out below:
FISCAL YEAR ENDED
---------------------------------------------
OCT. 2, SEPT. 30, SEPT. 29,
1999 2000 2001
------------- ------------- -------------
Deferred tax assets
--as reported............................................. -- -- --
--unaudited estimated impact on adoption.................. 21.5 31.7 26.9
------------- ------------- -------------
--unaudited estimated restated amount..................... 21.5 31.7 26.9
============= ============= =============
Tax on ordinary profit/(loss)
--as reported............................................. (5.9) (14.2) (6.6)
--unaudited estimated impact on adoption.................. 2.1 10.3 (4.8)
------------- ------------- -------------
--unaudited estimated amount.............................. (3.8) (3.9) (11.4)
============= ============= =============
(7) Total long term debt consists of all long term debt but excludes deferred
financing costs.
(8) For the purpose of determining the ratio of earnings to fixed charges,
earnings are defined as profit before income taxes plus fixed charges. Fixed
charges include interest expense. Under U.K. GAAP, in fiscal 2001, the 26
weeks ended March 31, 2001, and the 26 weeks ended March 30, 2002, earnings
were insufficient to cover fixed charges by L118.1 million, L46.9 million
and L8.2 million, respectively. Under U.S. GAAP, in fiscal 2001, the
26 weeks ended March 31, 2001, and the 26 weeks ended March 30, 2002,
earnings were insufficient to cover fixed charges by L118.8 million,
L53.7 million and L11.3 million, respectively.
11
RISK FACTORS
AN INVESTMENT IN THE NOTES INVOLVES RISKS. IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS BEFORE INVESTING IN THE NOTES. IF ANY OF THE POSSIBLE
EVENTS DESCRIBED BELOW OCCURS, OUR BUSINESS, FINANCIAL CONDITION, LIQUIDITY OR
RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED. IF THAT
HAPPENS, WE MAY NOT BE ABLE TO PAY INTEREST OR PRINCIPAL ON THE NOTES WHEN DUE
AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATING TO OUR BUSINESS
OUR SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS COULD ADVERSELY AFFECT OUR
BUSINESS.
We are highly leveraged. As of March 30, 2002, our total indebtedness
(including financial indebtedness, trade payables and other liabilities) was
L626.9 million. As of the same date, our net debt (financial indebtedness less
cash and cash equivalents) was L380.5 million. After giving effect to the
application of the net proceeds from the transactions described under
"Summary--Recent Developments," our net debt would have been below
L250.0 million as of March 30, 2002. All our operations are conducted through
our subsidiaries. As of March 30, 2002, the total indebtedness of our
subsidiaries was L526.9 million, (including financial indebtedness, trade
payables, and other liabilities, but excluding intercompany indebtedness), all
of which indebtedness effectively rank senior to the exchange notes. After
giving effect to the application of the net proceeds from the transactions
described under "Summary--Recent Developments," our subsidiaries' total
indebtedness would have been approximately L446.2 million (excluding
intercompany indebtedness) as of March 30, 2002, and our subsidiaries would have
been entitled to borrow an additional L44.2 million under our senior secured
credit facility. As of the same date our subsidiaries were entitled to borrow an
additional L44.2 million under our senior secured credit facility. Our level of
debt could have important consequences to you, including, but not limited to:
- making it more difficult for us to satisfy our debt obligations;
- increasing our vulnerability to a downturn in our business or economic and
industry conditions;
- limiting our ability to obtain additional financing to fund future working
capital, capital expenditures, debt service requirements and other corporate
requirements;
- requiring the dedication of a substantial portion of our cash flow from
operations to the payment of principal of, and interest on, our
indebtedness, which means that this cash flow will not be available to fund
our operations, technological developments, capital expenditures or other
corporate purposes;
- limiting our flexibility in planning for, or reacting to, changes in our
business, the competitive environment and the industry; and
- placing us at a competitive disadvantage to competitors with less leverage.
Based on the borrowings at March 30, 2002 and after giving effect to the
application of the net proceeds from the transactions described under
"Summary--Recent Developments," assuming LIBOR will remain constant over the
period, the amount of our annual debt service would be approximately L48.0
million. With the exception of borrowing under the notes, all of our
indebtedness bears interest at floating rates. After giving effect to the
application of the net proceeds from the transactions described under "Summary--
Recent Developments," on March 30, 2002 and after taking into account our
existing hedging arrangements, a hypothetical 100-basis point increase in
interest rates would increase our annual debt service by approximately
L0.3 million.
In addition, the lenders under our senior secured credit facilities have a
general lien over our U.S., U.K. and Canadian assets and a pledge of the stock
of most of our operating subsidiaries. Our ability to refinance or seek
additional financing could be impaired as a result of these liens.
12
WE ARE SUBJECT TO RESTRICTIVE DEBT COVENANTS, WHICH LIMIT OUR OPERATING
FLEXIBILITY.
Our senior secured credit facilities and the indenture governing the notes
contain significant operating and financial restrictions on us and our
subsidiaries, including restrictions on our ability to:
- make certain payments, including dividends or other distributions, with
respect to our share capital;
- incur additional indebtedness and issue preferred stock;
- make certain loans or investments;
- prepay or redeem subordinated debt or equity;
- create liens on our properties;
- make acquisitions;
- dispose of our assets;
- enter into joint ventures;
- enter into sale and leaseback transactions;
- engage in certain transactions with affiliates;
- issue or sell share capital of our subsidiaries;
- reorganize or enter into mergers; and
- substantially change the nature of our business.
These covenants limit our ability to finance future operations, capital
needs, debt service requirements and acquisitions and to engage in other
business activities that may be in our interest. See "Operating and Financial
Review and Prospects--Liquidity and Capital Resources--Description of Debt
Facilities" and "Description of Other Indebtedness."
Our senior secured credit facilities also require us to maintain specified
financial ratios and satisfy specified financial tests. Our ability to meet
these financial ratios and tests may be affected by events beyond our control
and, as a result, we cannot assure you that we will be able to meet these ratios
and tests. In the event of a default under our senior secured credit facilities,
the lenders could terminate their commitments and declare all amounts borrowed,
together with accrued interest and other fees, to be due and payable. Borrowings
under other debt instruments that contain cross-acceleration or cross-default
provisions may also be accelerated and become due and payable. We may be unable
to pay these debts in such circumstances.
THE LOSS OF CERTAIN LARGE CUSTOMERS OR CHANGES IN THEIR PURCHASING PATTERNS
COULD ADVERSELY IMPACT OUR OPERATING RESULTS.
If our large customers reduce their purchases from us for any reason,
including downturns in the economy or decisions by them to cut back on their
expansion plans, our revenues will be reduced. Our relationships with several
major quick-service restaurant chain customers are one of the principal drivers
behind our development of new and enhanced products and technological expertise
for the food service equipment business, which we believe helps us to attract
other customers. The loss of these customers would undermine one of our
important competitive strengths and could have an adverse impact on the results
of our global food service equipment group. In our food retail equipment group,
sales are often made to large retail chain customers under long term contracts,
usually one to three years in duration. If we fail to obtain or renew contracts
with these customers, or if contracts are granted to our competitors, we will
make few or no sales to these customers. In addition, financial difficulties
experienced by any of these major customers would adversely impact our results
of operations.
13
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF THE CURRENT ECONOMIC DOWNTURN
WORSENS OR IS LONGER IN DURATION THAN WE ANTICIPATE.
The current downturn in the global economy is adversely affecting our
business. While we cannot predict the depth or duration of these effects, we
have planned on the basis that they will adversely affect our order flow and
results of operations through at least the end of fiscal 2002. We continue to
take actions to reduce costs and restructure our business in light of the
downturn. However, if the downturn is more severe or longer in duration than
expected, our ability to reduce debt, or, in certain circumstances, to service
our debt, could be impaired.
COMPETITION IN THE FOOD SERVICE EQUIPMENT AND FOOD RETAIL EQUIPMENT BUSINESSES
COULD REDUCE OUR RESULTS OF OPERATIONS AND CASH FLOW.
In our business, competition is based on product features, brand
recognition, reliability, durability, technology, energy efficiency, breadth of
product offerings, service, price and customer relationships. We expect the
competitive environment in which we operate to remain difficult for the
foreseeable future. We have a number of competitors in each product line that we
offer. Some of our competitors are divisions of large companies that have
greater financial and marketing resources than we possess. In addition, some
competitors focus on particular product lines or geographical regions or
emphasize their local manufacturing presence or local market knowledge. We must
compete primarily on price in many product lines, particularly in food retail
equipment. Sustained competition on price would decrease our margins on sales of
these products and would therefore impact our profitability.
OUR TECHNOLOGICAL INNOVATIONS AND PROPRIETARY RIGHTS MAY NOT PROTECT US
EFFECTIVELY FROM INNOVATIONS BY COMPETITORS.
Large-scale purchasers of food equipment with multiple locations, such as
international quick service restaurant chains and food retail chains, seek
continual product improvement. Our ability to respond to our large customers'
needs in the food equipment industry depends in part on our ability to provide
product features and technological innovations superior to those offered by our
competitors. It also depends on our ability to be the first among our
competitors to offer those features and innovations. Some of our success in the
past has been due to our ability to have technology licensed to us and to obtain
and maintain patent protection of our proprietary technology, designs and other
innovations. See "Business--Intellectual Property." We may not be able to
develop new features or technological innovations sufficient to compete
effectively. We could be at a competitive disadvantage if another company
develops a significant technological improvement to an important line of
products.
CONSOLIDATION OF OUR FOOD RETAIL EQUIPMENT CUSTOMER BASE HAS INCREASED
COMPETITION AND COULD ADVERSELY IMPACT OUR MARGINS.
Our food retail equipment group, in particular our Kysor Warren subsidiary,
derives a substantial portion of its revenues from a small number of major
supermarket chains in North America. Over the past several years, mergers and
acquisitions have greatly reduced the number of major North American supermarket
chains and the aggregate number of supermarket outlets. This consolidation has
resulted in fewer potential food retail equipment customers, each of which has
increased purchasing power. These factors have resulted in increased price
pressure, and we and our competitors have closed production facilities and
otherwise placed greater emphasis on cost control in order to maintain profit
margins. The long term viability of our food retail equipment group will depend
on retaining existing business with and securing future business from these
larger customers and on implementing a cost structure that will enable
profitable sales of equipment.
From its acquisition in 1999 to the end of fiscal 2001, Kysor Warren has
operated at a profit (exclusive of exceptional costs and amortization). However,
Kysor Warren, along with its competitors, has been adversely impacted by
difficult market conditions. The unaudited results of this operation for the
first half of fiscal 2002 showed a small loss and were below our expectations.
We are currently reviewing the operations of Kysor Warren with the objective of
improving its operating performance. If we conclude that the necessary
14
long term improvement in performance cannot be achieved, it is possible that a
significant part of Kysor Warren's fixed assets (principally goodwill) could
potentially be impaired resulting in an exceptional non-cash charge. We may
reach a conclusion on this issue as early as August 2002, when we expect to
announce our results for the third quarter of fiscal 2002. Such a potential
impairment, if any, cannot be reasonably estimated at this time. As of
March 30, 2002, the carrying value of goodwill relating to Kysor Warren was
approximately L50 million.
PRICE CHANGES IN SOME MATERIALS AND SOURCES OF SUPPLY COULD AFFECT OUR
PROFITABILITY.
We use large amounts of stainless steel, aluminum, foam and other
commodities in the manufacture of our products. Any significant increase in the
prices of these commodities that we are not able to pass on to our customers
would adversely affect our operating results. While we have some multi-year
supply contracts, the protection they provide is limited, so that we remain
exposed to price increases even in those commodities.
CURRENCY FLUCTUATIONS, REPATRIATION RISK AND POLITICAL RISKS IN CERTAIN
COUNTRIES COULD AFFECT OUR REPORTED RESULTS OF OPERATIONS AND PROFITABILITY.
We sell products in over 100 countries and have manufacturing operations in
eight countries. Therefore, we face transactional currency exposure when our
operating subsidiaries enter into transactions denominated in currencies other
than their local currency. In addition, although we report our consolidated
results of operations in pounds sterling, based on our results for fiscal 2001,
approximately 72% of our operating profit before goodwill amortization and
exceptional items and approximately 62% of our turnover (net sales) were derived
principally from our North American operating segment. Accordingly, our reported
results are particularly subject to fluctuation based on changes in the
U.S. dollar/British pounds sterling exchange rate. See "Operating and Financial
Review and Prospects--Quantitative and Qualitative Disclosures About Market
Risk."
Some jurisdictions may restrict repatriation of our non-U.K. and non-U.S.
earnings. Various jurisdictions also have laws limiting the right and ability of
entities to pay dividends and remit earnings to affiliated companies unless
specified conditions are met. International operations in certain countries are
also subject to various political risks that are not present in our U.S. and
Western Europe operations, including the risk of war or civil unrest,
expropriation and nationalization. In addition, unfavorable changes in
international monetary and tax policies and other changes in the international
regulatory climate could affect our profitability or growth plans.
THE ADOPTION OF THE EURO MAY RESULT IN LOWER OPERATING PROFITS.
Twelve of the member states of the European Union have adopted the euro as
their national currency. The U.K., Sweden and Denmark, although Member States of
the European Union, have not adopted the euro. Since January 1, 2002, only
euro-denominated bills and coins have been issued in those twelve member states,
and national currencies have been withdrawn from circulation. The use of a
common currency throughout the participating states might permit our customers
to more readily compare the prices of our products and purchase our products in
the member state with the lowest price. This may lead to uniform pricing of our
products in countries in the European Union. Uniform pricing may erode margins
in certain member states, thereby adversely affecting our profits.
WE MAY INCUR LOSSES IN CONNECTION WITH CERTAIN LITIGATION.
Enodis plc is party to a lawsuit, and one of our subsidiaries, Enodis
Corporation, is a party to several lawsuits, all relating to a company,
Consolidated Industries Corp., which was formerly owned by our subsidiary.
Consolidated is currently in bankruptcy. The plaintiffs contend that each of
Enodis plc and our subsidiary is the alter ego of Consolidated and therefore is
liable for Consolidated's debts. In addition, the bankruptcy trustee is
asserting a variety of bankruptcy and equitable claims seeking to recover up to
$30 million in payments made by Consolidated to Enodis Corporation between 1988
and 1998. We have
15
thoroughly investigated these claims and believe that the claims based on the
alter ego theory, as well as the bankruptcy trustee's claims, are without merit.
We are therefore defending them vigorously. The claims alleged in these lawsuits
could potentially reach $600 million, which substantially exceeds our estimate
of, and accruals for, potential exposure. The extent, if any, to which the
potential liability would be covered by insurance is unclear. Accordingly, if
these lawsuits are ultimately decided in a manner adverse to our subsidiary, the
determination could have a material adverse impact on our financial condition.
See "Business--Legal Proceedings."
THE LOSS OF KEY MANAGEMENT PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS.
We have made recent changes to our Board of Directors and our senior
management. Our ability to implement our global marketing and sales strategy
could be adversely affected if we experience further management changes, or if
we are unable to successfully integrate those that have been recently appointed
to their positions.
IMPAIRMENT OF OUR GOODWILL OR ADJUSTMENT OF THE AMORTIZATION PERIOD WOULD
ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND NET WORTH.
As of March 30, 2002, we had total assets of L572.0 million, of which
intangible assets were approximately L312.9 million, consisting of goodwill
arising from a series of acquisitions we made in previous years. Goodwill
arising from acquisitions is generally amortized on a straight line basis over
an estimated useful life of 20 years. When it is apparent that the carrying
value of goodwill from an acquired business exceeds the estimated net present
value of future cash flows less operating assets for the acquired business, we
would recognize an impairment provision against goodwill for that period.
Indications of an impairment could occur for many reasons, such as downturns in
the long term business conditions or significant changes to the competitive
environment for the acquired business. In addition, if the estimated useful life
of the acquired business or asset falls below 20 years, we would be required to
shorten the amortization period for goodwill, resulting in higher amortization
charges in each year.
For example, in fiscal 2001, we recognized an exceptional charge of
L100 million relating to the writedown of the carrying value of goodwill
associated with our 1999 Scotsman acquisition. The writedown resulted from our
reassessment of the value of the goodwill in light of the downturn in the
U.S. economy. In addition, as discussed above, we are currently reviewing the
operations of Kysor Warren, part of our food retail equipment group, with the
objective of improving its operating performance. Any future impairments of our
goodwill or shortening of the amortization period would adversely affect our
results of operations and net worth.
RISKS RELATING TO OUR STRUCTURE AND THE TERMS OF THE NOTES
WE ARE A HOLDING COMPANY WITH NO REVENUE-GENERATING OPERATIONS OF OUR OWN, AND
YOU WILL NOT HAVE DIRECT CLAIMS AGAINST OUR OPERATING SUBSIDIARIES.
We are a holding company with no business operations of our own. As a
result, we derive all of our income from our operating subsidiaries. Our ability
to make payments on the notes will be dependent on the earnings of these
subsidiaries and the distribution of those earnings to us. Holders of
indebtedness of, and trade creditors of, our subsidiaries, including the lenders
under our senior secured credit facilities, are generally entitled to payment of
their claims from the assets of our subsidiaries before these assets are made
available for distribution to us, although payments may be made, in some
circumstances, under our subordinated intercompany loan to Enodis Holdings
Limited, our only direct wholly owned subsidiary.
Accordingly, in the event any of our subsidiaries becomes insolvent,
liquidates or otherwise reorganizes:
- our creditors (including you) will have no right to proceed against its
assets; and
- creditors of the subsidiary, including the lenders under our senior secured
credit facilities, will generally be entitled to payment in full from the
sale or other disposal of the assets of the subsidiary before we,
16
as indirect shareholder, will be entitled to receive any distributions,
although we may, in some circumstances, be permitted to recover under our
subordinated intercompany loan to Enodis Holdings Limited.
As of March 30, 2002, after giving effect to the application of the net
proceeds from the transactions described under "Summary--Recent Developments":
- our subsidiaries' indebtedness (excluding intercompany indebtedness) would
have been approximately L446.2 million (and we had contingent liabilities
with respect to outstanding letters of credit of L13.9 million); and
- approximately L44.2 million would have been available to our subsidiaries
for additional borrowings under our senior secured credit facilities.
In addition, the indenture for the notes will permit our subsidiaries to
incur additional indebtedness and will permit us to make significant investments
in our subsidiaries. If indebtedness of any subsidiary were to be accelerated,
we cannot assure you that the assets of that subsidiary would be sufficient to
repay the indebtedness or that our assets and those of the other subsidiaries
would be sufficient to repay in full our indebtedness, including the notes. See
"Description of Other Indebtedness--Senior Secured Credit Facilities."
OUR SUBSIDIARIES ARE SUBJECT TO COVENANTS CONTAINED IN OUR SENIOR SECURED CREDIT
FACILITIES THAT COULD LIMIT THEIR ABILITY TO MAKE PAYMENTS TO US.
Our subsidiaries are subject to the restrictive covenants contained in our
senior secured credit facilities, including:
- limits on the ability of our direct and indirect subsidiaries to make any
payments to us in order to enable us to pay any principal of the notes while
debt under the senior secured credit facilities is outstanding; and
- requirements that our subsidiaries maintain specified financial ratios and
satisfy financial condition tests, which become more restrictive over the
life of the facilities. The ability of our subsidiaries to meet those
financial ratios and tests can be affected by events beyond our control, and
we cannot assure you that our subsidiaries will meet them.
A breach of any of those covenants, ratios, tests or restrictions could
result in an event of default under the senior secured credit facilities. Upon
the occurrence of any event of default under the senior secured credit
facilities, the lenders could elect to declare all amounts outstanding under the
senior secured credit facilities, together with accrued interest, to be
immediately due and payable. If our subsidiaries were unable to repay those
amounts, the lenders could proceed against the collateral granted to them to
secure repayment of those amounts. If the lenders under the senior secured
credit facilities accelerate the payment of those amounts, we cannot assure you
that the assets of our subsidiaries would be sufficient to repay in full those
amounts, to satisfy all other liabilities of our subsidiaries which would be due
and payable and to make payments to us to enable us to repay the notes in full.
In addition, our subsidiaries are prohibited under the senior secured credit
facilities from making payments to us in order to pay interest on the notes in
the event that any payment has not been made when due under the senior secured
credit facilities or in the event that any of our material subsidiaries becomes
or is declared insolvent. If this occurs, we will be unable to pay interest on
the notes.
WE MAY NOT BE ABLE TO RECOVER ON OUR INTERCOMPANY LOAN TO ENODIS HOLDINGS
LIMITED BECAUSE OF THE SUBORDINATION OF THIS LOAN.
Our intercompany loan to our direct wholly owned subsidiary, Enodis Holdings
Limited, of the proceeds of the bridge loans (which will be partially refinanced
with the proceeds of the notes offered hereby) is
17
contractually subordinated to all of the obligations of our subsidiaries under
the senior secured credit facilities. As a result:
- in the event of a liquidation, dissolution, bankruptcy, insolvency or
similar proceeding involving us, the creditors under the senior secured
credit facilities will be entitled to payment in full before we would be
entitled to payments under the intercompany loan and, as a result, before
any noteholders would receive any payments on the notes;
- we may not make any demand or otherwise make any claim in respect of the
intercompany loan unless we have failed to make an interest or principal
payment on the notes when due and a standstill period of 179 days has
expired;
- the creditors under our senior secured credit facilities may prevent our
subsidiaries from making payments to us in order to pay interest or
principal on the notes in the event that any payment has not been made when
due under the senior secured credit facilities; this prohibition will
continue regardless of the expiration of the standstill period referred to
above; and
- the creditors under our senior secured credit facilities may prevent our
subsidiaries from making payments to us in order to pay interest or
principal on the notes for a period of up to 179 days in the event that
there exists any other event of default under the senior secured credit
facilities. This period would not necessarily run concurrently with the
standstill period referred to above.
CONVERSION OF THE BRITISH POUND STERLING TO THE EURO.
Although the U.K. government exercised its opt-out from the European
Economic and Monetary Union and did not adopt the euro to replace the British
pound sterling, it has indicated that it may adopt the euro as its currency in
the future. Investors in the notes are advised that if the euro is adopted in
the U.K., the euro will replace the British pound sterling as the legal tender
in the U.K. and result in the effective redenomination of the notes into euro.
We cannot assure you that the euro, if adopted by the U.K., will maintain its
value relative to other currencies, particularly to the U.S. dollar. If the
value of the euro were to decline relative to other currencies, the value of the
notes (as re-denominated into euros) would also decline relative to such
currencies.
WE ARE SUBJECT TO ENGLISH INSOLVENCY LAWS, WHICH POSE PARTICULAR RISKS FOR
HOLDERS OF UNSECURED DEBT OBLIGATIONS, SUCH AS THE NOTES.
As an English company, any insolvency proceedings by or against us would be
based on English insolvency laws. The procedural and substantive provisions of
English insolvency laws generally are more favorable to secured creditors, such
as the lenders under our senior secured credit facilities, than comparable
provisions of U.S. law and afford debtors only limited protection from these
creditors. In addition, due to the nature of English insolvency laws, the
ability of holders of unsecured debt obligations, such as holders of the notes,
to protect their interests may be more limited than would be the case under U.S.
bankruptcy laws.
Under English insolvency laws, the liquidator or administrator of a company
may, among other things, apply to the court to unwind a transaction entered into
by such company, if such company was insolvent (as defined in Section 123 of the
U.K. Insolvency Act 1986) at the time of, or as a result of, the transaction and
enters into a liquidation or administrative proceedings within two years of the
completion of the transaction. A transaction might be subject to a challenge if
it involved a gift by a company or if a company received consideration of
significantly less value than the benefit given by such company. A court
generally will not intervene, however, if a company entered into the transaction
in good faith for the purpose of carrying on its business and if at the time it
did so there were reasonable grounds for believing the transaction would benefit
the company. We believe that we are solvent and that the notes will not be
issued on terms which would amount to a transaction below market value and
further that the offering is in good faith for the purposes of carrying on our
business and that there are reasonable grounds for believing that the
transaction
18
will benefit us. We cannot assure you, however, that the issuance of the notes
will not be challenged by a liquidator or administrator or that a court would
support our analysis.
WE MAY NOT BE ABLE TO FINANCE A CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE.
Upon a change of control, as defined under the indenture, we will be
required to offer to repurchase all outstanding notes at 101% of the principal
amount thereof plus accrued and unpaid interest and additional amounts, if any,
to the date of repurchase. If a change of control were to occur, we cannot
assure you that we would have sufficient funds available at the time to pay the
purchase price of the outstanding notes or that the restrictions in our senior
secured credit facilities would allow us to make such required repurchases. In
addition, before we can purchase any notes, we will be required to:
- repay debt under our senior secured credit facilities or, possibly, other
future debt that ranks senior to the notes; or
- obtain a consent from lenders of senior debt to permit repurchase of the
notes.
A change of control may result in an event of default under our senior
secured credit facilities and may cause the acceleration of other indebtedness
which may be senior to the notes or rank equally with the notes. In any case, we
expect that we would require third-party financing to make a change of control
offer. We cannot assure you that we would be able to obtain this financing. See
"Description of the Notes--Change of Control."
IN SOME CIRCUMSTANCES, WE MAY HAVE TO WITHHOLD TAX FROM PAYMENTS ON THE EXCHANGE
NOTES.
We will be obliged to withhold U.K. tax with respect to payments of interest
on the exchange notes, unless, among other things, the exchange notes are and
remain listed on a stock exchange recognized by the U.K. Inland Revenue. This is
described in detail in "Taxation--United Kingdom Taxation." Although the
Luxembourg Stock Exchange is so recognized and the old notes are listed on the
Exchange and we intend to list the exchange notes on the Exchange, we cannot
assure you that the exchange notes will remain listed.
Under the indenture, any payments we make on or with respect to the notes
will be made without withholding or deduction for U.K. taxes unless required by
law. Our failure to obtain the listing of the notes on a stock exchange
recognized by the U.K. Inland Revenue or, having obtained such a listing,
maintain that listing, could result in tax becoming payable. If any withholding
is required, in general, we will be required to pay additional amounts to
holders of notes in respect of amounts withheld. The payment of those additional
amounts could have a material adverse effect on our financial condition or
results of operations, as it will effectively increase our obligations under the
notes.
On December 13, 2001, the Council of the European Union (acting through
ECOFIN) published a revised draft directive regarding the taxation of savings
income. Subject to a number of important conditions being met, it is proposed
that member states will be required to provide to the tax authorities of another
member state details of payments of interest or other similar income paid by a
person within its jurisdiction to an individual resident in that other member
state, subject to the right of certain member states to opt instead for a
withholding system for a transitional period in relation to such payments. The
proposed directive is not yet final, and may be subject to further amendment
and/or clarification. Consequently, it is not possible to say with certainty
what effect, if any, the adoption of the directive would have on the notes or
payments in respect thereof.
YOU MAY HAVE DIFFICULTY ENFORCING YOUR RIGHTS AGAINST CERTAIN OF OUR OFFICERS
AND DIRECTORS.
A majority of our directors reside outside the United States. We have been
advised by Clifford Chance Limited Liability Partnership, our special U.S.
counsel, that it may not be possible for investors to effect service of process
within the U.S. upon such persons or to enforce judgments obtained against such
persons in jurisdictions outside the U.S. without relitigation of the merits of
the claim. In addition, we have also been advised by Clifford Chance Limited
Liability Partnership, our special U.S. counsel, that it may be difficult to
19
enforce, in original actions brought outside the U.S., claims brought under the
civil liability or anti-fraud provision of the U.S. securities laws.
YOU MAY NOT BE ABLE TO SELL YOUR EXCHANGE NOTES.
The exchange notes are new securities for which there is currently no
established market. Accordingly, we cannot assure you as to the development of
liquidity of any market for the exchange notes.
The liquidity of any trading market for the exchange notes may also be
adversely affected by a general decline in the market for similar securities.
Such a decline may adversely affect the liquidity and trading markets for the
notes independent of our prospects or financial performance.
20
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking" statements. Forward-looking
statements include, among others, statements concerning:
- the anticipated growth of the demand for our products,
- plans to devote significant management time and capital resources to our
business strategy,
- our ability to successfully implement our business strategy,
- our anticipated future market share,
- our future capital needs,
- our cost reduction and restructuring plans,
- our expectations with respect to changes in industry or general economic and
business conditions,
- the anticipated outcome of current or future litigation,
- our ability to compete in a highly competitive environment, and
- other statements of expectations, beliefs, future plans and strategies,
anticipated developments and other matters that are not historical facts
concerning our business, operations and financial performance and condition.
The words "believe," "anticipate," "expect," "intend," "estimate," "plan,"
"assume," "may," "will," "risk," "project," "could" and other similar
expressions that are predictions of or otherwise indicate future events or
trends identify forward-looking statements. Forward-looking statements involve
known and unknown risks, uncertainties and other factors which are in some cases
beyond our control. These risks, uncertainties and factors may cause our actual
results, performance or achievements to differ materially from those expressed
or implied by the forward-looking statements (and from past results,
performances or achievements). Factors that may cause these differences include
but are not limited to the risks described under "Risk Factors," "Business" and
"Operating and Financial Review and Prospects."
You should not place undue reliance on these forward-looking statements
because they reflect our judgment at the date of this prospectus.
Forward-looking statements are not intended to give any assurances as to future
results. We will not normally publicly release any revisions we may make to
these forward-looking statements that may result from events or circumstances
arising after the date of this prospectus or otherwise.
INDUSTRY AND MARKET DATA
We obtained the market and competitive position data used throughout this
prospectus from our own research, surveys or studies conducted by third parties,
primarily from industry or general publications. Industry publications and
surveys generally state that they have obtained information from sources
believed to be reliable, but do not guarantee the accuracy and completeness of
such information. While we believe that each of these studies and publications
is reliable, we have not verified all such data through independent sources.
In particular, we base our beliefs about our competitive position as
detailed throughout the prospectus on the following sources: (1) previously
filed disclosure documents of our largest competitors; (2) an internal "market
mapping" study originally prepared on February 8, 2001; (3) a presentation by a
market research company, Botany Hill Management Inc., dated February 18, 2002;
(4) various independent analysts' reports on the food equipment industry; and
(5) a report by OC&C Strategy Consultants, dated September 22, 1999.
21
PRESENTATION OF FINANCIAL AND OTHER DATA
Our audited financial statements as of September 30, 2000, and
September 29, 2001, and for the fiscal years 1999, 2000 and 2001 and, unless
otherwise indicated, other financial information in this prospectus have been
prepared in accordance with U.K. GAAP, except as described below in connection
with restatements required by U.K. GAAP Financial Reporting Standard 19,
"Deferred Tax," which we call FRS 19. These financial statements do not,
however, constitute our statutory accounts within the meaning of section 240 of
the Companies Act 1985 in the United Kingdom. We also prepare statutory
financial statements that are filed with the London Stock Exchange, our primary
trading market, in accordance with U.K. GAAP, which are not included in this
document. In fiscal year 2000, we also prepared consolidated financial
statements in accordance with U.S. GAAP, which we filed with the SEC on
Form 20-F. However, since that time we have changed the format of the financial
statements that we will file with the SEC to follow U.K. GAAP and to include in
those financial statements a reconciliation to U.S. GAAP, as permitted under SEC
rules. Accordingly, the audited and unaudited financial statements included in
this prospectus, and in our Annual Report on Form 20-F for the fiscal year ended
September 29, 2001, have been prepared in accordance with U.K. GAAP, and include
a reconciliation to U.S. GAAP. Reconciliations of the material differences in
our consolidated financial statements to U.S. GAAP are set forth in Note 29 to
our consolidated financial statements included elsewhere in this prospectus.
We report our financial results on a 52-53 week fiscal year ending on the
Saturday nearest to September 30. The fiscal years ended September 30, 2000,
which we call fiscal 2000, and September 29, 2001, which we call fiscal 2001,
contained 52 weeks. The fiscal year ended October 2, 1999, which we call fiscal
1999, contained 53 weeks.
We adopted Financial Reporting Standard 19 "Deferred Tax" ("FRS 19") on
October 1, 2001. The interim results for the 26 weeks ended March 31, 2001 and
March 30, 2002, included in this prospectus under the headings "Summary,"
"Selected Consolidated Financial and Operating Data" and "Operating and
Financial Review and Prospects," are prepared on the basis of adopting FRS 19.
The fiscal year end results presented have not been adjusted for FRS 19, to
allow for comparability to the audited results presented in our Form 20-F.
Unless otherwise indicated or otherwise required by the context, all
references in this prospectus to "British pounds sterling," "sterling," "pounds"
or "L" are to the lawful currency of the United Kingdom. References to "U.S.
dollars," "dollars," "U.S. "or "$" are to United States dollars, the lawful
currency of the United States of America.
Certain numerical figures included in the prospectus have been subject to
rounding adjustments. Therefore, discrepancies in tables between totals and the
sums of the amounts listed may occur due to such rounding.
22
EXCHANGE RATES
The tables below set forth the noon buying rate in New York City for British
pounds sterling in U.S. dollars as certified for customs purposes by the Federal
Reserve Bank of New York, or the "Pound Noon Buying Rates." The average amounts
set forth below under "Average" are calculated as the average of the noon buying
rates on the last business day of each month. We do not represent that the U.S.
dollar amounts referred to below could have been converted into British pounds
sterling at any particular rate indicated or any other rate.
LOW HIGH AVERAGE END OF PERIOD
--------------- --------------- --------------- ---------------
FISCAL YEAR (U.S. DOLLARS PER L1.00)
-----------
1997...................................................... 1.4948 1.7123 1.5733 1.7123
1998...................................................... 1.5775 1.7035 1.6397 1.6427
1999...................................................... 1.6114 1.7222 1.6602 1.6628
2000...................................................... 1.3997 1.6538 1.5138 1.4955
2001...................................................... 1.3730 1.5045 1.4363 1.4543
2002 (through July 12, 2002).............................. 1.4095 1.5545 1.4407 1.5500
The tables below show the high and low noon buying rates for each month
during the six months prior to the date of this prospectus.
2002 LOW HIGH
---- -------- --------
January..................................................... 1.4074 1.4455
February.................................................... 1.4117 1.4322
March....................................................... 1.4146 1.4287
April....................................................... 1.4310 1.4592
May......................................................... 1.4474 1.4676
June........................................................ 1.4574 1.5285
July (through July 12, 2002)................................ 1.4574 1.5545
The noon buying rate on July 12, 2002 was 1.5500 per pound.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. In consideration for issuing the exchange notes as described in this
prospectus, we will receive in exchange old notes in like principal amount, the
terms of which are identical in all material respects to those of the exchange
notes. The old notes surrendered in exchange for the exchange notes will be
retired and cancelled and cannot be reissued.
23
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the exchange offer is to fulfill our obligations with
respect to the registration of the old notes. We originally issued and sold the
old notes on March 26, 2002. We did not register those sales under the
Securities Act of 1933, in reliance upon the exemption provided in section 4(2)
of the Securities Act of 1933 and Rule 144A and Regulation S promulgated under
the Securities Act of 1933. In connection with the sale of the old notes, we
agreed to file with the Securities and Exchange Commission an exchange offer
registration statement relating to the exchange offer. Under the exchange offer
registration statement, exchange notes, consisting of another series of our
notes and containing substantially identical terms to the old notes, except as
set forth in this prospectus, will be offered in exchange for old notes.
HOW TO DETERMINE IF YOU ARE ELIGIBLE TO PARTICIPATE IN THE EXCHANGE OFFER
We hereby offer to exchange, upon the terms and subject to the conditions
set forth in this prospectus, L1,000 in principal amount of exchange notes for
each L1,000 in principal amount of our old notes that you hold. The terms of the
exchange notes are substantially identical to the terms of the old notes, except
that the exchange notes will generally be freely transferable by you, and you
will not be entitled to certain registration rights which are applicable to the
old notes under the registration rights agreement. The exchange notes will
evidence the same debt as the old notes and will be entitled to the benefits of
the same indenture. See "Description of the Notes" above.
We are not making the exchange offer to, nor will we accept surrenders for
exchange from, holders of outstanding old notes in any jurisdiction in which
this exchange offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
We are not making the exchange offer conditional upon any minimum aggregate
principal amount of old notes being tendered or accepted for exchange.
Based on our view of interpretations set forth in no-action letters issued
by the staff of the Securities and Exchange Commission to third parties, we
believe that you may resell or transfer exchange notes issued pursuant to the
exchange offer in exchange for the old notes, unless you are our affiliate, a
broker-dealer who acquired old notes directly from us or a broker-dealer who
acquired old notes as a result of market-making or other trading activities. We
believe that you may resell or transfer such exchange notes without compliance
with the registration and prospectus delivery provisions of the Securities Act
of 1933 only if such exchange notes are acquired in the ordinary course of your
business and you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of such exchange notes.
If our belief is inaccurate and you transfer any note issued to you in the
exchange offer without delivering a prospectus meeting the requirement of the
Securities Act of 1933 or without an exemption from registration of your old
notes from such requirements, you may incur liability under the Securities Act
of 1933. We do not assume or indemnify you against such liability.
Pursuant to the registration rights agreement, we are required to file a
registration statement for a continuous offering pursuant to Rule 415 under the
Securities Act of 1933 in respect of the old notes if existing Securities and
Exchange Commission interpretations are changed such that the exchange notes
received by holders in the exchange offer are not, or would not be, upon
receipt, transferable by each such holder (other than our affiliates) without
restriction under the Securities Act of 1933.
If you are a broker-dealer that resells exchange notes that were received by
you for your own account pursuant to the exchange offer, and if you participate
in a distribution of the exchange notes, you may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933 and any profit in
any such resale of exchange notes and any commissions or concessions received by
you may be deemed to be
24
underwriting compensation under the Securities Act of 1933. If you are a
broker-dealer who acquires old notes as a result of market-making or other
trading activities, you may use this prospectus, as supplemented or amended, in
connection with resales of the exchange notes. If you tender old notes in the
exchange offer for the purpose of participating in a distribution of the
exchange notes, or if you cannot rely upon such interpretations, you must comply
with the registration and prospectus delivery requirements of the Securities Act
of 1933 in connection with a secondary resale transaction. See "Plan of
Distribution."
If you are tendering old notes, you will not be required to pay brokerage
commissions or fees or transfer taxes with respect to the exchange of the old
notes pursuant to the exchange offer. The exchange notes will bear interest from
March 26, 2002. If your old notes are accepted for exchange, you will be deemed
to have waived the right to have interest accrue, or to receive any payment in
respect of interest, on the old notes from March 26, 2002, to the date of the
issuance of the exchange notes. Interest on the exchange notes is payable on
April 15 and October 15 of each year, commencing October 15, 2002.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus,
we will accept any and all old notes validly tendered and not withdrawn prior to
5:00 p.m., New York City time on . We will issue L1,000 principal amount
of exchange notes in exchange for each L1,000 principal amount of outstanding
old notes pursuant to the exchange offer.
The form and terms of the exchange notes are identical to the form and terms
of the old notes except that the exchange notes have been registered under the
Securities Act of 1933 and will not bear legends restricting their transfer. The
exchange notes will evidence the same debt as the old notes and will be issued
pursuant to, and entitled to the benefits of, the same indenture pursuant to
which the old notes were issued.
As of the date of this prospectus, old notes representing L100,000,000
aggregate principal amount were outstanding, all in the form of global notes in
registered form. This prospectus is being sent to participants in Euroclear and
Clearstream, Luxembourg that hold book entry interests in the old notes for
distribution to the holders beneficial interests in the notes. See "Book-Entry;
Delivery and Form." We intend to conduct the exchange offer in accordance with
the applicable requirements of the Exchange Act of 1934 and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
INFORMATION ABOUT THE EXPIRATION DATE OF THE EXCHANGE OFFER
The exchange offer expires on the expiration date, which is on
5:00 p.m., New York City time unless we, in our sole discretion, extend the
period during which the exchange offer is open. If we extend the period for the
exchange offer, the expiration date will be the latest time and date on which
the exchange offer, as so extended, expires. We reserve the right to extend the
exchange offer at any time and from time to time prior to the expiration date by
giving written notice to The Bank of New York, which is the exchange agent, and
by timely public announcement communicated by no later than 5:00 p.m. on the
next business day following the expiration date, unless otherwise required by
applicable law or regulation, by making a release to the Dow Jones News Service
and/or Reuters News Service. During any extension of the exchange offer, all old
notes previously tendered pursuant to the exchange offer will remain subject to
the exchange offer.
We will mail this prospectus and other relevant materials to you as a record
holder of old notes and we will furnish these items to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the lists
of holders for subsequent transmittal to beneficial owners of old notes.
HOW TO TENDER YOUR OLD NOTES
If you tender to us any of your old notes pursuant to one of the procedures
set forth below, that tender will constitute an agreement between you and us in
accordance with the terms and subject to the conditions described below.
25
If your old notes are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and you wish to tender old notes, you
should contact the registered holder promptly and instruct the holder to tender
old notes on your behalf. If you wish to tender your old notes yourself, you
must make appropriate arrangements to register ownership of the old notes in
your name. Transferring record ownership from someone else's name to your name
may take considerable time.
Only a holder of old notes may tender old notes in the exchange offer. To
tender in the exchange offer, you must (i) read this prospectus, and
(ii) comply with the procedures established by Euroclear and/or Clearstream,
Luxembourg (Euroclear and Clearstream, Luxembourg are each referred to herein as
a book-entry transfer facility), prior to the expiration date. In addition, a
timely confirmation of a book-entry transfer of such old notes into the exchange
agent's account at the relevant book-entry transfer facility pursuant to the
procedure for book-entry transfer described below, must be received by the
exchange agent prior to the expiration date.
A tender that is not withdrawn before the expiration date will constitute an
agreement between you and the issuer in accordance with the terms and subject to
the conditions set forth herein.
In all cases, issuance of exchange notes for old notes that are accepted for
exchange pursuant to the exchange offer will be made only after timely receipt
by the exchange agent of a timely book-entry confirmation of such old notes into
the exchange agent's account at the relevant book-entry transfer facility by
electronic instructions in which the tendering holder acknowledges its receipt
of this prospectus and agreement to be bound by the terms and conditions of the
exchange offer set forth herein. If any tendered old notes are not accepted for
any reason or if old notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged old notes will be
returned without expense on behalf of such tendering holder pursuant to the
book-entry transfer procedures described below. Such non-exchanged old notes
will be credited to an account maintained with such book-entry transfer facility
as promptly as practicable after their withdrawal, if applicable or after the
expiration or termination of the exchange offer, as the case may be.
The exchange agent will make a request to establish an account with respect
to the old notes at the relevant book-entry transfer facility for purposes of
the exchange offer within two business days after the date of this prospectus,
and any financial institution that is a participant in the relevant book-entry
transfer facility's systems may make book-entry delivery of old notes being
tendered by causing the relevant book-entry transfer facility to such old notes
into the exchange agent's account at the relevant book-entry transfer facility
in accordance with such book-entry transfer facility's procedures for transfer.
TO ACCEPT THE EXCHANGE OFFER IN RESPECT OF THE NOTES, PARTICIPANTS IN
EUROCLEAR AND/OR CLEARSTREAM, LUXEMBOURG MUST SEND AN ELECTRONIC INSTRUCTION TO
EUROCLEAR AND/OR CLEARSTREAM, LUXEMBOURG, AS APPLICABLE, IN ACCORDANCE WITH
THEIR PROCEDURES ESTABLISHED TO TENDER OLD NOTES. THE ELECTRONIC INSTRUCTION
TRANSMITTED BY EUROCLEAR AND/OR CLEARSTREAM, LUXEMBOURG, AS APPLICABLE, TO THE
EXCHANGE AGENT MUST CONTAIN A COMPUTER GENERATED MESSAGE, BY WHICH THE
PARTICIPANT ACKNOWLEDGES ITS RECEIPT OF THIS PROSPECTUS AND AGREES TO BE BOUND
BY THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER SET FORTH HEREIN.
BY TENDERING YOUR OLD NOTES, YOU ARE DEEMED TO MAKE CERTAIN REPRESENTATIONS
If you tender your old notes in the exchange offer, you will be deemed to
represent and acknowledge that:
- you agree to be bound by the terms of the exchange offer as described in
this prospectus;
- prior to the exchange offer, there has been no public market for the old
notes or the exchange notes;
- you are not our affiliate, as defined in Rule 405 under the Securities Act
of 1933;
- you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of the exchange notes;
26
- you are acquiring the exchange notes in the ordinary course of business;
- you have a net long position within the meaning of Rule 14e-4 under the
Securities and Exchange Act of 1934 equal to or greater than the principal
amount of the old notes that you are tendering in the exchange offer;
- the tender of your old notes complies with Rule 14e-4 under the Securities
and Exchange Act, to the extent applicable;
- you have full power and authority to tender, exchange, assign and transfer
the old notes that you are tendering in the exchange offer;
- when we accept your old notes for exchange, we will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim or right; and
- you will, upon request, execute and deliver any additional documents deemed
by us or the exchange agent to be necessary or desirable to complete the
sale, assignment and transfer of the old notes that you are tendering.
In addition, if you are not a broker-dealer, by tendering your old notes in
the exchange offer you are deemed to represent that you are not engaged in, and
do not intend to engage in, a distribution of the exchange notes. If you are a
broker-dealer and will receive exchange notes for your own account in exchange
for old notes that you acquired as a result of market-making activities or other
trading activities, you acknowledge that you will deliver a prospectus in
connection with any resale of such exchange notes; however, by so acknowledging
and by delivering a prospectus, you will not be deemed to admit that you are an
"underwriter" within the meaning of the Securities Act of 1933.
This prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of exchange notes (subject
to compliance with applicable laws) received in exchange for old notes where
such old notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. We have agreed that, for a period of 180
days after the Expiration Date (as defined herein), we will make this prospectus
available to any broker-dealer for use in connection with any such resale. see
"Plan of Distribution."
YOU MAY WITHDRAW YOUR TENDER PRIOR TO THE EXPIRATION DATE
Tenders of old notes may be withdrawn at any time prior to 5:00 p.m., New
York City time on the expiration date.
For a withdrawal of a tender of old notes to be effective, a tested telex or
SWIFT message relating to such withdrawal must be received by Euroclear and/or
Clearstream, Luxembourg, as applicable, prior to 5:00 p.m., New York City time
on the expiration date. Any such notice of withdrawal must (i) specify the name
of the depositor, or the person having deposited the old notes to be withdrawn,
(ii) identify the old notes to be withdrawn (including the principal amount of
such old notes) and (iii) specify the account to which any such old notes are to
be credited, if different from that of the tendering holder. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the issuer, whose determination shall be final and binding
on all parties. Any old notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the exchange offer. Properly
withdrawn old notes may be retendered by following the procedures described
under "--How to Tender Your Old Notes" at any time on or prior to the expiration
date.
WE RESERVE THE RIGHT TO DETERMINE VALIDITY OF ALL TENDERS
All questions as to the validity, form, eligibility, including time of
receipt, and acceptance for exchange of your tender of old notes will be
determined by us. Our determination will be final and binding. We
27
reserve the absolute right to reject any or all of your tenders that are not in
proper from or the acceptances for exchange of which may, in the opinion of our
counsel, be unlawful. We also reserve the absolute right to waive any of the
conditions of the exchange offer or any defect or irregularities in tenders of
any particular holder whether or not similar defects or irregularities are
waived in your case. Neither we, the exchange agent nor any other person will be
under any duty to give you notification of any defects or irregularities in
tenders nor shall any of us incur any liability for failure to give you any such
notification. Our interpretation of the terms and conditions of the exchange
offer will be final and binding.
HOW YOUR OLD NOTES WILL BE EITHER EXCHANGED FOR EXCHANGE NOTES OR RETURNED TO
YOU
On the exchange date, we will determine which old notes were validly
tendered and we will issue exchange notes in exchange for them. The exchange
agent will act as your agent for the purpose of receiving exchange notes from us
and causing the exchange notes to be given to you in exchange for old notes
promptly after acceptance of the tendered old notes. If your old notes are not
accepted for exchange by us, they will be returned without expense to you. If
you tender your old notes through a book-entry transfer facility, pursuant to
the procedures described above, but your old notes are not accepted for
exchange, your non-exchanged old notes will be credited to an account maintained
with the book-entry transfer facility. In either case, we will return your
non-exchanged old notes to you promptly following the expiration of the exchange
offer.
The Bank of New York has been appointed as the exchange agent for the
exchange offer. You may contact the exchange agent at:
Tel: 011 44 20 7964 6582
Fax: 011 44 20 7893 7294
Attn: Conan Ashdown
WE ARE PAYING OUR COSTS FOR THE EXCHANGE OFFER
We have not retained any dealer-manager or similar agent in connection with
the exchange offer and will not make any payments to brokers, dealers or others
for soliciting acceptances of the exchange offer. We will, however, pay the
exchange agent reasonable and customary fees for its services and will reimburse
it for reasonable out-of-pocket expenses. We will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. We will pay the
expenses incurred in connection with the exchange offer, including the fees and
expenses of the exchange agent and printing, accounting, investment banking and
legal fees. We estimate that these fees are approximately L100,000.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS TO YOU IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS
IF ANYONE ELSE GIVES YOU INFORMATION OR REPRESENTATIONS ABOUT THE EXCHANGE
OFFER, YOU SHOULD NOT RELY UPON THAT INFORMATION OR REPRESENTATION OR ASSUME
THAT IT HAS BEEN AUTHORIZED BY US. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY EXCHANGE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THERE HAS
BEEN NO CHANGE IN OUR AFFAIRS SINCE THE RESPECTIVE DATES AS OF WHICH INFORMATION
IS GIVEN IN THIS PROSPECTUS. THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL
TENDERS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF OLD NOTES IN ANY
JURISDICTION IN WHICH THE MAKING OF THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF
WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF THAT JURISDICTION. HOWEVER, WE MAY,
AT OUR DISCRETION, TAKE SUCH ACTION AS WE MAY DEEM NECESSARY TO MAKE THE
EXCHANGE OFFER IN ANY SUCH JURISDICTION AND EXTEND THE EXCHANGE OFFER TO HOLDERS
OF OLD NOTES IN SUCH JURISDICTION. IN ANY JURISDICTION WHERE THE SECURITIES LAWS
OR BLUE SKY LAWS REQUIRE THE EXCHANGE OFFER TO BE MADE BY A LICENSED BROKER OR
DEALER, THE EXCHANGE OFFER IS BEING MADE ON BEHALF OF US BY ONE OR MORE
REGISTERED BROKERS OR DEALERS THAT ARE LICENSED UNDER THE LAWS OF THAT
JURISDICTION.
28
FEDERAL INCOME TAX CONSEQUENCES TO YOU
The exchange of old notes for exchange notes by you will not be a taxable
exchange for U.S. federal income tax purposes, and you should not recognize any
taxable gain or loss or any interest income as a result of the exchange. See
"Taxation--United States Taxation--Exchange Offer" below.
THIS IS THE ONLY EXCHANGE OFFER THAT WE ARE REQUIRED TO MAKE
Your participation in the exchange offer is voluntary and you should
carefully consider whether to accept the terms and conditions of it. You are
urged to consult your financial and tax advisors in making your own decisions on
what action to take with respect to the exchange offer. If you do not tender
your old notes in the exchange offer, you will continue to hold such old notes
and you will be entitled to all the rights and limitations applicable to the old
notes under the indenture. All non-exchanged old notes will continue to be
subject to the restriction on transfer set forth in the indenture. If old notes
are tendered and accepted in the exchange offer, the trading market, if any, for
any remaining old notes could be much less liquid.
We may in the future seek to acquire non-exchanged old notes in the open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plan to acquire any old notes that are not
exchanged in the exchange offer.
29
CAPITALIZATION
The following table sets forth our historical unaudited consolidated cash
and short term deposits, short term debt and capitalization under U.K. GAAP as
of March 30, 2002, and after giving effect to the application of the net
proceeds from the transactions described under "Summary--Recent Developments."
The historical information has been derived from the unaudited consolidated
financial statements included elsewhere in this prospectus. There has been no
material change in our capitalization since March 30, 2002, except as set forth
below.
ACTUAL AS ADJUSTED
AS OF ADJUSTMENTS AS OF
MARCH 30, FOR RIGHTS OTHER MARCH 30,
2002 OFFERING(1) ADJUSTMENTS(2) 2002
------------- ------------- -------------- -------------
(AMOUNTS IN MILLIONS)
Short term debt (including current
maturities)(3).................................. L14.6 -- L14.6
============= ============= ============= =============
Long term debt (less current maturities and
excluding unamortized issue costs)(4)(5):
Senior secured credit facilities(3)............. L248.7 L(16.0) L(73.1) L59.6
Bridge loan facility............................ 53.0 (53.0) -- --
Notes........................................... 100.0 -- -- 100.0
Other loans(3)(5)............................... 14.1 -- -- 14.1
------------- ------------- ------------- -------------
Total long term debt (less current maturities).... 415.8 (69.0) (73.1) 273.7
Shareholders' funds............................... 111.5 75.1 15.5 202.1
------------- ------------- ------------- -------------
Total capitalization.............................. L527.3 L6.1 L(57.6) L475.8
============= ============= ============= =============
------------------------------
(1) The extended aggregate fees in respect of the refinancing, including the
rights offering, were L25.0 million. Of this amount, L4.2 million has been
written off to profit and loss account and L4.8 million has been written off
to share premium in the first half of 2002 and are therefore reflected in
the shareholders' funds, as at March 30, 2002.
(2) Other adjustments reflect the following transactions described under
"Summary--Recent Developments":
EFFECT ON
NET PROCEEDS SHAREHOLDER FUNDS
------------ -----------------
Belshaw Bros................................................ L15.4 L8.6
Austral..................................................... 6.7 (6.5)
Aladdin Temp-Rite........................................... 25.7 11.3
Nobia Loan Note and Share Sale.............................. 24.3 2.9
Prolon...................................................... 1.0 (0.8)
------------ ------------
L73.1 L15.5
============ ============
(3) Short term debt and Senior secured credit facilities were guaranteed by
group companies. All other indebtedness is not guaranteed.
(4) Under U.K. GAAP, debt issuance costs are deducted from the related debt
amounts for the purposes of balance sheet presentation and are amortized
over the life of the debt.
(5) Other loans consist primarily of L11.5 million of industrial revenue bonds.
30
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
Our audited historical consolidated financial statements are presented in
British pounds sterling and are prepared in accordance with U.K. GAAP, which
differs in certain respects from U.S. GAAP. A reconciliation of certain amounts
from U.K. GAAP to U.S. GAAP, as well as a summary of principal differences
between U.K. GAAP and U.S. GAAP applicable to us, are presented in Note 29 to
our audited historical consolidated financial statements included elsewhere in
this prospectus.
The following selected financial data should be read in conjunction with
"Operating and Financial Review and Prospects" and our historical consolidated
financial statements, including the notes thereto. The selected statement of
income data set forth below for the fiscal years ended October 2, 1999,
September 30, 2000 and September 29, 2001, and the balance sheet data at
September 30, 2000, and September 29, 2001, have been derived from our audited
historical consolidated financial statements filed with the SEC on Form 20-F and
included elsewhere in this prospectus, but they do not, however, constitute our
statutory accounts within the meaning of section 240 of the Companies Act 1985
in the United Kingdom. The selected statement of income data for the fiscal
years ended September 27, 1997 and September 26, 1998 and the balance sheet data
at September 27, 1997, September 26, 1998, and October 2, 1999, have been
derived from our audited historical annual reports as filed with the U.K.
Listing Authority, or other Enodis plc information, which are not included in
this prospectus. The selected financial data set forth below as of and for the
26 week period ended March 31, 2001, and March 30, 2002, have been derived from
our unaudited historical consolidated financial statements included elsewhere in
this prospectus and, in our opinion, include all adjustments (consisting of
normal recurring accruals) necessary for the fair presentation of the financial
data for such periods. The results for the 26 weeks ended March 30, 2002 may not
be indicative of the results to be expected for the entire fiscal year.
We adopted FRS 19 with effect from September 30, 2001. FRS 19, which
replaces SSAP 15, requires full provision to be made for deferred tax assets and
liabilities arising from timing differences between the recognition of gains and
losses in the financial statements and their recognition in a tax computation.
The selected financial data as of and for the 26 week period ended March 30,
2002 reflects the adoption of FRS 19 and should be read in conjunction with the
unaudited historical consolidated financial statements included elsewhere in
this prospectus. The selected financial data as of and for the 26 weeks period
ended March 31, 2001 has also been restated for the adoption of FRS 19, in
accordance with the guidance provided by FRS 3. This guidance requires that
comparative financial information be restated to reflect the adoption of a new
accounting standard only when such financial information is reported as the
comparative for a period ending after the implementation date of a new standard.
The selected financial data as of and for the fiscal years ended September 27,
1997, September 26, 1998, October 2, 1999, September 30, 2000 and September 29,
2001, has not been restated to reflect the adoption of FRS 19.
31
FISCAL YEAR ENDED
-----------------------------------------------------------------------
SEPT. 27, SEPT. 26, OCT. 2,
1997 1998 1999
--------------------- --------------------- -----------------------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS AND PER SHARE DATA)
U.K. GAAP
PROFIT AND LOSS ACCOUNT DATA:
Turnover (net sales):
Global Food Service
Equipment................... L289.3 L322.4 L447.9
Food Retail Equipment......... 11.8 10.5 41.8
Property...................... 1.6 3.0 1.0
--------------------- --------------------- -----------------------
Continuing operations......... 302.7 335.9 490.7
Discontinued operations(1).... 247.0 255.3 265.6
--------------------- --------------------- -----------------------
Total turnover............ 549.7 591.2 756.3
Operating profit/(loss) before
goodwill amortization and
exceptional items:
Global Food Service
Equipment................. 36.1 43.8 61.3
Food Retail Equipment....... 4.0 3.7 5.3
Property.................... 0.1 0.4 0.2
Corporate costs............. (5.3) (5.3) (6.2)
--------------------- --------------------- -----------------------
Continuing operations....... 34.9 42.6 60.6
Discontinued
operations(1)............. 11.7 17.2 24.0
--------------------- --------------------- -----------------------
Total operating
profit/(loss) before
exceptional items and
goodwill amortization... 46.6 59.8 84.6
Operating exceptional
items(2)...................... (1.5) -- (6.0)
Goodwill amortization........... -- -- (2.7)
--------------------- --------------------- -----------------------
Operating profit/(loss)
Continuing operations......... 33.4 42.6 51.9
Discontinued operations(1).... 11.7 17.2 24.0
--------------------- --------------------- -----------------------
Total operating profit/(loss)... L45.1 L59.8 L75.9
Profit on disposal of businesses
and property fixed assets..... -- -- L4.1
Net interest payable and similar
charges(3).................... L(9.6) L(9.6) (13.3)
Non-operating exceptional
gain(5)....................... 24.9 -- --
Profit/(loss) for the
period(6)..................... 56.8 46.7 60.8
Basic earnings/(loss) per
share(6)(11).................. 30.2p 24.9p 31.3p
Diluted earnings/(loss) per
share(6)(11).................. 22.1p 18.9p 22.4p
Dividends declared per share.... 6.5p 9.5p 12.5p
BALANCE SHEET DATA:
Total assets(6)............... L338.1 L338.0 L921.1
Net assets/(liabilities)(6)... (65.3) (88.7) 85.9
Intangible fixed assets,
net......................... -- -- 371.0
Cash in bank and in hand...... 57.8 39.0 26.7
Net current
assets/(liabilities)(6)..... 83.8 61.5 25.6
Total long term debt(7)....... 255.7 249.0 445.8
Called up share capital....... 76.3 76.6 105.8
Number of ordinary shares
outstanding................. 152.7 153.2 211.6
FISCAL YEAR ENDED 26 WEEKS ENDED
----------------------------------------- --------------------------------
SEPT. 30, SEPT. 29, MAR. 31, MAR. 30,
2000 2001 2001 2002
----------------------- --------------- --------------- --------------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS AND PER SHARE DATA)
U.K. GAAP
PROFIT AND LOSS ACCOUNT DATA:
Turnover (net sales):
Global Food Service
Equipment................... L665.1 L684.1 L322.2 L301.1
Food Retail Equipment......... 219.4 203.1 97.5 88.9
Property...................... 19.9 16.6 0.9 --
----------------------- --------------- --------------- --------------
Continuing operations......... 904.4 903.8 420.6 390.0
Discontinued operations(1).... 275.7 177.3 132.9 --
----------------------- --------------- --------------- --------------
Total turnover............ 1,180.1 1,081.1 553.5 390.0
Operating profit/(loss) before
goodwill amortization and
exceptional items:
Global Food Service
Equipment................. 88.9 80.3 32.2 28.9
Food Retail Equipment....... 22.6 10.4 4.5 1.5
Property.................... 8.4 9.0 -- --
Corporate costs............. (7.3) (8.9) (4.5) (4.2)
----------------------- --------------- --------------- --------------
Continuing operations....... 112.6 90.8 32.2 26.2
Discontinued
operations(1)............. 27.1 9.1 7.6 --
----------------------- --------------- --------------- --------------
Total operating
profit/(loss) before
exceptional items and
goodwill amortization... 139.7 99.9 39.8 26.2
Operating exceptional
items(2)...................... -- (167.5) (40.5) (3.7)
Goodwill amortization........... (21.4) (23.0) (11.7) (10.1)
----------------------- --------------- --------------- --------------
Operating profit/(loss)
Continuing operations......... 91.2 (99.7) (20.0) 12.4
Discontinued operations(1).... 27.1 9.1 7.6 --
----------------------- --------------- --------------- --------------
Total operating profit/(loss)... L118.3 L(90.6) L(12.4) L12.4
Profit on disposal of businesses
and property fixed assets..... L3.0 L23.5 -- L2.7
Net interest payable and similar
charges(3).................... (37.5) (41.9)(4) L(26.9) (23.3)
Non-operating exceptional
gain(5)....................... -- -- -- 48.0
Profit/(loss) for the
period(6)..................... 69.3 (115.9) (43.2) (9.8)
Basic earnings/(loss) per
share(6)(11).................. 24.0p (37.7)p (14.1)p (3.2)p
Diluted earnings/(loss) per
share(6)(11).................. 22.4p (37.7)p (14.1)p (3.2)p
Dividends declared per share.... 13.8p 2.0p -- --
BALANCE SHEET DATA:
Total assets(6)............... L994.4 L773.5 L1,086.0 L792.5
Net assets/(liabilities)(6)... 214.9 88.0 199.6 112.5
Intangible fixed assets,
net......................... 412.7 310.2 434.5 312.9
Cash in bank and in hand...... 28.5 39.4 58.0 49.9
Net current
assets/(liabilities)(6)..... 35.4 118.2 189.0 143.4
Total long term debt(7)....... 371.1 401.8 550.6 409.6
Called up share capital....... 125.0 125.1 125.0 125.1
Number of ordinary shares
outstanding................. 250.1 250.3 248.8 400.5
------------------------------
SEE ACCOMPANYING FOOTNOTES ON FOLLOWING PAGES.
32
FISCAL YEAR ENDED
----------------------------------------------------------------------------------------
SEPT. 27, SEPT. 26, OCT. 2, SEPT. 30, SEPT. 29,
1997 1998 1999 2000 2001
-------------- -------------- ---------------- ---------------- ----------------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS AND PER SHARE DATA)
OTHER FINANCIAL INFORMATION:
Depreciation(8)...................... L6.7 L7.6 L12.9 L18.1 L18.6
Capital expenditures(8).............. 7.9 8.0 20.8 20.6 19.3
Ratio of earnings to fixed
charges(9)........................... 4.7x 3.5x 3.9x 2.5x --
U.S. GAAP
PROFIT AND LOSS ACCOUNT DATA:
Turnover (net sales)................. L302.7 L335.9 L490.7 L904.4 L903.8
Operating profit/(loss) from
continuing operations.............. 23.8 28.6 43.1 77.6 (106.8)
Profit/(loss) from continuing
operations......................... 4.7 2.2 10.6 9.1 (150.7)
Profit/(loss) for the period......... 37.5 16.3 27.3 25.3 (113.7)
Basic earnings per ordinary share
(pence):
Profit from continuing operations.... 2.5p 1.2p 5.4p 3.2p (49.0)p
Profit from discontinued
operations(1)...................... 4.2p 7.5p 8.7p 5.6p 2.3p
Gain on sale of discontinued
operations(1)...................... -- -- -- -- 9.7p
Extraordinary gain(5)................ 13.3p -- -- -- --
-------------- -------------- ---------------- ---------------- ----------------
Profit/(loss) for the period......... 20.0p 8.7p 14.1p 8.8p (37.0)p
============== ============== ================ ================ ================
Diluted earnings per ordinary share
(pence):
Profit from continuing operations.... 2.5p 1.1p 5.4p 2.9p (49.0)p
Profit from discontinued
operations(1)...................... 4.1p 7.4p 6.2p 5.3p 2.3p
Gain on sale of discontinued
operations(1)...................... -- -- -- -- 9.7p
Extraordinary gain(5)................ 13.1p -- -- -- --
-------------- -------------- ---------------- ---------------- ----------------
Profit/(loss) for the period......... 19.7p 8.5p 11.6p 8.2p (37.0)p
============== ============== ================ ================ ================
BALANCE SHEET DATA:
Total assets......................... L728.2 L1,281.9 L1,314.2 L1,151.5
Net assets........................... 344.1 492.7 586.8 443.0
Intangible assets, net............... -- 371.0 412.7 310.2
Net current
assets/(liabilities)(10)........... 146.5 126.2 133.3 123.6
OTHER FINANCIAL INFORMATION:
Goodwill amortization from continuing
operations......................... L14.1 L15.7 L19.3 L37.7 L39.0
Ratio of earnings to fixed
charges(9)......................... 4.0x 2.7x 3.2x 2.1x --
26 WEEKS ENDED
-----------------------------------
MAR. 31, MAR. 30,
2001 2002
(UNAUDITED) (UNAUDITED)
---------------- ----------------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS AND PER SHARE DATA)
OTHER FINANCIAL INFORMATION:
Depreciation(8)...................... L9.6 L8.7
Capital expenditures(8).............. (3.4) 5.7
Ratio of earnings to fixed
charges(9)........................... -- --
U.S. GAAP
PROFIT AND LOSS ACCOUNT DATA:
Turnover (net sales)................. L402.6 L390.0
Operating profit/(loss) from
continuing operations.............. (34.3) 17.5
Profit/(loss) from continuing
operations......................... (41.0) (16.3)
Profit/(loss) for the period......... (46.3) (16.3)
Basic earnings per ordinary share
(pence):
Profit from continuing operations.... (16.5)p (4.1)p
Profit from discontinued
operations(1)...................... 3.1p --
Gain on sale of discontinued
operations(1)...................... -- --
Extraordinary gain(5)................ -- --
---------------- ----------------
Profit/(loss) for the period......... (13.4)p (4.1)p
================ ================
Diluted earnings per ordinary share
(pence):
Profit from continuing operations.... (16.5)p (4.1)p
Profit from discontinued
operations(1)...................... 3.1p --
Gain on sale of discontinued
operations(1)...................... -- --
Extraordinary gain(5)................ -- --
---------------- ----------------
Profit/(loss) for the period......... (13.4)p (4.1)p
================ ================
BALANCE SHEET DATA:
Total assets......................... L1,451.1 L1,150.5
Net assets........................... 557.1 467.6
Intangible assets, net............... 210.8 251.0
Net current
assets/(liabilities)(10)........... 266.6 212.4
OTHER FINANCIAL INFORMATION:
Goodwill amortization from continuing
operations......................... L20.4 L17.6
Ratio of earnings to fixed
charges(9)......................... -- --
------------------------------
(1) During fiscal 2001, we disposed of our building and consumer products
division. Accordingly, the data for each of the periods presented has been
restated to reflect the effects of accounting for the building and consumer
products division as a discontinued operation.
33
(2) According to U.K. GAAP, exceptional items are material items which derive
from events or transactions that fall within the ordinary activities of a
reporting entity and which individually or, if of a similar type in
aggregate, need to be disclosed by virtue of their size or incidence if the
financial statements are to give a true and fair view. We determined the
following items to be exceptional in accordance with U.K. GAAP for fiscal
year 1997, fiscal 1999 and fiscal 2001 and for the 26 weeks ended March 30,
2002:
26 WEEKS 26 WEEKS
ENDED ENDED
FISCAL YEAR ENDED ------------- -------------
--------------------------------------------- MAR. 31, MAR. 30,
SEPT. 27, OCT. 2, SEPT. 29, 2001 2002
1997 1999 2001 (UNAUDITED) (UNAUDITED)
------------- ------------- ------------- ------------- -------------
(AMOUNTS IN MILLIONS)
Restructuring costs........................... L1.5 L6.0 L33.1 L3.7 14.5
Revisions to working capital provisions and
other exceptional warranty costs............ -- -- 13.7 -- 13.7
Litigation settlement costs................... -- -- 12.2 -- 12.3
Costs associated with the Board's review of
strategic options........................... -- -- 8.5 -- --
------------- ------------- ------------- ------------- -------------
Operating exceptionals, before goodwill
impairment................................ 1.5 6.0 67.5 3.7 40.5
Goodwill impairment........................... -- -- 100.0 -- --
------------- ------------- ------------- ------------- -------------
Total operating exceptional items....... L1.5 L6.0 L167.5 3.7 L40.5
============= ============= ============= ============= =============
(3) Net interest payable and similar charges consists of interest income,
interest expense and amortization and write-off of deferred financing costs.
(4) Net interest payable and similar charges for fiscal 2001 and for the
26 weeks ended March 30, 2002 include charges of L5.8 million and
L4.2 million, respectively, related to the write-off of unamortized costs of
previous financing arrangements that were replaced with alternate financing.
(5) For the fiscal year 1997, the non-operating exceptional gain (U.K. GAAP) and
extraordinary gain (U.S. GAAP) represents a gain arising on the repurchase
of our convertible unsecured loan stock. Such gain is considered as
non-operating profit under both U.K. GAAP and U.S. GAAP.
(6) The summary financial data as of and for the 26 week period ended March 30,
2002 reflects the adoption of FRS 19 and should be read in conjunction with
the unaudited historical financial statements included elsewhere in this
prospectus. The summary financial data as of and for the 26 week period
ended March 31, 2001 has also been restated for the adoption of FRS 19, in
accordance with the guidance provided by FRS 3.
The fiscal year end results presented within this prospectus have not been
adjusted for the adoption of FRS 19. The unaudited estimated impact of
application of FRS 19 to the financial data as of and for each period is set
out below:
FISCAL YEAR ENDED
--------------------------------------------------------------------------
SEPT. 27, SEPT. 26, OCT. 2, SEPT. 30, SEPT. 29,
1997 1998 1999 2000 2001
------------ ------------ ------------ ------------- -------------
Deferred tax assets
--as reported.................................. -- -- -- -- --
--unaudited estimated impact on adoption....... 17.8 19.4 21.5 31.7 26.9
------------ ------------ ------------ ------------- -------------
--unaudited estimated restated amount.......... 17.8 19.4 21.5 31.7 26.9
============ ============ ============ ============= =============
Tax on ordinary profit/(loss)
--as reported.................................. (3.6) (3.5) (5.9) (14.2) (6.6)
--unaudited estimated impact on adoption....... 6.2 1.6 2.1 10.3 (4.8)
------------ ------------ ------------ ------------- -------------
--unaudited estimated restated amount.......... 2.6 (1.9) (3.8) (3.9) (11.4)
============ ============ ============ ============= =============
(7) Total borrowings consists of all borrowings but excludes deferred financing
costs.
(8) Balances exclude amounts relating to our discontinued building and consumer
products division which we disposed of in fiscal 2001.
(9) For the purpose of determining the ratio of earnings to fixed charges,
earnings are defined as profit before income taxes plus fixed charges. Fixed
charges include interest expense. Under U.K GAAP, in fiscal 2001, the
26 weeks ended March 30, 2001, and the 26 weeks ended March 30, 2002,
earnings were insufficient to cover fixed charges by L118.1 million,
L46.9 million and L8.2 million, respectively. Under U.S. GAAP, in fiscal
2001, the 26 weeks ended March 30, 2001, and the 26 weeks ended March 30,
2002, earnings were insufficient to cover fixed charges by L118.8 million,
L53.7 million and L11.3 million, respectively.
(10) U.S. GAAP includes L39.9 million (1998), L40.4 million (1999) and
L39.3 million (2000) of non-current assets and liabilities related to
discontinued operations that are classified as current.
(11) The earnings per share numbers have been restated to reflect a
three-for-five rights offering that was approved in March 2002.
34
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
THE FOLLOWING IS A DISCUSSION OF OUR RESULTS OF OPERATIONS FOR, AND
FINANCIAL CONDITION AS OF THE END OF, THE 53 WEEK PERIOD ENDED SEPTEMBER 30,
1999, WHICH WE CALL FISCAL 1999, THE 52 WEEK PERIOD ENDED SEPTEMBER 30, 2000,
WHICH WE CALL FISCAL 2000, AND THE 52 WEEK PERIOD ENDED SEPTEMBER 29, 2001,
WHICH WE CALL FISCAL 2001, AS WELL AS THE 26 WEEK PERIOD ENDED MARCH 30, 2002,
WHICH WE CALL FIRST HALF 2002, COMPARED TO THE 26 WEEK PERIOD ENDED MARCH 30,
2001, WHICH WE CALL FIRST HALF 2001. THE 13 WEEKS ENDED MARCH 30, 2002 AND
MARCH 31, 2001, ARE CALLED, RESPECTIVELY, SECOND QUARTER 2002 AND SECOND QUARTER
2001. YOU SHOULD READ THIS DISCUSSION IN CONJUNCTION WITH THE SECTIONS ENTITLED
"RISK FACTORS," "SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA" AND OUR
CONSOLIDATED FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES INCLUDED ELSEWHERE
IN THIS PROSPECTUS.
WE HAVE PREPARED OUR FINANCIAL STATEMENTS IN ACCORDANCE WITH U.K. GAAP.
THESE ACCOUNTING PRINCIPLES DIFFER IN CERTAIN SIGNIFICANT RESPECTS FROM U.S.
GAAP. IN FISCAL 2000, WE ALSO PREPARED CONSOLIDATED FINANCIAL STATEMENTS IN
ACCORDANCE WITH U.S. GAAP, WHICH WE FILED WITH THE SEC ON FORM 20-F. HOWEVER,
SINCE THAT TIME WE HAVE CHANGED THE FORMAT OF THE FINANCIAL STATEMENTS THAT WE
WILL FILE WITH THE SEC TO FOLLOW U.K. GAAP AND TO INCLUDE IN THOSE FINANCIAL
STATEMENTS A RECONCILIATION TO U.S. GAAP, AS PERMITTED UNDER SEC RULES.
ACCORDINGLY, THE AUDITED FINANCIAL STATEMENTS INCLUDED IN THIS PROSPECTUS HAVE
BEEN PREPARED IN ACCORDANCE WITH U.K. GAAP AND INCLUDE A RECONCILIATION TO U.S.
GAAP. RECONCILIATIONS OF THE MATERIAL DIFFERENCES IN OUR CONSOLIDATED FINANCIAL
STATEMENTS TO U.S. GAAP ARE SET FORTH IN NOTE 29 TO OUR CONSOLIDATED FINANCIAL
STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS.
WE ADOPTED FRS 19 WITH EFFECT FROM SEPTEMBER 30, 2001. FRS 19, WHICH
REPLACES SSAP 15, REQUIRES FULL PROVISION TO BE MADE FOR DEFERRED TAX ASSETS AND
LIABILITIES ARISING FROM TIMING DIFFERENCES BETWEEN THE RECOGNITION OF GAINS AND
LOSSES IN THE FINANCIAL STATEMENTS AND THEIR RECOGNITION IN A TAX COMPUTATION.
OUR INTERIM RESULTS FOR EACH OF THE 26-WEEK PERIODS ENDED MARCH 30, 2002 AND
MARCH 31, 2001 REFLECT THE ADOPTION OF FRS 19. OUR RESULTS FOR FISCAL 1999, 2000
AND 2001 HAVE NOT BEEN RESTATED TO REFLECT THE ADOPTION OF FRS 19.
OVERVIEW
We believe we are one of the leading manufacturers and distributors of food
service equipment globally. We believe that we offer one of the broadest lines
of commercial food service equipment products in our industry, including both
"warm" and "cold" side products. We own a portfolio of over 30 brands, many with
leadership positions in their respective markets. We also have a technology
center at our global operational headquarters in New Port Richey, Florida, which
we believe is one of the leading research and development and technical support
facilities in the food service equipment industry. This facility enables us to
offer our customers an array of advanced product development services.
PRINCIPAL PROFIT AND LOSS ACCOUNT ITEMS
TURNOVER (NET SALES). Turnover is comprised of gross sales to third
parties, including shipping and handling fees, less allowances for sales
returns, rebates, discounts and other items. We recognize sales upon shipment of
goods to customers. Our principal source of turnover is sales of food service
equipment, which comprised 75.7% of our turnover from continuing operations in
fiscal 2001 (55.2% in North America and 20.5% in Europe & Rest of World). Sales
of food retail equipment comprised 22.5% of our turnover from continuing
operations in fiscal 2001 (18.7% in North America and 3.8% in Europe & Rest of
World). Finally, sales of property comprised 1.8% of our turnover from
continuing operations.
OPERATING PROFIT FROM CONTINUING OPERATIONS. Operating profit from
continuing operations represents turnover less operating costs. Operating costs
consist of cost of sales, administrative expenses, distribution costs and other
operating expenses. Costs of sales includes raw material components, direct
labor costs, fixed and variable overhead costs, depreciation and amortization
attributable to production and sales and marketing costs. Administrative
expenses include research and development on new products, bad debt provisions,
depreciation and rent on administrative building and professional fees.
35
SIGNIFICANT FACTORS AFFECTING RESULTS OF OPERATIONS
ACQUISITIONS, DIVESTITURES AND THE NEW FINANCING ARRANGEMENTS
During the three years ended September 29, 2001, we have made a number of
acquisitions in order to expand our product range and global coverage. These
acquisitions have affected our results of operations during the periods under
review:
- In August 1999, we acquired Scotsman Industries, Inc., a U.S. food equipment
manufacturer, for approximately L254 million plus assumed debt of
approximately L225 million;
- In June 2000, we acquired Merrychef Holdings Limited, a U.K. manufacturer of
commercial microwaves and combination microwave/convection ovens, for
approximately L16.7 million; and
- In November 2000, we acquired Jackson MSC Inc., a U.S. manufacturer of
dishwashers and ovens, for approximately $36.2 million.
During the period under review, we have engaged in a program to divest our
non-core businesses in order to focus on our core competencies. In
January 2001, we decided to sell our former building and consumer products
division. In June 2001, we completed the sale of the building and consumer
products division for gross cash proceeds of L114 million and a loan receivable
of L20 million. On June 25, 2002, we received approximately L3.9 million from
the sale of our 750,000 shares in Nobia which we had held previously in the form
of warrants. On June 27, 2002, we received repayment of the L20 million loan
issued by us to Nobia together with an early redemption penalty of L400,000 and
interest accrued from last interest payment date. Consequently, the results of
operations for the building and consumer products division are presented as
discontinued operations in our financial statements. In September 2001, we
completed the sale of Scotsman Response Limited, a technical service provider to
the U.K. beverage industry. In December 2001, we disposed of Sammic, our Spanish
food service equipment business, for consideration of L20 million. We have also
recently closed Booth, Inc., a Dallas-based beverage dispensing equipment
operation. After March 30, 2002, we completed a number of non-core disposals. In
April 2002, we sold Belshaw Bros., our donut manufacturing business, for net
cash consideration of L15.4 million. In May 2002, we sold our Austral
subsidiaries, our food retail equipment business in Australia and New Zealand,
for net cash consideration of L6.7 million. Also, in May 2002, we disposed of
our Aladdin Temp-Rite subsidiaries, our meal delivery systems businesses, for
net cash consideration of L25.7 million. On June 14, 2002, we sold the assets of
Prolon, a subsidiary that manufactures plastic tableware and other plastic
wares, for net cash consideration of L1.0 million. This completes our current
program of non-core disposals.
We incurred or assumed substantial debt in order to finance our
acquisitions. A portion of this debt has been repaid with the proceeds of our
recent divestitures and recent rights offering. Our net debt (total financial
debt less cash and cash equivalents) reached L434.2 million at the end of fiscal
2000, but was reduced to L380.5 million at the end of first half 2002. After
giving effect to the application of the net proceeds from the transactions
described under "Summary--Recent Developments," our net debt would have been
below L250.0 million as of March 30, 2002.
In March 2001, we established a medium term, senior credit facility to
refinance our prior bank debt. As a result of these financing arrangements, we
wrote off unamortized costs associated with our previous credit facility.
STRATEGIC REVIEW AND RESTRUCTURING
In fiscal 2001, we conducted a detailed review of our strategic options,
including a review of our operating strategy and consideration of a possible
sale of our entire business. We also entered into preliminary discussions and
negotiations with selected third parties. Upon completion of that process, we
concluded that our current strategy remains appropriate. In connection with the
review, we incurred L8.5 million of professional fees and other expenses.
36
Also during fiscal 2001, there was a general market decline in the food
equipment industry, primarily resulting from a slowdown in the U.S. and European
economies. In addition, the events of September 11, 2001, added uncertainty to
the outlook for the food equipment industry. Leading restaurant chains have
curtailed new store openings and refurbishment programs, and many independent
restaurant and hotel operators have delayed new openings and non-essential
replacement of equipment. This industry downturn, coupled with our already
significant debt burden, required us to restructure and refocus our business.
In March 2001, we announced a restructuring program with the objective of
removing excess capacity and improving production efficiency throughout our
operations. We implemented cost control measures through headcount reduction and
discretionary cost control and manufacturing plant restructuring. These
initiatives have so far resulted in a total headcount reduction of approximately
870 people and the closure of five plants and significantly reduced fixed,
headcount and discretionary costs in the second half of fiscal 2001. These cost
savings, together with the benefit of increased volume due to seasonality,
contributed to an improvement in operating margins in our global food service
equipment group, from 10.0% in the first half of fiscal 2001 to 13.3% in the
second half of fiscal 2001. The full year impact of the fixed and headcount cost
saving measures will be recognized in fiscal 2002. In connection with this
restructuring program, we recognized L33.1 million of exceptional restructuring
charges in fiscal 2001, primarily related to employee terminations, plant
closure costs and asset writedowns. Of such amounts, L14.5 million were cash
payments made in fiscal 2001, with a further L8.5 million expected cash outlay
in fiscal 2002. The remaining L10.1 million represented non-cash charges.
We have implemented further cost-cutting initiatives, including strategic
headcount reductions, reductions in discretionary spending, additional group
purchasing savings and, in our European operations, a range of cost reduction
initiatives. We have targeted additional cost savings of approximately L10
million in fiscal 2002. We estimate that we will recognize approximately L6
million of exceptional restructuring charges in fiscal 2002 relating to these
actions. See "--Current Financial and Trend Information."
CUSTOMER ORDERS
Major chain customers of our global food service equipment group from time
to time upgrade their equipment in a large number of outlets over a short period
of time or require the rapid development and deployment of new products for the
preparation of new menu additions. This results in a significant increase in our
revenues over that period followed by a decrease in revenues until the next
replacement cycle or menu addition. Furthermore, reductions in purchases by
large customers for any reason, including due to downturns in the economy or
decisions by them to cut back on expansion, could result in reduced revenues to
us and significant fluctuations in our operating results. No single customer
accounted for over 5% of our total turnover from continuing operations in fiscal
1999, 2000 and 2001.
AMORTIZATION AND IMPAIRMENT OF GOODWILL
Goodwill arising from acquisitions is amortized on a straight-line over its
estimated useful life, 20 years. When it is apparent that the carrying value of
goodwill exceeds the estimated net present value of future cash flows less
operating assets, an impairment provision is charged against the provision for
that period. Goodwill previously taken into reserves is charged in the profit
and loss account when the related business is sold. In fiscal 2001, we
recognized an exceptional charge of L100 million relating to the writedown of
the carrying value of goodwill associated with the Scotsman acquisition. The
writedown resulted from our reassessment of the value of goodwill in light of
the downturn in the U.S. economy.
We are currently reviewing the operations of Kysor Warren, part of our food
retail equipment group, with the objective of improving its operating
performance. From its acquisition in 1999 to the end of fiscal 2001, Kysor
Warren operated at a profit (exclusive of exceptional costs and amortization).
However, Kysor Warren, along with its competitors, has been adversely impacted
by difficult market conditions. The unaudited results of this operation for the
first half of fiscal 2002 showed a small operating loss and were below
expectations. If the result of our review is the conclusion that the necessary
long term improvement in
37
performance cannot be achieved, it is possible that a significant part of Kysor
Warren's fixed assets (principally goodwill) could potentially be impaired,
resulting in an exceptional non-cash charge. Such an impairment, if any, cannot
be reasonably estimated at this time. As of March 30, 2002, the carrying value
of goodwill relating to Kysor Warren was approximately L50 million.
FOREIGN EXCHANGE EFFECTS
Because we have significant capital employed in our non-U.K. operations
(primarily the U.S.), our results of operations, which are reported in pounds
sterling, can be affected by movements in foreign exchange rates between pounds
sterling and various currencies, primarily the U.S. dollar. The average exchange
rate for pounds sterling in U.S. dollars in fiscal 2001 was $1.44, as compared
to $1.55 in fiscal 2000 and $1.62 in fiscal 1999.
REAL PROPERTY SALES
During fiscal 2001 and fiscal 2002, we sold some of our real property assets
as part of our strategy to divest non-core assets. Future revenues from sales of
real property will depend on the nature and size of the properties sold, as well
as the timing of disposals, which are determined by management based on market
and other considerations. As of March 30, 2002, we held properties with an
aggregate historical cost basis of L10.9 million. As we continue to sell our
remaining real property assets, we expect revenue from property sales to decline
in future years.
WARRANTY PROVISIONS
Warranty provisions are estimated by reference to historic product failure
rates, estimated unit cost of product repair and the contracted warranty period.
We accrue for the estimated cost of warranty coverage and any returns at the
time the sale is recorded. For new products, the warranty provision is typically
calculated by reference to the historic failure rates and unit cost of
production of similar products. Differences arise between the actual and
estimated product warranty costs where unexpected product or component failures
occur.
CURRENT FINANCIAL AND TREND INFORMATION
While the market for food service equipment in North America remains
uncertain and pricing pressure significant, some more positive signs are
emerging from both the industry and end users. In Europe, the market outlook for
food service equipment is weak, exacerbated by intense price competition. The
market for food retail equipment remains depressed. However, the key to our
performance in this market will be our ability to turn around Kysor-Warren.
Our results for April and May show better than plan results from our food
service equipment group in North America but a weaker than plan performance in
Europe and Kysor-Warren.
Against this background, our expectations for full year operating profit are
unchanged from those at the time we released our preliminary results in
November 2001, other than in respect of the impact for the disposals. The second
half will benefit from the effects of seasonality and management actions,
including cost saving initiatives and new product development.
So far this year, we have made good progress towards our key objectives.
U.S. industry forecasts of food service sales are encouraging and confirm our
view that the industry fundamentals are attractive showing increased food and
beverage sales outside the home driven by lifestyle changes. Our global food
service equipment strategy is firmly on track. We believe Enodis is well
positioned to benefit as economies and markets recover.
38
RIGHTS OFFERING AND NEW FINANCING ARRANGEMENTS
We completed a rights offering on April 9, 2002, pursuant to which
qualifying existing shareholders subscribed for 139,551,567 of our ordinary
shares at a price of L0.50 per share. In addition, institutional and other
investors subscribed for 10,623,028 ordinary shares not purchased by
shareholders in the rights offering at a price of L0.92 per share. In accordance
with the terms of the rights offering, the premium over the rights offering
price (after deducting the expenses of the procuring subscribers) has been
distributed pro rata to the shareholders entitled thereto. The gross proceeds of
the rights offering were approximately L75.1 million and were used principally
to repay debt.
The rights offering is part of a refinancing of the senior credit facilities
we entered into in March 2001. These new financing arrangements include:
- a bridge loan facility in the amount of L150 million, all of which was
initially drawn and all of which has been repaid;
- a U.S. dollar-denominated term loan in the amount of approximately L260
million, all of which was drawn and $92.2 million (L63.8 million) of which
has been repaid as at May 31, 2002; and
- a U.S. dollar-denominated revolving credit facility in the amount of
approximately L60 million.
We used L16 million of the remaining net proceeds of the rights offering to
repay indebtedness under our new senior secured credit facilities, and the
remainder for general corporate purposes.
Fees and expenses associated with the rights offering were approximately
L4.8 million, which will be written off against the share premium account. Fees
and expenses relating to the bridge loan facility, term loan and revolving
credit facility as well as the offering of the old notes totalled approximately
L16.1 million; these fees and expenses have been capitalized and will be
amortized over the life of the related debt. Fees and expenses relating to the
bridge loan facility, totalling approximately L1.5 million were written off in
first half 2002. In addition, fees associated with the unwinding of our previous
financing arrangements of L2.7 million were charged as an exceptional item in
the second quarter of fiscal 2002.
RESULTS OF CONTINUING OPERATIONS
During fiscal 2000, our operations were reported as two segments: Food
Equipment and Other. During fiscal 2001, in order to more efficiently manage our
operations and to make more of our product line available to customers, we
reorganized our reportable segments into the following groups: Food Service
Equipment--North America; Food Service Equipment--Europe & Rest of World; Food
Retail Equipment; Building and Consumer Products; Property; and Corporate.
Accordingly, data for each of the periods presented has been restated to reflect
this change. During fiscal 2001, we sold our building and consumer products
division, and accordingly, the data for each period presented has been restated
to reflect the building and consumer products division as a discontinued
operation for all periods presented and the discussion below focuses on the
continuing operations of the Enodis group. Subsequent to fiscal 2001, as part of
our restructuring, we have combined Food Service Equipment--North America and
Food Service Equipment--Europe & Rest of World, and they are now managed as one
Global Food Service Equipment group.
The following table sets forth the components of our consolidated profit and
loss accounts, as presented in our consolidated historical financial statements
included elsewhere in this prospectus, and as a percentage of turnover (net
sales) of our continuing operations for fiscal 1999, fiscal 2000, fiscal 2001,
first half 2001 and first half 2002.
39
FISCAL YEAR ENDED
----------------------------------------------------------------------------------
OCTOBER 2, SEPTEMBER 30, SEPTEMBER 29,
1999 2000 2001
------------------------- ------------------------- --------------------------
(IN MILLIONS, EXCEPT PERCENTAGES)
Turnover (net sales) from continuing
operations:
Global Food Service Equipment....... L447.9 91.3% L665.1 73.5% L684.1 75.7%
Food Retail Equipment............... 41.8 8.5% 219.4 24.3% 203.1 22.5%
Property............................ 1.0 0.2% 19.9 2.2% 16.6 1.8%
-------------- ------ -------------- ------ --------------- ------
Total turnover from continuing
operations...................... 490.7 100.0% 904.4 100.0% 903.8 100.0%
Operating profit/(loss) from
continuing operations before
goodwill amortization and
exceptional items:
Global Food Service Equipment....... 61.3 12.5% 88.9 9.8% 80.3 8.9%
Food Retail Equipment............... 5.3 1.1% 22.6 2.5% 10.4 1.1%
Property............................ 0.2 -- 8.4 0.9% 9.0 1.0%
Corporate costs..................... (6.2) (1.2%) (7.3) (0.7%) (8.9) (1.0%)
-------------- ------ -------------- ------ --------------- ------
Total operating profit/(loss) from
continuing operations before
goodwill amortization and
exceptional items............... 60.6 12.4% 112.6 12.5% 90.8 10.0%
Operating exceptional items........... (6.0) (1.2%) -- -- (167.5) (18.5%)
Goodwill amortization................. (2.7) (0.6%) (21.4) (2.4%) (23.0) (2.5%)
-------------- ------ -------------- ------ --------------- ------
Operating profit/(loss) from
continuing operations............... 51.9 10.6% 91.2 10.1% (99.7) (11.0%)
Operating profit from discontinued
operations.......................... 24.0 4.9% 27.1 3.0% 9.1 1.0%
Profit on disposal of businesses and
property fixed assets............... 4.1 0.8% 3.0 0.3% 23.5 2.6%
Net interest payable and similar
charges............................. (13.3) (2.7%) (37.5) (4.1%) (41.9) (4.7%)
-------------- ------ -------------- ------ --------------- ------
Profit/(loss) on ordinary activities
before taxation..................... 66.7 13.6% 83.8 9.3% (109.0) (12.1%)
Tax on profit/(loss) on ordinary
activities.......................... (5.9) (1.2%) (14.2) (1.6%) (8.6) (1.0%)
Equity minority interest.............. -- -- (0.3) -- (0.3) --
-------------- ------ -------------- ------ --------------- ------
Profit/(loss) for the period.......... L60.8 12.4% L69.3 7.6% L(115.9) (12.8%)
============== ====== ============== ====== =============== ======
26 WEEKS ENDED
-----------------------------------------------------
MARCH 30, MARCH 30,
2001 2002
------------------------- -------------------------
(IN MILLIONS, EXCEPT PERCENTAGES)
Turnover (net sales) from continuing
operations:
Global Food Service Equipment....... L322.2 76.6% L301.1 77.2%
Food Retail Equipment............... 97.5 23.2% 88.9 22.8%
Property............................ 0.9 0.2% -- --
-------------- ------ -------------- -------
Total turnover from continuing
operations...................... 420.6 100% 390.0 100%
Operating profit/(loss) from
continuing operations before
goodwill amortization and
exceptional items:
Global Food Service Equipment....... 32.2 7.7% 28.9 7.4%
Food Retail Equipment............... 4.5 1.1% 1.5 0.4%
Property............................ -- -- -- --
Corporate costs..................... (4.5) (1.1%) (4.2) (1.1%)
-------------- ------ -------------- -------
Total operating profit/(loss) from
continuing operations before
goodwill amortization and
exceptional items............... 32.2 7.7% 26.2 6.7%
Operating exceptional items........... (40.5) (9.6%) (3.7) (1.0%)
Goodwill amortization................. (11.7) (2.8%) (10.1) (2.6%)
-------------- ------ -------------- -------
Operating profit/(loss) from
continuing operations............... (20.0) (4.8%) 12.4 3.1%
Operating profit from discontinued
operations.......................... 7.6 1.8% -- --
Profit on disposal of businesses and
property fixed assets............... -- -- 2.7 0.7%
Net interest payable and similar
charges............................. (26.9) (6.4%) (23.3) (6.0%)
-------------- ------ -------------- -------
Profit/(loss) on ordinary activities
before taxation..................... (39.3) (9.4%) (8.2) (2.1%)
Tax on profit/(loss) on ordinary
activities.......................... (3.9) (0.9%) (1.4) (0.4%)
Equity minority interest.............. -- -- (0.2) (0.1%)
-------------- ------ -------------- -------
Profit/(loss) for the period.......... L(43.2) (10.3%) L(9.8) (2.5%)
============== ====== ============== =======
40
FIRST HALF 2002 COMPARED TO FIRST HALF 2001
TURNOVER (NET SALES) FROM CONTINUING OPERATIONS
The following table sets forth a summary of turnover from continuing
operations.
SECOND SECOND
FIRST HALF FIRST HALF QUARTER QUARTER
2001 2002 % CHANGE 2001 2002 % CHANGE
---------- ---------- -------- -------- -------- --------
(L IN MILLIONS, EXCEPT PERCENTAGES)
Global Food Service Equipment...... 322.2 301.1 (6.5%) 170.9 157.9 (7.6%)
Food Retail Equipment.............. 97.5 88.9 (8.8%) 49.8 42.2 (15.3%)
Property........................... 0.9 -- (100%) 0.9 -- (100%)
----- ----- ------- ----- ----- -------
420.6 390.0 (7.3%) 221.6 200.1 (9.7%)
===== ===== ======= ===== ===== =======
Turnover in first half 2002 benefited from approximately L3.8 million of
foreign exchange movements compared to first half 2001.
Turnover from our North American operations for first half 2002 decreased by
L6.5 million, or 2.8%, to L228.3 million from L234.8 million in first half 2001,
reflecting the continuing weakness in the food service equipment market in North
America, which we believe has declined compared to the same period last year.
Comparable sales decreased by 5% due to the declining market and intense price
competition, although we believe that we are gaining market share. Turnover
decreased in second quarter 2002 by L2.2 million, or 1.8%, to L122.0 million
from L124.2 million in second quarter 2001 reflecting the decline in the market
mentioned above.
In first half 2002, turnover for Europe and Asia declined by L14.6 million,
or 16.7%, to L72.8 million from L87.4 million in first half 2001. Excluding the
effects of the sale of Sammic and, in the prior year, Scotsman Response,
comparable sales decreased 4%, which was due to a decrease in sales volume in a
market that we believe has declined.
Turnover in second quarter 2002 decreased by L10.8 million or 23.1% to
L35.9 million from L46.7 million in second quarter 2001.
FOOD RETAIL EQUIPMENT. First half 2002 turnover declined by L8.6 million,
or 8.8% to L88.9 million from L97.5 million in first half 2001. These results
reflect improved performance at Kysor Panel Systems and at Austral, now sold,
offset by much weaker performance at Belshaw Bros., now sold, and very
disappointing performance at Kysor Warren. We have completed an independent
market study and changed most of the Kysor Warren management team with the goal
of improving the performance of Kysor Warren. Turnover in first half 2002
benefited by L0.6 million from foreign exchange movements compared to first half
2001. Turnover in second quarter 2002 decreased by L7.6 million, or 15.3%, to
L42.2 million from L49.8 million in second quarter 2001 for the reasons
previously mentioned in the first half analysis.
PROPERTY. There were no sales of property assets in first half 2002.
Property generated turnover of L0.9 million in first half 2001.
41
OPERATING PROFIT FROM CONTINUING OPERATIONS BEFORE GOODWILL AMORTIZATION AND
EXCEPTIONAL ITEMS
The following table provides a summary of the total operating profit from
continuing operations before goodwill amortization and exceptional items.
SECOND SECOND
FIRST HALF FIRST HALF QUARTER QUARTER
2001 2002 % CHANGE 2001 2002 % CHANGE
---------- ---------- -------- -------- -------- --------
(L IN MILLIONS, EXCEPT PERCENTAGES)
Global Food Service Equipment....... 32.2 28.9 (10.2%) 18.9 16.4 (13.2%)
Food Retail Equipment............... 4.5 1.5 (66.7%) 2.1 (0.2) (109.5%)
Property............................ -- -- -- -- -- --
Corporate Costs..................... (4.5) (4.2) 6.7% (2.5) (2.1) 16.0%
----- ---- ------ ---- ---- -------
32.2 26.2 (18.6%) 18.5 14.1 (23.8%)
===== ==== ====== ==== ==== =======
Operating profit from continuing operations before goodwill amortization and
exceptional items in first half 2002 has benefited by approximately
L0.3 million as a result of foreign exchange translation movements compared to
first half 2001.
GLOBAL FOOD SERVICE EQUIPMENT. The following table sets forth a summary of
our operating profit from continuing operations before goodwill amortization and
exceptional items in our global food service equipment segment.
SECOND SECOND
FIRST HALF FIRST HALF QUARTER QUARTER
2001 2002 % CHANGE 2001 2002 % CHANGE
---------- ---------- -------- -------- -------- --------
(L IN MILLIONS, EXCEPT PERCENTAGES)
North America...................... 23.0 24.6 7.0% 12.9 14.8 14.7%
Europe & Asia...................... 9.2 4.3 (53.3%) 6.0 1.6 (73.3%)
---- ---- ------ ------ ---- ------
Total Global Food Service
Equipment........................ 32.2 28.9 (10.2%) 18.9 16.4 (13.2%)
==== ==== ====== ====== ==== ======
Operating profit from continuing operations before goodwill amortization and
exceptional items in first half 2002 benefited by L0.4 million from foreign
exchange movements compared to first half 2001.
Operating profit from continuing operations before goodwill amortization and
exceptional items in North America increased by L1.6 million, or 7.0%, to
L24.6 million in first half 2002 from L23.0 million in first half 2001.
Operating profit from continuing operations before goodwill amortization and
exceptional items as a percentage of turnover from North America increased by
1.0 percentage point to 10.8% in first half 2002 from 9.8% in first half 2001.
Operating profit has increased on a comparable basis by 7% to L24.6 million,
because adverse volume, net price and product mix changes together with normal
ongoing cost inflation, principally labor, were more than offset by the benefits
of our cost reduction programs that saved L10.5 million. Operating profit from
continuing operations before goodwill amortization and exceptional items
increased in second quarter 2002 by L1.9 million, or 14.7%, to L14.8 million
from L12.9 million in second quarter 2001. Operating profit from continuing
operations before goodwill amortization and exceptional items as a percentage of
turnover from North America increased by 1.7 percentage points to 12.1% in
second quarter 2002 from 10.4% in second quarter 2001.
Operating profit from continuing operations before goodwill amortization and
exceptional items in Europe and Asia decreased by L4.9 million, or 53.3%, to
L4.3 million in first half 2002 from L9.2 million in first half 2001. On a
comparable basis, the decrease was 48.0%. Operating profit from continuing
operations before goodwill amortization and exceptional items as a percentage of
net sales from Europe and Asia decreased by 4.6 percentage points to 5.9% in
first half 2002 from 10.5% in first half 2001. While cost savings amounted to
approximately L2.0 million, this was more than offset by adverse price and
product mix,
42
additional infrastructure costs for new factories at Viscount, Ventmaster and
Convotherm, weak beverage dispensing equipment performance and the absence of
last year's property profits of L0.9 million. Operating profit from continuing
operations before goodwill amortization and exceptional items decreased by
L4.4 million, or 73.3%, in second quarter 2002 to L1.6 million from
L6.0 million in second quarter 2001, primarily due to reduced sales in 2002.
FOOD RETAIL EQUIPMENT. Operating profit from continuing operations before
goodwill amortization and exceptional items decreased by L3.0 million, or 66.7%,
to L1.5 million in first half 2002 from L4.5 million in first half 2001. The net
effect on operating profit from continuing operations before goodwill
amortization and exceptional items of foreign exchange movements in first half
2002 compared with first half 2001 was negligible. Operating profit from
continuing operations before goodwill amortization and exceptional items as a
percentage of net sales decreased by 2.9 percentage points to 1.7% in first half
2002 from 4.6% in first half 2001. The decrease in operating profit from
continuing operations before goodwill amortization and exceptional items
principally reflects reduced sales of refrigeration systems and display cases by
Kysor Warren and weakening performance at Belshaw Bros., now sold. This was
offset in part by stronger performance in refrigerated panels and walk-in
freezers and coolers sold by Kysor Panel Systems, along with improvements at
Austral, now sold. The decline in operating margin was partially offset by the
effect of the cost savings program enacted in the second half of fiscal 2001 and
in first quarter 2002. Operating profit from continuing operations before
goodwill amortization and exceptional items decreased by L2.3 million in second
quarter 2002 to an operating loss of L0.2 million from a profit L2.1 million in
second quarter 2001.
PROPERTY. Future profits from sales of property will depend on the nature
and size of the properties sold, as well as the timing of sales, which are
determined by management based on market and other considerations. We have
signed a contract for the sale of Felsted Phase 3, which is targeted for
practical completion and profit recognition at the end of September 2002.
Profits of L7.0 million will be recognized on practical completion.
GOODWILL AMORTIZATION
Amortization and impairment of goodwill from continuing operations decreased
by L1.6 million to L10.1 million in first half 2002 from L11.7 million in first
half 2001 due to the effect of the L100 million impairment in the value of our
goodwill booked in September 2001. This has been offset in part by the full half
year effect of the amortization of goodwill arising from the Jackson acquisition
in November 2000.
As previously discussed in the announcement of first quarter results, we are
currently reviewing the operations of Kysor Warren with the objective of
improving its operating performance. From its acquisition in 1999 to the end of
fiscal 2001, Kysor Warren operated at a profit (exclusive of exceptional costs
and goodwill amortization). However, Kysor Warren, along with its competitors,
has been adversely impacted by difficult market conditions but has also lost
market share due to a lack of customer focus. We have completed an independent
market study and changed most of the management team. The unaudited results of
this operation for half year 2002 showed an operating loss and were below
expectations. If the result of our review is the conclusion that the necessary
long term improvement in performance cannot be achieved, then a significant part
of Kysor Warren's fixed assets (principally goodwill) would be impaired,
resulting in an exceptional non-cash charge. Such impairment, if any, cannot be
reasonably estimated at this time. As at March 30, 2002, the carrying value of
goodwill relating to Kysor Warren was approximately L50 million.
OPERATING EXCEPTIONAL ITEMS
Exceptional operating charges from continuing operations totalled
L3.7 million for first half 2002. These costs relate principally to the
reduction of excess capacity in our Food Retail Equipment group and the
continuing rationalization of administration functions within the European
business.
43
PROFIT ON SALE OF BUSINESSES AND OTHER ASSETS
There were no sales of businesses or other assets in first half 2001.
However, we sold our building and consumer products business in June 2001, and
the results from this business have been shown as discontinued operations. The
profit from the sale of businesses in first half 2002 amounted to L2.7 million,
due to the sale of Sammic for consideration of L20 million.
NET INTEREST PAYABLE AND SIMILAR CHARGES
Net interest payable and similar charges were L23.3 million in first half
2002 (L26.9 million in fiscal 2001). Charges for first half 2002 include a write
off of L4.2 million in unamortized financing costs (first half was:
L5.8 million), and exceptional costs relating to the refinancing of
L4.2 million. Excluding these charges, net interest expense decreased by
L6.2 million or 29.4% to L14.9 million in first half 2002, reflecting lower
average principal outstanding and lower interest rates. Net interest payable and
similar charges, excluding the charges mentioned above, decreased in second
quarter 2002 by L3.2 million to L7.9 million from L11.1 million in second
quarter 2001 principally reflecting the decreased costs of borrowing and lower
principal amount outstanding. Our current debt position is discussed below under
"Debt and Liquidity" and "Recent Developments."
TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES
Tax on profit/(loss) on ordinary activities decreased by L2.5 million, or
64.1%, to L1.4 million in first half 2002 from L3.9 million in first half 2001.
Tax on profit/(loss) on ordinary activities decreased in second quarter 2002 by
L1.8 million to L0.8 million from L2.6 million in first quarter 2002. The
effective underlying rate of current tax in first half 2002 was 15.9% versus
13.5% in first half 2001 reflecting the different geographical mix of profit in
each year.
In December 2000, the Accounting Standards Board issued Financial Reporting
Standard 19 ("FRS 19"), "Deferred Tax," which replaced Statement of Standard
Accounting Practice 15 "Accounting for Deferred Tax" and prescribes significant
changes to the accounting disclosures for deferred tax. FRS 19 requires full
provision to be made for deferred tax assets (to the extent that they are
estimated to be recoverable in the immediate future) and liabilities arising
from timing differences between the recognition of gains and losses in the
financial statements and their recognition in a tax computation. Accordingly,
results for interim 2001 have been restated, recognizing a deferred tax asset of
L30.3 million at March 31, 2001, principally relating to timing differences on
tax losses and warranty reserves.
FISCAL 2001 COMPARED TO FISCAL 2000
TURNOVER (NET SALES) FROM CONTINUING OPERATIONS
Total turnover from continuing operations decreased by L0.6 million, or
0.1%, to L903.8 million in fiscal 2001 from L904.4 million in fiscal 2000.
GLOBAL FOOD SERVICE EQUIPMENT. The following table sets forth a summary of
our turnover (net sales) from our global food service equipment group.
FISCAL 2000 FISCAL 2001 CHANGE
-------------------------- -------------------------- -------------------------
(IN MILLIONS, EXCEPT PERCENTAGES)
North America.............................. L487.0 73.2% L498.7 72.9% L11.7 2.4%
Europe & Rest of World..................... 178.1 26.8% 185.4 27.1% 7.3 4.1%
--------------- ------ --------------- ------ -------------- ------
Total Global Food Service Equipment........ L665.1 100.0% L684.1 100.0% L19.0 2.9%
=============== ====== =============== ====== ============== ======
Turnover increased by L19.0 million, or 2.9%, to L684.1 million in fiscal
2001 from L665.1 million in fiscal 2000.
Turnover from our North America operations increased by L11.7 million, or
2.4%, to L498.7 million in fiscal 2001 from L487.0 million in fiscal 2000. The
increase reflected both the effects of positive foreign
44
exchange movements of approximately L33.1 million due to the strength of the
dollar against pounds sterling and additional revenues of L22.1 million
attributable to the acquisition of the Jackson business in first quarter 2001.
These increases were substantially offset by a decline in comparable sales of
approximately L43.5 million, or 8.9%, reflecting the general downturn in the
North American food service equipment market.
Turnover from Europe and the rest of the world increased by L7.3 million, or
4.1%, to L185.4 million in fiscal 2001 from L178.1 million in fiscal 2000. This
resulted primarily from an increase of approximately L8.6 million attributable
to a full year of sales from fiscal 2000 acquisitions, primarily the Merrychef
business and the effects of positive foreign exchange movements of approximately
L100,000. These increases were offset in part by a decrease in comparable sales
of approximately L1.4 million, or 1.2%, which was primarily the result of
weakening performance in the German market and in the U.K. beverage business.
FOOD RETAIL EQUIPMENT. Turnover decreased by L16.3 million, or 7.4%, to
L203.1 million in fiscal 2001 from L219.4 million in fiscal 2000. This was due
to decreases in comparable sales of approximately L25.4 million, or 11.6%,
attributable to decreased sales levels at Kysor Warren, offset in part by
positive foreign exchange movements of approximately L9.1 million. Kysor Warren,
which accounted for over 41% of sales in the food retail group, suffered from a
challenging market environment characterized by continuing consolidation of key
U.S. supermarket chains and a resulting slowdown in new store openings. In
addition, sales from our Austral subsidiary declined after sales increases in
the prior year associated with preparations for the Olympic games in Sydney.
PROPERTY. Sales of property assets decreased by L3.3 million, to
L16.6 million in fiscal 2001 from L19.9 million in fiscal 2000. Revenue on
property sales is recognized only when land is sold.
OPERATING PROFIT FROM CONTINUING OPERATIONS BEFORE GOODWILL AMORTIZATION AND
EXCEPTIONAL ITEMS
Operating profit from continuing operations before goodwill amortization and
exceptional items decreased by L21.8 million, or 19.4%, to L90.8 million in
fiscal 2001 from L112.6 million in fiscal 2000. The decrease reflected decreases
in operating profit from continuing operations before goodwill amortization and
exceptional items in our food service equipment and food retail equipment
business and increased corporate costs, offset in part by increased profit from
property sales.
GLOBAL FOOD SERVICE EQUIPMENT. The following table sets forth a summary of
our operating profit from continuing operations before goodwill amortization and
exceptional items from our global food service equipment group.
FISCAL 2000 FISCAL 2001 CHANGE
------------------------ ------------------------ -------------------------
(IN MILLIONS, EXCEPT PERCENTAGES)
North America.................................. L66.3 74.6% L62.6 78.0% L(3.7) (5.6%)
Europe & Rest of World......................... 22.6 25.4% 17.7 22.0% (4.9) (21.7%)
------------- ------ ------------- ------ -------------- -------
Total Global Food Service Equipment............ L88.9 100.0% L80.3 100.0% L(8.6) (9.7%)
============= ====== ============= ====== ============== =======
Operating profit from continuing operations before goodwill amortization and
exceptional items decreased L8.6 million, or 9.7%, to L80.3 million in fiscal
2001 from L88.9 million in fiscal 2000.
Operating profit from continuing operations before goodwill amortization and
exceptional items in North America decreased by L3.7 million, or 5.6%, to
L62.6 million in fiscal 2001 from L66.3 million in fiscal 2000. Operating profit
from continuing operations before goodwill amortization and exceptional items as
a percentage of turnover from North America decreased to 12.6% in fiscal 2001
from 13.6% in fiscal 2000, primarily because fixed costs did not decline at the
same rate as sales volumes. Operating profit from continuing operations before
goodwill amortization and exceptional items from comparable sales decreased by
approximately L9.6 million from fiscal 2000, primarily due to sales volume
decreases described above and inflationary cost increases that were partially
offset by the benefit of costs savings achieved through the
45
implementation of restructuring programs in the second half of fiscal 2001. The
decrease in operating profit from continuing operations before goodwill
amortization and exceptional items from comparable sales was partially offset by
additional profits of approximately L2.0 million attributable to the acquisition
of the Jackson business in the first quarter of fiscal 2001, as well as the
effects of favorable foreign exchange movements of approximately L3.9 million.
Operating profit from continuing operations before goodwill amortization and
exceptional items in Europe and the rest of the world decreased by
L4.9 million, or 21.7%, to L17.7 million in fiscal 2001 from L22.6 million in
fiscal 2000. Operating profit from continuing operations before goodwill
amortization and exceptional items as a percentage of turnover from Europe and
the rest of the world decreased to 9.5% in fiscal 2001 from 12.7% in fiscal
2000. Operating profit from continuing operations before goodwill amortization
and exceptional items from comparable sales decreased by approximately
L6.3 million from fiscal 2000, principally due to lower volumes and margins at
our beverage businesses and losses at Scotsman Response Limited (approximately
L1.3 million). Other factors contributing to the decline in operating profit
from continuing operations before goodwill amortization and exceptional items
included lower margins at our distribution companies in Canada and Europe due to
the effects of the strong U.S. dollar on products imported from the United
States. This was partially offset by cost savings achieved through the
restructuring programs implemented in the second half of fiscal 2001 as well as
additional operating profits of approximately L1.4 million attributable to a
full year of operations from fiscal 2000 acquisitions, primarily the Merrychef
business.
FOOD RETAIL EQUIPMENT. Operating profit from continuing operations before
goodwill amortization and exceptional items decreased by L12.2 million, or
54.0%, to L10.4 million in fiscal 2001 from L22.6 million in fiscal 2000.
Operating profit from continuing operations before goodwill amortization and
exceptional items as a percentage of turnover from the food retail equipment
group decreased to 5.1% in fiscal 2001 from 10.3% in fiscal 2000. Operating
profit from continuing operations before goodwill amortization and exceptional
items from comparable sales decreased by approximately L12.8 million from fiscal
2000, primarily due to lower sales volumes and a relative increase in sales of
lower margin products at Kysor Warren and Austral. Increased competition created
lower pricing for refrigerated display cases, which was offset by cost savings
achieved through the restructuring programs implemented in the second half of
fiscal 2001. This decrease in operating profit from continuing operations before
goodwill amortization and exceptional items from comparable sales excludes the
effects of approximately L0.6 million of favorable foreign exchange movements.
PROPERTY. Operating profit increased by L0.6 million, or 7.1%, to
L9.0 million in fiscal 2001, from L8.4 million in fiscal 2000.
CORPORATE COSTS. Corporate costs increased by L1.6 million, or 21.9%, to
L8.9 million in fiscal 2001 from L7.3 million in fiscal 2000. This was primarily
the result of higher personnel costs due to the implementation of our
centralized management strategy as well as increased consultancy costs.
GOODWILL AMORTIZATION
Goodwill amortization from continuing operations increased by L1.6 million
to L23.0 million in fiscal 2001 from L21.4 million in fiscal 2000, due to the
full year effect of acquisitions in fiscal 2000 and the partial year impact of
acquisitions in 2001. These charges do not affect our cash flows.
OPERATING EXCEPTIONAL ITEMS
We recognized exceptional operating costs from continuing operations of
L167.5 million in fiscal 2001. These charges consisted of a writedown of
L100.0 million in the carrying value of goodwill associated with the Scotsman
acquisition, which we reassessed following the recent downturn in the U.S.
economy, restructuring costs of L33.1 million and L8.5 million of professional
fees incurred in connection with a review of our strategic options. In addition,
we recorded charges of L13.7 million relating to revisions of working capital
provisions and exceptional warranty costs as well as L12.2 million related to
the settlement of certain
46
claims related to Bomar Resources Inc., a former indirect subsidiary of Enodis.
See "Business--Material Contracts."
PROFIT ON DISPOSAL OF BUSINESSES AND OTHER ASSETS
Profit on disposal of businesses and other assets in fiscal 2001 amounted to
L23.5 million and related to a L29.1 million gain recognized on the sale of our
building and consumer products division in June 2001, partially offset by a loss
of L5.6 million recognized on the sale of Scotsman Response in September 2001.
NET INTEREST PAYABLE AND SIMILAR CHARGES
Net interest payable and similar charges increased by L4.4 million, or
11.7%, to L41.9 million in fiscal 2001 from L37.5 million in fiscal 2000. The
increase was due primarily to the write-off of L5.8 million in remaining
unamortized financing costs related to a previous financing facility, which was
replaced with a new multi-currency facility in March 2001. Excluding this
charge, interest expense declined by L1.4 million, reflecting lower average
principal and interest rates, offset in part by adverse foreign exchange
movements.
TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES
Provision for income taxes increased by L5.6 million to L8.6 million in
fiscal 2001 from L14.2 million in fiscal 2000. Despite reporting a loss in
fiscal 2001, we still incurred a current tax charge due to the effects of
non-deductible items, such as goodwill amortization and impairment. Our
effective current tax rate on profits before exceptional items and amortization
remained constant in fiscal 2001 compared to fiscal 2000. Our effective current
tax rate is significantly lower than the U.K. statutory rate and the U.S.
federal statutory rate of 30% and 35%, respectively. This is due primarily to
the benefit of net operating loss carry-forwards. At September 29, 2001, we had
approximately L190.0 million, L85.0 million and L9.0 million of losses available
to offset against future profits in the U.S., the U.K. and other territories,
respectively. The U.S. losses will fully expire by fiscal year 2010, but are
expected to be fully utilized prior to that date. Losses in the U.K. and other
territories do not expire.
OPERATING PROFIT FROM DISCONTINUED OPERATIONS
Operating profit from discontinued operations for fiscal 2001 was
L9.1 million and relates to our building and consumer products division, which
we sold in June 2001.
FISCAL 2000 COMPARED TO FISCAL 1999
TURNOVER (NET SALES) FROM CONTINUING OPERATIONS
Total turnover from continuing operations increased by L413.7 million, or
84.3%, to L904.4 million in fiscal 2000 from L490.7 million in fiscal 1999,
primarily due to sales generated by the Scotsman businesses acquired
(L382.8 million), as well as favorable foreign exchange gains of approximately
L19.0 million, partially offset by a decrease in comparable sales of
approximately L8.0 million.
GLOBAL FOOD SERVICE EQUIPMENT. The following table sets forth a summary of
our turnover from our global food service equipment group.
FISCAL 1999 FISCAL 2000 CHANGE
------------------------- ------------------------- -------------------------
(IN MILLIONS, EXCEPT PERCENTAGES)
North America................................ L342.6 76.6% L487.0 73.2% L144.4 42.1%
Europe & Rest of World....................... 105.3 23.4% 178.1 26.8% 72.8 69.1%
-------------- ------- -------------- ------- -------------- -------
Total Global Food Service Equipment.......... L447.9 100.0% L665.1 100.0% L217.2 48.5%
============== ======= ============== ======= ============== =======
Turnover increased by L217.2 million, or 48.5%, to L665.1 million in fiscal
2000 from L447.9 million in fiscal 1999.
47
Turnover from our North America operations increased by L144.4 million, or
42.1%, to L487.0 million in fiscal 2000 from L342.6 million in fiscal 1999. The
majority of the increase, approximately L119.8 million, was attributable to the
full-year impact in fiscal 2000 of the acquisition of the Scotsman businesses,
which closed during the fourth quarter of fiscal 1999, excluding the effects of
favorable foreign exchange movements of approximately L20.8 million. The
remaining increase, approximately L3.8 million, related to comparable sales
increases resulting from price increases and a favorable change in product mix
compared to fiscal 1999.
Turnover from Europe and the rest of the world increased by L72.8 million,
or 69.1%, to L178.1 million in fiscal 2000 from L105.3 million in fiscal 1999.
The acquisitions of the Scotsman beverage businesses and Merrychef in the U.K.
as well as the Scotsman Ice business in Italy accounted for an increase of
L79.1 million. In addition, comparable sales increased by approximately
L5.0 million due to general volume increases as well as the full year effects of
the Convotherm business, which was acquired in December 1998. These increases
were offset by the effects of unfavorable exchange rate movements of
approximately L11.3 million.
FOOD RETAIL EQUIPMENT. Turnover increased by L177.6 million, or 424.9%, to
L219.4 million in fiscal 2000 from L41.8 million in fiscal 1999. The majority of
the increase, L183.9 million, was attributable to the full-year effect of the
Scotsman retail businesses (Kysor Warren and Kysor Panel Systems) acquired in
the fourth quarter of fiscal 1999. Turnover also benefitted from the effects of
favorable foreign exchange movements of approximately L9.5 million.
PROPERTY. Sales of property assets were L19.9 million in fiscal 2000,
compared to L1.0 million in fiscal 1999. Revenue on property sales is only
recognized when land is sold.
OPERATING PROFIT FROM CONTINUING OPERATIONS BEFORE GOODWILL AMORTIZATION AND
EXCEPTIONAL ITEMS
Operating profit from continuing operations before goodwill amortization and
exceptional items increased by L52.0 million, or 85.8%, to L112.6 million in
fiscal 2000 from L60.6 million in fiscal 1999, primarily due to the Scotsman
acquisition, as well as a significant increase in profits from property sales.
GLOBAL FOOD SERVICE EQUIPMENT. The following table sets forth a summary of
our operating profit from continuing operations before goodwill amortization and
exceptional items from our global food service equipment group.
FISCAL 1999 FISCAL 2000 CHANGE
------------------------ ------------------------ ------------------------
(IN MILLIONS, EXCEPT PERCENTAGES)
North America................................... L49.3 80.4% L66.3 74.6% L17.0 34.5%
Europe & Rest of World.......................... 12.0 19.6% 22.6 25.4% 10.6 88.3%
------------- ------- ------------- ------- ------------- -------
Total Global Food Service Equipment............. L61.3 100.0% L88.9 100.0% L27.6 45.0%
============= ======= ============= ======= ============= =======
Operating profit from continuing operations before goodwill amortization and
exceptional items increased by L27.6 million, or 45.0%, from L61.3 million in
fiscal 1999 to L88.9 million in fiscal 2000.
Operating profit from continuing operations before goodwill amortization and
exceptional items from our North America operations increased by L17.0 million,
or 34.5%, from L49.3 million in fiscal 1999 to L66.3 million in fiscal 2000. The
largest portion of the increase, approximately L13.2 million, was due to the
full year effect of the Scotsman businesses acquired in fourth quarter of fiscal
1999. Operating profit from continuing operations before goodwill amortization
and exceptional items also benefitted from approximately L2.9 million in
favorable foreign exchange movements. Operating profit from continuing
operations before goodwill amortization and exceptional items as a percentage of
turnover in North America decreased to 13.6% in fiscal 2000 from 14.4% in fiscal
1999, primarily reflecting the acquisition of Scotsman, which had businesses
which operated at lower margins.
Operating profit from continuing operations before goodwill amortization and
exceptional items in Europe and the rest of the world increased by
L10.6 million to L22.6 million in fiscal 2000 from L12.0 million
48
in fiscal 1999. Operating profit from continuing operations before goodwill
amortization and exceptional items as a percentage of turnover of Europe and the
rest of the world increased to 12.7% in fiscal 2000 from 11.4% in fiscal 1999.
The majority of the increase, approximately L10.3 million, related to the
acquisitions of the Scotsman Beverage businesses and Merrychef in the U.K. as
well as the Scotsman Ice business in Italy. In addition, operating profit from
continuing operations before goodwill amortization and exceptional items from
comparable sales increased approximately L1.9 million due to improved margins.
These measures were partially offset by adverse foreign exchange movements of
approximately L1.6 million.
FOOD RETAIL EQUIPMENT. Operating profit from continuing operations before
goodwill amortization and exceptional items increased by L17.3 million from
L5.3 million in fiscal 1999 to L22.6 million in fiscal 2000. The majority of the
increase, L16.5 million, was attributable to the full-year effect of the
Scotsman retail businesses (Kysor Warren and Kysor Panel Systems) acquired in
the fourth quarter of fiscal 1999. Operating profit from continuing operations
before goodwill amortization and exceptional items also benefitted from the
effects of favorable foreign exchange movements of approximately L1.0 million.
This was offset by a decrease in operating profit from continuing operations
before goodwill amortization and exceptional items from comparable sales of
L0.2 million due to sales declines at Kysor Warren. Operating profit from
continuing operations before goodwill amortization and exceptional items as a
percentage of turnover decreased to 10.3% in fiscal 2000 from 12.7% in fiscal
1999.
PROPERTY. Operating profit increased by L8.2 million, from L0.2 million in
fiscal 1999 to L8.4 million in fiscal 2000, reflecting the higher level of
property sales in fiscal 2000.
CORPORATE COSTS. Corporate costs increased by L1.1 million from
L6.2 million in fiscal 1999 to L7.3 million in fiscal 2000, primarily due to
higher personnel costs as we integrated the Scotsman businesses.
GOODWILL AMORTIZATION
Goodwill amortization from continuing operations increased by L18.7 million
to L21.4 million in fiscal 2000 from L2.7 million in fiscal 1999, primarily due
to the impact of a full year of amortization in fiscal 2000 of the goodwill
acquired as part of the Scotsman acquisition in fiscal 1999.
OPERATING EXCEPTIONAL ITEMS
We did not incur any exceptional costs in fiscal 2000. The exceptional costs
of L6.0 million in fiscal 1999 related to the restructuring of Scotsman
facilities acquired in the fourth quarter of fiscal 1999.
PROFIT ON DISPOSAL OF BUSINESSES AND PROPERTY FIXED ASSETS
Profit on disposal of businesses and property fixed assets decreased
L1.1 million from L4.1 million to L3.0 million, due to timing and nature of
sales.
NET INTEREST PAYABLE AND SIMILAR CHARGES
Net interest payable and similar charges increased by L24.2 million from
L13.3 million in fiscal 1999 to L37.5 million in fiscal 2000. This increase was
attributable to the impact of a full year of increased outstanding indebtedness,
which was incurred primarily in connection with our acquisition of Scotsman in
the fourth quarter of fiscal 1999, partially offset by reductions caused by the
redemption of our outstanding convertible unsecured loan stock in fiscal 2000.
TAX ON PROFIT OF ORDINARY ACTIVITIES
Provision for income taxes increased by L8.3 million from L5.9 million in
fiscal 1999 to L14.2 million in fiscal 2000. This is primarily due to higher
income during fiscal 2000 in tax jurisdictions where we did not have the benefit
of prior year losses.
49
OPERATING PROFIT FROM DISCONTINUED OPERATIONS
Operating profit from discontinued operations for fiscal 2000 was
L24.0 million relating to our building and consumer products division sold in
June 2001.
U.S. GAAP RECONCILIATION
Net loss under U.S. GAAP for first half 2002 was L16.3 million, compared to
a net loss for the same period of L9.8 million under U.K. GAAP. The primary
differences between the net loss amount under U.S. GAAP and U.K. GAAP related to
additional amortization of goodwill resulting from acquisitions completed before
March 31, 1998 (L6.8 million), differences in the carrying value of goodwill on
disposals resulting in an additional gain on the sale of Sammic (L3.5 million),
as well as differences in accounting for deferred taxation (L3.4 million).
Net loss under U.S. GAAP for fiscal 2001 was L113.7 million, compared to a
net loss for the same period of L115.9 million under U.K. GAAP. The primary
differences between the net loss amount under U.S. GAAP and U.K. GAAP related to
additional amortization of goodwill resulting from acquisitions completed before
March 31, 1998 (L16.6 million), as well as differences in net asset values under
U.S. GAAP which resulted in a reduced impairment charge of L9.8 million.
Net income under U.S. GAAP for fiscal 2000 was L25.3 million, compared to
net income for the same period of L69.3 million under U.K. GAAP. The primary
differences between the net income amount under U.S. GAAP and U.K. GAAP related
to additional amortization of goodwill (L16.5 million) resulting from
acquisitions completed before March 31, 1998, as well as movements in deferred
taxation not recognized under U.K. GAAP (L27.0 million).
U.S. GAAP also affects the accounting for certain reorganization costs in
purchase price allocations, the timing of the recognition of gains on
sale/leaseback transactions, the timing of the recognition of restructuring
expenses, and the accounting for pension related costs. In addition, differences
exist in the presentation of certain financial statement line items such as cost
of goods sold, exceptional items, gain on sale of business and operating costs.
For a further explanation of the differences between U.K. GAAP and U.S.
GAAP, including a summary of the impact of recently issued U.S. accounting
standards, please refer to Note 29 to our consolidated financial statements
included elsewhere in this prospectus.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
During the past three years, our principal sources of funds have been cash
flows generated from operations, dispositions of assets and bank borrowings. We
incurred substantial debt to acquire Scotsman in 1999, and we generated
approximately L98.6 million from the sale of businesses in 2001 and
L16.4 million in the first half of 2002, which we utilized to pay down existing
debt. After giving effect to the application of the net proceeds from the
transactions described under "Summary--Recent Developments," our net debt would
have been below L250.0 million at March 30, 2002.
We believe that cash on hand and funds from operations, together with funds
available under our senior secured credit facilities, will provide us with
sufficient liquidity and resources to meet our financial obligations, including
payment of interest on the notes as well as for working capital, capital
expenditures and other needs over the next twelve months. Although we
experienced net cash outflows from operations during the first quarter of fiscal
2002, this trend was reversed in the second quarter of fiscal 2002 and we expect
to generate positive cash flows from operations for full fiscal year 2002. At
May 31, 2002, we had L42.0 million worth of cash and cash equivalents. In
addition, as of that date, we had L44.2 million of borrowing availability under
our new senior credit facility. Borrowing availability under our new senior
credit facility is dependent upon our ongoing compliance with the financial and
other covenants set forth in the
50
facility. For a discussion of the financial covenants and our compliance
therewith at March 30, 2002, see "Description of Other Indebtedness".
HISTORICAL CASH FLOWS
The following table sets forth a summary of cash flow items for the periods
presented:
FIRST HALF
FISCAL FISCAL FISCAL -----------------------------
1999 2000 2001 2001 2002
-------------- ------------- ------------- ------------- -------------
(AMOUNTS IN MILLIONS)
Net cash inflow from operating activities before
exceptional items.............................. L88.3 L160.5 L120.8 L39.3 L36.5
Net cash outflow from operating exceptional
items.......................................... -- -- (27.8) (4.3) (16.1)
-------------- ------------- ------------- ------------- -------------
Net cash inflow from operating activities........ L88.3 L160.5 L93.0 L35.0 L20.4
============== ============= ============= ============= =============
Capital expenditure and financial investment..... L(16.9) L(23.3) L(16.3) L(5.1) L(5.7)
Acquisitions and disposals....................... (233.0) (48.2) 72.8 (25.0) 16.4
-------------- ------------- ------------- ------------- -------------
L(249.9) L(71.5) L56.5 L(30.1) L10.7
============== ============= ============= ============= =============
Financing........................................ L183.4 L(13.8) L(60.6) L71.6 L10.4
============== ============= ============= ============= =============
OPERATING ACTIVITIES
Net cash provided by operating activities before exceptional items decreased
by L2.8 million to L36.5 million in first half 2002 from L39.3 million in first
half 2001. This was achieved in spite of L12.0 million lower operating profits,
principally due to improved collection of debtors.
Net cash used for operating exceptional items was L16.1 million in first
half 2002 and L4.3 million in first half 2001. The operating exceptional items
in the first half of 2002 comprised costs in relation to restructuring
(L8.0 million), final payments in respect of the Bomar litigation
(L5.1 million) and final costs in respect of the Board's review of strategic
options (L3.0 million). The operating exceptional items in the first half of
2001 comprised primarily of restructuring costs.
Net cash provided by operating activities before exceptional items decreased
by L39.7 million to L120.8 million in fiscal 2001 from L160.5 million in fiscal
2000. This was primarily attributable to the decrease in operating profit of
L41.4 million, partially offset by improvements in working capital of
L4.0 million. The increase of L72.2 million to L160.5 million in fiscal 2000
from L88.3 million in fiscal 1999 was primarily due to the full year effects of
cash generated by the Scotsman businesses acquired in the fourth quarter of
fiscal 1999.
Net cash used for operating exceptional items in fiscal 2001 of
L27.8 million comprised costs in relation to restructuring (L15.5 million), cost
in relation to the Board's review of strategic options (L5.2 million) and
initial payments in respect of the Bomar litigation (L7.1 million). There were
no exceptional cash flows in fiscal 1999 or fiscal 2000.
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT AND ACQUISITIONS AND DISPOSALS
Cash provided by such activities was L0.6 million in first half 2002,
compared to cash used in such activities of L8.2 million in first half 2001, an
increase of L8.8 million. This change was primarily the result of a decrease in
cash expended for acquisitions of businesses in first half 2002 of L1.9 million
and a decrease in cash received from the disposal of businesses in first half
2002 of L1.5 million.
Cash provided by such activities was L56.5 million in fiscal 2001, compared
to cash used in such activities of L71.5 million in fiscal 2000, an increase of
L128.0 million. This change was primarily the result of a decrease in cash
expended for acquisitions and equipment of L30.4 million in fiscal 2001, and
cash received
51
from the sale of our building and consumer products division of L98.6 million,
offset partially by a decrease in cash received from the sale of assets of
L0.8 million in fiscal 2001. Cash used in such activities decreased by
L178.4 million, to L71.5 million in fiscal 2000 from L249.9 million in fiscal
1999, due primarily to the decrease in cash payments to acquire businesses of
L182.9 million, offset partially by a decrease in proceeds from sale of fixed
assets of L8.0 million.
FINANCING ACTIVITIES
Cash gained from financing activities was L10.4 million in first half 2002,
compared to cash gained from financing activities of L71.6 million in first half
2001.
Cash used in financing activities increased by L46.8 million, to
L60.6 million in fiscal 2001, compared to cash used in financing activities of
L13.8 million for fiscal 2000. This change was primarily due to a decrease in
net borrowings. Cash used in financing activities increased by L197.2 million to
cash used of L13.8 million in fiscal 2000 from cash provided of L183.4 million
in fiscal 1999. This change reflected the substantial borrowings obtained to
fund the acquisition of the Scotsman businesses in the fourth quarter of fiscal
1999.
CAPITAL EXPENDITURE AND COMMITMENTS
We made capital expenditures for equipment and construction of new
facilities for continuing operations in the aggregate amount of L19.3 million,
L20.6 million and L20.8 million in fiscal 2001, 2000 and 1999, respectively.
These capital expenditures were financed using a combination of cash flows from
operations, borrowings under credit facilities and sale and leaseback
arrangements. These included the construction of a new 135,000 square foot
manufacturing facility in Shreveport, Louisiana for our Frymaster subsidiary and
a 25,000 square foot facility in New Port Richey, Florida to house our
technology center. The Frymaster facility was completed in November 1999, and
the technology center was completed in March 1999. In June 2000, we completed a
17,000 square foot addition to the technology center, which is also our new
principal office in the United States.
At September 29, 2001, we had L2.9 million in outstanding contracts to
purchase fixed assets. We expect to fund these commitments using cash from
operating activities.
RESEARCH AND DEVELOPMENT
Our policy is to expense research and development costs as they are
incurred. Research and development expenditures for fiscal 2001, 2000, and 1999
were L13.8 million, L13.6 million, and L8.9 million, respectively.
MOVEMENTS IN DEBT POSITION
Net debt at the end of first half 2002 was L380.5 million, compared to
L365.9 million at the end of the 2001 financial year and L493.8 million at the
end of first half 2001. The increase from the end of the 2001 financial year
reflects foreign exchange movements, the final payment of the Bomar litigation
settlement and other prior year exceptional costs, and normal seasonal working
capital movements, largely offset by the net proceeds of L20 million from the
disposal of Sammic. The overall decrease from first half 2001 reflects the
52
efforts made over the last year in reducing debt. The following table summarizes
the movements in net debt from September 29, 2001, to March 30, 2002.
(IN MILLIONS)
---------------
Net debt at September 29, 2001.............................. L(365.9)
Operating cash flow......................................... 36.5
Interest expense............................................ (16.4)
Tax......................................................... (0.4)
Exceptional items........................................... (16.1)
Refinancing costs........................................... (14.7)
Disposal of businesses...................................... 16.4
Capital expenditure......................................... (5.7)
Foreign exchange movements.................................. (14.2)
---------------
Net debt at March 30, 2002.............................. L(380.5)
===============
DESCRIPTION OF DEBT FACILITIES
On February 20, 2002, our direct subsidiary, Enodis Holdings Limited,
("Holdings"), entered into a senior secured credit agreement with certain of our
other subsidiaries as borrowers and/or as guarantors, Credit Suisse First Boston
and The Royal Bank of Scotland plc as arrangers and The Royal Bank of
Scotland plc as issuing bank and as agent. The senior secured credit facilities
are comprised of a $300 million 5-year "A" term loan facility and a $70 million
6-year "B" term loan facility and a $85 million 5 year revolving credit
facility. The proceeds of the term loan facility were used to repay outstanding
indebtedness under our prior credit facility. The revolving facility can be used
to finance working capital requirements and for general corporate purposes. The
indebtedness under the senior secured credit facilities is secured by (i) fixed
and floating charges over substantially all the assets of those guarantors
incorporated in the U.K., the U.S. and Canada and (ii) pledges over the shares
of all the guarantors. Each of the guarantors will unconditionally guarantee
Holdings' and each other guarantor's obligations under the senior secured credit
facilities. The senior secured credit facilities contain customary operating and
financial covenants including, without limitation, covenants to maintain minimum
ratios of EBITDA to total interest costs, minimum ratios of EBITDA to senior
interest costs, maximum ratios of total net debt to EBITDA, maximum ratios of
total net senior debt to EBITDA and a minimum tangible net worth. The senior
secured credit facilities also include covenants relating to limitations on
sales of assets, dividends and other restricted payments, mergers, indebtedness,
acquisitions and liens. Advances under the A term loan facility and the
revolving facility bear interest at LIBOR or EURIBOR plus a margin and advances
under the B term loan facility bear interest at LIBOR or EURIBOR plus a margin.
The margins are adjusted after September 30, 2002, based on our ratio of
consolidated total net debt to consolidated EBITDA. A commitment fee based on
the undrawn amount of the revolving facility commitment is payable quarterly in
arrears. Mandatory prepayment in full is required if there is a change in
control of us or a disposal of substantially all of our assets. Certain
mandatory partial repayments are required to be made out of proceeds from asset
sales, other than in the ordinary course of business, and out of 75% of our
surplus cash in any fiscal year as defined in the senior secured credit
agreement. The senior secured credit facilities contain customary events of
default, including failure to make payments under the senior secured credit
facilities, breach of covenants, including financial covenants, breach of
representations, cross-default in respect of indebtedness in excess of
L5 million, insolvency, bankruptcy or similar events, change of control and
material adverse change.
We have also borrowed funds under several industrial revenue bonds, which
bear interest at rates that are adjusted based on market movements and were
between 2.0% and 5.7% during fiscal 2001. At September 29, 2001, and
September 30, 2000, respectively, an aggregate of L11.3 million and
L15.7 million was outstanding under the industrial revenue bonds.
53
We also entered into a bridge loan facility, pursuant to which we had
L53 million outstanding as of March 30, 2002, which we have repaid with a
portion of the net proceeds of the rights offering. See "Use of Proceeds" and
"Description of Other Indebtedness."
DIVIDEND PAYMENT
In light of the downturn in our end markets and uncertain economic
conditions, our Board decided that it would not be prudent to maintain recent
dividend levels, and accordingly no final dividend was paid in respect of the
financial year ended September 29, 2001. The Board's intention is to resume
payment of dividends when it is financially prudent to do so.
For the purposes of the new financing arrangements, substantially all of the
subsidiaries and other assets previously held by the parent company of our group
have been transferred to another company within the group. The effect of these
transfers, for statutory accounting purposes, is the recognition of certain
losses in the parent company. These losses do not arise on consolidation and
will not have an impact on our group results. However, as a result of the losses
recognized on this transfer, we do not currently have sufficient distributable
reserves to lawfully make dividend payments.
As and when our Board determines to resume dividend payments, we will seek
to take the steps necessary to enable us to increase our distributable reserves
so that we are able to lawfully pay dividends. Any such action is likely to
require the approval of our shareholders and court approval. In addition, our
ability to make future dividend payments will depend on our profit and cash flow
and the need to comply with the terms of the new credit facilities and the
notes.
NEW ACCOUNTING PRONOUNCEMENTS
U.K. GAAP
In November 2000, the U.K. Accounting Standards Board, or ASB, issued
Financial Reporting Standard 17, "Retirement Benefits," relating to accounting
for pension costs and other post-retirement benefits, which replaces Statement
of Standard Accounting Practice, or SSAP, No. 24, "Accounting for Pension
Costs," and Urgent Issues Task Force Abstract, or UITF, No. 6, "Accounting for
post-retirement benefits other than pensions." FRS 17 changes the accounting for
defined benefit schemes as actuarial gains and losses are recognized immediately
and scheme assets are valued at fair values. The accounting requirements of
FRS 17 are mandatory for periods ending on or after June 22, 2003. However, we
have adopted the applicable disclosure provisions of FRS 17 during fiscal 2001.
The effects of the adoption of this standard on net assets has been disclosed in
Note 25 to our consolidated financial statements included elsewhere in this
prospectus, and the effects of adoption on the profit and loss account is not
expected to be material.
In December 2000, the ASB issued FRS 18, "Accounting Policies," which sets
out the principles to be followed in selecting accounting policies and the
disclosures needed to help users to understand the accounting policies adopted
and how they have been applied. FRS 18 also defines accounting policies and
estimation techniques used in implementing those policies. Our group adopted the
provisions of FRS 18 during 2001, and as a result, our group has reassessed its
accounting estimates for warranty provisions and have provided an additional
L8.0 million during 2001.
In December 2000, the Accounting Standards Board issued Financial Reporting
Standard 19, "Deferred Tax," which replaced Statement of Standard Accounting
Practice 15 "Accounting for Deferred Tax" and prescribes significant changes to
the accounting disclosures for deferred tax. FRS 19 requires full provision to
be made for deferred tax assets (to the extent that it is regarded as more
likely than not that they will be recovered) and liabilities arising from timing
differences between the recognition of gains and losses in the financial
statements and their recognition in a tax computation. During first half 2002,
we adopted the provisions of FRS 19.
54
The interim results for the 26 weeks ended March 31, 2001 and March 30, 2002
are prepared on the basis of adopting FRS 19. The fiscal year-end results have
not been adjusted for FRS 19, to allow for comparability to the audited results
presented in our Form 20-F. The deferred tax assets principally relate to timing
differences on tax losses and warranty reserves and recording the related tax
effects on tax on profit/ (loss).
U.S. GAAP
ADOPTED IN 2001
In June 1998, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities.
SFAS 133, as amended by SFAS No. 137 and No. 138, establishes accounting and
reporting standards for derivative financial instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
embedded derivatives) and for hedging activities. The new standard requires an
entity to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. We
adopted the provisions of these statements in October 2000. Upon the adoption of
SFAS 133, we recorded a gain of L0.2 million as a cumulative effect of
accounting change to reflect the fair value of those instruments which do not
meet the hedging criteria under SFAS 133. Subsequent to adoption, we have
recorded a loss of L0.8 million related to changes in the fair value of such
derivative instruments.
In June 2000, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements. SAB 101 provides the SEC staff's views in
applying generally accepted accounting principles to selected revenue
recognition issues. We adopted the applicable provisions of SAB 101 during
fiscal 2001. The impact of adopting the provisions of SAB 101 was not material.
RECENT PRONOUNCEMENTS
In June 2001, the FASB issued two new pronouncements: SFAS No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets. SFAS 141 prohibits the use of the pooling-of-interest method for
business combinations initiated after June 30, 2001, and also applies to all
business combinations accounted for by the purchase method that are completed
after June 30, 2001. There are also transition provisions that apply to business
combinations completed before July 1, 2001, that were accounted for by the
purchase method. We have had no business combinations subsequent to June 30,
2001.
SFAS 142 is effective for fiscal years beginning after December 15, 2001,
for all goodwill and other intangible assets recognized in an entity's statement
of financial position at that date, regardless of when those assets were
initially recognized. SFAS 142 requires, among other things, the discontinuance
of goodwill amortization and an annual test for impairment. In addition, the
standard includes provisions for the reclassification of certain existing
recognized intangibles as goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the identification of reporting units for
purposes of assessing potential future impairments of goodwill. SFAS 142 also
requires us to complete a transitional goodwill impairment test six months from
the date of adoption. We are currently assessing but have not yet determined the
impact of SFAS 142 on our financial position and results of operations.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which requires that the fair value of an asset
retirement obligation be recorded as a liability in the period in which it
incurs the obligation. SFAS 143 is effective for fiscal years beginning after
June 15, 2002. We are currently assessing but have not yet determined the impact
of SFAS 143 on our financial position and results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets," which serves to clarify and
further define the provisions of SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 144 does
not
55
apply to goodwill and other intangible assets that are not amortized. SFAS 144
is effective for fiscal years beginning after December 15, 2001. We are
currently assessing but have not yet determined the impact of SFAS 144 on our
financial position and results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks from changes in foreign currency exchange
rates and interest rates. We monitor and manage these risks as an integral part
of our overall risk management program, which recognizes the unpredictability of
financial markets and seeks to reduce their potentially adverse effects on our
results. As a result, we do not anticipate any material losses in these areas.
We operate a central treasury function that controls all decisions and
commitments regarding cash management, arrangement of borrowing facilities,
banking relationships and foreign currency commitments. Our treasury operations
are conducted within a framework that has been authorized by the board of
directors to regulate the approval levels and the scope of decision making of
the central treasury function. Monthly reports from subsidiaries have been
established to ensure that treasury-related activities are appropriately
managed.
To reduce our currency translation and interest rate risks, we selectively
use a number of financial instruments. We do not use financial instruments for
trading or speculative purposes.
INTEREST RATE RISK
We are exposed to interest rate risk primarily due to our borrowing
activities, the majority of which are denominated in U.S. dollars. After giving
effect to the application of the net proceeds from the transactions described
under "Summary--Recent Developments," our floating rate borrowings amounted to
L235.4 million at March 30, 2002.
To reduce the impact of changes in interest rates on these borrowings, we
generally hedge a portion of our long term floating rate borrowings for a period
of up to three years. Accordingly, we have contracted with major financial
institutions for:
- a number of forward interest rate agreements, each of which has a pre-set
interest rate for a specified future period; and
- interest rate swap agreements, where we have agreed to exchange the
difference between a fixed rate and a variable rate, as applied to the
principal amounts stated in the agreements.
At March 30, 2002, after giving effect to the application of the net
proceeds from the transactions described under "Summary--Recent Developments,"
approximately 69.0% of our indebtedness accrued interest at rates that fluctuate
with prevailing interest rates and, accordingly, increases in these rates may
increase our interest payment obligations.
We have hedged approximately 88.6% of our outstanding floating rate
borrowings to reduce the sensitivity of our interest rate charges to future
changes in interest rates. At March 30, 2002, after giving effect to the
application of the net proceeds from the transactions described under
"Summary--Recent Developments," we would have had fixed and floating rate
borrowings of L314.5 million and L26.8 million respectively (based on hedges in
place at March 20, 2002). A hypothetical 100-basis point increase in the
interest rates associated with our borrowings, as of March 30, 2002, after
taking into account the current hedging arrangements, would reduce our net
income by L0.3 million.
FOREIGN CURRENCY RISK
Substantial portions of our revenues and expenses are denominated in
currencies other than British pounds sterling, particularly the U.S. dollar.
Fluctuations in the values of these currencies compared to the pound sterling
may affect our financial condition, results of operations and our ability to
repay debt denominated in British pounds sterling. In order to mitigate the
impact of fluctuations in foreign currencies,
56
where possible, we borrow in the same currencies as the capital employed in our
main overseas operating units, thereby employing a degree of natural hedging. In
addition, in certain circumstances, foreign exchange contracts are used to match
the currency of our borrowings to the currencies used by our main overseas
operating units.
A portion of foreign currency requirements for sales transactions between
our subsidiaries and our obligations to or from third parties are hedged through
forward currency agreements with terms generally of less than one year. We do
not enter into foreign currency transactions for speculative purposes. We
monitor our foreign currency exposures to ensure the effectiveness of our
foreign currency hedge positions. The principal currencies hedged include the
U.S. dollar and the euro. We also face exposure arising from the impact of
translating our global foreign currency assets into British pounds sterling at
balance sheet dates. Wherever possible, we seek to minimize this exposure
through the matching of local currency borrowings and assets.
At March 30, 2002, and March 31, 2001, we had foreign currency forward
contracts maturing at various dates to sell L61.7 million and L36.3 million,
respectively, in various foreign currencies. The fair value of the forward
contracts is the amount that we would receive or pay to terminate the contracts.
In order to terminate these agreements at March 30, 2002, and March 31, 2001, we
would have recognized a loss of L0.1 million and a loss of L0.5 million,
respectively.
At March 30, 2002, after giving effect to the application of the net
proceeds from the transactions described under "Summary--Recent Developments,"
68.8% of our net debt was denominated in U.S. dollars, 23.2% was denominated in
British pounds sterling, and 8.0% was denominated in other currencies, primarily
euro. We continually review this exposure and, in the event that a natural
hedging position cannot be achieved, we consider the use of appropriate
financial instruments. The translation impact on the balance sheet for fiscal
2001 was a loss of L1.7 million. This adjustment is included in our statement of
shareholders' equity under the heading "Accumulated Other Comprehensive Loss" in
our consolidated financial statements included elsewhere in this prospectus.
A hypothetical 10% strengthening of the pound against all currencies in
which our international net earnings and net assets are denominated would:
- reduce our net income at March 30, 2002 (after giving effect to the
application of the net proceeds from the transactions described under
"Summary--Recent Developments") by L2.4 million, mainly due to U.S. dollar
exposure; and
- reduce our net assets at March 30, 2002 (after giving effect to the
application of the net proceeds from the transactions described under
"Summary--Recent Developments") by L16.3 million, mainly due to U.S. dollar
and euro exposure.
A hypothetical 10% weakening of the pound against all currencies in which
our international net earnings and net assets are denominated would:
- increase our net income at March 30, 2002 (after giving effect to the
application of the net proceeds from the transactions described under
"Summary--Recent Developments") by L2.9 million, mainly due to U.S. dollar
exposure; and
- increase our net assets at March 30, 2002 (after giving effect to the
application of the net proceeds from the transactions described under
"Summary--Recent Developments") by L20.0 million, mainly due to U.S. dollar
and euro exposure.
In connection with the new financing arrangements, we have borrowings
denominated in currencies that reflect the profile of the capital employed in
our overseas operating units, in order to reduce the risk of adverse currency
movements on our net assets. Borrowings under our term loan are denominated in
U.S. dollars, and borrowings represented by the notes are denominated in British
pounds sterling. We have hedged most of the borrowings represented by the notes
into U.S. dollars and euros. Borrowings under our revolving credit facility can,
at our option, be denominated in a number of currencies, including U.S. dollars,
British pounds sterling and euros.
57
BUSINESS
OVERVIEW
We believe we are one of the leading manufacturers and distributors of food
service equipment globally. We believe that we offer one of the broadest lines
of commercial food service equipment products in our industry, including both
"warm" and "cold" side products. We own a portfolio of over 30 brands, many with
leadership positions in their respective markets. We also have a technology
center at our global operations headquarters in New Port Richey, Florida, which
we believe is one of the leading research and development and technical support
facilities in the food service equipment industry. This facility enables us to
offer our customers an array of advanced product development services.
We operate our business in two principal groups:
- Global food service equipment (75.7% of total turnover from continuing
operations in fiscal 2001), which manufactures and distributes cooking,
warming, ice, storage, preparation, ventilation, dispensing and warewashing
equipment used by commercial and institutional food service operators; and
- Food retail equipment (22.5% of total turnover from continuing operations in
fiscal 2001), which manufactures and distributes equipment used to store and
display food in retail food outlets such as supermarkets, convenience and
specialty stores.
Our end-customer base includes many of the world's leading quick service
restaurant chains, restaurants, hotels and institutional customers for food
service equipment and leading supermarket chains and convenience stores for food
retail equipment. We have 28 manufacturing facilities located in eight countries
in North America, Europe and Asia. Several of our brands have been manufactured
for over 50 years. The network of third party authorized service agencies that
we have established services our global customers in over 100 countries around
the world. For a summary of revenues by segment and geographic market for each
of the last three fiscal years, see "Operating and Financial Review and
Prospects--Results of Continuing Operations."
We also have property development activities (1.8% of total turnover from
continuing operations in fiscal 2001), and hold approximately 100 acres of land,
the most significant part of which is located in Felsted, England. We plan to
sell this land over the next several years.
OUR COMPETITIVE STRENGTHS
We believe several factors give us a competitive advantage in the global
food equipment industry, including:
- BROAD PORTFOLIO OF LEADING FOOD SERVICE EQUIPMENT PRODUCTS AND STRONG
BRANDS. We own a portfolio of food service equipment brands that places us
among the industry leaders in a number of product lines and geographic
regions, with a significant presence in both the "warm" and "cold" segments
of the market. Our wide range of products and brands makes us attractive to
food service equipment dealers and distributors, who can offer end-customers
an extensive range of food service equipment solely by carrying our
portfolio of brands. Moreover, we believe that brand recognition represents
an important factor in the decision-making process of our end-customers and
that our portfolio of strong brands helps us to introduce and increase sales
of our other brands to these customers. In addition, for many of our food
service equipment product lines, we own multiple brands, which allow us to
offer a diversified set of products to appeal to customers' different
preferences and price ranges. Also, we believe our broad product offering
and brand recognition help us to increase sales to customers seeking to
reduce the number of their food equipment suppliers.
- TECHNICAL EXPERTISE AND NEW PRODUCT DEVELOPMENT. We have a technology
center in New Port Richey, Florida that we believe is one of the leading
research and development and technical support facilities in the food
service equipment industry. We use the technology center to develop new food
equipment
58
technologies, to enhance our existing products and to provide training for
our customers, marketing representatives, service providers, industry
consultants, dealers and distributors. In developing new or enhanced
products, we work closely with existing major customers, who ask us to
participate with them in the design and development of products that will
deliver specific operational efficiencies to their businesses or that will
meet new food quality or hygiene requirements. These efforts may lead to
significant future order flow for such products as they are rolled out to
our customers' operations. In addition, as our customers see our full range
of customized food equipment products and meet our technical staff while
visiting our technology center, it serves as a focal point to drive product
sales. Recent new product developments include an exhaust filtration system
for commercial kitchens, which utilizes ultraviolet light to treat
contaminated air, an energy-efficient reach-in refrigerator and an
accelerated cooking oven combining microwave and convection technology.
- STRONG AND DIVERSIFIED CUSTOMER BASE. The end-customers of our food service
equipment business include some of the world's leading quick service
restaurant chain outlets, full service restaurants, hotels and institutional
customers. The end-customers of our food retail equipment business include
major supermarket chains and convenience stores. Many of our customer
relationships are based on a long history of service to these customers. We
believe that our relationships with some of the largest and most globalized
of the quick service restaurant and retail chains present us with
opportunities for long term growth. We believe that we enhance these
relationships by using our technological expertise to co-develop with these
customers new products that are aimed at meeting specific customer
requirements and solving customer problems. Our customer base is also very
diversified; in fiscal 2001, no single customer accounted for more than 5%
of our total turnover from continuing operations.
- GLOBAL FOOD SERVICE EQUIPMENT COVERAGE. We believe we can provide our large
food service equipment customers with global coverage. We have one of the
largest food service equipment operations in North America. We also have
several manufacturing plants in Europe and two in Asia. In addition, we have
access to a distribution network comprising the master distributors we own
in five key European markets, and third party distributors elsewhere in
Europe and Asia. This global manufacturing and distribution network,
combined with our broad product offering and commercial and key account
management structure, allows us to focus on the regional and local customer
needs of our major global chain customers. As our major customers continue
to expand globally, we believe the ability to provide broad geographic
coverage gives us a competitive advantage.
- GLOBAL SERVICE AND PARTS DISTRIBUTION CAPABILITIES. Through the global
network of authorized third-party service agencies that we have established,
we are able to offer our food service equipment customers the benefit of
prompt warranty and after-warranty service, including parts replacement,
throughout the world. Because end-customers often require assurance that the
equipment they purchase will be supported by efficient service, we believe
that our global service network, strengthened through training programs and
the development of long term relationships with service providers, is an
important factor in our customers' purchasing decisions. As our service
providers gain expertise on our entire line of products, they can contribute
to sales growth when providing authorized services. We believe this
capability makes us attractive not only to global quick service restaurants
but to all end-customers and is a competitive advantage.
OUR OPERATING STRATEGY
As one of the leading manufacturers and distributors of food service
equipment globally, our objective is to establish Enodis as the world's leading
supplier of commercial food service equipment through product, distribution and
service excellence. The key elements of our strategy to achieve this goal are
to:
- EXPLOIT AND DEVELOP OUR BROAD PORTFOLIO OF LEADING FOOD SERVICE EQUIPMENT
PRODUCTS AND STRONG BRANDS. We intend to build on the strength of our food
service equipment brands, technology, manufacturing facilities and
distribution networks to expand the presence of our food service equipment
products in Europe and the rest of the world. We intend to promote
cross-selling of our products and
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increase the geographic and customer penetration of our brands by continuing
to concentrate our marketing and distribution through representatives,
dealers and distributors who emphasize our entire food service equipment
product line. As part of this strategy, we intend to utilize existing
manufacturing capacity to introduce certain of our well-known U.S. products
to new markets, principally in Europe.
- IMPROVE OPERATING EFFICIENCY THROUGH, AMONG OTHER THINGS, COST REDUCTION AND
RESTRUCTURING. In March 2001, we initiated a rationalization and
restructuring program to improve management and production efficiencies and
to remove excess capacity in both our food service equipment and food retail
equipment businesses. Key cost-cutting initiatives in fiscal 2001 included
the closure of five plants, headcount reduction of approximately 870 people
and more efficient management of our purchasing processes. We are
consolidating our global operational management team in New Port Richey,
Florida. Furthermore, we have merged our North American and European food
service equipment operations into a global food service equipment group. At
the same time, our food service equipment business has been simplified to
enable us to remain firmly customer-focused while lowering costs. Our food
retail equipment group is now managed as a separate business. These
initiatives, which were implemented in March 2001, significantly reduced
fixed, headcount and discretionary costs in the second half of fiscal 2001.
The full year impact of the fixed and headcount cost saving measures will be
recognized in fiscal 2002. We are now pursuing a number of further
initiatives, including additional reductions in discretionary spending,
further manufacturing rationalization, continued implementation of group
purchasing plans and, in our European operations, ongoing execution of a
range of cost reduction initiatives. We have targeted additional cost
savings of approximately L10 million in fiscal 2002. We have also phased out
some of our lower margin products, and plan to continue reviewing our
products in order to discontinue unprofitable product lines. Finally, we
will seek to improve our financial management by implementing better
management information systems and strengthening financial controls.
- CAPITALIZE ON TECHNOLOGICAL LEADERSHIP AND NEW PRODUCT DEVELOPMENT
CAPABILITIES. We intend to continue using our technological strengths to
develop innovative food service equipment products that allow our customers
to improve the efficiency and profitability of their operations by, for
example, reducing cooking times, labor and energy costs and providing
greater menu flexibility. Our technology focus enabled us to display twenty
new food service equipment products at the biennial North American Food
Equipment Manufacturers show in September 2001. Recently developed new
products include the Mealstream Series Five Combination Oven, marketed under
the Garland-Registered Trademark- brand, which is a fully programmable,
extra capacity combination oven designed to accommodate high volume
catering, and the Touchfree-TM- Automatic Ice and Water Dispensers, marketed
under the Scotsman-Registered Trademark- brand, which provide an increased
level of hygiene by allowing ice and water to be dispensed without physical
contact. We also currently have a number of new food service equipment
products in our pipeline. Our most advanced equipment is often
custom-designed to a customer's specifications. We believe that, by focusing
on developing advanced products, we can strengthen relationships with our
best customers, leading to increased customer loyalty and a greater
likelihood of future sales to these customers.
- PARTNER WITH DEALERS, DISTRIBUTORS AND SALES REPRESENTATIVES TO INCREASE
MARKET SHARE. We have integrated our food service equipment sales forces in
order to increase market share. In the U.S., we have created a network of
sales representatives, each of which operates within its respective
territory to market our food service equipment products. Most of these
representatives do not offer any competing products, and therefore provide
our customers with our extensive product range to meet their "one-stop"
purchasing needs. In five of the ten largest markets outside of the U.S., we
own master distributors who sell our food service equipment products.
Because these distributors focus primarily on our product line, we believe
we can generate higher sales volume. We intend to focus on the training,
support and economic incentives we offer to our dealers and distribution
partners worldwide to increase our market share with their customers. In
addition, we plan to expand our Internet capabilities in order to provide
information to our major customers to increase the ease of doing business
with us. By offering our
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distributors and end-customers a wide range of enhanced services and
solutions, we aim to increase their loyalty and strengthen these
relationships.
- IMPROVE THE PERFORMANCE OF OUR FOOD RETAIL EQUIPMENT BUSINESSES. A key part
of our food retail equipment strategy has involved the implementation of the
rationalization and restructuring program discussed above. In addition, we
have launched new product lines, such as the E-Line refrigerated display
cases for the North American market, in order to expand our customer base.
We aim to achieve greater geographic penetration of the Kysor Warren brand
and to expand its customer base beyond existing core customers.
- REDUCE DEBT. We intend to continue reducing our debt burden by increasing
cash available to pay debt through cost savings, improving manufacturing
plant utilization and reducing our cash conversion days. We believe that
using cash generated through more efficient operations to reduce debt
whenever possible will increase our operating flexibility in the long term
placing us in a stronger financial and competitive position.
MARKET OVERVIEW
The global food equipment product market, which we estimate generated in
excess of $20 billion of sales in 2001, is comprised of the following segments:
- FOOD SERVICE EQUIPMENT--This market segment includes cooking and warming
equipment, ice machines and storage, preparation, ventilation, dispensing
and warewashing equipment used by commercial and institutional food service
operations. We estimate that this segment constitutes approximately 65% of
the total global food equipment product market.
- FOOD RETAIL EQUIPMENT--This market segment includes refrigerated storage and
display products sold to food retailers, such as supermarkets and
convenience stores. We estimate that this segment constitutes approximately
26% of the global food equipment product market.
- OTHER FOOD EQUIPMENT--This segment comprises vending machines for hot and
cold food, representing approximately 9% of the global food equipment
product market. We do not operate in this segment.
The five largest sellers of food equipment worldwide in 2001, including
Enodis, are estimated to account for approximately 28% of global sales. It is
estimated that no single seller accounted for more than 7% of the market.
We estimate that the North American market accounts for approximately one
third of the global food equipment market, while the second largest market,
Western Europe, accounts for slightly less than one third of the global food
equipment market. The market for food service equipment grew at an annual rate
of 5.4% in the U.S. from 1992 to 2000. While the U.S. market is currently
experiencing a severe decline due to economic circumstances, we believe it will
continue to grow over the long term in excess of U.S. gross national product,
principally driven by the following factors:
- New restaurant and store openings, driven by overall economic growth and
increases in consumer spending on food prepared outside of the home. A
recent National Restaurant Association survey in the U.S. predicts this
trend will continue with substantial growth to 2010; and
- Sales of replacement and upgrade equipment, driven by customer menu
adjustments and the needs of customers to increase food preparation
efficiency to improve throughput, reduce energy consumption, reduce labor
costs through increased automation and comply with increasingly stringent
health and safety regulations.
Generally, food service operators purchase new food service equipment for
three reasons: new restaurant or store openings, upgrades of existing equipment
and replacement of existing equipment. We estimate that each of these reasons
accounts for approximately one third of food service equipment sales.
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OUR HISTORY AND RECENT ACQUISITIONS AND DISPOSITIONS
Our origins date to the mid-nineteenth century, when we were founded as a
small food merchant based in the north of England. We incorporated in 1910 under
the name S. & W. Berisford (1910) Limited and re-registered in 1982 as a public
limited company. We are subject to the Companies Act 1985, as amended, and are
registered with the Registrar of Companies in England and Wales. In 1995, we
changed our name to Berisford plc, and in June 2000 we changed our name to
Enodis plc.
In 1995, we entered the commercial food equipment business by acquiring
Welbilt Corporation, a publicly-traded U.S. company and a leading U.S.-based
manufacturer and distributor of commercial cooking and warming equipment sold
primarily for use in quick service restaurants, full service restaurants,
hospitals and other institutions. At the time of this acquisition, we remained
engaged in businesses other than commercial food equipment. We have since
divested all our other businesses except our real property segment in order to
focus on our commercial food equipment business.
In 1999, we acquired Scotsman Industries, Inc., a major manufacturer and
distributor of "cold" side products, including refrigerated display cases, ice
machines, food preparation and storage equipment, walk-in coolers and freezers
and beverage systems, for $791.5 million, including assumed debt. The
acquisition of Scotsman expanded our product line, increased our manufacturing
capabilities and enhanced our service, distribution and sales networks. The
acquisition of the Scotsman businesses also enhanced and expanded our customer
relationships. We believe the integration of the Scotsman businesses is now
largely complete.
In fiscal 2001, we acquired Jackson MSC Inc., a leading U.S. manufacturer of
dishwashers, for approximately $36 million. For more information about this
acquisition, see "Material Contracts--Acquisitions and Dispositions."
In fiscal 2001, we disposed of our former building and consumer products
business (unrelated to our food equipment business), for gross consideration of
L134 million (less a post-closing adjustment of approximately L2.1 million). In
December 2001, we sold Sammic, a Spanish food service equipment business, for
consideration of L20 million.
In April 2002, we sold Belshaw Bros., our donut manufacturing business, for
net cash consideration of L15.4 million. In May 2002, we sold our Austral
subsidiaries, our food retail equipment business in Australia and New Zealand,
for net cash consideration of L6.7 million. Also, in May 2002, we disposed of
our Aladdin Temp-Rite subsidiaries, our meal delivery systems businesses, for
net cash consideration of L25.7 million. On June 14, 2002, we sold the assets of
Prolon Inc., a subsidiary that manufactures plastic tableware and other plastic
wares. This completes our current program of non-core disposals. We are now
focusing our attention on increasing the operating efficiency and performance of
our core businesses.
During the past three fiscal years, we made capital expenditures for
equipment and construction of new facilities for continuing operations in the
aggregate amount of L19.3 million, L20.6 million and L20.8 million in fiscal
2001, 2000 and 1999, respectively. See "Operating and Financial Review and
Prospects--Liquidity and Capital Resources--Capital Expenditures and
Commitments."
FOOD SERVICE EQUIPMENT
Food service equipment consists of cooking, warming, ice, storage,
preparation, ventilation, dispensing and warewashing equipment used by
commercial and institutional food service operators such as full service
restaurants, quick service restaurant chains, hotels, industrial caterers,
supermarkets, hospitals, schools and other institutions. In fiscal 2001, sales
of food service equipment were L684.1 million, or approximately 75.7% of our
turnover from continuing operations. Our food service equipment business is
conducted in over 100 countries. Sales of food service equipment in North
America constituted 72.9% of our fiscal 2001 food service equipment turnover
from continuing operations.
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GLOBAL PRODUCT FOCUS
The global food service equipment group is pursuing a global product
strategy aimed at leveraging existing brands, technology, manufacturing
facilities and distribution networks and service to expand the presence of its
products in Europe and the rest of the world. In fiscal 2001, the North American
and Europe & Rest of World divisions of the global food service equipment group
were combined into one group, creating an integrated management team to
implement our global product strategy.
GLOBAL PRODUCT GROUPS
COOKING EQUIPMENT
We design, manufacture and sell a broad array of commercial ovens, ranges
and grills, including combination microwave/convection ovens, conveyor ovens,
rotisserie ovens, broilers and skillets. We believe that we are a leading
manufacturer of these products in North America, with a wide range of brands and
extensive service coverage. We sell traditional oven, range and grill products
under the Garland-Registered Trademark-, U.S. Range-TM-,
Technyform-Registered Trademark- and Moorwood Vulcan-Registered Trademark- brand
names, and we sell microwave and combination microwave/convection ovens under
the Merrychef-Registered Trademark- and Garland-Registered Trademark- brand
names. Our cooking equipment products are manufactured at plants in the U.S.,
Canada, the U.K. and France. Our Merrychef combination microwave/convection
ovens utilize Accelerated Cooking Technology-TM- and have a strong market
presence in the United Kingdom. We believe we have the opportunity to achieve
growth in this product group by introducing U.S. brands and technology to the
European market and by linking the Merrychef products with the Garland U.S.
distribution network. Other brands in this product group include Cleveland-TM-,
Lincoln-Registered Trademark-, Electroway-Registered Trademark- and Merco
Savory-Registered Trademark-.
FRYING EQUIPMENT
We design, manufacture and sell commercial fryers and frying systems,
including open pot fryers under the Frymaster-Registered Trademark- brand name
and tube fryers under the Dean-Registered Trademark- brand name. We also
manufacture commercial fryers in the U.K. under the Henry
Nuttall-Registered Trademark- and Moorwood Vulcan-Registered Trademark- brand
names. We believe that, through Frymaster and Dean, we have the leading market
position in the U.S. commercial fryer market, and we intend to use our brand
recognition and product expertise to increase European sales. Based on the trend
in the U.S., we believe European restaurants will experience increased customer
throughput in future years, leading to greater demand for high production
fryers.
REFRIGERATION EQUIPMENT
We design, manufacture and sell commercial refrigerators, freezers and blast
chillers. Delfield is a leading supplier of both catalog and custom-made
commercial refrigerators and freezers in the United States. We plan to leverage
recognition of our Delfield-Registered Trademark-,
Castelmac-Registered Trademark-, Shelleyglas-Registered Trademark- and
Guyon-Registered Trademark- brand names to increase geographic market
penetration, particularly in Europe.
ICE MACHINES
We design, manufacture and sell commercial ice making and ice dispensing
equipment, in addition to ice dispensing and storage bins, under a variety of
brand names, including Scotsman-Registered Trademark-,
Ice-O-Matic-Registered Trademark-, IceMatic-Registered Trademark-,
Bar-Line-Registered Trademark-, Simag-Registered Trademark-, Mile
High-Registered Trademark- and New Ton-Registered Trademark-. We have a wide
product offering in this segment and are one of the leaders in both the U.S. and
global markets. Our equipment produces and dispenses ice cubes, used primarily
by convenience stores, quick service restaurants, full service restaurants,
bars, hotels and health care facilities; ice nuggets, used primarily by
households and small bars; and ice flakes, used primarily by supermarkets. Our
ice storage bins have capacities of 200 to 1,250 pounds of ice, and we
manufacture a range of water filtration systems designed to remove tastes,
odors, dirt and rust particles from water used to make ice.
With manufacturing facilities in the U.S., Italy, Thailand and China, we
believe we are well-positioned to meet the growing demand of large global chains
for regional manufacturing capability. In addition, we plan
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to use the services of our technology center, as well as component
standardization and pooled purchasing, to improve our products and reduce
manufacturing costs.
AIR PURIFICATION AND VENTILATION EQUIPMENT
We design, manufacture and sell air purification systems and ventilation
hoods, ranging from individual stand-alone ventilation and filtration systems to
comprehensive integrated air filtration systems. We believe this is a growth
market, driven by increasingly stringent requirements for odor control, stronger
environmental regulations and the need to retrofit existing buildings with
ventilation systems. We believe we can use our technological capabilities to
capitalize on this growth, and we have recently introduced an ultra-violet
commercial kitchen ventilation system which utilizes ultraviolet light to treat
contaminated air. This technology significantly improves grease removal and
thereby improves safety, lowers maintenance requirements and reduces odors. We
sell these products under the brand names Vent Master-Registered Trademark- and
Airtech-Registered Trademark-. The production by our facilities in Canada, the
U.S. and the U.K. is complemented by the production by several licensees around
the world.
STEAM EQUIPMENT
We believe we are a leading global manufacturer of steam equipment,
including steam kettles, pressure steamers, combination ovens and cook-chill
systems, primarily through Convotherm, which is based in Germany, and Cleveland,
which is based in the U.S. and has plants in the U.S. and Canada. We believe we
have a significant opportunity to leverage our technology, distribution and
manufacturing capabilities to increase our global market share in steam
equipment.
REGIONAL PRODUCT GROUPS
WAREWASHING EQUIPMENT
We design, manufacture and sell commercial dishwashing and other warewashing
equipment. We entered this business with the purchase of Jackson MSC Inc. in
November 2000, and currently offer a full range of undercounter dishwashers,
door-type dishwashers, round dishwashers and glasswashers. Our brand for these
products is Jackson-Registered Trademark- and we distribute a flight type
dishwasher under the brand Meiko by Jackson-Registered Trademark-.
BEVERAGE SYSTEMS
We design, manufacture and sell a range of soft-drink and beverage
dispensing equipment for pre-mix and post-mix, undercounter and remote
applications for the European market. Our products, which include combination
ice and soft-drink dispensing units, custom beer cooling products and related
accessories, are sold to global and national soft-drink companies and brewers
under the brand names Scotsman-Registered Trademark-,
Whitlenge-Registered Trademark- and Hartek-Registered Trademark-.
FOOD PREPARATION PRODUCTS
We also manufacture a wide range of food preparation equipment such as
mixers, peelers, pots and pans. Our brand names for food storage and preparation
products include Varimixer-Registered Trademark-, Wearever-Registered Trademark-
and Redco-Registered Trademark-.
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The following table provides information on our product groups in the global
food service equipment group, including the brands and product lines of each
group and the location of the manufacturing facilities where we manufacture the
products of each group.
PRODUCT GROUPS BRANDS PRODUCT LINES LOCATIONS
------------------------- ------------------------------ -------------------------------- ------------------------
Cooking Equipment Garland, Lincoln, U.S. Range, Ranges, convection ovens, Mississauga, Canada
Merrychef, Moorwood Vulcan, conveyor ovens, microwave and Freeland, Pennsylvania
Technyform, Merco Savory combination ovens, grills, Fort Wayne, Indiana
broilers, toasters, rotisserie Aldershot, U.K.
ovens Sheffield, U.K.
Moneteau, France
Frying Equipment Frymaster, Dean, Henry Tube type and open top fryers Shreveport, Louisiana
Nuttall, Moorwood Vulcan Sheffield, U.K.
Refrigeration Equipment Delfield, Advanced, Castelmac, Custom refrigeration, Mount Pleasant, Michigan
Guyon, Shellymatic, reach-in refrigeration, Covington, Tennessee
Shelleyglas display systems/counters, Moneteau, France
cook-chill systems, freezers, Sheffield, U.K.
blast chillers
Ice Machines Scotsman, Ice-O-Matic, Simag, Cube, flake and nugget ice Fairfax, South Carolina
Icematic, Barline, Mile High, machines Denver, Colorado
New Ton Milan, Italy
Castelfranco, Italy
Bangkok, Thailand
Shanghai, China
Air Purification and Ventmaster, Airtech Exhaust and air purification Mississauga, Canada
Ventilation Equipment systems Rochester, U.K.
Mount Pleasant, Michigan
Steam Equipment Cleveland, Convotherm Steam kettles, pressure Concord, Canada
steamers, Cleveland, Ohio
skillets, combination ovens Eglfing, Germany
Warewashing Equipment Jackson Undercounter, conveyor and Barbourville, Kentucky
flight type dishwashers
Beverage Systems Scotsman, Hartek, Whitlenge Pre-mix, post-mix, undercounter Radevormwald, Germany
and remote beverage dispensing Halesowen, U.K.
equipment
Food Preparation Products Wearever, Redco, Varimixer Pots and pans, small food Fort Wayne, Indiana
preparation equipment, dishes Shreveport, Louisiana
CUSTOMERS
The customer base for our global food service equipment group is primarily
comprised of global quick service restaurant chain outlets and full service
restaurants, as well as contract caterers, hotel chains, multinational
supermarkets, leisure companies, beverage manufacturers, institutional customers
such as hospitals and schools and large industrial companies. We do not
typically have long term contracts with our customers. Rather, large chains
frequently authorize specific food service equipment manufacturers as approved
vendors for particular products and, thereafter, sales are made locally or
regionally to end-customers via kitchen equipment suppliers or dealers. Many
large quick service restaurant chains refurbish or expand a large number of
outlets, or implement menu changes requiring investment in new equipment, over a
short period of time. When this occurs, these customers often choose a small
number of manufacturers whose approved products may or must be purchased by
restaurant operators. We work closely with our customers to develop the products
they need and also to become the approved vendors for these products. Although
no single food service equipment customer accounted for over 5% of our total
turnover
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from continuing operations in fiscal 2001, revenues from certain food service
equipment customers slightly exceeded 5% of our food service equipment turnover.
DISTRIBUTION CHANNELS
We distribute our food service equipment products principally through
third-party equipment dealers, kitchen equipment suppliers and distributors and
our own distributor subsidiaries.
EQUIPMENT DEALERS
Equipment dealers generally market food service equipment on a non-exclusive
basis and may have showrooms, service personnel and facilities to fabricate
kitchen work surfaces and storage units. We believe there are approximately
3,000 dealers in the U.S., with the top 100 dealers accounting for approximately
30% of all equipment sold. Approximately half of these dealers carry Enodis
products. Dealers often belong to or are associated with one or more dealer
"buying groups" that are created to combine the dealers' collective purchasing
power in order to negotiate advantageous terms relating to pricing, rebates and
advertising support. These agreements are typically one to two years in duration
but do not guarantee any level of purchases. We estimate that the five largest
such groups control approximately a quarter of all food service equipment
purchases in the United States. We have implemented an initiative that provides
incentives for dealer buying groups to broaden the range of Enodis products they
sell. We also train and provide technical product information to our approved
dealers through a website created for this purpose.
KITCHEN EQUIPMENT SUPPLIERS
Kitchen equipment suppliers are dealers that serve a specific chain or a
number of chains by coordinating their purchases of food service equipment and
other items necessary to establish a new location or refurbish an existing
location. The chain operator, who leaves the responsibility of securing and
shipping the product to the kitchen equipment supplier, usually establishes
product selection and pricing in advance with each of their preferred or
approved equipment vendors.
DISTRIBUTORS
Distributors are similar to dealers, but they hold significantly higher
levels of stock and align exclusively with manufacturers within specific product
categories. Distributors sell both to end-customers and to dealers. They also
provide value-added services such as marketing and after-sales service,
including warranty administration. In the U.S., we use distributors primarily in
our ice business.
SALES AND MARKETING
UNITED STATES
We primarily market our food service equipment products through a network of
independent, commissioned sales representatives and sell primarily to dealers
and distributors. We also market our products directly through our relationships
with customers, as we design improved products for them and through
participation in trade shows and other industry conferences.
Our network of sales representatives markets our products to end-customers,
dealers, kitchen equipment suppliers, distributors and food industry
consultants. Because industry consultants often have significant influence over
the end-customer's purchasing decisions, we actively support the primary food
service equipment consultants' industry association through sponsorship of its
programs and events and by providing continuing education seminars for groups of
consultants at our technology center.
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In the U.S., we carry out most of our marketing through our sales
representatives. We recently restructured our sales representative network into
21 territories and selected representatives for each region. In 20 out of
21 territories, we endeavor to have a single representative handling our core
line of products and brands on an exclusive or near exclusive basis. This
structure allows us to focus training and incentives on a smaller number of
representatives and we train and provide technical product information to our
sales representatives at our technology center and through a website created for
this purpose.
To manage our sales representative network, we have organized the U.S.
market into three sales regions, each headed by a commercial president. Each
commercial president has responsibility for the sales results of six or seven
representatives, supervises sales activities with dealers, distributors and
end-customers, handles buying group requests and coordinates with food service
equipment consultants. We also have a Global Accounts President who focuses on
our large chain sales effort. We also have dedicated key account teams that
focus on large global, national and regional customers. In addition, each
operating company provides product and sales support to the marketplace.
EUROPE AND CANADA
Sales and marketing in Europe and Canada differ from the U.S., as there are
fewer manufacturers' representatives and we rely to a great extent on the
efforts of our company-owned master distributors in Canada and five key European
countries: France, Germany, Italy, Spain and the United Kingdom. We sell
products through our own sales force. The sales force works directly with
end-customers to secure orders and to agree on custom-made product
specifications. In most cases, unless end-customers require otherwise, products
are distributed to the end-customer via a dealer. The sales force also sells to
dealers in order to access the demand for commercial food equipment in the
smaller independent sector.
REST OF WORLD
Outside of North America and Europe, we generally use non-exclusive
third-party master distributors to market our products. We have started to
rationalize this network, concentrating more of our products with fewer
distributors.
TRADE SHOWS AND OTHER ACTIVITIES
We also participate in a variety of trade shows and exhibitions throughout
the year where we present extensive displays of our product lines, including the
annual National Restaurant Association show in the U.S., the biennial National
Association of Food Equipment Manufacturers' show in the U.S., the biennial
Hotelympia show in London and the biennial Expo Tour show in Milan.
In addition, our website provides information about our food service
equipment products and services and links to the websites of many of our
individual brands and product lines.
CUSTOMER SERVICE
Efficient global parts and service support is a prerequisite for doing
business with global quick service restaurants. We have invested considerable
resources over many years to select and train a network of authorized third
party service agencies in order to provide service support to global quick
service restaurants. This effort was led primarily by Frymaster on the "hot"
side and by Scotsman on the "cold" side. Since this network has been in place,
these agencies have been trained to service additional Enodis products. In
addition, we have access to a network of third party service agencies providing
service to all our customers throughout the world, which we intend to
rationalize through selection and training.
Our operating companies and master distributors provide additional support
to service agencies through access to our technical and parts personnel, stocks
of replacement parts at our plants and regionally at our master distributors,
technical and parts manuals (some of which are now available on the Internet),
and ongoing training both at our operating companies and in the field. We
provide emergency technical support
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through some of our operating companies twenty-four hours a day, seven days a
week to support key accounts and service partners.
In addition, we have established a new position of Vice President-Global
Service to align all our operating companies with the established global service
network already in place. This executive is also responsible for building
stronger partnerships with leading service agencies, and providing a much
simpler interface with end-customers. Additionally, this executive will seek
ways to more efficiently deliver parts to our global service network to minimize
lead time in connection with product service.
SEASONALITY
Generally, sales of food service equipment have been strongest in the second
half of our fiscal year (April through September). This is because new
construction and installations by customers upgrading or replacing food service
equipment occur mostly in the warm weather months. In addition, schools usually
renovate and replace food service equipment during the summer, when classes are
not in session. We also sell more ice machines in the summer months.
COMPETITION
The global food service equipment market is highly fragmented, although it
is currently undergoing consolidation. Competition in the food service equipment
industry is based primarily on product features, brand recognition, reliability,
durability, technology, energy efficiency, breadth of product offerings,
service, price and customer relationships. Several of our competitors are
divisions or subsidiaries of large, diversified companies. We believe the
largest sellers of food service equipment worldwide are Enodis and Premark
International Inc., a subsidiary of Illinois Tool Works. We believe that the top
ten competitors in the industry comprise about one-third of all industry sales.
Premark is an international competitor in most of our markets, and we also
compete with United Technologies, Electrolux, Ali Group, Middleby Corporation,
Manitowoc and Hoshizaki in certain product lines. Our other main competitors are
either regional or are specialized companies that compete with us in particular
product lines.
FOOD RETAIL EQUIPMENT
Food retail equipment consists of equipment used to store and display food
in retail food outlets such as supermarkets, convenience stores, specialty
stores and retail chains. In fiscal 2001, sales of food retail equipment were
L203.1 million, or approximately 22.5% of our turnover from continuing
operations. Our food retail equipment business is conducted in North America.
Sales of food retail equipment in North America constituted 81.7% of our total
food retail equipment turnover from continuing operations.
OUR PRODUCT GROUPS
REFRIGERATED DISPLAY CASES AND SYSTEMS
We design, manufacture and sell standard and customized refrigeration
systems, as well as refrigerated self-serve cases, service deli cases and custom
merchandisers in North America under the Kysor Warren brand. Our Kysor Warren
operations have historically been focused in the southeastern U.S. and have
relied on a small number of major supermarket and retail chain customers for the
bulk of their sales. These products are used to store and preserve food items
such as meat, dairy, fish, cheese, produce, frozen foods and floral products. We
sell these products under the Kysor Warren-Registered Trademark- brand. In
fiscal 2001, Kysor Warren generated approximately 43% of revenues and
approximately 20% of operating profit from continuing operations before goodwill
amortization and exceptional items (and before allocation of corporate and group
costs) for the food retail equipment group.
Kysor Warren recently launched the E-line, a new line of display cases for
the North American market. The new line incorporates more attractive styling,
improved energy efficiency, powder paint technology and evaporator coil
manufacturing. We believe the design and productivity improvements of the E-line
will reduce both costs of materials and the number of man-hours required to
manufacture each unit.
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WALK-IN FREEZERS AND COOLERS
We design, manufacture and sell pre-fabricated cooler and freezer panels for
use in the construction of refrigerated storage rooms, walk-in coolers and
environmental systems in North America through our Kysor Panel Systems business,
which we believe is one of the market leaders in its sector, with national sales
and technical support capabilities. In 2001, Kysor Panel Systems commenced
operations in Mexico. In fiscal 2001, Kysor Panel generated approximately 33% of
revenue and 40% of operating profit from continuing operations before goodwill
amortization and exceptional items (and before allocation of corporate and group
costs) for the food retail equipment group.
The following table provides information on our product groups in our food
retail equipment group, including the brands and product lines of each group and
the location of the manufacturing facilities where we manufacture the products
of each group.
PRODUCT GROUPS BRANDS PRODUCT LINES LOCATIONS
------------------------- ------------------------------ -------------------------------- ------------------------
Refrigerated display Kysor Warren Refrigeration systems and glass Columbus, Georgia
cases doors
Walk-in freezers and Kysor Panel Systems Pre-fabricated cooler and Fort Worth, Texas
coolers freezer panels for refrigerated Goodyear, Arizona
storing rooms Piney Flats, Tennessee
CUSTOMERS
The customer base for our food retail equipment group is primarily comprised
of a small number of large retail and supermarket chains, food convenience
stores, specialty food retailers and quick service restaurant chains. The
largest customers in the industry generally enter into contracts for specific
products with a small number of manufacturers. These contracts, which are
typically one to three years in duration, usually contain detailed design
specifications and are awarded through a competitive bidding process based
primarily on price. Once a manufacturer is awarded a contract, it generally
becomes a non-exclusive "approved supplier" of the particular product for the
duration of the contract. Smaller customers often purchase food retail equipment
on an individual basis. Although no single food retail equipment customer
accounted for over 5% of our total turnover from continuing operations in fiscal
2001, Kysor Warren derives a substantial portion of its revenues from a small
number of major supermarket and retail chains in North America. In addition, one
of Kysor Warren's customers, a major U.S. discount retail chain, has filed for
protection under Chapter 11 of the U.S. Bankruptcy Code.
DISTRIBUTION CHANNELS
The majority of our food retail equipment is sold directly to end-customers
through the direct sales force of each of our operating subsidiaries. The
balance of our food retail equipment sales are made through third-party dealers.
SALES AND MARKETING
In our Kysor Panel Systems business, key account teams manage the customer
relationships with the major quick service restaurant chains and supermarket
chains. We also participate in a variety of trade shows and exhibitions
throughout the year where we present extensive displays of our product lines,
including the annual Food Marketing Institute show in the U.S., the annual
Canadian Federation of Independent Grocers show in Canada, the annual National
Association of Convenience Stores show in the U.S. and the Annual Retailer's
Convention and Trade Show in Mexico.
In addition, our website provides information about our food retail
equipment products and services and links to the websites of many of our
individual brands and product lines.
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CUSTOMER SERVICE
The food retail equipment industry requires after-market service support
that provides parts and labor both during the warranty period and on an after-
or out-of-warranty basis. We provide service for our Kysor Warren products
through our 15 field service employees and for our Kysor Panel Systems products
through a network of third party subcontractors and authorized service
engineers. The warranty period for our food retail equipment is typically one
year for parts and 90 days for labor. Our food retail equipment products have an
average lifespan of seven to nine years. Because of this long lifespan, we also
derive revenues from the refurbishment of previously sold units.
SEASONALITY
Sales of food retail equipment have been strongest in the second half of our
fiscal year (April through September). This is because new store constructions
and installations by customers upgrading or replacing food retail equipment
occur mostly in warm weather months. In addition, most retail businesses seek to
complete refurbishments before the end of November.
COMPETITION
The food retail equipment market in North America is highly concentrated,
with only a small number of vendors of food retail equipment in the United
States. Competition in the food retail equipment industry is based primarily on
price, although energy efficiency and product features also play a role. In
addition to competing for sales, manufacturers of food retail equipment compete
for contract awards for specific products, in order to become the approved
supplier of these products to a particular customer over the contract period. We
believe that recent significant consolidation in the global supermarket
industry, which has resulted in a reduced number of large customers with
significant buying power and fewer stores, has led to increased price
competition in the industry. Kysor Panel Systems competes primarily with
Crown-Tonka, and Kysor Warren competes primarily with: Hill/Phoenix, a division
of Dover; Hussmann, a division of Ingersoll Rand; and Tyler, a division of
United Technologies. Kysor Warren also competes with several other regional
competitors in the United States.
REAL PROPERTY
We currently hold approximately 100 acres of real estate located in Felsted
and Coventry, England, of which approximately 80 acres is at Felsted. We have
retained this land from former business operations because we believe it is more
valuable when sold for development. We market the land to third parties for
residential development and real estate investment. Prior to selling any portion
of the land, we invest resources in resolving existing environmental issues
relating to the plot. In addition, certain portions of the land at Felsted have
already been allocated to uses for which we will receive no revenues, such as
infrastructure needs and community uses. After accounting for such uses of the
land, we have 50 acres remaining to be sold for development. We have contracted
to sell approximately 10 acres of our real estate located in Felsted and we plan
to sell the remainder of this land over the next several years.
Revenue on this land is only recognized when the land is sold. Accordingly,
the property segment revenues may vary significantly from period to period. In
fiscal 2001, we generated 1.8% of our total turnover from continuing operations
from property development activities.
PRODUCT DEVELOPMENT
FOOD SERVICE EQUIPMENT
Many restaurants, especially quick service restaurants, frequently seek to
differentiate their products by changing their menu and format. In addition, our
end-customers often need equipment upgrades that enable them to improve
productivity, reduce labor costs, respond to enhanced hygiene requirements and
reduce energy consumption. These changes often require customized cooking
equipment. We believe product development is therefore critical to the success
of our food service equipment business, because we must
70
respond quickly to requests for new products or modifications to existing
models. Product development is also important because the quality of food
equipment is a primary factor in the customer's purchasing decision.
In 1999, our product development group moved into our newly designed modern
technology center in New Port Richey, Florida. This new facility contains
computer assisted design platforms, a model shop for on-site development of
prototypes, a laboratory for product testing and various display areas for new
products, including a test kitchen for hands-on testing of new products with
customers.
At our technology center we work directly with our customers to provide
customized solutions to meet their precise needs. When a customer requests a new
or refined product from us, the engineering team designs, prototypes, tests,
demonstrates, evaluates and refines that product in our technology center with
the customer. We believe this rapid response to specific customer demands for
product-specific applications and customization increases the loyalty of our
existing customers and enhances our ability to attract new ones. We currently
have a number of projects under development with leading customers.
In addition, our technology center works together with the new product
development teams at our operating companies so that our new products
incorporate our product expertise and technological resources.
In addition to the engineers working in our technology center, we also have
approximately 330 employees involved in new product development at the operating
company level.
The following table provides information on some of our recently developed
products:
SUBSIDIARY PRODUCT DESCRIPTION
--------------------- ---------------------------------- ------------------------------------------------------------
Delfield Safe Chill-Blast Chillers Flexible two section blast chiller.
Reach-ins Energy efficient refrigerators.
Dual View Display Case Allows simultaneous display of refrigerated and dry
merchandise.
Nordic Zone Cold Food Bar Five stage refrigeration unit allowing multi-product
display.
Garland Moisture + Oven Ovens which utilize the benefits of moisture for better
yield and appearance without the need for a broiler.
Master Electric Grill Heavy duty griddle plate with electronic controls for
maximum temperature uniformity over the entire cooking
surface.
Mealstream Series Five Fully programmable, extra capacity combination oven to
accommodate high volume catering.
Jackson Horizon Services Dishwashers Compact water and energy efficient dishwasher.
Cleveland Combi Craft Cook and Hold Oven Simplified design with humidity controls for higher quality
food.
Power Pan Tilting Skillets Both normal operation plus high powered, fast recovery and
heat up similar to a griddle.
Merrychef Mealstream Series Convection ovens in combination with microwave to allow for
speed without sacrificing quality.
Lincoln Impinger Series Digital controlled ovens ranging from counter top to high
capacity models.
Insta Slice Vegetable User Quick cutting one-stroke vegetable slicer.
Scotsman Eclipse Ice Machine Condenser and compressor are roof mounted (extremely quiet).
Touch Free Automatic Ice and Water Dispenses ice and water without physical contact.
Dispensers
Vent Master Reactocell Treats contaminated air with high efficiency pre-filters and
ultraviolet enhanced oxidation technology.
Convotherm Plus 2 Range Upgraded steam combination ovens with de-condensation and
manual moisturizing systems, a serial interface and improved
aesthetics.
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FOOD RETAIL EQUIPMENT
In the food retail equipment group, Kysor Warren, and Kysor Panel Systems
have laboratories located within their facilities, where new product development
is conducted. We recently launched a new product line--the E-line. See "--Food
Retail Equipment--Our Product Groups--Refrigerated Display Cases and Systems."
PRODUCTION MATERIALS
The primary materials used in the production of our products are high
quality stainless steel, galvanized steel, urethane insulating foam,
compressors, evaporation coils, electronic controls and other electrical and
refrigeration components. As one of the largest companies in the commercial food
equipment industry, we purchase many of these materials in large quantities and
are, therefore, often able to negotiate favorable prices from suppliers.
We purchase stainless steel in various sheet sizes, which is either sheared
into blanks, or, more frequently, is delivered directly to computer controlled
turret punch presses or lasers for cutting. We purchase generic steel primarily
from Ryerson Tull, pursuant to a two year agreement, which expires December 31,
2003. The agreement provides for firm prices through December 2002 and provides
incentives for us to maximize our steel purchases from this supplier.
BASF Corporation supplies urethane foam to the majority of the Enodis group
pursuant to a three-year agreement, which expires on March 31, 2004. The
agreement provides for firm prices through March 31, 2002.
Other components of significance include electric motors, copper and
aluminum refrigeration coils, heating elements, compressors, thermostats, gas
regulators, and various types of analogue, digital, and programmable computer
controls, which we purchase from various suppliers.
The primary materials used in the production of all our products are readily
available from various other suppliers at competitive market prices.
INTELLECTUAL PROPERTY
We use a combination of trade secret and trademark laws and other
contractual and technical measures to protect our proprietary rights. We have
filed and have been granted a variety of patents in the U.S. and in other
countries. Several of our products, such as the Lincoln-Registered Trademark-
air impingement conveyor ovens, use patents, know-how and other intellectual
properties licensed from third parties. Our patents in the food equipment
business generally relate to operating features of our products that may be
functionally duplicated by competitors, and some of our intellectual property
rights (including those licensed from third parties) are due to expire in the
near term. Although we believe that our patents give us a cumulative advantage,
no material portion of our business depends on any one patent. Consequently, we
do not believe that our food equipment business would be adversely affected by
the expiration or invalidity of any one of our patents or by the termination of
any one license arrangement. We have registered trademarks to protect our brand
names in the U.S., the U.K. and many other countries where we sell branded
products.
SUBSIDIARIES
We currently have over 100 subsidiaries, all but a few of which are
wholly-owned, directly or indirectly. Our largest subsidiaries are Enodis
Corporation, which owns Scotsman Industries, Inc., Lincoln Foodservice Products,
Inc., Cleveland Range, Inc., Frymaster L.L.C., Garland Commercial Industries,
Inc., Mile High Equipment Company, and Jackson MSC Inc., among others. Scotsman
Industries, Inc. owns The Delfield Company and Kysor Industrial Corporation,
among others.
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PROPERTY, PLANT AND EQUIPMENT
We currently have 28 manufacturing facilities located in eight countries. We
believe our manufacturing facilities meet the standards of our customers around
the world. Our facilities are integrated manufacturing units which, with few
exceptions, purchase only those components that are outside their competence to
produce.
Our manufacturing process aims to increase production efficiency by
minimizing set-up time and scrap and reducing the number of sheet steel sizes
that are kept in inventory. We conduct metal fabrication, finishing,
sub-assembly and assembly operations at our manufacturing facilities. At
individual locations we have installed numerically controlled turret presses,
robotic and conventional welding equipment, numerically controlled machining
centers, computer assisted design systems, product testing and quality assurance
measurement devices and other equipment. We review the capacity and utilization
of our facilities on an ongoing basis and make adjustments where appropriate.
Most food service equipment products are built to order, usually with lead
times of one to three weeks. We also build certain standard models with high
stock turnover in order to provide quick shipment and stable production flows.
We have food service equipment manufacturing facilities in the U.S., the U.K.,
Canada, Germany, Italy, China and Thailand.
In the food retail equipment group almost all of our products are built to
order. The lead time for manufacturing is approximately five to six weeks. Kysor
Warren has a manufacturing facility located in Columbus, Georgia; Kysor Panel
Systems has manufacturing facilities located in Fort Worth, Texas, Goodyear,
Arizona and Piney Flats, Tennessee.
As of March 30, 2002, we owned or leased approximately 40 commercial
properties in the U.S., the U.K., Europe, Canada and Thailand, including
corporate offices in London, our technology center and operations head office in
New Port Richey, Florida, manufacturing plants and warehouses. Each property is
appropriately insured, in accordance with the respective leases, where
applicable.
Our principal executive office is located at Washington House, 40-41 Conduit
Street, London W1S 2YQ, United Kingdom. The following table contains information
describing our principal operational real properties.
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APPROXIMATE OWNED/
LOCATION PRINCIPAL USE SQUARE FEET PRODUCTS PRODUCED LEASED
----------------------------- ------------------------------ ------------ --------------------------- ---------------
Washington House,
40-41 Conduit Street,
London U.K................... Executive office 4,589 -- Leased
2227 Welbilt Boulevard New
Port Richey, FL, U.S......... Technology Center and office 42,000 -- Owned
Denver, CO, U.S.............. Manufacturing plant, 168,000 Ice machines Owned(1)
engineering facilities and
office
Columbus, GA, U.S............ Manufacturing plant, warehouse 300,000 Refrigerated display cases Owned
and office
Manufacturing plant and office 140,000 Refrigeration systems Owned
Vernon Hills, IL, U.S........ Office 15,000 -- Leased
Fort Wayne, IN, U.S.......... Manufacturing plant and office 358,000 Conveyer ovens, rotisseries Leased
and kitchenware
Barbourville, KY, U.S........ Manufacturing plant, office, 115,000 Dishwashers Owned
land
Corbin, KY, U.S.............. Warehouse 19,550 Dishwashers Leased
Shreveport, LA, U.S.......... Manufacturing plant, 249,000 Fryers Owned
engineering facilities and 91,000 Vacant Owned
office 135,054 Non-fryer products Owned
Mt. Pleasant, MI, U.S........ Manufacturing plant and office 330,000 Refrigeration equipment Owned
Cleveland, OH, U.S........... Manufacturing plant and office 97,600 Steam cooking equipment and Owned(2)
cook-chill
Freeland, PA, U.S............ Manufacturing plant and office 225,000 Ovens and ranges Owned
Fairfax, SC, U.S............. Manufacturing plant and 360,000 Ice machines Owned(3)
warehouse
Covington, TN, U.S........... Manufacturing plant and office 188,000 Refrigeration equipment Owned(4)
Piney Flats, TN, U.S......... Manufacturing plant and office 110,000 Walk-in coolers and Leased
freezers
Dallas, TX, U.S.............. Manufacturing plant and office 170,000 Vacant Leased(5)
Fort Worth, TX, U.S.......... Manufacturing plant and office 118,000 Walk-in coolers and Owned
freezers
Office 5,000 -- Leased
Concord, Ontario, Canada..... Manufacturing plant and office 116,000 Steam cookers and Leased
cook-chill
Mississauga, Ontario, Manufacturing plant and office 155,000 Ovens and ranges Leased
Canada....................... Manufacturing plant and office 35,000 Ventilation equipment Leased
Shanghai, China.............. Manufacturing plant and office 17,000 Ice machines Leased
Moneteau, France............. Manufacturing plant and office 100,000 Cooking equipment Leased
Eglfing, Germany............. Manufacturing plant, office 130,000 Combination ovens Leased
and warehouse
Radevormwald, Germany........ Manufacturing plant and office 35,000 Beverage systems Leased
Castelfranco, Italy.......... Manufacturing plant and office 242,000 Ice machines Owned
Milan, Italy................. Manufacturing plant, warehouse 150,000 Ice machines Leased
and office
Bangkok, Thailand............ Manufacturing plant and office 45,000 Ice machines Leased
Aldershot, U.K............... Manufacturing plant and office 20,000 Microwave ovens Leased
Halesowen, U.K............... Manufacturing plant and office 84,000 Beverage systems Leased
Rochester, U.K............... Manufacturing plant and office 27,000 Ventilation systems Leased
Sheffield, U.K............... Manufacturing plant and office 100,000 Ovens, ranges and Leased
refrigeration products
------------------------------
(1) Subject to industrial revenue bond financing in the aggregate principal
amount of $4.5 million due in 2007.
(2) Subject to a mortgage on a portion of the land and building in an original
aggregate principal amount of $500,000 to secure our obligations under our
Loan Agreement with the City of Cleveland.
(3) Subject to industrial revenue bond financing in the aggregate principal
amount of $9.3 million due in 2020.
(4) Subject to industrial revenue bond financing in the aggregate principal
amount of $3.2 million due in 2006. When the bonds are repaid, the property
will be conveyed to us.
(5) Approximately 33,000 square feet sublet to a shoe company. We occupy only
59,000 square feet, and all but the 33,000 square feet sublet to the shoe
company is available for sublet.
74
For information concerning our rental expenses and commitments under
operating leases, see Note 27 to our consolidated financial statements included
elsewhere in this prospectus. We believe our properties are generally suitable
and adequate for the purposes for which they are intended.
In addition to the above properties, we have agreed to lease certain other
non-operational properties (including four former Magnet properties for which we
assumed liability at the time of the sale of our former building and consumer
products division). The aggregate rents payable under these non-operational
leases amount to L2.7 million per annum, and rents currently receivable amount
to L1.4 million per annum. Provision has been made of an amount that is
considered appropriate to cover potential liability under these leases.
EMPLOYEES
At the end of fiscal 1999, 2000 and 2001 we had the following number of
employees:
OCTOBER 2, SEPTEMBER 30, SEPTEMBER 29,
1999 2000 2001
---------- ------------- -------------
Food Service Equipment...................................... 6,036 5,917 5,655
Food Retail Equipment....................................... 2,536 2,352 1,934
Other Employees............................................. 2,679 2,965 278
------ ------ -----
Total....................................................... 11,251 11,234 7,867
====== ====== =====
As a result of the acquisition of Scotsman in August 1999, our workforce
almost doubled. As a result of the disposition of our business and consumer
products division in July 2001, our workforce decreased by approximately 2,400
employees. As of April 28, 2002, after taking into account the recent non-core
disposals, we had approximately 6,460 employees. As of the same date,
approximately 1,380 of our employees in North America belong to unions or are
covered by collective bargaining agreements. None of our subsidiaries has
suffered a material work stoppage or strike under our ownership, and we believe
relations with our employees and their unions are generally good.
ENVIRONMENTAL MATTERS
Our products and operations include the use, generation and disposal of
hazardous materials. We are subject to various U.S. federal, state, and local
and foreign laws and regulations relating to the protection of the environment,
including those governing the discharge of pollutants into the air and water,
the management of hazardous materials, and the cleanup of contaminated sites.
Thus, we could incur substantial costs, including cleanup costs, fines and civil
or criminal sanctions, and costs arising from third party property damage or
personal injury claims, as a result of violations of or liabilities under
environmental laws or non-compliance with environmental permits required at our
facilities. Currently, we do not expect the costs of compliance with these
requirements to have a material adverse effect on our business, results of
operations or financial condition.
Some of our subsidiaries have been named as a potentially responsible party
under the U.S. Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 (also known as CERCLA or the Superfund law) and similar U.S. state
statutes in connection with the cleanup of hazardous waste sites. Under these
laws, liability for the entire cost of the cleanup of contaminated sites can be
imposed upon any current or former site owners or operators, or upon any party
who sent waste to the site, regardless of the lawfulness of the original
activities that led to the contamination. In the past, however, our actual
liability has typically been immaterial. We do not believe that any liability
which might be imposed on us in connection with any known hazardous waste
previously used by our subsidiaries, either individually or in the aggregate,
will have a material adverse effect upon our business, financial condition,
liquidity and results of operation.
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MATERIAL CONTRACTS
ACQUISITIONS AND DISPOSITIONS
On April 20, 2001, we entered into an agreement to sell our building and
consumer products division to a subsidiary of Nobia for consideration of
L134 million satisfied by the payment of L114 million in cash and a vendor loan
of L20 million (which have been repaid), together with warrants to acquire
shares in Nobia. The consideration was adjusted downwards after preparation of
the completion accounts by approximately L2.1 million pursuant to an agreement
dated December 17, 2001. The agreement contains certain warranties and
indemnities from us. In particular, we gave an indemnity to the purchaser for
certain specified environmental matters up to an aggregate cap of L3 million for
three years from June 14, 2001, together with an indemnity for previously
unidentified environmental matters up to an aggregate cap of L2 million for
6 years from June 14, 2001. There is also a customary tax deed of indemnity
given by us in favor of the purchaser, for any tax liabilities incurred by the
building and consumer products division on or before September 30, 2000. We are
not aware of any claims or any potential claims under this indemnity. Claims for
breach of any warranty related to taxation and claims under the tax deed of
indemnity must be made within seven years of June 14, 2001. All other claims for
breach of warranty must be made within two years of June 14, 2001.
FINANCE AGREEMENTS
On February 20, 2002, our direct subsidiary, Enodis Holdings Limited
("Holdings"), entered into a senior secured credit agreement with certain of our
other subsidiaries as borrowers and/or as guarantors (the "guarantors"), Credit
Suisse First Boston and The Royal Bank of Scotland plc as arrangers and The
Royal Bank of Scotland plc, as issuing bank and agent. See "Description of Other
Indebtedness."
On February 20, 2002, we entered into an underwriting agreement in
connection with the rights offering with Credit Suisse First Boston (Europe)
Limited and Credit Suisse First Boston Equities Limited, wherein it has been
agreed between the parties thereto, subject to the conditions set out therein,
that:
- we appoint Credit Suisse First Boston (Europe) Limited as sponsor for the
purpose of the application for admission of the new ordinary shares in nil
paid form to listing on the Official List;
- we appoint Credit Suisse First Boston (Europe) Limited as nominated
representative for the purpose of the application for admission of the new
ordinary shares in nil paid form to trading on the London Stock Exchange;
- in consideration of its agreement to, among other things, underwrite the
rights offering, we have agreed to pay to Credit Suisse First Boston
Equities Limited a commission of 2.25% of the aggregate issue price of the
shares allotted in the rights offering, and we have also agreed to pay
Credit Suisse First Boston (Europe) Limited a fee of L80,000 per month for
the period from October 1, 2001, to April 30, 2002, in connection with its
appointment as sponsor to and financial adviser in connection with the
rights offering. This latter fee will be payable irrespective of whether or
not the rights offering proceeds;
- we have given certain representations, warranties and unlimited indemnities
to Credit Suisse First Boston (Europe) Limited and Credit Suisse First
Boston Equities Limited typical to a transaction of this nature;
- we have agreed to pay all costs arising in connection with the underwriting
agreement including all costs and out of pocket expenses incurred by Credit
Suisse First Boston (Europe) Limited and Credit Suisse First Boston Equities
Limited on our behalf in relation to the applications for listing and
trading; and
- the underwriting agreement is conditional, among other things, on admission
becoming effective by no later than 10:00 a.m. on March 19, 2002 (or such
later time and/or date as we, Credit Suisse First Boston (Europe) Limited
and Credit Suisse First Boston Equities Limited may agree). The underwriting
agreement confers on Credit Suisse First Boston (Europe) Limited and Credit
Suisse First Boston Equities Limited the right to terminate their
obligations in certain circumstances, prior to admission, including material
breach of warranty, material inaccuracy of the prospectus relating to the
rights offering, cancelation or demand for repayment of the senior secured
credit facilities or if there shall occur any fundamental change in national
or international financial, economic or political conditions or
76
a material adverse change in market conditions which in the reasonable
opinion of Credit Suisse First Boston would materially prejudice the success
of the rights offering or materially and adversely affect our financial
position and/or prospects.
EMPLOYMENT AGREEMENTS
We have an employment agreement with Andrew Allner dated February 14, 2002,
which has been amended by two letter agreements, all dated February 14, 2002.
Mr. Allner is entitled to a base salary at the rate of L350,000 per annum and
benefits, including participation in the discretionary bonus scheme, the senior
executive benefit plans and the share option plans, life insurance coverage
which provides for a death benefit of four times Mr. Allner's salary and family
medical and disability insurance, a car allowance in lieu of the use of a
company car and 26 weeks of salary in the event of disability as well as
retention on the payroll for the purpose of receiving any prolonged disability
benefits which may be payable and for the purposes of the pension plans.
Mr. Allner also receives 27% of base salary as "additional salary" in lieu
of membership in the Defined Benefit Pension Plan and in lieu of a contribution
to the Defined Contribution Pension Plan.
We may terminate Mr. Allner's employment on 12 months' notice. If the
termination is without cause or if Mr. Allner resigns within 12 months after a
change of control, Mr. Allner is entitled to a payment equal to (a) 95% of his
annual base salary, (b) 95% of his additional salary, (c) 95% of annual on
target bonus (only if termination occurs before May 31, 2003 or on change of
control) in addition to any pro rated bonus entitlement up to the date of
termination of employment, (d) one year's car allowance, (e) continuation of
medical and life assurance for one year, and (f) outplacement counselling.
Mr. Allner may terminate his employment upon three months' notice. The agreement
also provides for one year post-employment restrictive covenants.
We have an employment agreement with David McCulloch dated as of October 1,
2001. Mr. McCulloch is entitled to a base salary at the rate of $357,500 per
annum. In addition, Mr. McCulloch participates in the discretionary bonus
scheme, the share option plans and bonus plans generally provided to other
senior executives. If we were to terminate Mr. McCulloch's employment for cause,
Mr. McCulloch would be entitled only to earned but unpaid salary, benefits and
unreimbursed expenses. If the termination is without cause and takes place on or
before March 31, 2003, Mr. McCulloch would be entitled to instalment payments
equal to 24 months' base salary at the rate in effect on the date of his
termination, as well as unreimbursed expenses and other benefits to the date of
termination. In the event of a termination without cause after March 31, 2003,
Mr. McCulloch would be entitled to 12 months' base salary. In the event of a
termination without cause or if Mr. McCulloch resigns for good reason within one
year following a change of control, Mr. McCulloch would be entitled to a payment
equal to his base salary for 24 months from the date of termination and his full
target bonus for such year, pro-rata to the date of termination, plus a lump sum
payment equal to 24 months' full target bonus. If Mr. McCulloch terminates the
agreement for good reason, other than a change of control he would be entitled
to instalment payments equal to 24 months' base salary at the rate in effect on
the date of his termination, as well as unreimbursed expenses and other benefits
to the date of termination. The agreement also provides for one year
post-employment restrictive covenants.
We have an employment with David Wrench dated as of , 2002.
Mr. Wrench is entitled to a base salary at the rate of $270,000 per annum. In
addition, Mr. Wrench participates in:
- our discretionary bonus scheme;
- our share option plans; and
- bonus plans generally provided to our other senior executives.
If we were to terminate Mr. Wrench's employment for cause, Mr. Wrench would
be entitled only to earned but unpaid salary, benefits and unreimbursed
expenses. If the termination is without cause or for good reason, in exchange
for a general release in our favor, Mr. Wrench would be entitled to installment
payments equal to twelve months of his base salary at the rate in effect on the
date of his termination, as well as unreimbursed expenses and other benefits to
the date of termination. In the event of a termination without cause within
12 months following a change of control, Mr. Wrench would be entitled to a lump
sum
77
payment equal to 12 months of his base salary at the rate in effect on the date
of his termination, as well as unreimbursed expenses and other benefits to the
date of termination, as well as any bonus with respect to any fiscal year ended
prior to each change in control which Mr. Wrench would have been entitled to had
he remained with us. The agreement also provides for one year post-employment
restrictive covenants.
We have an employment agreement with Robert Eimers dated as of July 1, 2002.
Mr. Eimers is entitled to a base salary at the rate of $225,000 per annum. In
addition, Mr. Eimers participates in:
- our discretionary bonus scheme;
- our share option plans; and
- bonus plans generally provided to our other senior executives.
If we were to terminate Mr. Eimers' employment for cause, Mr. Eimers would
be entitled only to earned but unpaid salary, benefits and unreimbursed
expenses. If the termination is without cause or for good reason, in exchange
for a general release in our favor, Mr. Eimers would be entitled to installment
payments equal to twelve months of his base salary at the rate in effect on the
date of his termination, as well as unreimbursed expenses and other benefits to
the date of termination. In the event of a termination without cause within
12 months following a change of control, Mr. Eimers would be entitled to a lump
sum payment equal to 12 months of his base salary at the rate in effect on the
date of his termination, as well as unreimbursed expenses and other benefits to
the date of termination, as well as any earned bonus with respect to any fiscal
year ended prior to such change in control which Mr. Eimers would have been
entitled to had he remained with us. The agreement also provides for one year
post-employment restrictive covenants.
We have an employment agreement with David Odum dated as of October 1, 2001,
which was amended as of May 31, 2002, the date of Mr. Odum's resignation from
his positions with us. Under the agreement, as amended, Mr. Odum shall make
himself reasonably available to us until November 30, 2002 to render business
advice, among other matters. Mr. Odum received, in exchange for a general
release in our favor, a lump sum payment equal to 24 months' base salary of
$324,500 per year as well as unreimbursed expenses and other benefits to the
date of termination. He also received an additional payment in the amount of
$18,000. The agreement also provides for one year post-employment restrictive
covenants.
OTHER AGREEMENTS
On May 14, 2001, we entered into a settlement agreement with Shimon Katz,
Bomar Resources Incorporated (Bomar), Bomar Resources Holdings, Incorporated
(BRHI), International Minerals and Resources, S.A. (IMR) and International
Shipping Company, S.A. (ISR), pursuant to which we agreed to pay a total of
$17.5 million to IMR and ISR in final settlement of all claims under an
indemnity. Of the $17.5 million, $10 million was paid on May 14, 2001 and $7.5
million was paid on October 1, 2001. In 1996, Katz, Bomar and BRHI, brought an
action against us in the U.S. Federal District Court for the Southern District
of New York for indemnification against various third party claims, principally
claims by IMR and ISR against Bomar for profits lost through Bomar's
interference with the sale of a vessel and fraud claims against Bomar by Sierra
Rutile Ltd. (SRL) arising from a commercial joint venture with Bomar, together
with Bomar's costs of litigation defense. We had previously granted the
indemnity to predecessors of BRHI in connection with the 1988 sale of Bomar, our
former indirect subsidiary, and we had previously settled all claims with SRL in
1995. In September 1999, the District Court found us liable to provide
indemnification to BRHI. We were pursuing an appeal of this decision when the
settlement was reached.
We are a party to a deposit agreement dated July 11, 2000, with The Bank of
New York and all owners and holders from time to time of our ADRs pursuant to
which The Bank of New York acts as depository and registrar for our ADRs.
Generally, the depository will issue and register ADRs as requested against the
deposit of Ordinary Shares with its London or corporate trust office and upon
payment of fees, expenses and taxes. The depository will also deliver the
underlying Ordinary Shares as requested against the deposit of our ADRs for
cancelation and upon payment of fees, expenses and taxes.
78
LEGAL PROCEEDINGS
CONSOLIDATED-RELATED LAWSUITS
Enodis plc is party to a lawsuit in the U.S., and one of our subsidiaries,
Enodis Corporation, has been named in a number of lawsuits throughout the U.S.
in which the plaintiffs seek to hold Enodis plc and Enodis Corporation liable
for the alleged obligations of a former subsidiary, Consolidated Industries
Corp., by reason of Consolidated's alleged design and manufacture of some
870,000 defective home furnaces. Consolidated's alleged liability in respect of
these furnaces could potentially reach $600 million. Enodis Corporation sold
Consolidated to an unrelated party in 1998. The plaintiffs contend that each of
Enodis plc and Enodis Corporation is the alter ego of Consolidated and therefore
liable for its debts. The plaintiffs in these actions who are seeking to hold
Enodis Corporation accountable for the liabilities of Consolidated include
Daniel L. Freeland, in his capacity as trustee of the Chapter 7 bankruptcy
estate of Consolidated, the Trane Company, a division of America Standard,
Amana, LLC, Bard Manufacturing Company and Janet Pearce, on behalf of a class of
homeowners claiming, among other things, to be entitled to have their furnaces
replaced free of charge. The action by Janet Pearce has been voluntarily
withdrawn.
Additionally, Consolidated is a defendant in a certified class action in
California, which claims that certain furnaces manufactured by Consolidated were
defective. Enodis Corporation is not a party to that action but has an interest
in the outcome due to the alter ego claims described. This action is the subject
of a settlement agreement described below.
Finally, the bankruptcy trustee, Daniel L. Freeland, is also asserting a
variety of bankruptcy and equitable claims seeking to recover up to $30 million
that was paid by Consolidated to Enodis Corporation between 1988 and 1998.
Enodis Corporation has thoroughly investigated these claims and believes
that the claims based on the alter ego theory, as well as the trustee claims,
are without merit. Enodis Corporation is therefore defending them vigorously. We
record as a liability on our financial statements the amount of any future
losses that we consider to be both probable and reasonably estimable. Based upon
our current assessments of these lawsuits and claims and the capital resources
available to us, we believe that the ultimate resolution of these lawsuits and
claims would not exceed, by a material amount, the aggregate of the amounts
currently accrued in respect of them. Therefore, the resolution of these
lawsuits should not have a material effect on our financial condition, liquidity
or results of operations. However, the damages alleged in the lawsuits could
potentially reach $600 million, which substantially exceeds the estimate of, and
accruals for, the potential exposure. Enodis Corporation has placed its
insurance carriers on notice of these claims, and they have uniformly reserved
their rights in respect of them while at the same time co-operating with Enodis
Corporation in attempts to resolve them. Accordingly, if these lawsuits were
ultimately decided in a manner adverse to us, and in amounts in excess of the
accruals, it is "reasonably possible" that those determinations could have a
material adverse effect on our group. The term "reasonably possible" as used in
the preceding sentence means that the chance of a future transaction or event
occurring is more than remote but less than likely.
On February 21, 2002, Consolidated entered into a stipulation of settlement
of the California class action. The terms of the settlement were approved by the
California state court. The settlement remains subject to termination by the
settlement class or by Consolidated. Consolidated's obligations under the
settlement would be funded by us and certain of our insurance carriers. Our
contribution would be within our reserve estimates. If the settlement is
ultimately approved and implemented, the continuing liability of Consolidated to
the class would be substantially reduced or eliminated. We can provide no
assurance that the settlement will ultimately be implemented.
OTHER LITIGATION
Our subsidiaries are routinely defendants in litigation regarding product
liability claims. This litigation is generally covered by insurance.
79
MANAGEMENT
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
The following table sets forth information regarding our directors and
executive officers as of the date of this prospectus:
NAME AGE TITLE
---- ----------- -------------------------------------------------------------
DIRECTORS:
Andrew J. Allner............. 48 Director and Chief Executive Officer
Robert E. Briggs............. 54 Director
Peter M. Brooks.............. 55 Director and Chairman
Robert C. Eimers............. 54 Director and Executive Vice President, Global Human Resources
David S. McCulloch........... 55 Director and Chief Operating Officer
G. Eryl Morris............... 58 Director
Waldemar Schmidt............. 61 Director
W. David Wrench.............. 56 Director and Chief Financial Officer
ANDREW J. ALLNER, Chief Executive Officer, was appointed to our Board in
October 2000 as Chief Financial Officer. He was appointed CEO in November 2001,
having led the executive team since the former CEO resigned in March 2001. From
January 1998 to April 2000, he was Group Finance Director of Dalgety plc and
then Chief Financial Officer and Senior Vice President of its successor company,
PIC International Group plc, based in California. From September 1996 to
November 1997, he was Group Finance Director of Nycomed Amersham plc (formerly
known as Amersham International plc). Prior to that, from 1992 to
September 1996, he was Director of Financial Planning and Control at Guinness
plc. Formerly, he was a partner at Price Waterhouse. Mr. Allner was elected by
the shareholders for a term of service that expires in January 2004, although
his employment agreement provides that he shall resign from the Board upon the
termination of his employment. Mr. Allner is also a non-executive director of
Moss Bros. Group plc.
ROBERT E. BRIGGS, a non-executive director based in the U.S., joined our
board in August 2000. He was appointed to our Audit Committee in January 2001.
Mr. Briggs is currently the Senior Vice President and Chief Financial Officer of
Kaiser Permanente Health Plan and Hospitals, Inc., having joined Kaiser in
December 2001. Prior to joining Kaiser Permanente, Mr. Briggs was Senior Vice
President and Chief Financial Officer of The Pillsbury Company, from
January 1998 until November 2001. From October 1996 to December 1997,
Mr. Briggs was self-employed as a financial advisory consultant. Previously,
Mr. Briggs held various senior positions with both Triarc and Pepsico including
President, Arby's International from 1993 to September 1996 and Vice President
and Chief Financial Officer of Kentucky Fried Chicken U.S.A. from 1992 to 1993.
Mr. Briggs was elected by the shareholders for a term of service that expires in
January 2004.
PETER M. BROOKS, is our Chairman, a non-executive position, and a member of
our Nominations Committee. He also serves on our Audit and Remuneration
Committees. Mr. Brooks joined our Board as a non-executive director in May 1998
and became our Chairman in January 2000. He was a consultant to Clifford Chance,
LLP, where he acted as Chairman of European Corporate Coverage from June 1999
until May 2002. From 1992 to December 1996, he was Head of Corporate Practice at
Clifford Chance. In January 1997, he became General Counsel of Deutsche Morgan
Grenfell. From January 1998 to February 1999, Mr. Brooks was General Counsel to
the Board of the Global Corporate and Institutions Division at Deutsche Bank
Group. Mr. Brooks is currently Chairman of Chesterton International plc and
Chesterton Investment Services. Mr. Brooks was elected by the shareholders for a
term of service that expires in January 2005.
ROBERT C. EIMERS, was appointed Executive Vice President, Global Human
Resources and Director in May 2002. Prior to that, he was Vice President, Global
Human Resources from July 2001 to May 2002. Prior to that, he was Vice
President, Global Organization Development of APW, Ltd. a manufacturing services
company, from January 2001 to July 2001. From November 1998 to November 1999,
Mr. Eimers was Vice
80
President, Human Resources at Scotsman Industries, Inc., and, after Scotsman's
1999 acquisition by Welbilt, from November 1999 to December 2000 Vice President,
Organization Development of Welbilt. From November 1997 to November 1998,
Mr. Eimers was Vice President of Medina & Thompson, Inc., a management
consulting firm specializing in executive assessment and development. From
January 1995 to September 1997, Mr. Eimers was Senior Vice President, Human
Resources, of Service Merchandise. Mr. Eimers is also a director of One Source,
a consulting firm.
DAVID S. MCCULLOCH, Chief Operating Officer and Director, joined us in 1987.
Mr. McCulloch was appointed to the Board in November 2001. He held the position
of President, Global Food Service Equipment Group from September 2001 to
May 2002. He held the positions of President and CEO of Garland Canada from 1992
to 1995, President and CEO of the Garland Group from 1995 to August 1998,
President of the Global Specifications Group from August 1998 to March 2001 and
President, Food Service Equipment--North America from March 2001 to
September 2001. Prior to joining Enodis, he spent 17 years in the residential
appliance business with Camco Inc, a subsidiary of General Electric.
Mr. McCulloch was elected by the shareholders for a term of service that expires
in January 2005.
G. ERYL MORRIS, is a non-executive and Senior Independent Director and the
Chairman of our Audit Committee. He also serves on our Remuneration Committee.
Mr. Morris joined our Board as a non-executive director in July 1998. He is
Chairman of Airinmar Group Limited and HPI Group Limited and is a non-executive
director of awg plc, IMVA Holding Limited and Mill Digital Media Limited. From
1970 to August 1998, Mr. Morris was employed by Courtaulds plc, becoming a
director in 1981 and Deputy Chief Executive in 1994. Mr. Morris was elected by
the shareholders for a term of service that expires in January 2004.
WALDEMAR SCHMIDT, was appointed a non-executive director of our Board in
April 2000. He also serves as Chairman of our Nominations and Remuneration
Committees. He was Chief Executive of ISS Group from 1995, and had been employed
by ISS from 1973, until he left ISS in September 2000. Mr. Schmidt is Chairman
of Superfos A/S, Tholstrup Cheese Holding A/S, Navision A/S and Thrane & Thrane
A/S and a director of F Group A/S, Group 4 Falck A/S, Alfa Laval AB, Ore Arkil
Holding A/S, Energi E2 A/S and Viterra Energy Services AG. Mr. Schmidt was
elected by the shareholders for a term of service that expires in January 2005.
W. DAVID WRENCH, was appointed Chief Financial Officer and Director of our
Group in May 2002. Prior to that, he was Chief Financial Officer of our Global
Food Service Equipment Group from March 2001 to May 2002 and Chief Financial
Officer, Global Operations from November 2001 to May 2002. Prior to that, he was
Chief Financial Officer of the Global Specifications Group (Enodis), appointed
in February 2000. From January 1997 to July 1999, he was Executive
Vice-President and Chief Operating Officer of Jonview Canada Inc., an inbound
tour operator. From February 1993 to December 1996, Mr. Wrench held various
executive positions for Noma Industries Limited, ultimately serving as
President, Noma Consumer Products. Mr. Wrench is a member of the Financial
Executives Institute.
81
DIRECTOR COMPENSATION
The compensation in fiscal 2001 of each of our directors who served during
fiscal 2001 is set forth below. For information regarding stock option plan and
pension benefits, see "--Compensation Plans" and "--Share Options of
Management."
NAME SALARY FEES BONUSES(1) BENEFITS(2) TOTAL
---- ---------------- ---------------- ---------------- --------------- ------------------
Andrew J. Allner.................. L293,686(3) -- L 250,000 L 21,496 L 565,182
Robert E. Briggs.................. -- L 27,500 -- -- 27,500
Peter M. Brooks................... -- 161,461 -- -- 161,461
Penny L. Hughes(4)................ -- 10,833 -- -- 10,833
G. Eryl Morris.................... -- 32,500 -- -- 32,500
Andrew F. Roake(5)................ 364,382 -- -- 8,333 372,715
Waldemar Schmidt.................. -- 31,250 -- -- 31,250
David W. Williams(6).............. 162,500 -- -- 55,162 217,662
---------------- ---------------- ---------------- --------------- ------------------
Total............................. L 820,568 L 263,544 L 250,000 L 84,991 L 1,419,103
------------------------------
(1) Bonuses are paid based on budgeted financial targets or as approved by the
Remuneration Committee. Bonuses are not included in pensionable salary.
(2) Benefits are not included in pensionable salary. No benefit has been
included in the table for options granted and other compensation under the
various executive and employee plans discussed below.
(3) Mr. Allner's salary amount includes L62,437 in lieu of our contribution to
our pension arrangements.
(4) Ms. Hughes resigned from the Board on January 17, 2001.
(5) Mr. Roake resigned from the Board and left our employ as of December 31,
2001. He will receive $535,000 (plus benefits) in 26 installments in 2002.
Payments would accelerate if there is a change of control.
(6) Mr. Williams resigned from the Board on March 23, 2001 and left our employ
on March 31, 2001. Benefits include a relocation bonus. He also received
L327,302 (plus one year's benefits) in severance payments.
COMPENSATION PLANS
No more than 10% of our newly issued ordinary shares from time to time may
be allotted under our Employee Share Schemes over a ten year period, excluding
options to purchase existing ordinary shares. We have the following Executive
Share Option Schemes under which options to acquire ordinary shares have been
granted to executives and key employees:
- a 2001 Executive Share Option Scheme, approved on January 16, 2001, which
may use either new or existing shares;
- a 1995 Executive Share Option Scheme, which used new shares;
- a 1993 Executive Share Option Scheme, which used shares purchased by an
independently managed share trust and was established in 1994; and
- a 1984 Executive Share Option Scheme, which used new shares.
These Executive Share Option Schemes each have a part approved by the U.K.
Inland Revenue and an unapproved part. Gross gains on exercise of Inland Revenue
approved options are normally subject to U.K. capital gains tax on disposal of
the shares acquired. Gross gains on exercise of unapproved options are subject
to U.K. income tax. The exercise price of options granted under these schemes
must be not less than the market price of an ordinary share shortly before the
time of grant. With respect to the 1993 Scheme, 1,269,341 ordinary shares are
currently held in the trust. We finance the trust by way of an interest free
loan in the amount of L2.1 million. The trustees have waived the right to
receive dividends on all shares held.
Options may not normally be exercised until the third anniversary of the
date of grant and may be subject to performance conditions. The performance
condition set by the Remuneration Committee for the options granted during
fiscal 2000 was that, under normal circumstances, options would be exercisable
only if
82
the increase in our adjusted earnings per share had exceeded the growth in the
U.K. Retail Price Index by an average of at least 3% annually over a three year
period. No further options will be granted under the 1995, 1993 and 1984
Schemes.
Under all of the above schemes (except the 1993 Scheme), options to purchase
an aggregate of 14.1 million ordinary shares were outstanding on May 31, 2002.
Of these, options to purchase 0.9 million shares were exercisable on May 31,
2002. The number of options outstanding and exercisable have been adjusted
following the rights offering.
Under the 2001 Scheme, the value of shares under options that an executive
may receive in any year may not normally exceed twice his or her basic salary.
The initial options granted under this scheme will be exercisable in full only
if our total shareholder return over at least three years is ranked in the upper
quartile compared, as to half the options, to U.K. companies in the FTSE Mid 250
Index and, as to the other half of the options, to a select group of other
companies with similar businesses. If our total shareholder return is between
the median and the upper quartile compared to these two groups, the number of
options exercisable will be reduced proportionately between a maximum of 50% and
a minimum of 17.5% for each half of the options. If our total shareholder return
is equal to or less than the median compared to either group, that half of the
options will not be exercisable. In addition, no options will be exercisable
unless the growth in our earnings per share exceeds the rate of inflation.
For future grants of options, the performance conditions have been
simplified: our total shareholder return will no longer be compared with the
select group of companies with similar businesses, and for options in any
financial year of a value up to and including one times annual salary, all
options will be exercisable if our total shareholder return exceeds the median
compared with the U.K. companies in the FTSE mid 250 Index.
In addition, our shareholders have authorized three other employee share
schemes under which executives and others may purchase our ordinary shares: the
2002 Sharesave Scheme, the Share Matching Scheme and the Employee Stock Purchase
Plan. Although our shareholders have authorized them, we have not implemented
these plans, and we do not currently intend to implement them in the future. In
addition, although we cannot in the future grant any further options under our
1992 Sharesave Scheme, options granted pursuant to that scheme remain
outstanding.
Executive directors residing in the U.K. are also eligible to join a
tax-approved defined-benefits plan that is part of our Berisford (1948) Pension
Scheme. The plan is non-contributory and provides for a pension of up to
two-thirds of final salary up to the Inland Revenue earnings cap at normal
retirement age of 60 after 20 years' service. Funded Unapproved Retirement
Benefits Schemes are available to provide additional retirement and death
benefits for the U.K. executive directors. These are money-purchase
arrangements. For U.K. executive directors, we contribute 30% of pensionable
salary in excess of the Inland Revenue earnings cap and pay additional life
assurance premiums and all expenses incurred in administering the arrangements.
Executive directors are provided with a fully expensed company car (or
allowance in lieu thereof), medical insurance, disability insurance and other
benefits similar to those provided by other public companies of our size. See
"Business--Material Contracts" for a description of the executive directors'
employment agreements, including benefits upon termination of employment.
SHARE OPTIONS OF MANAGEMENT
The following table describes the options to acquire ordinary shares granted
to our directors and executive officers under our Executive Share Option Schemes
and held by them at June 30, 2002, or their resignation date if earlier.
83
The exercise prices have been rounded to the nearest 0.1p.
NUMBER OF EARLIEST
DATE OF OPTIONS EXERCISE DATE EXPIRATION
DIRECTORS GRANT GRANTED PRICE EXERCISABLE DATE
--------- -------- --------- -------- ----------- ----------
Andrew J. Allner.............................. 03/21/02 1,481,977(1) 85.5p 03/21/05 03/21/12
03/21/02 334,332 147p 03/21/05 03/21/12
Robert C. Eimers.............................. 07/03/00 24,699 260.70p 07/03/03 07/02/10
03/21/02 102,013 85.5p 03/21/05 03/21/12
David S. McCulloch............................ 07/01/97 49,399 116.60p 07/01/00 06/30/07
07/28/99 43,223 212.80p 07/28/02 07/27/09
09/10/01 444,063 81.78p 09/10/04 09/09/11
03/21/02 302,401 85.5p 03/21/05 03/21/12
03/21/02 271,218 147p 03/21/05 03/21/12
Andrew F. Roake............................... 11/28/97 314,684 151.82p 12/31/01 02/03/04
(resigned December 31, 2001) 11/17/98 170,348 145.75p 12/31/01 02/03/04
11/24/99 111,393 254.25p 12/31/01 02/03/04
07/03/00 95,884 260.73p 12/31/01 02/03/04
W. David Wrench............................... 07/03/00 37,049 260.73p 07/03/03 07/02/10
01/22/01 61,469 146.56p 01/22/04 01/21/11
03/21/02 194,551 85.5p 03/21/05 03/21/12
------------------------------
(1) Upon exercise of options over 469,829 of these shares, Mr. Allner is
entitled to receive at the time of exercise the sum of L51,681.
DIRECTORS' PENSION INFORMATION
The following table relates to the defined benefit arrangements for the
executive directors residing in the U.K. as of September 29, 2001, or earlier
resignation.
INCREASE IN ACCUMULATED
ACCRUED TOTAL
PENSION DURING TRANSFER PENSION AT
YEARS FISCAL 2001 VALUE OF 9/29/01
NAME OF SERVICE P.A. INCREASE P.A.
---- ---------- -------------- -------- -----------
David W. Williams (resigned March 23, 2001).......... 5 L1,200 L15,700 L13,800
The transfer value disclosed above does not represent a sum paid or payable
to the individual director. Instead, it represents a potential liability of the
pension scheme. In addition, we paid sums of L22,003 and L31,410 in fiscal 2001
to unapproved money purchase arrangements for the benefit of Messrs. Roake and
Williams, respectively. The total amount set aside or accrued for all employees
and directors for pension benefits was L2.9 million. See Note 25 to our
consolidated financial statements.
BOARD PRACTICES
TERMS OF OFFICE
Non-executive directors are appointed by the Board for an initial term of
five years, but the directors' appointments are subject to approval by
shareholders at the first opportunity after their appointment, and to
re-election thereafter by our shareholders at least every three years in
accordance with our Articles of Association.
COMMITTEES OF THE BOARD
The Nominations Committee undertakes the search process and recommends
candidates to the Board as necessary. The committee's chairman is Mr. Schmidt,
who serves together with Messrs. Brooks and Allner.
84
The Audit Committee monitors accounting policies and financial reporting,
receives reports from the internal audit function and reviews the half-yearly
and annual accounts before they are presented to the Board. It also maintains a
liaison with external auditors and keeps under review the scope and results of
the audit and its cost effectiveness and the independence and objectivity of the
auditors, taking into account where necessary any non-audit services provided to
Enodis by its auditors. The committee's chairman is Mr. Morris, who serves
together with Messrs. Brooks and Briggs. The Audit Committee must be comprised
solely of non-executive directors and consist of not less than three members.
The Audit Committee met four times in Fiscal 2001 and plans to meet not less
than four times in each subsequent year.
The Remuneration Committee reviews and advises upon the remuneration and
benefits packages of the executive directors, and it reports to the full Board.
The fees of the non-executive directors are determined by the full Board. The
committee is advised and assisted as required by external consultants and the
Vice President, Global Human Resources. The committee's chairman is
Mr. Schmidt, who serves together with Messrs. Brooks and Morris.
The Remuneration Committee's policy is to offer executives a compensation
package which will enable Enodis to recruit and retain high quality executives.
Within this overall strategy, however, the committee places an emphasis on
fairness throughout the company and considers the median salary for similar
positions paid by comparable global businesses in each country or region, taking
into account individual and company performance. Bonuses are based on
performance targets, including profit before tax, and any others that the
committee considers relevant. Long term compensation, including executive and
employee option and share purchase plans and proposed plans, are described above
under "--Compensation Plans." The Board believes that the total remuneration
package aligns senior executives' interests with those of the shareholders and
gives these individuals strong incentives to perform at the highest levels.
The executive management of our group is undertaken by an Executive
Committee, which is currently composed of: Andrew Allner, David McCulloch, David
Wrench, and Robert Eimers. The Committee meets in person or by telephone
conference call on a weekly basis.
SHARE OWNERSHIP OF DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
As of June 30, 2002 (or earlier resignation), our directors and executive
officers owned our ordinary shares and ADSs as set forth below. The options to
purchase ordinary shares held by these persons are not included in the figures
set forth in the table below.
PERCENT
SHARES ADSS OF CLASS
-------- -------- --------
Andrew J. Allner............................................ 7,200 0 *
Robert E. Briggs............................................ 0 2,000 *
Peter M. Brooks............................................. 43,500 0 *
Robert C. Eimers............................................ 0 0 *
Penny L. Hughes (resigned on January 17, 2001).............. 2,000 0 *
David S. McCulloch.......................................... 57,000 0 *
G. Eryl Morris.............................................. 32,000 0 *
Andrew F. Roake (resigned December 31, 2001)................ 100,000 10,000 *
Waldemar Schmidt............................................ 13,680 0 *
David W. Williams (resigned on March 23, 2001).............. 8,353 100 *
W. David Wrench............................................. 0 0 *
------------------------------
* Less than 1%
85
SHAREHOLDERS
The number of our ordinary shares outstanding at July 1, 2002, was
400,465,587, held by 7,343 holders of record. Holders of record in the U.K. held
396,555,744, or 99.02%, of the ordinary shares and there were 19 holders of
record, with 3,600,825 ordinary shares, in the United States. There were also
three holders of record of our ADSs, holding 286,100 ADSs (representing
1,144,400 ordinary shares held by holders of record in the U.K.), each residing
in the United States. We also believe, based on notices provided to us, that, as
of July 1, 2002, the following persons beneficially owned 3% or more of our
outstanding ordinary share capital:
SHARES
BENEFICIALLY
OWNED PERCENT OF CLASS
------------ ----------------
Harris Associates L.P.(1).............................. 42,903,960 10.74%
Arnhold & Bleichroeder Holdings Inc.(2)................ 17,927,000 4.47%
Putnam Investment Management LLC(3).................... 10,799,400 4.31%
CGNU plc(3)............................................ 7,776,273 3.12%
Du Pont Capital Management Corp.(3).................... 7,663,274 3.06%
------------------------------
(1) Based on information provided to us, we believe that as at May 28, 2002,
these shares were beneficially held by accounts managed by an investment
adviser, Harris Associates L.P., the largest of which is Oakmark
International Fund (with 32,609,920 shares).
(2) Based on information provided to us, we believe that as of July 1, 2002,
these shares were beneficially held by accounts managed by an investment
adviser, Arnhold & Bleichroder Holdings Inc.
(3) Based on notices received prior to the increase in the Company's share
capital following the Rights Issue in April 2002.
None of our shareholders has different voting rights from other holders of
ordinary shares. To our knowledge, we are not controlled, directly or
indirectly, by any corporation, foreign government or any other natural or legal
person or group of persons.
86
DESCRIPTION OF OTHER INDEBTEDNESS
SENIOR SECURED CREDIT FACILITIES
As part of the new financing arrangements, our subsidiary Enodis Holdings
Limited ("Holdings") and certain of its direct and indirect subsidiaries entered
into a credit agreement dated February 20, 2002, among Credit Suisse First
Boston and The Royal Bank of Scotland plc as arrangers, The Royal Bank of
Scotland plc as issuing bank and as agent and a number of Holdings' direct and
indirect subsidiaries as borrowers and/or as guarantors (the "Guarantors"). The
following is a summary of the material provisions of the senior secured credit
facilities. We recommend you refer to the actual agreement for further details,
copies of which are available upon request.
GENERAL
The facilities constituted by the senior secured credit facilities comprise
a $300,000,000 five-year term loan facility (the "A Term Loan Facility") and a
$70,000,000 six-year term loan facility (the "B Term Loan Facility" and,
together with the A Term Loan Facility, the "Term Loan Facilities") and a
$85,000,000 five-year revolving credit facility (the "Revolving Facility"). The
Term Loan Facilities were used by Holdings to repay outstanding indebtedness
under our prior credit facility. The Revolving Facility can be used to finance
working capital requirements and for general corporate purposes.
SECURITY; GUARANTEES
The indebtedness under the senior secured credit facilities is secured by
(i) fixed and floating charges over substantially all of the assets of Holdings
and those Guarantors incorporated in the U.K., the U.S. and Canada and (ii)
pledges over the shares of all the guarantors. Each of the Guarantors will
unconditionally guarantee all of the outstanding obligations under the senior
secured credit facilities.
COVENANTS
The senior secured credit facilities contain customary operating and
financial covenants, including without limitation, covenants to maintain:
- a minimum consolidated net worth, which may be no less than
L150 million (subject to certain adjustments), less any writedowns
associated with our Kysor Warren operations. At March 30, 2002, our
consolidated net worth was L84.2 million, which was below the
covenant's requirements due to the timing of the receipt of the rights
offering proceeds, and was waived by the banks. We are now in
compliance with this covenant;
- a ratio of consolidated total net debt to consolidated EBITDA, that
does not exceed 4.50:1 at March 31, 2000 and 4.00:1 at June 30, 2002,
and that continues to decline quarterly to 2.00:1 at December 31, 2004
and remains constant thereafter. At March 30, 2002, this ratio was
3.76:1;
- a ratio of consolidated total net senior debt to consolidated EBITDA,
that does not exceed 3.00:1 at March 30, 2002 and 2.90:1 at June 30,
2002, and that continues to decline quarterly to 1.00:1 at
December 31, 2004 and remains constant thereafter. At March 30, 2002,
this ratio was 2.23:1;
- a ratio of consolidated EBITDA to consolidated net interest payable,
that is not less than 2.00:1 at March 30, 2002 and 2.15:1 at June 30,
2002, and that continues to increase quarterly to 4.00:1 at
December 31, 2004 and remains constant thereafter. At March 30, 2002,
this ratio was 2.86:1;
- a ratio of consolidated EBITDA to consolidated net senior debt payable,
that is not less than 3.20:1 at March 30, 2002 and June 30, 2002, and
that continues to increase quarterly to 6.00:1 at June 30, 2004 and
remains constant thereafter. At March 30, 2002, this ratio was 5.29:1;
and
- consolidated cashflow that is not less than 1.05 times the consolidated
total debt service, starting from December 31, 2002.
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Consolidated EBITDA is generally defined in the senior secured credit facility
to mean the consolidated net pre-tax profit of the Enodis group adjusted by:
- adding back consolidated interest payable;
- deducting any financing charges received or receivable;
- excluding any amount attributable to minority interest
- excluding exceptional or extraordinary items;
- excluding any profit and loss arising from the sale of a real property
asset;
- adding back depreciation and amortization, including the amortization
of deferred finance costs;
- adding back any upfront fees and other finance costs;
- deducting the amount of profit included in any joint venture included
in consolidated EBITDA which has not been distributed in cash; and
- for the purposes of calculating our leverage ratios only, including the
net pre-tax of a member of our group (subject to certain adjustments)
that has been acquired during the measurement period.
We are currently in compliance with all of the above covenants.
In addition, the senior secured credit facilities include covenants relating to
limitations on:
- sales of assets;
- dividends and other restricted payments;
- mergers;
- indebtedness;
- acquisitions; and
- liens.
INTEREST RATE AND FEES
Advances under the A Term Loan Facility and the Revolving Facility bear
interest at LIBOR or EURIBOR plus a margin of 2.75%. Advances under the B Term
Loan Facility bear interest at LIBOR plus 3.5%. The margins for the A Term Loan
Facility and the Revolving Facility will be further adjusted based on our ratio
of consolidated total net debt to consolidated EBITDA.
A commitment fee based on the undrawn amount of the Revolving Facility
commitment is payable quarterly in arrears, computed at the rate of 50% of the
applicable margin per annum (subject to a maximum of 0.875% per annum).
MANDATORY PREPAYMENT; REPAYMENT
Mandatory prepayment in full is required if there is a change of control of
the Company or a disposal of substantially all of the assets of the Company and
its subsidiaries.
Mandatory partial repayments are required to be made out of:
- proceeds from asset sales, other than in the ordinary course of
business; or
- 75% of surplus cashflow of the Company in any fiscal year. Surplus
cashflow is defined to mean consolidated cashflow for any financial
year or for the financial half-year from April 1, 2002 to
September 28, 2002, minus consolidated total debt service during such
period and before deducting dividends paid by Enodis plc during such
period.
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EVENTS OF DEFAULT
The senior secured credit facilities contain customary events of default,
including:
- failure to make payments under the senior secured credit facilities;
- breach of covenants, including financial covenants;
- breach of representations;
- cross-default in respect of indebtedness in excess of L5 million;
- insolvency, bankruptcy or similar events;
- change of control; and
- material adverse change.
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DESCRIPTION OF THE NOTES
Enodis plc issued the old notes and will issue the exchange notes (together,
the "Notes") under an Indenture (the "Indenture") between itself and The Bank of
New York, a New York banking corporation, acting through its London branch, as
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the U.S. Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act").
Certain terms used in this description are defined under the subheading
"--Certain Definitions." In this description, the word "Company" refers only to
Enodis plc and not to any of its subsidiaries.
The following is a description of the material provisions of the Indenture
and the Registration Rights Agreement. This description should be read in
conjunction with the Indenture and the Registration Rights Agreement. You may
request copies of these agreements at our address set forth under the heading
"Where You Can Find More Information."
BRIEF DESCRIPTION OF THE NOTES
These Notes:
- are unsecured senior obligations of the Company;
- are senior in right of payment to any future Subordinated Obligations
of the Company;
- are effectively subordinated to indebtedness and other liabilities of
our subsidiaries; and
- are subject to registration with the SEC pursuant to the Registration
Rights Agreement.
PRINCIPAL, MATURITY AND INTEREST
The Company issued the old notes initially with a maximum aggregate
principal amount of L100 million. The Company issued the old notes and will
issue the exchange notes in denominations of L1,000 and any integral multiple of
L1,000. The Notes will mature on April 15, 2012. Subject to our compliance with
the covenant described under the subheading "--Certain Covenants--Limitation on
Indebtedness," we are permitted to issue more Notes under the Indenture in an
unlimited principal amount (the "Additional Notes"). The Notes and the
Additional Notes, if any, will be treated as a single class for all purposes of
the Indenture, including waivers, amendments, redemptions and offers to
purchase. Unless the context otherwise requires, for all purposes of the
Indenture and this "Description of the Notes," references to the Notes include
any Additional Notes actually issued.
Interest on these Notes will accrue at the rate of 10 3/8% per annum and
will be payable semiannually in arrears on April 15 and October 15, commencing
on October 15, 2002. We will make each interest payment to the holders of record
of these Notes on the immediately preceding April 1 and October 1. We will pay
interest on overdue principal at 1% per annum in excess of the above rate and
will pay interest on overdue installments of interest at such higher rate to the
extent lawful.
Interest on these Notes will accrue from March 26, 2002. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Additional interest may accrue on the Notes in certain circumstances
pursuant to the Registration Rights Agreement.
OPTIONAL REDEMPTION
Except as set forth below or under "Redemption for Changes in Withholding
Taxes," we will not be entitled to redeem the Notes at our option prior to
April 15, 2007.
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On and after April 15, 2007, we will be entitled at our option to redeem all
or a portion of these Notes upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed in percentages of principal amount on the
redemption date), plus accrued interest to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the 12-month period
commencing on April 15 of the years set forth below:
PERIOD REDEMPTION PRICE
------ ----------------
2007........................................................ 105.188%
2008........................................................ 103.458%
2009........................................................ 101.729%
2010 and thereafter......................................... 100.000%
In addition, before April 15, 2005, we may at our option on one or more
occasions redeem Notes (which includes Additional Notes, if any) in an aggregate
principal amount not to exceed 35% of the aggregate principal amount of the
Notes (which includes Additional Notes, if any) originally issued at a
redemption price (expressed as a percentage of principal amount) of 110.375%,
plus accrued and unpaid interest to the redemption date, with the net cash
proceeds from one or more Public Equity Offerings; PROVIDED that
(1) at least 65% of such aggregate principal amount of Notes (which includes
Additional Notes, if any) remains outstanding immediately after the
occurrence of each such redemption (other than Notes held, directly or
indirectly, by the Company or its Affiliates); and
(2) each such redemption occurs within 60 days after the date of the related
Public Equity Offering.
We may exercise our option to redeem if (i) it is permitted under our senior
secured credit facilities, (ii) we have the required amount of cash to effect
the redemption and (iii) our directors, utilizing their business judgment,
determine that it is commercially and economically beneficial to us and our
shareholders. For example, we may deem it to be in our and our shareholders'
best interest to redeem the notes if interest rates available to us become
sufficiently low.
SELECTION AND NOTICE OF REDEMPTION
If we are redeeming less than all the Notes at any time, the Trustee will
select Notes on a pro rata basis, by lot or by such other method as the Trustee
in its sole discretion shall deem to be fair and appropriate.
We will redeem Notes of L1,000 or less in whole and not in part. We will
cause notices of redemption to be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at its registered address.
If any Note is to be redeemed in part only, the notice of redemption that
relates to that Note will state the portion of the principal amount thereof to
be redeemed. We will issue a new Note in a principal amount equal to the
unredeemed portion of the original Note in the name of the holder upon
cancelation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION; OFFERS TO PURCHASE; OPEN MARKET PURCHASES
We are not required to make any mandatory redemption or sinking fund
payments with respect to the Notes. However, under certain circumstances, we may
be required to offer to purchase Notes as described under the captions "--Change
of Control" and "Certain Covenants--Limitation on Sales of Assets and Subsidiary
Stock." We may at any time and from time to time purchase Notes in the open
market or otherwise.
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SUBSTITUTION OF CURRENCY
Twelve of the Member States of the European Union have adopted the euro as
their national currency. The United Kingdom did not elect to adopt, and has not
yet adopted, the euro. If, however, the U.K. does adopt the euro in the future,
U.K. government regulations relating to the euro will apply to the Notes offered
hereby and the Indenture. In this event, neither we nor any Holder will be
entitled to early redemption, rescission, notice or repudiation of the terms and
conditions of the Notes or the Indenture based on redenomination of the Notes
and the Indenture into euro. Neither we nor any Holder will be entitled to raise
other defenses or request any compensation claim or affect any other obligation
of ours under the Notes or the Indenture on that basis.
ADDITIONAL AMOUNTS
We are required to make all our payments under or with respect to the Notes
free and clear of and without withholding or deduction for or on account of any
present or future tax, duty, levy, impost, assessment or other governmental
charge (including penalties, interest and other liabilities related thereto)
(hereinafter "Taxes") imposed or levied by or on behalf of the U.K. or any
political subdivision thereof or any authority therein or thereof having power
to tax, or within any other jurisdiction in which we are organized or are
otherwise resident for tax purposes or any jurisdiction from or through which
payment is made (each a "Relevant Taxing Jurisdiction"), unless we are required
to withhold or deduct Taxes by law. Currently, the U.K. is the only relevant
taxation jurisdiction.
If we are so required to withhold or deduct any amount for or on account of
Taxes imposed by a Relevant Taxing Jurisdiction from any payment made under or
with respect to the Notes, we will be required to pay such additional amounts
("Additional Amounts") as may be necessary so that the net amount received by
you (including Additional Amounts) after such withholding or deduction will not
be less than the amount you would have received if such Taxes had not been
withheld or deducted; PROVIDED, HOWEVER, that the foregoing obligation to pay
Additional Amounts does not apply to (1) any Taxes that would not have been so
imposed but for the existence of any present or former connection between the
relevant Holder (or between a fiduciary, settlor, beneficiary, member or
shareholder of, or possessor of power over the relevant Holder, if the relevant
Holder is an estate, nominee, trust or corporation) and the Relevant Taxing
Jurisdiction (other than the mere holding of such Note); (2) any estate,
inheritance, gift, sales, excise, transfer, personal property tax or similar
tax, assessment or governmental charge; (3) any Taxes that are imposed or
withheld by reason of the failure of the Holder or beneficial owner of the Note
to comply with any request by the Company to provide information or
documentation concerning the nationality, residence or identity of such Holder
or beneficial owner or to make any declaration or similar claim or satisfy any
information or reporting requirement, which is required or imposed by a statute,
treaty, regulation or administrative practice of the taxing jurisdiction as a
precondition to exemption from all or part; (4) a withholding or deduction
imposed on a payment to an individual which is required to be made pursuant to
any European Union Directive on the taxation of savings implementing the
conclusions of the ECOFIN Council meeting on November 26-27, 2000 or any law
implementing or complying with, or introduced in order to conform to, such
Directive; (5) a Note presented for payment by or on behalf of a Noteholder who
would have been able to avoid such withholding or deduction by presenting the
relevant Note to another paying agent in a Member State of the European Union;
or (6) any Taxes imposed by reason of any combination of clauses (1), (2), (3),
(4) or (5) above.
In addition, we will not pay Additional Amounts (a) if the payment could
have been made without such deduction or withholding if the beneficiary of the
payment had presented the Note for payment within 30 days after the date on
which such payment or such Note became due and payable or the date on which
payment thereof is duly provided for, whichever is later (except to the extent
that the holder would have been entitled to Additional Amounts had the Note been
presented on the last day of such 30-day period), or (b) with respect to any
payment of principal of (or premium, if any, on) or interest on such Note to any
holder who is a fiduciary or partnership or any person other than the sole
beneficial owner of such payment, to the extent that a beneficiary or settlor
with respect to such fiduciary, a member of such a partnership or
92
the beneficial owner of such payment would not have been entitled to the
Additional Amounts had such beneficiary, settlor, member or beneficial owner
been the actual holder of such Note.
Upon request, we will provide the Trustee with official receipts or other
documentation satisfactory to the Trustee evidencing the payment of the Taxes
with respect to which Additional Amounts are paid.
Whenever in the Indenture there is mentioned, in any context:
(1) the payment of principal;
(2) purchase prices in connection with a purchase of Notes;
(3) interest; or
(4) any other amount payable on or with respect to any of the Notes,
such reference shall be deemed to include payment of Additional Amounts as
described under this heading to the extent that, in such context, Additional
Amounts are, were or would be payable in respect thereof.
We will pay any present or future stamp or similar court or documentary
taxes, charges or levies (referred to in this paragraph as "stamp taxes") that
arise in any jurisdiction from the execution, delivery, enforcement or
registration of the Notes, the Indenture or any other document or instrument in
relation thereof, excluding such taxes, charges or similar levies imposed by any
jurisdiction outside of the U.K., the jurisdiction of incorporation of any
successor of the Company or any jurisdiction in which a paying agent is located,
and we will agree to indemnify the Holders for any such stamp taxes paid by such
Holders.
The obligations described under this heading will survive any termination,
defeasance or discharge of the Indenture and will apply MUTATIS MUTANDIS to any
jurisdiction in which any successor Person to the Company is organized or any
political subdivision or taxing authority or agency thereof or therein.
For a discussion of U.K. withholding taxes applicable to payments under or
with respect to the Notes, see "Taxation."
REDEMPTION FOR CHANGES IN WITHHOLDING TAXES
We are entitled to redeem the Notes, at our option, at any time as a whole
but not in part, upon not less than 30 nor more than 60 days' notice, at 100% of
the principal amount thereof, plus accrued and unpaid interest (if any) to the
date of redemption (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date), in
the event we have become or would become obligated to pay, on the next date on
which any amount would be payable with respect to the Notes, any Additional
Amounts as a result of:
(1) a change in or an amendment to the laws (including any regulations
promulgated thereunder) of the U.K. (or any political subdivision or taxing
authority thereof or therein); or
(2) any change in or amendment to any official position regarding the
application or interpretation of such laws or regulations, which change or
amendment is announced or becomes effective on or after the date of this
prospectus,
and we cannot avoid such obligation by taking reasonable measures available to
us. The foregoing provisions will apply MUTATIS MUTANDIS to the laws and
official positions of any jurisdiction in which any successor permitted under
"--Certain Covenants--Merger and Consolidation" is organized, but only with
respect to events arising after the date of succession. We are not aware of any
such existing or pending legislation that would, if implemented, permit us to
redeem the notes under the circumstances described.
Before we publish or mail notice of redemption of the Notes as described
above, we will deliver to the Trustee an Officers' Certificate to the effect
that we cannot avoid our obligation to pay Additional Amounts by taking
reasonable measures available to us. We will also deliver an opinion of
independent legal counsel of recognized standing stating that we would be
obligated to pay Additional Amounts as a result of a change in tax laws or
regulations or the application or interpretation of such laws or regulations.
93
RANKING
SENIOR INDEBTEDNESS VERSUS NOTES
The indebtedness evidenced by these Notes will be unsecured and will rank
PARI PASSU in right of payment to the Senior Indebtedness of the Company.
As of March 30, 2002, after giving effect to the application of the net
proceeds from the transactions described under "Summary--Recent Developments,"
the Company had no Senior Indebtedness other than the Notes. The Notes are
unsecured obligations of the Company. Any secured debt and other secured
obligations of the Company will be effectively senior to the Notes to the extent
of the value of the assets securing such debt or other obligations.
LIABILITIES OF SUBSIDIARIES VERSUS NOTES
All our operations are conducted through our subsidiaries. Claims of
creditors of such subsidiaries, including trade creditors and creditors holding
indebtedness or guarantees issued by such subsidiaries, and claims of preferred
stockholders of such subsidiaries, generally will have priority with respect to
the assets and earnings of such subsidiaries over the claims of our creditors,
including Holders of the Notes. Accordingly, the Notes will be effectively
subordinated to creditors (including obligations with respect to the Credit
Agreement and trade creditors) and preferred stockholders, if any, of our
subsidiaries.
As of March 30, 2002, after giving effect to the application of the net
proceeds from the transactions described under "Summary--Recent Developments,"
the total liabilities of our subsidiaries would have been approximately
L446.2 million, including trade payables, but excluding intercompany
liabilities. Although the Indenture limits the incurrence of Indebtedness and
preferred stock of our subsidiaries, such limitation is subject to a number of
significant qualifications. Moreover, the Indenture does not impose any
limitation on the incurrence by such subsidiaries of liabilities, such as
operating leases, that are not considered Indebtedness under the Indenture. See
"--Certain Covenants--Limitation on Indebtedness."
Furthermore, we will depend upon payments from Enodis Holdings Limited under
the Intercompany Loan in order to make payments on the Notes, and the payment by
Enodis Holdings Limited of all obligations owing to us under the Intercompany
Loan will be subordinated to all obligations under the Credit Agreement through
the Subordination Agreement. As a result:
- in the event of a liquidation, dissolution, bankruptcy, insolvency or
similar proceeding involving us, the creditors under our senior secured
credit facilities will be entitled to payment in full before we are entitled
to payments under the Intercompany Loan and, as a result, before any
Noteholders would receive any payments on the Notes;
- we may not make any demand or otherwise make any claim in respect of the
Intercompany Loan unless we have failed to make an interest or principal
payment on the Notes when due and a standstill period of 179 days has
expired;
- the creditors under our senior secured credit facilities may prevent our
subsidiaries from making payments to us in order to pay interest or
principal on the Notes in the event that any payment has not been made when
due under the senior secured credit facilities; this prohibition will
continue regardless of the expiration of the standstill period referred to
below; and
- the creditors under our senior secured credit facilities may prevent our
subsidiaries from making payments to us in order to pay interest or
principal on the Notes for a period of up to 179 days in the event that
there exists any other event of default under the senior secured credit
facilities. This period would not necessarily run concurrently with the
standstill period referred to above.
In addition, it is an event of default under our senior secured credit
facilities if any of our subsidiaries makes payments to us under the
intercompany loan in order to enable us to make interest payments on the Notes
if, at such time, any of our material subsidiaries is insolvent.
94
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Company
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof on the date of purchase plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of
this clause (1) such person shall be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than a majority of the total voting power of
the Voting Stock of (i) the Company (other than a Parent Entity) or
(ii) following the completion of any Scheme of Arrangement, a Parent Entity;
(2) individuals who on the Issue Date constituted the board of directors of the
Company (together with any new directors whose election by such board of
directors or whose nomination for election by the shareholders of the
Company was approved by a vote of 66 2/3% of the directors of the Company
then still in office who were either directors on the Issue Date or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the board of directors of the Company
(or, after completion of any Scheme of Arrangement, a Parent Entity) then in
office;
(3) the adoption of a plan relating to the liquidation or dissolution of the
Company (or, after completion of any Scheme of Arrangement, the Company or a
Parent Entity); or
(4) the merger or consolidation of the Company (or, after completion of any
Scheme of Arrangement, the Company or a Parent Entity) with or into another
Person or the merger of another Person with or into the Company (or, after
completion of any Scheme of Arrangement, the Company or a Parent Entity), or
the sale of all or substantially all the assets of the Company (or, after
completion of any Scheme of Arrangement, the Company or a Parent Entity),
determined on a consolidated basis, to another Person, other than a
transaction following which (A) in the case of a merger or consolidation
transaction, holders of securities that represented 100% of the Voting Stock
of the Company (or, after completion of any Scheme of Arrangement, the
Company or a Parent Entity) immediately prior to such transaction (or other
securities into which such securities are converted as part of such merger
or consolidation transaction) own directly or indirectly at least a majority
of the voting power of the Voting Stock of the surviving Person in such
merger or consolidation transaction immediately after such transaction and
in substantially the same relative proportions as before the transaction and
(B) in the case of a sale of assets transaction, the transferee Person
becomes the obligor in respect of the Notes and a Subsidiary of the
transferor of such assets.
Within 30 days following any Change of Control, we will publish a notice in
a leading newspaper having a general circulation in New York (which is expected
to be the Wall Street Journal) and in a leading newspaper having a general
circulation in London (which is expected to be the Financial Times) (and, if and
so long as the Notes are listed on the Luxembourg Stock Exchange and the rules
of the Luxembourg Stock Exchange so require, a newspaper having a general
circulation in Luxembourg (which is expected to be the Luxemburger Wort) and, in
the case of definitive notes, mail a notice to each Holder in each case with a
copy to the Trustee (the "Change of Control Offer") stating, among other things:
(1) that a Change of Control has occurred and that such Holder has the right to
require us to purchase such Holder's Notes at a purchase price in cash equal
to 101% of the principal amount thereof on the date of purchase, plus
accrued and unpaid interest, if any, to the date of purchase (subject to the
right of Holders of record on the relevant record date to receive interest
on the relevant interest payment date);
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(2) the circumstances and relevant facts regarding such Change of Control
(including information with respect to PRO FORMA historical income, cash
flow and capitalization, in each case after giving effect to such Change of
Control);
(3) the purchase date (which shall be no earlier than 30 days nor later than
60 days from the date such notice is mailed); and
(4) the instructions, as determined by us, consistent with the covenant
described hereunder, that a Holder must follow in order to have its Notes
purchased.
We will not be required to make a Change of Control Offer following a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by us and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
We will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes as a result of a Change of Control.
To the extent that the provisions of any securities laws or regulations conflict
with the provisions of the covenant described hereunder, we will comply with the
applicable securities laws and regulations and shall not be deemed to have
breached our obligations under the covenant described hereunder by virtue of our
compliance with such securities laws or regulations.
The Change of Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a sale or takeover of the
Company and, thus, the removal of incumbent management. The Change of Control
purchase feature is a result of negotiations between the Company and the initial
purchasers of the old notes. We have no present intention to engage in a
transaction involving a Change of Control, although it is possible that we could
decide to do so in the future. Subject to the limitations discussed below, we
could, in the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change of
Control under the Indenture, but that could increase the amount of indebtedness
outstanding at such time or otherwise affect our capital structure or credit
ratings. Restrictions on our ability to Incur additional Indebtedness are
contained in the covenants described under "--Certain Covenants--Limitation on
Indebtedness," "--Limitation on Liens" and "--Limitation on Sale/Leaseback
Transactions." Such restrictions can only be waived with the consent of the
holders of a majority in principal amount of the Notes then outstanding. Except
for the limitations contained in such covenants, however, the Indenture will not
contain any covenants or provisions that may afford holders of the Notes
protection in the event of a highly leveraged transaction.
The Credit Agreement and the Bridge Loan Agreement prohibit us from
purchasing any Notes. In the event a Change of Control occurs at a time when we
are prohibited from purchasing Notes, we may seek the consent of our lenders to
the purchase of Notes or may attempt to refinance the borrowings that contain
such prohibition. If we do not obtain such a consent or repay such borrowings,
we will remain prohibited from purchasing Notes. In such case, our failure to
offer to purchase Notes would constitute a Default under the Indenture, which
would, in turn, constitute a default under the Credit Agreement and the Bridge
Loan Agreement.
Future indebtedness that we may incur may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require the repurchase of such indebtedness upon a Change of Control. Moreover,
the exercise by the holders of their right to require us to repurchase the Notes
could cause a default under such indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on us. Finally,
our ability to pay cash to the holders of Notes following the occurrence of a
Change of Control may be limited by our then existing financial resources. There
can be no assurance that sufficient funds will be available when necessary to
make any required repurchases.
The definition of "Change of Control" includes a disposition of all or
substantially all of the assets of the Company to any Person. Although there is
a limited body of case law interpreting the phrase
96
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, in certain circumstances there may be a
degree of uncertainty as to whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company. As a
result, it may be unclear as to whether a Change of Control has occurred and
whether a holder of Notes may require the Company to make an offer to repurchase
the Notes as described above.
The provisions under the Indenture relative to our obligation to make an
offer to repurchase the Notes as a result of a Change of Control may be waived
or modified with the written consent of the holders of a majority in principal
amount of the Notes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS
(a) The Company will not, and will not permit any Restricted Subsidiary to,
Incur, directly or indirectly, any Indebtedness; PROVIDED, HOWEVER, that the
Company will be entitled to Incur Indebtedness, and its Restricted
Subsidiaries will be entitled to Incur Eligible Indebtedness, in each case
if, on the date of such Incurrence and after giving effect thereto on a PRO
FORMA basis, no Default has occurred and is continuing and the Consolidated
Coverage Ratio exceeds 2.5 to 1.
(b) Notwithstanding the foregoing paragraph (a), the Company and the Restricted
Subsidiaries will be entitled to Incur any or all of the following
Indebtedness:
(1) Indebtedness Incurred pursuant to any Revolving Credit Facility;
PROVIDED, HOWEVER, that, immediately after giving effect to any such
Incurrence, the aggregate principal amount of all Indebtedness Incurred
under this clause (1) and then outstanding does not exceed the greater of
(A) $85 million less the sum of all principal payments with respect to
such Indebtedness pursuant to paragraph (a)(3)(A) of the covenant
described under "--Limitation on Sales of Assets and Subsidiary Stock"
and (B) the sum of (x) 50% of the book value of the inventory of the
Company and its Restricted Subsidiaries and (y) 80% of the book value of
the accounts receivable of the Company and its Restricted Subsidiaries;
(2) Indebtedness Incurred pursuant to any Term Loan Facility; PROVIDED,
HOWEVER, that, after giving effect to any such Incurrence, the aggregate
principal amount of all Indebtedness Incurred under this clause (2) and
then outstanding does not exceed $370 million less the aggregate sum of
all principal payments actually made from time to time after the Issue
Date with respect to such Indebtedness (other than principal payments
made from any permitted Refinancings thereof);
(3) Indebtedness owed to and held by the Company or a Wholly Owned
Subsidiary; PROVIDED, HOWEVER, that (A) any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of such Indebtedness (other than to the Company or a Wholly
Owned Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the obligor thereon and (B) if the
Company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
obligations with respect to the Notes;
(4) the Notes and the Exchange Notes (other than any Additional Notes);
(5) Indebtedness outstanding on the Issue Date (other than Indebtedness
described in clause (1), (2), (3) or (4) of this covenant);
97
(6) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or
prior to the date on which such Subsidiary was acquired by the Company
(other than Indebtedness Incurred in connection with, or to provide all
or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary or was acquired by the Company); PROVIDED,
HOWEVER, that on the date of such acquisition and after giving PRO FORMA
effect thereto, the Company would have been able to Incur at least L1.00
of additional Indebtedness pursuant to paragraph (a) of this covenant;
(7) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to
paragraph (a) or pursuant to clause (4), (5) or (6) or this clause (7) of
this paragraph (b); PROVIDED, HOWEVER, that to the extent such
Refinancing Indebtedness directly or indirectly Refinances Indebtedness
of a Subsidiary Incurred pursuant to clause (6), such Refinancing
Indebtedness shall be Incurred only by such Subsidiary;
(8) Hedging Obligations directly related to Indebtedness permitted to be
Incurred by the Company and the Restricted Subsidiaries pursuant to the
Indenture;
(9) obligations in respect of performance, bid and surety bonds and
completion guarantees provided by the Company or any Restricted
Subsidiary in the ordinary course of business;
(10) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business; PROVIDED, HOWEVER,
that such Indebtedness is extinguished within five Business Days of its
Incurrence;
(11) any Guarantees by the Company of Indebtedness of a Restricted
Subsidiary so long as the Incurrence of such Indebtedness by such
Restricted Subsidiary is permitted under the terms of the Indenture;
(12) obligations of the Company or any of its Restricted Subsidiaries
arising from agreements of the Company or a Restricted Subsidiary
providing for indemnification, adjustment of purchase price or similar
obligations, in each case, Incurred or assumed in connection with the
disposition of any business, assets or a Subsidiary, other than
Guarantees of Indebtedness Incurred by any Person acquiring all or any
portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; PROVIDED that (a) such Indebtedness is not
reflected on the balance sheet of the Company or any Restricted
Subsidiary (contingent obligations referred to in a footnote or footnotes
to financial statements and not otherwise reflected on the balance sheet
will not be deemed to be reflected on such balance sheet for purposes of
this clause (a)) and (b) the maximum assumable liability in respect of
such Indebtedness will at no time exceed the gross proceeds including
non-cash proceeds (the fair market value of such non-cash proceeds being
measured at the time received and without giving effect to any subsequent
changes in value) actually received by the Company or such Restricted
Subsidiary in connection with such disposition;
(13) Indebtedness (including Capital Lease Obligations) Incurred by the
Company or any of its Restricted Subsidiaries to finance the purchase,
lease or improvement of assets (real or personal) or equipment (whether
through the direct purchase of assets or the Capital Stock of any Person
owning such assets) in an aggregate principal amount which when added
together with the amount of other Indebtedness Incurred pursuant to this
clause (13) and then outstanding, does not exceed the greater of
(A) L15 million and (B) 6% of Consolidated Net Tangible Assets (in each
case including any Refinancing Indebtedness with respect thereto);
provided such assets or equipment are used in a Related Business); and
(14) Indebtedness in an aggregate principal amount which, when taken
together with all other Indebtedness outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (1) through
(13) above or paragraph (a)) does not exceed L10 million at any time
outstanding.
98
(c) Notwithstanding the foregoing, the Company will not Incur any Indebtedness
pursuant to the foregoing paragraph (b) if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Obligations unless
such Indebtedness shall be subordinated to the Notes to at least the same
extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this covenant, (1) in the event
that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described above, the Company, in its sole discretion,
will classify such item of Indebtedness at the time of Incurrence and only
be required to include the amount and type of such Indebtedness in one of
the above clauses and (2) the Company will be entitled to divide and
classify an item of Indebtedness in more than one of the types of
Indebtedness described above; PROVIDED, HOWEVER, that all outstanding
indebtedness under the Credit Agreement immediately following the Issue Date
will be deemed to have been Incurred pursuant to clauses (1) and (2) of
paragraph (b) of this covenant.
(e) For purposes of determining compliance with any sterling denominated
restriction on the Incurrence of Indebtedness where the Indebtedness
Incurred is denominated in a different currency, the amount of such
Indebtedness will be the Sterling Equivalent, determined on the date of the
Incurrence of such Indebtedness, PROVIDED, HOWEVER, that if any such
Indebtedness denominated in a different currency is subject to a Currency
Agreement with respect to Sterling, covering all principal, premium, if any,
and interest payable on such Indebtedness, the amount of such Indebtedness
expressed in Sterling will be as provided in such Currency Agreement. The
principal amount of any Refinancing Indebtedness Incurred in the same
currency as the Indebtedness being Refinanced will be the Sterling
Equivalent of the Indebtedness Refinanced, except to the extent that
(1) such Sterling Equivalent was determined based on a Currency Agreement,
in which case the Refinancing Indebtedness will be determined in accordance
with the preceding sentence, and (2) the principal amount of the Refinancing
Indebtedness exceeds the principal amount of the Indebtedness being
Refinanced, in which case the Sterling Equivalent of such excess will be
determined on the date such Refinancing Indebtedness is Incurred.
LIMITATION ON RESTRICTED PAYMENTS
(a) The Company will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time the
Company or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not entitled to Incur an additional L1.00 of Indebtedness
pursuant to paragraph (a) of the covenant described under "--Limitation
on Indebtedness"; or
(3) the aggregate amount of such Restricted Payment and all other Restricted
Payments since the Issue Date would exceed the sum of (without
duplication):
(A) 50% of the Consolidated Net Income accrued during the period (treated
as one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Issue Date
occurs to the end of the most recent fiscal quarter ending at least
45 days prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit); PLUS
(B) 100% of the aggregate Net Cash Proceeds received by the Company from
the issuance or sale of its Capital Stock or received by the Company
from a Parent Entity as a capital contribution in respect of the
Company's Capital Stock (other than (i) in either case, Disqualified
Stock or (ii) any Net Cash Proceeds from the Rights Offering)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of either the Company or any Parent Entity and other than
an issuance or sale to an employee stock ownership plan or to a trust
established by either the Company or any Parent Entity or any of their
respective Subsidiaries for the benefit of their
99
employees) and 100% of any cash capital contribution received by the
Company from its shareholders subsequent to the Issue Date; PLUS
(C) the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than by
a Subsidiary of the Company) subsequent to the Issue Date of any
Indebtedness of the Company convertible or exchangeable for Capital
Stock (other than Disqualified Stock) of the Company (less the amount
of any cash, or the fair value of any other property, distributed by
the Company upon such conversion or exchange); PLUS
(D) an amount equal to the sum of (x) the net reduction in the
Investments (other than Permitted Investments) made by the Company or
any Restricted Subsidiary in any Person resulting from repurchases,
repayments or redemptions of, or expiration or cancelation (in the
case of Investments consisting of Guarantees or other contingent
obligations) of such Investments by such Person, proceeds realized on
the sale of such Investment and proceeds representing the return of
capital (excluding dividends and distributions), in each case received
by the Company or any Restricted Subsidiary, and (y) to the extent
such Person is an Unrestricted Subsidiary, the portion (proportionate
to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of such Unrestricted Subsidiary at the
time such Unrestricted Subsidiary is designated a Restricted
Subsidiary; PROVIDED, HOWEVER, that the foregoing sum shall not
exceed, in the case of any such Person or Unrestricted Subsidiary, the
amount of Investments (excluding Permitted Investments) previously
made (and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Person or Unrestricted Subsidiary.
(b) The preceding provisions will not prohibit:
(1) any Restricted Payment made out of the Net Cash Proceeds of the
substantially concurrent sale of, or made by exchange for, Capital Stock
of the Company (other than the Rights Offering) or Net Cash Proceeds
received as a capital contribution in respect of the Capital Stock of the
Company (other than, in any such case, Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary of either the Company or any
Parent Entity or an employee stock ownership plan or to a trust
established by either the Company or any Parent Entity or any of their
respective Subsidiaries for the benefit of their employees) or a
substantially concurrent cash capital contribution received by the
Company from its shareholders; PROVIDED, HOWEVER, that (A) such
Restricted Payment shall be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale or such
cash capital contribution (to the extent so used for such Restricted
Payment) shall be excluded from the calculation of amounts under
clause (3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Obligations made by exchange for, or
out of the proceeds of the substantially concurrent sale of, Indebtedness
which is permitted to be Incurred pursuant to the covenant described
under "--Limitation on Indebtedness"; PROVIDED, HOWEVER, that such
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount
of Restricted Payments;
(3) dividends paid within 60 days after the date of declaration thereof if
at such date of declaration such dividend would have complied with this
covenant; PROVIDED, HOWEVER, that at the time of payment of such
dividend, no other Default shall have occurred and be continuing (or
result therefrom); PROVIDED FURTHER, HOWEVER, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
(4) so long as no Default has occurred and is continuing, the repurchase or
other acquisition of shares of Capital Stock of the Company or any of its
Subsidiaries from employees, former employees,
100
directors or former directors of the Company or any of its Subsidiaries
(or permitted transferees of such employees, former employees, directors
or former directors), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto) approved by the
Board of Directors under which such individuals purchase or sell or are
granted the option to purchase or sell, shares of such Capital Stock;
PROVIDED, HOWEVER, that the aggregate amount of such repurchases and
other acquisitions shall not exceed L1 million in any calendar year;
PROVIDED FURTHER, HOWEVER, that such repurchases and other acquisitions
shall be excluded in the calculation of the amount of Restricted
Payments;
(5) (a) payments or distributions to dissenting stockholders pursuant to
applicable law in connection with a consolidation, merger or transfer of
all or substantially all of the Company's property or assets that
complies with the terms of the Indenture applicable to mergers,
consolidations and transfers of all or substantially all of the Company's
property or assets, or (b) the repurchase, redemption, or other
acquisition for value of Capital Stock of the Company or its Restricted
Subsidiaries representing fractional shares of such Capital Stock in
connection with a merger, consolidation, amalgamation, or other
combination of the Company or any such Restricted Subsidiary; provided,
however, that any such payments, distributions, repurchases, redemptions
or acquisitions for value do not in the aggregate exceed 1% of the total
consideration paid in such merger, consolidation, transfer, amalgamation
or other combination of the Company or such Restricted Subsidiary;
(6) repurchases of Capital Stock deemed to occur upon cashless exercises of
stock options if the aggregate value of the repurchases of such Capital
Stock does not exceed the aggregate amount of the exercise price of such
options received by the Company or such Restricted Subsidiary; PROVIDED,
HOWEVER, that such repurchases shall be excluded in the calculation of
the amount of Restricted Payments;
(7) any Specified Parent Payments; or
(8) any other Restricted Payment which, together with all other Restricted
Payments made pursuant to this clause (8) since the Issue Date, does not
exceed L5 million; PROVIDED, HOWEVER that no default shall have occurred
and be continuing (or would result therefrom); PROVIDED FURTHER, HOWEVER,
that such Restricted Payment shall be excluded in the calculation of the
amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to
(a) pay dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) make any loans or advances to the Company or (c) transfer any of its
property or assets to the Company, except:
(1) with respect to clauses (a), (b) and (c),
(A) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on the Issue Date, including, without limitation, the
Credit Agreement (as in effect on the Issue Date);
(B) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary on or prior to the date on
which such Restricted Subsidiary was acquired by the Company (other
than Indebtedness Incurred as consideration in, or to provide all or
any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Restricted Subsidiary or was acquired
by the Company) and outstanding on such date;
101
(C) any encumbrance or restriction pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred pursuant to an agreement referred
to in clause (A) or (B) of clause (1) of this covenant or this
clause (C) or contained in any amendment to an agreement referred to
in clause (A) or (B) of clause (1) of this covenant or this
clause (C); PROVIDED, HOWEVER, that the encumbrances and restrictions
with respect to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are no more restrictive than
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such predecessor agreements (as determined by
the Company in good faith);
(D) any encumbrance or restriction contained in the Subordination
Agreement or the terms of the Intercompany Loan or any future
subordination agreement or intercompany loan that (i) is substantially
the same as those contained in the Subordination Agreement and the
Intercompany Loan and (ii) relate to loans made by the Company to a
Wholly Owned Subsidiary of the proceeds of an equity or debt financing
permitted under the Indenture;
(E) any encumbrance or restriction included in any instrument governing
Eligible Indebtedness of a Restricted Subsidiary permitted to be
Incurred pursuant to the covenant described under the caption
"--Limitation on Indebtedness"; PROVIDED, HOWEVER, that the
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in any such instrument are no less favorable to
the Holders of the Notes than the encumbrances and restrictions
included in the Credit Agreement on the Issue Date (as determined by
the Company in good faith); and
(2) with respect to clause (c) only,
(A) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to
the extent such provisions restrict the transfer of the lease or the
property leased thereunder;
(B) restrictions contained in security agreements or mortgages securing
Indebtedness of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such
security agreements or mortgages; and
(C) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of
all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK
(a) The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless:
(1) the Company or such Restricted Subsidiary receives consideration at the
time of such Asset Disposition at least equal to the fair market value
(including as to the value of all non-cash consideration), as determined
in good faith by a Senior Officer of the Company (or, if the fair market
value of the shares and assets subject to such Asset Disposition exceeds
L1 million, by the Board of Directors of the Company), of the shares and
assets subject to such Asset Disposition;
(2) at least 75% of the consideration thereof received by the Company or
such Restricted Subsidiary is in the form of cash or cash equivalents;
and
(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary, as
the case may be)
(A) FIRST, to the extent the Company elects (or is required by the terms
of any Indebtedness), to prepay, repay, redeem or purchase Senior
Indebtedness of the Company, Indebtedness of Restricted Subsidiaries
under the Credit Agreement or other Indebtedness (other than any
Disqualified Stock) of a Wholly Owned Subsidiary (in each case other
than Indebtedness owed
102
to the Company or an Affiliate of the Company) within one year from
the later of the date of such Asset Disposition or the receipt of such
Net Available Cash;
(B) SECOND, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), to the extent the Company
elects, to acquire Additional Assets within one year from the later of
the date of such Asset Disposition or the receipt of such Net
Available Cash;
(C) THIRD, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an offer
to the holders of the Notes (and to holders of other Senior
Indebtedness designated by the Company) to purchase Notes (and such
other Senior Indebtedness) pursuant to and subject to the conditions
contained in the Indenture; and
(D) FOURTH, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C), for any
general corporate purpose otherwise permitted by the terms of the
Indenture;
PROVIDED, HOWEVER, that in connection with any prepayment, repayment
or purchase of Indebtedness pursuant to clause (A) or (C) above, the
Company or such Restricted Subsidiary shall permanently retire such
Indebtedness and shall cause the related loan commitment (if any) to
be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this covenant, the Company and
the Restricted Subsidiaries will not be required to apply any Net Available Cash
in accordance with clause (a)(3) of this covenant except to the extent that the
aggregate Net Available Cash from all Asset Dispositions which is not applied in
accordance with this covenant exceeds L5 million. Pending application of Net
Available Cash pursuant to clause (a)(3) of this covenant, such Net Available
Cash shall be invested in Temporary Cash Investments or applied to temporarily
reduce revolving credit indebtedness.
For the purposes of clause (a) (2) of this covenant, the following are
deemed to be "cash or cash equivalents":
(1) the assumption of Indebtedness of the Company or any Restricted
Subsidiary and the release of the Company or such Restricted Subsidiary
from all liability on such Indebtedness in connection with such Asset
Disposition; and
(2) securities received by the Company or any Restricted Subsidiary from the
transferee that are promptly converted by the Company or such Restricted
Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of
Notes (and other Senior Indebtedness) pursuant to clause (a)(3)(C)
above, the Company will purchase Notes tendered pursuant to an offer
by the Company for the Notes (and such other Senior Indebtedness) at a
purchase price of 100% of their principal amount (or, in the event
such other Senior Indebtedness was issued with significant original
issue discount, 100% of the accreted value thereof), without premium,
plus accrued but unpaid interest (or, in respect of such other Senior
Indebtedness, such lesser price, if any, as may be provided for by the
terms of such Senior Indebtedness) in accordance with the procedures
(including prorating in the event of over subscription) set forth in
the Indenture. If the aggregate purchase price of the securities
tendered exceeds the Net Available Cash allotted to their purchase,
the Company will select the securities to be purchased on a pro rata
basis but in round denominations, which in the case of the Notes will
be denominations of L1,000 principal amount or multiples thereof. The
Company shall not be required to make such an offer to purchase Notes
(and other Senior Indebtedness) pursuant to clause (a)(3)(C) of this
covenant if the Net Available Cash available therefor is less than
L5 million (which lesser amount shall be carried forward for purposes
of
103
determining whether such an offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase of
Notes pursuant to this covenant. To the extent that the provisions of
any securities laws or regulations conflict with provisions of this
covenant, the Company will comply with the applicable securities laws
and regulations and will not be deemed to have breached its
obligations under this covenant by virtue of its compliance with such
securities laws or regulations.
LIMITATION ON AFFILIATE TRANSACTIONS
(a) The Company will not, and will not permit any Restricted Subsidiary
to, enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property, employee
compensation arrangements or the rendering of any service) with, or
for the benefit of, any Affiliate of the Company (an "Affiliate
Transaction") unless:
(1) the terms of the Affiliate Transaction are no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained
at the time of the Affiliate Transaction in arm's-length dealings with a
Person who is not an Affiliate;
(2) if such Affiliate Transaction involves an amount in excess of
L2 million, the terms of the Affiliate Transaction are set forth in
writing and a majority of the Board of Directors of the Company who are
disinterested with respect to such Affiliate Transaction have determined
in good faith that the criteria set forth in clause (1) are satisfied
and have approved the relevant Affiliate Transaction as evidenced by a
resolution of the Board of Directors; and
(3) if such Affiliate Transaction involves an amount in excess of
L10 million, the Board of Directors shall also have received a written
opinion from an Independent Qualified Party to the effect that such
Affiliate Transaction is fair, from a financial standpoint, to the
Company and its Restricted Subsidiaries or is not less favorable to the
Company and its Restricted Subsidiaries than could reasonably be
expected to be obtained at the time in an arm's-length transaction with
a Person who was not an Affiliate.
(b) The provisions of the preceding paragraph (a) will not prohibit:
(1) any Restricted Payment permitted to be made pursuant to the covenant
described under "--Limitation on Restricted Payments" or any Permitted
Investment described in clause (5) of the definition of "Permitted
Investment";
(2) any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the
Board of Directors;
(3) loans or advances to employees in the ordinary course of business in
accordance with the past practices of the Company or its Restricted
Subsidiaries, but in any event not to exceed L1 million in the aggregate
outstanding at any one time;
(4) the payment of reasonable fees to directors of the Company and its
Restricted Subsidiaries and, following any Scheme of Arrangement, of a
Parent Entity, in any case who are not employees of the Company or its
Restricted Subsidiaries or such Parent Entity;
(5) any transaction with a Restricted Subsidiary or joint venture or similar
entity which would constitute an Affiliate Transaction solely because
the Company or a Restricted Subsidiary owns an equity interest in or
otherwise controls such Restricted Subsidiary, joint venture or similar
entity;
104
(6) any agreement as in effect on the Issue Date and described in this
prospectus or any renewals or extensions of any such agreement (so long
as such renewals or extensions are not less favorable to the Company or
the Restricted Subsidiaries) and the transactions evidenced thereby;
(7) the issuance or sale of any Capital Stock (other than Disqualified
Stock) of the Company;
(8) any employment agreement, employee benefit plan or scheme (including
employee stock incentive), related trust agreement, officer and director
indemnification agreement or any similar arrangement heretofore or
hereafter entered into in the ordinary course of business and approved
by the Board of Directors of the Company, or any collective bargaining
agreement approved by any member of the Executive Committee of the
Company;
(9) any Scheme of Arrangement; and
(10) any Specified Parent Payments.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
The Company
(1) will not, and will not permit any Restricted Subsidiary to, sell, lease,
transfer or otherwise dispose of any Capital Stock of any Restricted
Subsidiary to any Person (other than the Company or a Wholly Owned
Subsidiary);
(2) will not permit any Restricted Subsidiary to issue any of its Capital
Stock (other than, if necessary, shares of its Capital Stock constituting
directors' or other legally required qualifying shares) to any Person
(other than to the Company or a Wholly Owned Subsidiary), and
(3) will not sell, lease, transfer or otherwise dispose of (other than Liens
which are permitted pursuant to clause (7) of the definition of
"Permitted Liens"), or permit the issuance or sale to any Person of,
shares of Capital Stock of Enodis Holdings Limited or Enodis Group
Limited,
unless, in the case of clauses (1) and (2) above,
(A) immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Subsidiaries own any
Capital Stock of such Restricted Subsidiary; or
(B) immediately after giving effect to such issuance, sale or other
disposition, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in such Person remaining
after giving effect thereto is treated as a new Investment by the
Company and such Investment would be permitted to be made under the
covenant described under "--Limitation on Restricted Payments" if made
on the date of such issuance, sale or other disposition.
Notwithstanding the foregoing, the issuance or sale of shares of Capital
Stock of any Restricted Subsidiary of the Company other than Enodis Holdings
Limited or Enodis Group Limited will not violate the provisions of the
immediately preceding sentence if such Capital Stock is issued or sold in
connection with: (x) the formation or initial capitalization of such Restricted
Subsidiary, including at such time any issuance of Capital Stock to other
Persons or (y) a single transaction or a series of substantially contemporaneous
transactions whereby such Restricted Subsidiary becomes a Restricted Subsidiary
of the Company by reason of the acquisition of securities or assets from another
Person.
LIMITATION ON LIENS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, Incur or permit to exist any Lien (the "Initial Lien")
of any nature whatsoever on any of its properties (including Capital Stock of a
Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired,
securing any Indebtedness, other than Permitted Liens, without effectively
providing that the Notes shall be secured
105
equally and ratably with (or prior to) the obligations so secured for so long as
such obligations are so secured.
Any Lien created for the benefit of the Holders of the Notes pursuant to the
preceding sentence shall provide by its terms that such Lien shall be
automatically and unconditionally released and discharged:
(1) upon the release and discharge (as it relates to the Company and its
Restricted Subsidiaries) of the Initial Lien; and
(2) with respect to any Restricted Subsidiary the assets of which, or the
Company's Capital Stock in which, are encumbered by such Lien, upon
(a) any sale, exchange or transfer to any Person not an Affiliate of the
Company of all of the Company's Capital Stock in, or all or substantially
all the assets of, such Restricted Subsidiary, provided that such sale,
exchange or transfer is made in compliance with the applicable provisions
of the Indenture, or (b) the designation of such Restricted Subsidiary as
an Unrestricted Subsidiary in accordance with the terms of the Indenture.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale/Leaseback Transaction with respect to any property, other
than a Sale/Leaseback Transaction between the Company and any Restricted
Subsidiary, unless:
(1) the Company or such Restricted Subsidiary would be entitled to
(A) Incur Indebtedness in an amount equal to the Attributable Debt with
respect to such Sale/Leaseback Transaction pursuant to the covenant
described under "--Limitation on Indebtedness" and (B) create a Lien on
such property securing such Attributable Debt without equally and ratably
securing the Notes pursuant to the covenant described under "--Limitation
on Liens";
(2) the gross proceeds received by the Company or any Restricted Subsidiary
in connection with such Sale/Leaseback Transaction are at least equal to
the fair value (as determined by the Board of Directors) of such
property; and
(3) the Company applies the proceeds of such transaction in compliance with
the covenant described under "--Limitation on Sale of Assets and
Subsidiary Stock."
LIMITATION ON GUARANTEES OF COMPANY INDEBTEDNESS
The Company will not permit any Restricted Subsidiary to Guarantee any
Indebtedness of the Company or to secure any Indebtedness of the Company with a
Lien on the assets of such Restricted Subsidiary, unless contemporaneously
therewith (or prior thereto) effective provision is made to Guarantee or secure
the Notes, as the case may be, on an equal and ratable basis with such Guarantee
or Lien for so long as such Guarantee or Lien remains effective, and in an
amount equal to the amount of Company Indebtedness so Guaranteed or secured;
PROVIDED, HOWEVER, that any Guarantee by a Restricted Subsidiary of a
Subordinated Obligation of the Company shall be subordinated and junior in right
of payment to the contemporaneous Guarantee of the Notes by such Restricted
Subsidiary; PROVIDED FURTHER, HOWEVER, that the Company shall not permit a
Restricted Subsidiary to secure any Subordinated Obligation of the Company or to
Guarantee or secure any Capital Stock of the Company.
Any such Guarantee of the Notes shall be released upon:
(a) the release of the Guarantee that gave rise to the obligation to provide
a Guarantee of the Notes so long as no other Indebtedness of the Company
is at the time Guaranteed by such Restricted Subsidiary;
(b) a sale or other disposition of all or substantially all of the Capital
Stock of such Restricted Subsidiary held by the Company and the
Restricted Subsidiaries;
106
(c) the designation in accordance with the Indenture of the Guarantor as an
Unrestricted Subsidiary; and
(d) legal defeasance and discharge of the Notes as provided in
"--Defeasance."
LIMITATION ON BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than a Related Business, except to such extent as
is not material to the Company and its Restricted Subsidiaries taken as a whole.
MERGER AND CONSOLIDATION
The Company will not consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, directly or
indirectly, all or substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the "Successor Company")
shall be a Person organized and existing under the laws of (i) England
and Wales, (ii) any country that is a member of the European Union on the
Issue Date or (iii) the United States of America, any State thereof or
the District of Columbia and the Successor Company (if not the Company)
shall expressly assume, by an indenture supplemental thereto, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture;
(2) immediately after giving PRO FORMA effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary as a result of such transaction as having been
Incurred by such Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;
(3) immediately after giving PRO FORMA effect to such transaction, the
Successor Company would be able to Incur an additional L1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under
"--Limitation on Indebtedness";
(4) immediately after giving PRO FORMA effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount that is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction;
(5) the Company shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger
or transfer and such supplemental indenture (if any) comply with the
Indenture;
(6) the Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders will not recognize income, gain or loss for
U.S. Federal income tax purposes as a result of such transaction and will
be subject to U.S. Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
transaction had not occurred; and
(7) the Company shall have delivered to the Trustee an Opinion of Counsel in
the jurisdiction of organization of the Company or the Successor Company
(as applicable) to the effect that the Holders will not recognize income,
gain or loss for income tax purposes of such jurisdiction as a result of
such transaction or series of transactions and will be subject to income
tax in such jurisdiction on the same amounts, in the same manner and at
the same times as would have been the case if such transaction or series
of transactions had not occurred;
PROVIDED, HOWEVER, that clauses (3) and (4) will not be applicable to (A) a
Restricted Subsidiary consolidating with, merging into or transferring all or
part of its properties and assets to the Company or (B) the
107
Company merging with an Affiliate of the Company solely for the purpose and with
the sole effect of reincorporating the Company in another jurisdiction.
The Successor Company will be the successor to the Company and shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under the Indenture, and the predecessor Company, except in the case of
a lease, shall be released from the obligation to pay the principal of and
interest on the Notes.
SEC REPORTS
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13(a) or 15(d) of the Exchange Act or otherwise report
on an annual and quarterly basis on forms provided for such annual and quarterly
reporting pursuant to rules and regulations promulgated by the SEC, the Company
will file with or furnish to the SEC and provide the Trustee for the benefit of
the Noteholders:
(1) within 120 days after the end of each fiscal year, annual reports on
Form 20-F (or any successor form) containing the information required to
be contained therein (or required on each successor form), including
audited financial statements prepared in accordance with GAAP and
reconciled to generally accepted accounting principles in the United
States;
(2) within 45 days (or, in the case of the second quarter of the fiscal year
ended September 28, 2002, 60 days) after the end of each of the first
three fiscal quarters of each fiscal year, reports on Form 6-K (or any
successor form) including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and unaudited quarterly
financial statements, in each case in form and substance substantially
similar to the corresponding information required to be contained in a
Form 10-Q (or required in any successor form), including unaudited
financial statements prepared in accordance with GAAP and reconciled to
generally accepted accounting principles in the United States; and
(3) promptly from time to time after the occurrence of an event that would
be required to be the subject of a public announcement by the Company in
accordance with the listing rules of the U.K. Listing Authority, other
reports on Form 6-K (or any successor form), which Form 6-K shall contain
substantially the same information required to be contained in such
public announcement.
So long as any of the Notes are listed on the Luxembourg Stock Exchange and
the rules of such stock exchange so require, copies of such information will
also be available during normal business hours on any business day at the office
of The Bank of New York (Luxembourg) S.A.
In addition, in the event that the Company is neither subject to
Section 13(a) or Section 15(d) of the Exchange Act nor exempt from reporting
pursuant to Rule 12g3-2(b) under the Exchange Act, the Company will furnish to
the Holders of the Notes and to prospective investors upon the requests of such
Holders, any information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act so long as the Notes are not freely transferable under
the Securities Act.
DEFAULTS
Each of the following is an Event of Default:
(1) a default in the payment of interest or any Additional Amounts on the
Notes when due, continued for 30 days;
(2) a default in the payment of principal of any Note when due at its Stated
Maturity, upon optional redemption, upon required purchase, upon
declaration of acceleration or otherwise;
(3) the failure by the Company to comply with its obligations under
"--Certain Covenants--Merger and Consolidation" above;
108
(4) the failure by the Company to comply for 30 days after notice with any
of its obligations in the covenants described above under "Change of
Control" (other than a failure to purchase Notes) or under "--Certain
Covenants" under "--Limitation on Indebtedness," "--Limitation on
Restricted Payments," "--Limitation on Restrictions on Distributions from
Restricted Subsidiaries," "--Limitation on Sales of Assets and Subsidiary
Stock" (other than a failure to purchase Notes), "--Limitation on
Affiliate Transactions," "--Limitation on the Sale or Issuance of Capital
Stock of Restricted Subsidiaries," "--Limitation on Liens," "--Limitation
on Sale/Leaseback Transactions," "--Limitation on Guarantees of Company
Indebtedness," "--Limitation on Business Activities" or "--SEC Reports";
(5) the failure by the Company to comply for 60 days after notice with its
other agreements contained in the Indenture;
(6) Indebtedness of the Company or any Significant Subsidiary is not paid
within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds L5.0 million or its foreign
currency equivalent (the "cross acceleration provision");
(7) the Subordination Agreement or the Subordinated Intercompany Loan
Agreement is amended or supplemented to make any change in the rights of
the Company thereunder that adversely affects in any respect the Holders
of the Notes (other than any amendment converting a portion of the
Intercompany Loan into equity in Enodis Holdings Limited), or the
principal amount of the Intercompany Loan is converted, exchanged or
otherwise reduced to an amount which (i) is less than the aggregate
principal amount of the Notes and Bridge Loans outstanding at such time
or (ii) together with any other intercompany loans owed by Enodis
Holdings Limited (or any other direct wholly owned subsidiary of the
Company) to the Company on subordination terms no less favorable to the
Company than those of the Intercompany Loan (including those set forth in
the Subordination Agreement), is less than the aggregate principal amount
of outstanding Indebtedness of the Company at such time;
(8) certain events of bankruptcy, insolvency or reorganization of the
Company or any Significant Subsidiary (the "bankruptcy provisions"); or
(9) any judgment or decree for the payment of money in excess of
L5.0 million or its foreign currency equivalent is entered against the
Company or any Significant Subsidiary, remains outstanding for a period
of 60 consecutive days following such judgment and is not discharged,
waived or stayed (the "judgment default provision").
However, a default under clauses (4) and (5) will not constitute an Event of
Default until the Trustee or the holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holders of the Notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense.
109
Except to enforce the right to receive payment of principal, premium (if any) or
interest when due, no holder of a Note may pursue any remedy with respect to the
Indenture or the Notes unless:
(1) such holder has previously given the Trustee notice that an Event of
Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding Notes
have requested the Trustee to pursue the remedy;
(3) such holders have offered the Trustee reasonable security or indemnity
against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the
receipt thereof and the offer of security or indemnity; and
(5) holders of a majority in principal amount of the outstanding Notes have
not given the Trustee a direction inconsistent with such request within
such 60-day period.
Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other holder of a Note or that would involve the Trustee in personal
liability.
If a Default occurs, is continuing and is known to the Trustee, the Trustee
must mail to each holder of the Notes notice of the Default within 90 days after
it occurs. Except in the case of a Default in the payment of principal of or
interest on any Note, the Trustee may withhold notice if and so long as a
committee of its Trust Officers determines that withholding notice is not
opposed to the interest of the holders of the Notes. In addition, we are
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year. We are required to deliver to the
Trustee, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain Defaults, their status and what action we
are taking or propose to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Notes) and any past default or compliance with any provisions may also be
waived with the consent of the holders of a majority in principal amount of the
Notes then outstanding. However, without the consent of each holder of an
outstanding Note affected thereby, an amendment or waiver may not, among other
things:
(1) reduce the amount of Notes whose holders must consent to an amendment;
(2) reduce the rate of or extend the time for payment of interest on any
Note;
(3) reduce the principal of or extend the Stated Maturity of any Note;
(4) reduce the amount payable upon the redemption of any Note or change the
time at which any Note may be redeemed as described under "--Optional
Redemption" or "--Redemption for Changes in Withholding Taxes" above;
(5) make any Note payable in money other than that stated in the Note;
(6) impair the right of any holder of the Notes to receive payment of
principal of and interest on such holder's Notes on or after the due
dates therefor or to institute suit for the enforcement of any payment on
or with respect to such holder's Notes;
110
(7) make any change in the amendment provisions which require each holder's
consent or in the waiver provisions;
(8) make any change in the ranking or priority of any Note that would
adversely affect the Noteholders; or
(9) make any change in the provisions of the Indenture described under
"--Additional Amounts" that adversely affects the rights of any
Noteholder or amend the terms of the Notes or the Indenture in a way that
would result in the loss of an exemption from any of the Taxes described
thereunder.
Notwithstanding the preceding, without the consent of any holder of the
Notes, the Company and Trustee may amend the Indenture:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture;
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated Notes are described in
Section 163(f)(2)(B) of the Code);
(4) to add guarantees with respect to the Notes or to secure the Notes;
(5) to add to the covenants of the Company for the benefit of the holders of
the Notes or to surrender any right or power conferred upon the Company;
(6) to make provision for the issuance of Additional Notes to the extent
such issuance is permitted under the covenants described herein;
(7) to make any change that does not adversely affect the rights of any
holder of the Notes; or
(8) to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act.
The consent of the holders of the Notes is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, we are required to
mail to holders of the Notes a notice briefly describing such amendment.
However, the failure to give such notice to all holders of the Notes, or any
defect therein, will not impair or affect the validity of the amendment.
TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
We may require payment of a sum sufficient to cover any tax, assessment or other
governmental charge payable in connection with certain transfers and exchanges.
DEFEASANCE
At any time, we may terminate all our obligations under the Notes and the
Indenture ("legal defeasance"), except for certain obligations, including those
respecting the defeasance trust and obligations to register the transfer or
exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and
to maintain a registrar and paying agent in respect of the Notes.
In addition, at any time we may terminate our obligations under "--Change of
Control" and under the covenants described under "--Certain Covenants" (other
than the covenant described under "--Merger and Consolidation"), the operation
of the cross acceleration provision, the bankruptcy provisions with respect to
111
Significant Subsidiaries and the judgment default provision described under
"--Defaults" above and the limitations contained in clauses (3) and (4) of the
first paragraph under "--Certain Covenants--Merger and Consolidation" above
("covenant defeasance").
We may exercise our legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, payment of the Notes may not be accelerated because of an Event of
Default with respect thereto. If we exercise our covenant defeasance option,
payment of the Notes may not be accelerated because of an Event of Default
specified in clause (4), (6), (8) (with respect only to Significant
Subsidiaries) or (9) under "--Defaults" above or because of the failure of the
Company to comply with clause (3) or (4) under "--Certain Covenants--Merger and
Consolidation" above.
In order to exercise either of our defeasance options, we must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.K.
Government Obligations or U.S. Government Obligations for the payment of
principal and interest on the Notes to redemption or maturity, as the case may
be, and must comply with certain other conditions, including delivery to the
Trustee of (1) an Opinion of Counsel to the effect that holders of the Notes
will not recognize income, gain or loss for Federal income tax purposes as a
result of such deposit and defeasance and will be subject to Federal income tax
on the same amounts and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred (and, in the case
of legal defeasance only, such Opinion of Counsel must be based on a ruling of
the Internal Revenue Service or other change in applicable Federal income tax
law), (2) an Opinion of Counsel in the U.K to the effect that holders of the
Notes will not recognize income, gain or loss for U.K. income tax purposes as a
result of such deposit and defeasance and will be subject to U.K. income tax on
the same amounts and in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred and (3) an Opinion of
Counsel to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under the U.S.
Investment Company Act of 1940.
CONCERNING THE TRUSTEE
The Bank of New York is the Trustee under the Indenture. We have appointed
The Bank of New York as Registrar and Paying Agent and The Bank of New York
(Luxembourg) S.A. as Luxembourg Paying Agent with regard to the Notes. As long
as the Notes remain outstanding, we also have agreed that, if the conclusions of
the ECOFIN Council meeting in November 2000 are implemented, we will, to the
extent possible as a matter of law, ensure that there is a paying agent for the
Notes in a European Union Member State that will not be obligated to withhold or
deduct tax pursuant to any European Union Directive on the taxation of savings
implementing such conclusions.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; provided, however, if it acquires any conflicting interest it must
either eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. If an Event of Default occurs (and is not cured), the Trustee will
be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any Holder of Notes, unless such Holder
shall have offered to the Trustee security and indemnity satisfactory to it
against any loss, liability or expense and then only to the extent required by
the terms of the Indenture.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
will have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver and release may not be
effective to waive liabilities under the U.S. Federal securities laws, and it is
the view of the SEC that such a waiver is against public policy.
GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to applicable
principles of conflicts of law to the extent that the application of the law of
another jurisdiction would be required thereby.
ENFORCEABILITY OF JUDGMENTS
We have been informed by our English counsel, Clifford Chance, that in such
counsel's opinion the laws of England and Wales permit an action to be brought
in a court of competent jurisdiction in the U.K. on a final and conclusive
judgment in personam of a U.S. Federal court or a court of the State of New York
sitting in the Borough of Manhattan in The City of New York (the "New York
Court"), respecting the enforcement of the Notes or the Indenture, that is not
impeachable as void or voidable under the laws of the State of New York and that
is for a sum certain in money if:
(1) the New York Court that rendered such judgment has jurisdiction over the
judgment debtor, as recognized by the courts of the U.K. and in
accordance with its conflict of laws rules (and submission by the Company
in the Indenture to the jurisdiction of the New York Court will be
sufficient for this purpose);
(2) such judgment was not obtained by fraud or in a manner contrary to
natural justice and the enforcement thereof would not be inconsistent
with public policy, as such term is understood under the laws of England
and Wales;
(3) the enforcement of such judgment does not constitute, directly or
indirectly, the enforcement of foreign revenue, expropriatory, public or
penal laws;
(4) no new admissible evidence relevant to the action is discovered prior to
the rendering of judgment by the court in the U.K.; and
(5) the action to enforce such judgment is commenced within six years after
the date of such judgment.
Furthermore, we have been advised by such counsel that they do not know of
any reason under present laws of England and Wales for avoiding recognition of
such judgment of New York Court under the Indenture or on the Notes based upon a
reasonable interpretation of public policy.
CONSENT TO JURISDICTION AND SERVICE
We have appointed Shack Siegel Katz Flaherty & Goodman P.C., 530 Fifth
Avenue, New York, New York 10036 as our agent for actions relating to the Notes,
the Indenture or the Registration Rights Agreement or brought under Federal or
state securities laws in any Federal or state court located in the Borough of
Manhattan in The City of New York and will submit to such jurisdiction.
CERTAIN DEFINITIONS
"ADDITIONAL ASSETS" means:
(1) any property, plant or equipment used in a Related Business;
113
(2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a
result of the acquisition of such Capital Stock by the Company or another
Restricted Subsidiary; or
(3) Capital Stock constituting a minority interest in any Person that at
such time is a Restricted Subsidiary;
PROVIDED, HOWEVER, that any such Restricted Subsidiary described in clause (2)
or (3) above is primarily engaged in a Related Business.
"AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the covenants described under "--Certain Covenants--Limitation on
Restricted Payments", "--Certain Covenants--Limitation on Affiliate
Transactions" and "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 5% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"ASSET DISPOSITION" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by the Company or
any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares or shares required by applicable law to be
held by a Person other than the Company or a Restricted Subsidiary);
(2) all or substantially all the assets of any division or line of business
of the Company or any Restricted Subsidiary; or
(3) any other assets of the Company or any Restricted Subsidiary outside of
the ordinary course of business of the Company or such Restricted
Subsidiary.
Notwithstanding the foregoing, the following shall not be deemed to be Asset
Dispositions:
(A) a disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Wholly Owned Subsidiary;
(B) for purposes of the covenant described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition that constitutes a Restricted Payment permitted by the
covenant described under "--Certain Covenants--Limitation on
Restricted Payments" or a Permitted Investment;
(C) a disposition of Temporary Cash Investments on an arms-length basis;
(D) the conveyance, sale, transfer, assignment or other disposition in
the ordinary course of business by the Company or a Restricted
Subsidiary of (i) inventory and other assets acquired and held for
resale (excluding land real estate assets held by the Company) or
(ii) damaged, worn out or obsolete assets; and
(E) a disposition of assets with a fair market value of less than
L500,000.
"ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction means, as of
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/
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Leaseback Transaction (including any period for which such lease has been
extended); PROVIDED, HOWEVER, that if such Sale/Leaseback Transaction results in
a Capital Lease Obligation, the amount of Indebtedness represented thereby will
be determined in accordance with the definition of "Capital Lease Obligation."
"AVERAGE LIFE" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing:
(1) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment
of or redemption or similar payment with respect to such Indebtedness
multiplied by the amount of such payment by
(2) the sum of all such payments.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"BRIDGE LOAN AGREEMENT" means the Bridge Loan Agreement dated as of
February 20, 2002, entered into by and among the Company, Credit Suisse First
Boston and The Royal Bank of Scotland plc, together with the related documents
thereto, as amended, extended, renewed, restated, supplemented or otherwise
modified from time to time.
"BRIDGE LOANS" means any and all loans made to the Company pursuant to the
Bridge Loan Agreement.
"BUSINESS DAY" means each day which is not a Legal Holiday.
"CAPITAL LEASE OBLIGATION" of any Person means any obligation of such Person
or any of its Restricted Subsidiaries under any capital lease of (or other
agreement conveying the right to use) real or personal property which, in
accordance with GAAP, is required to be recorded as a capitalized lease
obligation in such Person's consolidated financial statements.
"CAPITAL STOCK" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED COVERAGE RATIO" as of any date of determination means the
ratio of (x) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination to (y) Consolidated Interest Expense for such four fiscal
quarters; PROVIDED, HOWEVER, that:
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding
or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a PRO FORMA basis to such Indebtedness
as if such Indebtedness had been Incurred on the first day of such
period;
(2) if the Company or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the beginning of
such period or if any Indebtedness is to be repaid, repurchased, defeased
or otherwise discharged (in each case other than Indebtedness Incurred
under any revolving credit facility unless such Indebtedness has been
permanently repaid and has not been replaced) on the date of the
transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period
shall be calculated on a PRO FORMA basis as if such discharge had
occurred on the first day of such period and as if the Company or such
Restricted Subsidiary has not earned the interest income actually earned
during such period in respect of cash or Temporary Cash Investments used
to repay, repurchase, defease or otherwise discharge such Indebtedness;
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(3) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition, EBITDA for such period
shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to EBITDA
(if negative), directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable
to any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company
and its continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary
to the extent the Company and its continuing Restricted Subsidiaries are
no longer liable for such Indebtedness after such sale);
(4) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any person which becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition of
assets occurring in connection with a transaction requiring a calculation
to be made hereunder, which constitutes all or substantially all of an
operating unit of a business, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving PRO FORMA effect thereto
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period; and
(5) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or
any Restricted Subsidiary since the beginning of such period) shall have
made any Asset Disposition, any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or (4) above if
made by the Company or a Restricted Subsidiary during such period, EBITDA
and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition occurred on the first day of such period.
For purposes of this definition, whenever PRO FORMA effect is to be given to
an acquisition of assets, the amount of income or earnings relating thereto and
the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the PRO FORMA calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given PRO
FORMA effect, the interest on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months).
"CONSOLIDATED CURRENT LIABILITIES" as of the date of determination means the
aggregate amount of liabilities of the Company and its consolidated Restricted
Subsidiaries which may properly be classified as current liabilities (including
taxes accrued as estimated), on a consolidated basis, after eliminating:
(1) all intercompany items between the Company and any Restricted
Subsidiary; and
(2) all current maturities of long term Indebtedness, all as determined in
accordance with GAAP consistently applied.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, without duplication:
(1) interest expense attributable to capital leases and the interest expense
attributable to leases constituting part of a Sale/Leaseback
Transaction;
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(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expense;
(5) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing;
(6) net payments pursuant to Hedging Obligations;
(7) Preferred Stock dividends in respect of all Preferred Stock held by
Persons other than the Company or a Wholly Owned Subsidiary (other than
dividends payable solely in Capital Stock (other than Disqualified
Stock) of the Company);
(8) interest incurred in connection with Investments in discontinued
operations;
(9) interest accruing on any Indebtedness of any other Person to the extent
such Indebtedness is Guaranteed by (or secured by the assets of) the
Company or any Restricted Subsidiary; and
(10) cash contributions to any employee stock ownership plan or similar trust
to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Company) in connection
with Indebtedness Incurred by such plan or trust.
"CONSOLIDATED NET INCOME" means, for any period, the net income or loss of
the Company and its consolidated Subsidiaries as determined in accordance with
GAAP; PROVIDED, HOWEVER, that there shall not be included in such Consolidated
Net Income:
(1) any net income of any Person (other than the Company) if such Person is
not a Restricted Subsidiary, except that:
(A) subject to the exclusion contained in clause (4) below, the Company's
equity in the net income of any such Person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Person during such period to the
Company or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid to a
Restricted Subsidiary, to the limitations contained in clause (3)
below); and
(B) the Company's equity in a net loss of any such Person for such period
shall be included in determining such Consolidated Net Income;
(2) any net income (or loss) of any Person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(3) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that:
(A) subject to the exclusion contained in clause (4) below, the Company's
equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the
aggregate amount of cash which could actually have been distributed by
such Restricted Subsidiary for such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (by loans,
advances, intercompany transfer or otherwise) for so long as so
permitted (subject, in the case of a dividend or other distribution
which could have been paid to another Restricted Subsidiary, to the
limitation contained in this clause (3)); PROVIDED, HOWEVER, for
purposes of determining whether an Incurrence of Indebtedness by the
Company or any Restricted Subsidiary will be permitted pursuant to
paragraph (a) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness," to the extent
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that any net income of a Restricted Subsidiary would be excluded
solely as a result of Permitted Bank Restrictions, that net income of
such Restricted Subsidiary will be included in determining
Consolidated Net Income so long as, in the case of an Incurrence of
Indebtedness by the Company, the Credit Agreement permits such
Restricted Subsidiary to pay dividends or make distributions
sufficient to pay interest on the Indebtedness being Incurred by the
Company and any other Indebtedness of the Company in existence as of
the date of determination and all other amounts scheduled to become
due on any such Indebtedness prior to the Stated Maturity of the
Notes; and
(B) the Company's equity in a net loss of any such Restricted Subsidiary
for such period shall be included in determining such Consolidated Net
Income;
(4) any gain (but not loss) realized upon the sale or other disposition of
any assets of the Company, its consolidated Subsidiaries or any other
Person (including pursuant to any sale-and-leaseback arrangement) which
is not sold or otherwise disposed of in the ordinary course of business
and any gain (but not loss) realized upon the sale or other disposition
of any Capital Stock of any Person;
(5) extraordinary gains or losses;
(6) to the extent reflected in net income, the effect of any non-cash items
resulting from any write-up, write-down or write-off of assets (including
any impairment of goodwill) of the Company or any Restricted Subsidiary;
and
(7) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described
under "Certain Covenants--Limitation on Restricted Payments" only, there shall
be excluded from Consolidated Net Income any repurchases, repayments or
redemptions of Investments, proceeds realized on the sale of Investments or
return of capital to the Company or a Restricted Subsidiary to the extent such
repurchases, repayments, redemptions, proceeds or returns increase the amount of
Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D)
thereof.
"CONSOLIDATED NET TANGIBLE ASSETS" as of any date of determination, means
the total amount of assets (less accumulated depreciation and amortization,
allowances for doubtful receivables, other applicable reserves and other
properly deductible items) which would appear on a consolidated balance sheet of
the Company and its consolidated Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, and after giving effect to purchase
accounting and after deducting therefrom Consolidated Current Liabilities and,
to the extent otherwise included, the amounts of:
(1) minority interests in consolidated Subsidiaries held by Persons other
than the Company or a Restricted Subsidiary;
(2) excess of cost over fair value of assets of businesses acquired, as
determined in good faith by the Board of Directors of the Company
(exclusive of any reductions in such excess since the date of acquisition
as a result of the amortization or writedown thereof);
(3) any revaluation or other write-up in book value of assets subsequent to
the Issue Date as a result of a change in the method of valuation in
accordance with GAAP consistently applied;
(4) unamortized debt discount and expenses and other unamortized deferred
charges, goodwill, patents, trademarks, service marks, trade names,
copyrights, licenses, organization or developmental expenses and other
intangible items;
(5) treasury stock;
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(6) cash set apart and held in a sinking or other analogous fund established
for the purpose of redemption or other retirement of Capital Stock to the
extent such obligation is not reflected in Consolidated Current
Liabilities; and
(7) Investments in and assets of Unrestricted Subsidiaries.
"CONSOLIDATED NET WORTH" means the total of the amounts shown on the balance
sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as the sum of:
(1) the par or stated value of all outstanding Capital Stock of the Company
plus
(2) paid-in capital or capital surplus relating to such Capital Stock plus
(3) any retained earnings or earned surplus
less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"CREDIT AGREEMENT" means the Senior Credit Agreement dated as of
February 20, 2002, entered into by and among Enodis Holdings Limited, certain
Subsidiaries of Enodis Holdings Limited as borrowers, certain Subsidiaries of
Enodis Holdings Limited as guarantors, the lenders referred to therein, Credit
Suisse First Boston and The Royal Bank of Scotland plc, as Arrangers, and The
Royal Bank of Scotland plc, as Facility Agent and Issuing Bank, together with
the related documents thereto (including the term loans and revolving loans
thereunder, any guarantees and security documents and any subordination
agreements), as amended, extended, renewed, restated, supplemented or otherwise
modified (in whole or in part, and without limitation as to amount, terms,
conditions, covenants and other provisions) from time to time, and any agreement
(and related document) governing Indebtedness incurred to Refinance, in whole or
in part, the borrowings and commitments then outstanding or permitted to be
outstanding under such Credit Agreement or a successor Credit Agreement, whether
by the same or any other lender or group of lenders, and any successive
Refinancing of the foregoing.
"CURRENCY AGREEMENT" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"DEFAULT" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable at the option of the holder) or upon the
happening of any event:
(1) matures or is mandatorily redeemable (other than redeemable only for
Capital Stock of such Person which is not itself Disqualified Stock)
pursuant to a sinking fund obligation or otherwise;
(2) is convertible or exchangeable at the option of the holder for
Indebtedness or Disqualified Stock; or
(3) is mandatorily redeemable or must be purchased upon the occurrence of
certain events or otherwise, in whole or in part;
in each case on or prior to the first anniversary of the Stated Maturity of the
Notes; PROVIDED, HOWEVER, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of
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an "asset sale" or "change of control" occurring prior to the first anniversary
of the Stated Maturity of the Notes shall not constitute Disqualified Stock if:
(1) the "asset sale" or "change of control" provisions applicable to such
Capital Stock are not more favorable to the holders of such Capital Stock
than the terms applicable to the Notes and described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" and
"--Certain Covenants--Change of Control"; and
(2) any such requirement only becomes operative after compliance with such
terms applicable to the Notes, including the purchase of any Notes
tendered pursuant thereto.
The amount of any Disqualified Stock that does not have a fixed redemption,
repayment or repurchase price will be calculated in accordance with the terms of
such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or
repurchased on any date on which the amount of such Disqualified Stock is to be
determined pursuant to the Indenture; PROVIDED, HOWEVER, that if such
Disqualified Stock could not be required to be redeemed, repaid or repurchased
at the time of such determination, the redemption, repayment or repurchase price
will be the book value of such Disqualified Stock as reflected in the most
recent financial statements of such Person.
"EBITDA" for any period means the sum of Consolidated Net Income, plus the
following to the extent deducted in calculating such Consolidated Net Income,
but without duplication:
(1) all income tax expense of the Company and its consolidated Restricted
Subsidiaries;
(2) Consolidated Interest Expense;
(3) depreciation and amortization expense of the Company and its
consolidated Restricted Subsidiaries (excluding amortization expense
attributable to a prepaid operating activity item that was paid in cash
in a prior period); and
(4) all other non-cash charges of the Company and its consolidated
Restricted Subsidiaries (excluding any such non-cash charge to the extent
that it represents an accrual of or a reserve for cash expenditures in
any future period);
in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion,
including by reason of minority interests) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net Income.
"ELIGIBLE INDEBTEDNESS" means any indebtedness other than:
(1) Indebtedness in the form of, or represented by, bonds or other
securities or any guarantee thereof; and
(2) Indebtedness that is, or may be, quoted, listed or purchased and sold in
any stock exchange, automated trading system or over-the-counter or other
securities market (including, without prejudice to the generality of the
foregoing, the market for securities eligible for resale pursuant to
Rule 144A under the Securities Act).
"EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934, as amended.
"EXCHANGE NOTES" means the debt securities of the Company issued pursuant to
the Indenture in exchange for, and in an aggregate principal amount equal to,
the old notes, in compliance with the terms of the Registration Rights
Agreement.
"GAAP" means generally accepted accounting principles in the U.K., as in
effect from time to time.
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Unless otherwise provided by the terms of the Indenture, all ratios and
computations contained in the Indenture will be computed in conformity with
GAAP.
"GUARANTEE" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise); or
(2) entered into for the purpose of assuring in any other manner the obligee
of such Indebtedness of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part);
PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person pursuant to any Interest Rate Agreement or Currency Agreement.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is registered
on the Registrar's books.
"INCUR" means issue, assume, Guarantee, incur or otherwise become liable
for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Person at the time it becomes a Restricted Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. Solely for
purposes of determining compliance with "--Certain Covenants--Limitation on
Indebtedness," (1) amortization of debt discount or the accretion of principal
with respect to a non-interest bearing or other discount security and (2) the
payment of regularly scheduled interest in the form of additional Indebtedness
of the same instrument or the payment of regularly scheduled dividends on
Capital Stock in the form of additional Capital Stock of the same class and with
the same terms will not be deemed to be the Incurrence of Indebtedness.
"INDEBTEDNESS" means, with respect to any Person on any date of
determination (without duplication):
(1) the principal in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(2) all Capital Lease Obligations of such Person and all Attributable Debt
in respect of Sale/Leaseback Transactions entered into by such Person;
(3) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such
Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
(4) all obligations of such Person for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (1) through
(3) above) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the fifteenth
Business Day following payment on the letter of credit);
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(5) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock of
such Person or, with respect to any Preferred Stock of any Subsidiary of
such Person, the principal amount of such Preferred Stock to be
determined in accordance with the Indenture (but excluding, in each case,
any accrued dividends);
(6) all obligations of the type referred to in clauses (1) through (5) of
other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(7) all obligations of the type referred to in clauses (1) through (6) of
other Persons secured by any Lien on any property or asset of such Person
(whether or not such obligation is assumed by such Person), the amount of
such obligation being deemed to be the lesser of the value of such
property or assets and the amount of the obligation so secured; and
(8) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; PROVIDED,
HOWEVER, that in the case of Indebtedness sold at a discount, the amount of such
Indebtedness at any time will be the accreted value thereof at such time.
"INDEPENDENT QUALIFIED PARTY" means an internationally recognized investment
banking firm, accounting firm or appraisal firm; provided, however, that such
firm is not an Affiliate of the Company.
"INTERCOMPANY LOAN" means the subordinated loan from the Company to Enodis
Holdings Limited made pursuant to the Subordinated Intercompany Loan Agreement.
"INTEREST RATE AGREEMENT" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates, including, without limitation, collars, floors, forwards and options
relating to any such agreement.
"INVESTMENT" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of the lender and commission, travel
and similar advances to officers and employees made in the ordinary course of
business) or other extensions of credit (including by way of Guarantee or
similar arrangement) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. Except as
otherwise provided for herein, the amount of an Investment shall be its fair
value at the time the Investment is made and without giving effect to subsequent
changes in value.
For purposes of the definition of "Unrestricted Subsidiary," the definition
of "Restricted Payment" and the covenant described under "--Certain
Covenants--Limitation on Restricted Payments":
(1) "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net
assets of any Subsidiary of the Company at the time that such Subsidiary
is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company
shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary equal to an amount (if positive) equal to
(A) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (B) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time of such redesignation; and
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(2) any property transferred to or from an Unrestricted Subsidiary shall be
valued at its fair market value at the time of such transfer, in each
case as determined in good faith by the Board of Directors.
"ISSUE DATE" means March 26, 2002.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in London, England or New York, New York are not required to be
open.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"NET AVAILABLE CASH" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form), in each case net of:
(1) all legal, title and recording tax expenses, commissions and other fees
and expenses incurred (including, without limitation, accountants' fees,
brokerage fees and underwriters' or placement agents' fees, discounts or
commissions), and all taxes required to be accrued as a liability under
GAAP, as a consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any
Lien upon or other security agreement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of
the proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to minority
interest holders in Restricted Subsidiaries as a result of such Asset
Disposition;
(4) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and
retained by the Company or any Restricted Subsidiary after such Asset
Disposition; and
(5) foreign exchange costs resulting from the conversion of currencies to
sterling or U.S. dollars.
"NET CASH PROCEEDS," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"OFFICER" means any Senior Officer or the Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"PARENT ENTITY" means any Person which becomes the owner of 100% of the
Capital Stock of the Company as the result of a Scheme of Arrangement.
"PERMITTED BANK RESTRICTIONS" means the restrictions on the payment of
dividends or the making of distributions by subsidiaries of the Company included
in the Credit Agreement on the Issue Date, as such Credit Agreement may be
amended, extended, renewed, restated, supplemented or otherwise modified from
123
time to time so long as such restrictions are no more restrictive than the
restrictions included therein on the Issue Date; PROVIDED, HOWEVER, that to the
extent that the term of the Credit Agreement or any replacement Credit Agreement
extends to or beyond the final maturity date of the Notes, such Credit Agreement
contains no restrictions on the payment of dividends or the making of
distributions by subsidiaries of the Company that could prevent such
subsidiaries from dividending or distributing funds to the Company to pay the
full principal amount of the Notes at maturity, including all accrued and unpaid
interest thereon.
"PERMITTED INVESTMENT" means an Investment by the Company or any
Restricted Subsidiary in:
(1) the Company, a Restricted Subsidiary or a Person that will, upon the
making of such Investment, become a Restricted Subsidiary; PROVIDED,
HOWEVER, that the primary business of such Restricted Subsidiary is a
Related Business;
(2) another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
PROVIDED, HOWEVER, that such Person's primary business is a Related
Business;
(3) cash and Temporary Cash Investments;
(4) receivables owing to the Company or any Restricted Subsidiary if created
or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; PROVIDED,
HOWEVER, that such trade terms may include such concessionary trade terms
as the Company or any such Restricted Subsidiary deems reasonable under
the circumstances;
(5) payroll, travel and similar advances to cover matters that are expected
at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business;
(6) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted
Subsidiary;
(7) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments;
(8) any Person to the extent such Investment represents the non-cash portion
of the consideration received for an Asset Disposition as permitted
pursuant to the covenant described under "--Certain Covenants--Limitation
on Sales of Assets and Subsidiary Stock";
(9) any Person where such Investment is acquired by the Company or any of
its Restricted Subsidiaries (A) in exchange for any other Investment or
accounts receivable held by the Company or any such Restricted Subsidiary
in connection with or as a result of a bankruptcy, workout,
reorganization or recapitalization of the issuer of such other Investment
or accounts receivable or (B) as a result of a foreclosure by the Company
or any of its Restricted Subsidiaries with respect to any secured
Investment or other transfer of title with respect to any secured
Investment in default;
(10) any Person that is in existence on the Issue Date and, where relevant,
any extension, modification or renewal of any such Investments as long as
any such extension, modification or renewal does not cause an increase in
the amount of such Investment;
(11) Notes;
(12) any Person that consists of utility deposits in the ordinary course of
business;
(13) loans to a trustee of any of Company's stock option plans which are in
existence on the Issue Date or entered into pursuant to clause (b)(8) of
the covenant described under "--Certain Covenants--Limitation on
Affiliate Transactions"; PROVIDED, HOWEVER, that the proceeds of such
loans are used to fund purchases of the Company's Capital Stock in
connection with the exercise of employee stock
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options; and PROVIDED, FURTHER, that no more than L2 million of such
loans may be made in any fiscal year; and
(14) so long as no Default shall have occurred and be continuing (or result
therefrom), any Person in an aggregate amount which, when added together
with the amount of all the Investments made pursuant to this clause (14)
which at such time have not been repaid through repayments of loans,
cancelation or expiration of Guarantees or advances or other transfers of
assets and which remain outstanding, does not exceed L5 million (with the
fair market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value).
"PERMITTED LIENS" means, with respect to any Person:
(1) pledges or deposits by such Person under worker's compensation laws,
unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or
deposits of cash or U.S. government bonds to secure surety or appeal
bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business;
(2) Liens imposed by law, such as carriers', warehousemen's, landlord's and
mechanics' Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceedings or other Liens arising out of
judgments or awards against such Person with respect to which such Person
shall then be proceeding with an appeal or other proceedings for review
and Liens arising solely by virtue of any statutory or common law
provision relating to banker's Liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; PROVIDED, HOWEVER, that (A) such deposit
account is not a dedicated cash collateral account and is not subject to
restrictions against access by the Company in excess of those set forth
by regulations promulgated by the Federal Reserve Board and (B) such
deposit account is not intended by the Company or any Restricted
Subsidiary to provide collateral to the depository institution;
(3) Liens for property taxes not yet subject to penalties for non-payment or
which are being contested in good faith by appropriate proceedings;
(4) Liens in favor of issuers of surety bonds or letters of credit issued
pursuant to the request of and for the account of such Person in the
ordinary course of its business; PROVIDED, HOWEVER, that such letters of
credit do not constitute Indebtedness;
(5) minor survey exceptions, minor encumbrances, easements or reservations
of, or rights of others for, licenses, rights-of-way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real property or Liens
incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely
affect the value of said properties or materially impair their use in the
operation of the business of such Person;
(6) Liens securing Indebtedness (including Capital Lease Obligations)
Incurred to finance the construction, purchase or lease of, or repairs,
improvements or additions to, property, plant or equipment of such
Person; PROVIDED, HOWEVER, that the Lien may not extend to any other
property owned by such Person or any of its Restricted Subsidiaries at
the time the Lien is Incurred (other than assets and property affixed or
appurtenant thereto), and the Indebtedness (other than any interest
thereon) secured by the Lien may not be Incurred more than 180 days after
the later of the acquisition, completion of construction, repair,
improvement, addition or commencement of full operation of the property
subject to the Lien;
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(7) Liens to secure Indebtedness Incurred by a Restricted Subsidiary under
the Credit Agreement (or the Bilateral Documents referred to in the
Credit Agreement (as in effect on the Issue Date)) that is permitted
pursuant to the covenant described under "--Certain Covenants--Limitation
on Indebtedness";
(8) Liens existing on the Issue Date;
(9) Liens on property or shares of Capital Stock of another Person at the
time such other Person becomes a Subsidiary of such Person; PROVIDED,
HOWEVER, that the Liens may not extend to any other property owned by
such Person or any of its Restricted Subsidiaries (other than assets and
property affixed or appurtenant thereto);
(10) Liens on property at the time such Person or any of its Subsidiaries
acquires the property, including any acquisition by means of a merger or
consolidation with or into such Person or a Subsidiary of such Person;
PROVIDED, HOWEVER, that the Liens may not extend to any other property
owned by such Person or any of its Restricted Subsidiaries (other than
assets and property affixed or appurtenant thereto);
(11) Liens securing Indebtedness or other obligations of a Subsidiary of
such Person owing to such Person or a wholly owned Subsidiary of such
Person;
(12) Liens securing Hedging Obligations so long as such Hedging Obligations
relate to Indebtedness that is, and is permitted to be under the
Indenture, secured by a Lien on the same property securing such Hedging
Obligations;
(13) Liens created for the benefit of (or to secure) the Notes (or
Guarantees of the Notes);
(14) Any interest or title of a lessor under any Capital Lease Obligation
permitted to be incurred under the Indenture;
(15) To the extent constituting a Lien, rights of banks to set-off deposits
against Indebtedness owed to such banks;
(16) Any other Liens imposed by operation of law which do not materially
affect the Company's ability to perform its obligations under the Notes
and the Indenture;
(17) Any other Lien not described in clauses (1) through (16) above which,
together with all other Liens created pursuant to this clause (17) since
the Issue Date, does not exceed L1 million; and
(18) Liens to secure any Refinancing (or successive Refinancings) as a
whole, or in part, of any Indebtedness secured by any Lien referred to in
the foregoing clause (6), (8), (9) or (10); PROVIDED, HOWEVER, that:
(A) such new Lien shall be limited to all or part of the same property
and assets that secured or, under the written agreements pursuant to
which the original Lien arose, could secure the original Lien (plus
improvements and accessions to such property or proceeds or
distributions thereof); and
(B) the Indebtedness secured by such Lien at such time is not increased
to any amount greater than the sum of (x) the outstanding principal
amount or, if greater, committed amount of the Indebtedness described
under clause (6), (8), (9) or (10) at the time the original Lien
became a Permitted Lien and (y) an amount necessary to pay any fees
and expenses, including premiums, related to such refinancing,
refunding, extension, renewal or replacement.
Notwithstanding the foregoing, "Permitted Liens" will not include any Lien
described in clause (6), (9) or (10) above to the extent such Lien applies to
any Additional Assets acquired directly or indirectly from Net Available Cash
pursuant to the covenant described under "--Certain Covenants--Limitation on
126
Sale of Assets and Subsidiary Stock." For purposes of this definition, the term
"Indebtedness" shall be deemed to include interest on such Indebtedness.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"PREFERRED STOCK", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"PRINCIPAL" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"PUBLIC EQUITY OFFERING" means an underwritten primary public offering of
ordinary shares of the Company other than the Rights Offering.
"REFINANCE" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, all or any part of such
Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that:
(1) such Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being Refinanced;
(2) such Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced; and
(3) such Refinancing Indebtedness has an aggregate principal amount (or if
Incurred with original issue discount, an aggregate issue price) that is
equal to or less than the aggregate principal amount (or if Incurred with
original issue discount, the aggregate accreted value) then outstanding
or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced;
PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness shall not include
(A) Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or
(B) Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated March 19, 2002, among the Company, Credit Suisse First Boston Corporation
and The Royal Bank of Scotland plc.
"RELATED BUSINESS" means any business in which the Company was engaged on
the Issue Date and any business related, ancillary or complementary to any
business of the Company in which the Company was engaged on the Issue Date.
"RESTRICTED PAYMENT" with respect to any Person means:
(1) the declaration or payment of any dividends or any other distributions
of any sort in respect of its Capital Stock (including any payment in
connection with any merger or consolidation involving such Person) or
similar payment to the direct or indirect holders of its Capital Stock
(other than dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and dividends or distributions
payable solely to the Company or a Restricted Subsidiary, and other than
PRO RATA dividends or other distributions made by a Subsidiary that is
not a Wholly Owned
127
Subsidiary to minority stockholders (or owners of an equivalent interest
in the case of a Subsidiary that is an entity other than a corporation));
(2) the purchase, redemption or other acquisition or retirement for value of
any Capital Stock of the Company held by any Person or of any Capital
Stock of a Restricted Subsidiary held by any Affiliate of the Company
(other than a Restricted Subsidiary), including the exercise of any
option to exchange any such Capital Stock (other than for or into Capital
Stock of the Company that is not Disqualified Stock);
(3) the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Obligations of such
Person (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in each
case due within one year of the date of such purchase, repurchase or
other acquisition); or
(4) the making of any Investment (other than a Permitted Investment) in any
Person.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"REVOLVING CREDIT FACILITY" means the revolving credit facility contained in
the Credit Agreement (including any Ancillary Facilities referred to in the
Credit Agreement (as in effect on the Issue Date)) and any other facility or
financing arrangement that Refinances, in whole or in part, any such revolving
credit facility.
"RIGHTS OFFERING" means the fully underwritten offering by the Company of
rights to purchase up to 150,861,463 of its ordinary shares commenced on
February 21, 2002.
"SALE/LEASEBACK TRANSACTION" means an arrangement relating to property owned
by the Company or a Restricted Subsidiary on the Issue Date or thereafter
acquired by the Company or a Restricted Subsidiary whereby the Company or a
Restricted Subsidiary transfers such property to a Person and the Company or a
Restricted Subsidiary leases it from such Person.
"SCHEME OF ARRANGEMENT" means a scheme of arrangement pursuant to
section 425 of the Companies Act 1985 in England, pursuant to which a new public
limited company will become the owner of 100% of the Capital Stock of the
Company and the holders of the ordinary shares of the Company immediately prior
to such transaction will hold the same relative proportions of all of the
ordinary shares of the new public limited company immediately after such
transaction.
"SEC" means the U.S. Securities and Exchange Commission.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as amended.
"SENIOR INDEBTEDNESS" means with respect to any Person:
(1) Indebtedness of such Person, whether outstanding on the Issue Date or
thereafter Incurred; and
(2) accrued and unpaid interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating to
such Person whether or not post-filing interest is allowed in such
proceeding) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is
responsible or liable
unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the Notes;
PROVIDED, HOWEVER, that Senior Indebtedness shall not include:
(1) any obligation of such Person to any Subsidiary;
128
(2) any liability for federal, state, local or other taxes owed or owing by
such Person;
(3) any accounts payable or other liability to trade creditors arising in
the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities);
(4) any Indebtedness of such Person (and any accrued and unpaid interest in
respect thereof) which is subordinate or junior in any respect to any
other Indebtedness or other obligation of such Person; or
(5) that portion of any Indebtedness which at the time of Incurrence is
Incurred in violation of the Indenture.
"SENIOR OFFICER" means the Chairman of the Board, the Chief Executive
Officer, the Chief Financial Officer-Group, Chief Financial Officer-Operations
or the Treasurer (or comparable positions) or any member of the Executive
Committee of the Company.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"SPECIFIED PARENT PAYMENTS" means payments to a Parent Entity in respect of
financial obligations and liabilities incurred by a Parent Entity in the
ordinary course of maintaining its existence, including, without limitation,
obligations and liabilities for the payment of taxes, fees in connection with
obtaining and maintaining the listing of shares on the London Stock Exchange,
obtaining and maintaining the listing of American Depositary Shares on the New
York Stock Exchange, compliance with applicable rules and regulations of the
SEC, audit fees, non-executive directors' fees, costs of shareholder
communications and meetings, legal expenses, filing fees and other bona fide
costs and expenses incurred by a Parent Entity in the ordinary course of
maintaining its existence.
"STATED MATURITY" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"STERLING EQUIVALENT" means with respect to any monetary amount in a
currency other than sterling, at any time of determination thereof, the amount
of sterling obtained by converting such foreign currency involved in such
computation into sterling at the spot rate for the purchase of sterling with the
applicable foreign currency as published in Financial Times on the date two
Business Days prior to such determination.
Except as described under "Certain Covenants--Limitation on Indebtedness,"
whenever it is necessary to determine whether the Company has complied with any
covenant in the Indenture or a Default has occurred and an amount is expressed
in a currency other than sterling, such amount will be treated as the Sterling
Equivalent determined as of the date such amount is initially determined in such
currency.
"SUBORDINATED INTERCOMPANY LOAN AGREEMENT" means the Subordinated Loan
Agreement dated February 20, 2002 between the Company and Enodis Holdings
Limited.
"SUBORDINATED OBLIGATION" means, with respect to a Person, any Indebtedness
of such Person (whether outstanding on the Issue Date or thereafter Incurred)
which is subordinate or junior in right of payment to the Notes pursuant to a
written agreement to that effect.
"SUBORDINATION AGREEMENT" means the Subordination Agreement dated
February 20, 2002, among the Company, Enodis Holdings Limited and Credit Suisse
First Boston and The Royal Bank of Scotland plc as agents for the lenders under
the Credit Agreement.
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"SUBSIDIARY" means, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Voting Stock is at the time owned or controlled,
directly or indirectly, by:
(1) such Person;
(2) such Person and one or more Subsidiaries of such Person; or
(3) one or more Subsidiaries of such Person.
"TEMPORARY CASH INVESTMENTS" means any of the following:
(1) any investment in direct obligations of the United Kingdom, the Federal
Republic of Germany or the United States of America or any agency thereof
or obligations guaranteed by the United Kingdom or the United States of
America or any agency thereof;
(2) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the
laws of the United States of America, any State thereof or any foreign
country recognized by the United States of America, and which bank or
trust company has capital, surplus and undivided profits aggregating in
excess of L50.0 million (or the foreign currency equivalent thereof) and
has outstanding debt which is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or
any money-market fund sponsored by a registered broker dealer or mutual
fund distributor;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2)
above;
(4) investments in commercial paper, maturing not more than 90 days after
the date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United
States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's
Ratings Group; and
(5) investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth
or territory of the United States of America, the Federal Republic of
Germany or the United Kingdom, or by any political subdivision or taxing
authority thereof, and rated at least "A" by Standard & Poor's Ratings
Group or "A" by Moody's Investors Service, Inc.
"TERM LOAN FACILITY" shall mean the term loan facilities contained in the
Credit Agreement and any other facility or financing arrangement that Refinances
in whole or in part any such term loan facility.
"TRUSTEE" means The Bank of New York until a successor replaces it and,
thereafter, means the successor.
"TRUST OFFICER" means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"UNRESTRICTED SUBSIDIARY" means:
(1) any Subsidiary of the Company that at the time of determination shall be
designated an Unrestricted Subsidiary by the Board of Directors in the
manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
130
The Board of Directors may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital
Stock or Indebtedness of, or holds any Lien on any property of, the Company or
any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary
to be so designated; PROVIDED, HOWEVER, that either (A) the Subsidiary to be so
designated has total assets of L1,000 or less or (B) if such Subsidiary has
assets greater than L1,000, such designation would be permitted as an Investment
under the covenant described under "--Certain Covenants--Limitation on
Restricted Payments."
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect
to such designation (A) the Company could Incur L1.00 of additional Indebtedness
under paragraph (a) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness" and (B) no Default shall have occurred
and be continuing. Any such designation by the Board of Directors shall be
evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.K. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United Kingdom
for the payment of which the full faith and credit of the United Kingdom is
pledged and which are not callable or redeemable at the issuer's option.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"VOTING STOCK" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"WHOLLY OWNED SUBSIDIARY" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries.
131
BOOK-ENTRY; DELIVERY AND FORM
GENERAL
The exchange notes will initially be represented by one global note in
registered form without interest coupons attached. On the date of issuance of
the exchange notes, the global note will be deposited with, and registered in
the name of, a common depositary for Euroclear and Clearstream, or its nominee.
Ownership of interests in the global note, which we refer to as book-entry
interests, will be limited to persons that have accounts with Euroclear or
Clearstream or persons that may hold interests through such participants.
Book-entry interests will be shown on, and transfers thereof will be effected
only through, records maintained in book-entry form by Euroclear and Clearstream
and their participants.
The book-entry interests will not be held in definitive form. Instead,
Euroclear or Clearstream will credit on their respective book-entry registration
and transfer systems a participant's account with the interest beneficially
owned by such participant. The laws of some jurisdictions, including certain
states of the U.S., may require that certain purchasers of securities take
physical delivery of such securities in definitive form. The foregoing
limitations may impair your ability to own, transfer or pledge book-entry
interests. In addition, while the notes are in global form, "holders" of
book-entry interests will not be considered the owners or "holders" of notes for
any purpose.
So long as the notes are held in global form, the common depositary for
Euroclear or Clearstream (or its nominee) will be considered the sole holder of
the global note for all purposes under the indenture. As such, participants must
rely on the procedures of Euroclear and Clearstream, and indirect participants
must rely on the procedures of the participants through which they own
book-entry interests, to transfer their interests or in order to exercise any
rights of holders under the indenture.
Neither we nor the trustee or any of our or their respective agents will
have any responsibility or be liable for any aspect of the records relating to
the book-entry interests.
ISSUANCE OF DEFINITIVE REGISTERED NOTES
Under the terms of the indenture, to the extent permitted by Euroclear or
Clearstream, owners of book-entry interests will receive definitive notes in
registered form:
- If either Euroclear or Clearstream notifies us that is unwilling or unable
to continue to act as depositary and we do not appoint a successor
depositary within 120 days;
- If Euroclear or Clearstream so request following an event of default under
the indenture; or
- At any time if we in our sole discretion determine that the global note
should be exchanged for definitive registered notes.
In such an event, the registrar will issue definitive registered notes,
registered in the name or names and issued in any approved denominations,
requested by or on behalf of Euroclear or Clearstream, as applicable (in
accordance with their respective customary procedures and based upon directions
received from participants reflecting the beneficial ownership of the book-entry
interests).
REDEMPTION OF THE GLOBAL NOTE
In the event the global note, or any portion thereof, is redeemed, Euroclear
or Clearstream, as applicable, will distribute the amount received by them in
respect of the global note to the holders of the book-entry interests in the
global note. The redemption price payable in connection with the redemption of
such book-entry interests will be equal to the amount received by Euroclear or
Clearstream, as applicable, in connection with the redemption of the global note
(or any portion thereof). We understand that under existing practices of
Euroclear and Clearstream, if fewer than all of the notes are to be redeemed at
any time, Euroclear and Clearstream will credit their respective participants'
accounts on a proportionate basis
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(with adjustments to prevent fractions) or by lot or on such other basis as they
deem fair and appropriate; provided, however, that no book-entry interest of
less than L1,000 principal amount may be redeemed in part.
PAYMENTS ON THE GLOBAL NOTE
Payments of any amounts owing in respect of the global note (including
principal, premium, interest and additional amounts) will be made by us in
British pounds sterling to the principal paying agent. The principal paying
agent will, in turn, make such payments to the common depositary for Euroclear
and Clearstream, which will distribute such payments to participants in
accordance with its procedures.
Under the terms of the indenture, we and the trustee will treat the
registered holder of the global note (i.e., the common depositary or its
nominee) as the owner thereof for the purpose of receiving payments and for all
other purposes. Consequently, neither we nor the trustee or any of our or their
respective agents has or will have any responsibility or liability for:
- any aspect of the records of Euroclear, Clearstream or any participant or
indirect participant relating to or payments made on account of a book-entry
interest, for any such payments made by Euroclear, Clearstream or any
participant or indirect participants, or for maintaining supervising or
reviewing the records of Euroclear, Clearstream or any participant or
indirect participant relating to or payments made on account of a book-entry
interest; or
- Euroclear, Clearstream or any participant or indirect participant.
Payments by participants to owners of book-entry interests held through
participants are the responsibility of such participants, as is the case with
securities held for the accounts of customers registered in "street name."
ACTION BY OWNERS OF BOOK-ENTRY INTERESTS
Euroclear and Clearstream have advised us that they will take any action
permitted to be taken by a holder of notes (including the presentation of old
notes for exchange as described in "The Exchange Offer") only at the direction
of one or more participants to whose account the book-entry interests in the
global note are credited and only in respect of such portion of the aggregate
principal amount of old notes as to which such participant or participants has
or have given such direction. Euroclear and Clearstream will not exercise any
discretion in the granting of consents, waivers or the taking of any other
action in respect of the global note. However, if there is an event of default
under the notes, each of Euroclear and Clearstream reserves the right to
exchange the global note for definitive registered notes in certificated form,
and to distribute such definitive registered notes to its participants.
TRANSFERS
Book-entry interests in the exchange notes may be transferred and exchanged
as described under "Description of the Notes--Transfer".
Definitive registered notes may be transferred and exchanged for book-entry
interests in the global note only as described under "Description of the
Notes--Transfer" and, if required, only after the transferor first delivers to
the Trustee a written certificate (in the form provided in the indenture) to the
effect that such transfer will comply with the appropriate transfer restrictions
applicable to such notes.
GLOBAL CLEARANCE AND SETTLEMENT UNDER THE BOOK-ENTRY SYSTEM
INITIAL SETTLEMENT
Initial settlement for the exchange notes will be made in British pounds
sterling. Book-entry interests owned through Euroclear or Clearstream accounts
will follow the settlement procedures applicable to conventional eurobonds in
registered form. Book-entry interests will be credited to the securities custody
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account of Euroclear and Clearstream holders on the business day following the
settlement date against payment for value on the settlement date.
SECONDARY MARKET TRADING
The book-entry interests will trade through participants of Euroclear or
Clearstream, and will settle in same-day funds. Since the purchase determines
the place of delivery, it is important to establish at the time of trading of
any book-entry interests where both the purchaser's and seller's accounts are
located to ensure that settlement can be made on the desired value date.
INFORMATION CONCERNING EUROCLEAR AND CLEARSTREAM
Euroclear and Clearstream hold securities for participating organizations
and facilitate the clearance and settlement of securities transactions between
their respective participants through electronic book-entry changes in accounts
of such participants. Euroclear and Clearstream provide to their participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Euroclear and Clearstream interface with domestic securities markets.
Euroclear and Clearstream participants are financial institutions such as
underwriters, securities brokers and dealers, banks, trust companies and certain
other organizations. Indirect access to Euroclear or Clearstream is also
available to others such as banks, brokers dealers and trust companies that
clear through or maintain a custodian relationship with a Euroclear or
Clearstream participant, either directly or indirectly.
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TAXATION
INVESTORS IN THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS AS TO
THE TAX CONSEQUENCES, UNDER THE TAX LAWS OF THE COUNTRY OF WHICH THEY ARE
RESIDENT, OF A PURCHASE OF NOTES INCLUDING, WITHOUT LIMITATION, THE CONSEQUENCES
OF RECEIPT OF INTEREST AND PREMIUM, IF ANY, AND SALE OR REDEMPTION OF THE NOTES
OR ANY INTEREST THEREIN.
The summaries set out below describe certain material U.S. tax consequences
of the acquisition, ownership and disposition of the notes by a U.S. holder, as
defined below, and certain material U.K. tax consequences of the acquisition,
ownership and disposition of the notes. The statements regarding U.S. and U.K.
tax laws and practices set forth below, including the statements regarding the
U.S./U.K. double taxation convention relating to income and capital gains, which
we call the U.S./U.K. Tax Treaty, assume that the notes will be issued, and
transfers thereof will be made, in accordance with the indenture governing the
notes.
For purposes of the U.S. Internal Revenue Code of 1986, as amended to the
date hereof, U.S. holders of book-entry interests will be treated as owners of
the notes underlying such book-entry interests and, except as noted below, the
tax consequences of owning book-entry interests will be the same as those
applicable to ownership of notes. However for U.K. tax purposes the tax
consequences of owning book-entry interests will not in all cases be the same as
those applicable to ownership of the notes and it should not be assumed that the
U.K. tax consequences of ownership of the notes set out below will apply equally
to ownership of book-entry interests.
PROPOSED EU SAVINGS DIRECTIVE
On December 13, 2001, the Council of the European Union (acting through
ECOFIN) published a revised draft directive regarding the taxation of savings
income. Subject to a number of important conditions being met, it is proposed
that member states will be required to provide to the tax authorities of another
member state details of payments of interest or other similar income paid by a
person within its jurisdiction to an individual resident in that other member
state, subject to the right of certain member states to opt instead for a
withholding system for a transitional period in relation to such payments. The
proposed directive is not yet final, and may be subject to further amendment
and/or clarification.
UNITED KINGDOM TAXATION
Subject to the limitations and qualifications set forth herein, the
following discussion is the opinion of Clifford Chance Limited Liability
Partnership, our U.K. tax counsel, as to the material tax consequences of the
ownership of the notes as of the date hereof but does not purport to be
comprehensive. It relates only to the position of the 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 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 (possibly with retrospective effect) so as to result in U.K. tax
consequences different from those discussed below. Persons considering the
purchase, ownership or disposition of notes should consult their tax advisers
concerning U.K. tax consequences in the 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 notes are made hereby.
U.K. WITHHOLDING TAX ON U.K. SOURCE INTEREST
The notes issued by Enodis plc will constitute "quoted Eurobonds" provided
they carry a right to interest and are and continue to be listed on a recognized
stock exchange. Under a published U.K. Inland Revenue interpretation, securities
which are to be listed on a stock exchange in a country which is a member state
of the European Union or which is part of the European Economic Area will
satisfy this requirement if they are listed by a competent authority in that
country and are admitted to trading on a recognized stock
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exchange in that country; securities which are to be listed on a stock exchange
in any other country will satisfy this requirement if they are admitted to
trading on a recognized stock exchange in that country. The Luxembourg Stock
Exchange is a recognized stock exchange for these purposes. While the notes are
and continue to be quoted Eurobonds, payments of interest on the notes may be
made without withholding or deduction for or on account of U.K. income tax.
In all other cases, interest on the notes will be paid under deduction of
U.K. income tax at the lower rate (currently 20%), subject to any direction from
Inland Revenue in relation to any particular holding of notes to make payment
free of deduction or subject to a reduced deduction by virtue of relief
available to the holder of such notes under an applicable double taxation
treaty. Such directions will be issued on prior application to the relevant tax
authorities by the holder in question. A holder who is entitled to the benefit
of the U.S./U.K. tax treaty as a resident of the U.S. and who satisfies the
relevant conditions relating to exemption from withholding tax on interest which
are set out in the U.S./U.K. tax treaty, will normally be able 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 U.S./U.K. tax treaty on the
appropriate form. Alternatively, a claim may be made by such a holder in advance
of a payment of interest. If the claim is accepted by the Inland Revenue, they
may authorize subsequent payments to the holder to be made without withholding
for U.K. tax.
WITHHOLDING TAX ON SPECIAL INTEREST
Payments of additional cash interest pursuant to the registration rights
agreement, which we call Special Interest, may be subject to deduction of U.K.
income tax at the lower rate subject to such relief as may be available under
the terms of any applicable double tax treaty.
PROVISION OF INFORMATION
Noteholders who are individuals should note that where any interest on notes
is paid to them (or to any person acting on their behalf) by us or any person in
the U.K. acting on our behalf, which we call a paying agent, or is received by
any person in the U.K. acting on behalf of the relevant noteholder (other than
solely by clearing or arranging the clearing of a check), which we call a
collecting agent, then we, the paying agent or the collecting agent (as the case
may be) may, in certain cases, be required to supply to the U.K. Inland Revenue
details of the payment and certain details relating to the noteholder (including
the noteholder's name and address). These provisions will apply whether or not
the interest has been paid subject to withholding or deduction for or on account
of U.K. income tax and whether or not the noteholder is resident in the U.K. for
U.K. taxation purposes. Where the noteholder is not a resident, the details
provided to the U.K. Inland Revenue may, in certain cases, be passed by the U.K.
Inland Revenue to the tax authorities of the jurisdiction in which the
noteholder is resident for taxation purposes.
For the above purposes, "interest" should be taken, for practical purposes,
as including payments made by a guarantor in respect of interest on notes.
OTHER RULES RELATING TO UNITED KINGDOM WITHHOLDING TAX
- Notes may be issued at an issue price of less than 100% of their principal
amount. Any discount element on any such notes will not be subject to any
U.K. withholding tax pursuant to the provisions mentioned above, but may be
subject to reporting requirements as outlined above.
- Where notes are redeemed at a premium, then any such element of premium may
constitute a payment of interest. Payments of interest are subject to U.K.
withholding tax and reporting requirements as outlined above.
- Where interest has been paid under deduction of U.K. income tax, noteholders
who are not resident in the U.K. may be able to recover all or part of the
tax deducted if there is an appropriate provision in any applicable double
taxation treaty.
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- The references to "interest" above mean "interest" as understood in U.K. tax
law. The statements above do not take any account of any different
definitions of "interest" or "principal" which may prevail under any other
law or which may be created by the terms and conditions of the notes or any
related documentation.
TAXATION BY DIRECT ASSESSMENT OF NOTEHOLDERS
Notwithstanding that interest is received subject to deduction of income
tax, noteholders who are resident in the U.K. for tax purposes or noteholders
who are non-resident and carrying on a trade, profession or vocation in the U.K.
through a branch or agency, may be liable to pay further tax on the interest
received. Certain noteholders may be entitled to a refund of all or part of the
tax deducted depending on their individual circumstances.
Where the interest is paid without withholding or deduction, the interest
will not be assessed to U.K. tax in the hands of noteholders who are not
resident in the U.K., except where such persons are carrying on a trade,
profession or vocation in the U.K. through a branch or agency in connection with
which the interest is received or to which the notes are attributable. In such a
case (subject to exemptions for interest received by certain categories of
agent) tax may be levied on the U.K. branch or agency.
OWNERSHIP AND DISPOSAL (INCLUDING REDEMPTION) OF THE NOTES BY U.K. CORPORATION
TAX PAYERS
In general, noteholders which are within the charge to U.K. corporation tax
will be charged to tax on all returns and fluctuations in value of the notes
broadly in accordance with their statutory accounting treatment so long as the
accounting treatment is in accordance with a mark-to-market basis or an accruals
basis which is authorized for tax purposes. Such noteholders will generally be
charged to tax as income in each accounting period by reference to interest (and
discount) and to any profit or gain (or entitled to relief for any loss) which,
in accordance with the noteholders' authorized accounting method, is applicable
to that period.
OWNERSHIP AND DISPOSAL (INCLUDING REDEMPTION) OF THE NOTES BY OTHER U.K. TAX
PAYERS
A transfer of a note by an individual noteholder who is resident or
ordinarily resident for tax purposes in the U.K., or who carries on a trade in
the U.K. through a branch or agency to which the note is attributable, may give
rise to a charge to tax on income, under rules known as the "accrued income
scheme," in respect of an amount representing interest on the note which has
accrued from the last interest payment to the time of transfer.
An individual noteholder who is resident or ordinarily resident in the U.K.,
or who carries on a trade, profession or vocation in the U.K. through a branch
or agency to which the note is attributable, may be subject to U.K. taxation on
disposal or redemption of a note. However, in calculating any chargeable gain
(or allowable loss) on the transfer of a note, the consideration for disposal of
the note will be reduced by any amount on which the noteholder is chargeable to
income tax on the transfer under the accrued income scheme as described in the
preceding paragraph.
If the notes are issued at a discount to their par value, they constitute
"relevant discounted securities" within the meaning of Schedule 13 to the
Finance Act 1996, in which case the accrued income scheme would not apply and
any profit or loss on a disposal (including redemption) of the notes by an
individual noteholder subject to U.K. tax may be taxed or relieved as income.
STAMP DUTY AND STAMP DUTY RESERVE TAX ON THE NOTES
No U.K. stamp duty or stamp duty reserve tax is payable on the issue of the
notes or any transfer of, or agreement to transfer, full legal and beneficial
ownership of a note.
The above discussion, to the extent it relates to stamp duty and stamp duty
reserve tax, assumes that (a) the notes do not carry and will not at any time
carry a right to interest the amount of which exceeds a
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reasonable commercial return on the nominal amount of the capital; (b) the notes
do not carry and will not at any time carry a right on repayment to an amount
which exceeds the nominal amount of the capital and is not reasonably comparable
with what is generally repayable (in respect of a similar nominal amount of
capital) under the terms of issue of loan capital listed in the Official List of
the Financial Services Authority acting in its capacity as the competent
authority for the purposes of Part VI of the Financial Services and Markets Act
2000.
Furthermore, the above discussion, to the extent it relates to stamp duty
and stamp duty reserve tax, assumes that any transfer of, or agreement to
transfer, a noteholder's rights in respect of notes held in a clearing system
does not amount to the transfer of, or an agreement to transfer either:
- an interest in such notes; or
- rights against the clearing system;
in each case falling short of full ownership of the relevant notes.
PAYMENTS OF INTEREST ON THE NOTES TREATED AS DISTRIBUTIONS
In the event that any or part of any interest payment is characterized as a
distribution for U.K. tax purposes, which may be the case if the return on the
notes depends on the results of, or a part of our business, or represents more
than a reasonable commercial return or if the thin-capitalization or transfer-
pricing rules apply, that payment or part of such payment would not be
deductible in computing our profits for U.K. corporation tax purposes.
UNITED STATES TAXATION
GENERAL
Subject to the limitations and qualifications set forth herein, the
following discussion is the opinion of Clifford Chance Limited Liability
Partnership, our U.S. tax counsel, as to the material U.S. federal income tax
consequences of the purchase, ownership and disposition of the notes acquired
for cash upon the initial offering of the notes at their issue price. The
following is a summary and does not purport to be a comprehensive description of
all of the tax considerations that may be relevant to a decision to purchase the
notes. In particular, this summary of U.S. federal income tax matters deals only
with holders that are U.S. holders (as defined below) and that will hold the
notes as capital assets for U.S. federal income tax purposes (generally, assets
held for investment) and does not address special tax situations, such as the
U.S. federal income tax treatment of holders that are (i) subject to special tax
rules (e.g., financial institutions, securities or currency dealers, brokers,
insurance companies, regulated investment companies and tax-exempt
organizations), (ii) holding notes as part of a hedging or larger integrated
financial transaction or (iii) U.S. holders (as defined below) with a currency
other than the U.S. dollar as their functional currency.
This summary is based upon the Internal Revenue Code of 1986, as amended,
final, temporary and proposed regulations promulgated thereunder and judicial
and administrative interpretations thereof, each as in effect on the date
hereof, all of which are subject to change, possibly with retroactive effect. No
ruling has been requested from the U.S. Internal Revenue Services on the tax
consequences of owning the notes, and it is possible that the IRS could disagree
with portions of this summary. Prospective purchasers of the notes should
consult their own tax advisers as to the U.S. federal income tax consequences of
the purchase, ownership and disposition of the notes, in addition to the effect
of any state or local tax laws or tax laws of any jurisdiction other than the
United States.
As used herein, a U.S. holder means a beneficial owner of a note who is, for
U.S. federal income tax purposes, (i) a citizen or resident of the U.S., (ii) a
corporation or other entity taxable as a corporation created or organized in or
under the laws of the U.S. or of any state, (iii) any estate the income of which
is subject to U.S. federal income taxation regardless of its source, and
(iv) any trust if a court within the U.S. is able to exercise primary
supervision over the administration of the trust and one or more U.S.
fiduciaries have the authority to control all substantial decisions of the trust
or if the trust makes a valid election under
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U.S. Treasury Regulations to be treated as a domestic trust. If a partnership
holds notes, the tax treatment of a partner will generally depend upon the
status of the partner and upon the activities of the partnership. Partners in a
partnership considering the purchase of notes should consult their own tax
adviser.
TAX TREATMENT OF THE NOTES
STATED INTEREST, SPECIAL INTEREST AND ADDITIONAL AMOUNTS. Stated interest
on the notes, special interest, if any, and additional amounts, if any,
generally will be includible in a U.S. holder's gross income as ordinary
interest income in accordance with such U.S. holder's usual method (cash or
accrual) of tax accounting.
In the case of stated interest received on a note, special interest or
additional amounts, the amount of income recognized by a cash basis U.S. holder
will be the U.S. dollar value of the stated interest payment, based on the "spot
rate" in effect on the date of receipt. Spot rate generally means a rate that
reflects a fair market rate of exchange available to the public for pound
sterling under a "spot contract" in a free market and involving representative
amounts. A spot contract is a contract to buy and sell pound sterling on or
before two business days following the date of execution of the contract. If
such spot rate cannot be demonstrated, the IRS has authority to determine the
spot rate.
The amount of stated interest, special interest or additional amounts
recognized by an accrual basis U.S. holder of a note will be determined for any
accrual period in pounds sterling and then translated into U.S. dollars using
the average U.S. dollar-pound sterling exchange rate for the accrual period (or,
with respect to an accrual period that spans two taxable years, using the
average exchange rate for the partial period within each taxable year). The
average rate for an accrual period (or partial period) is the simple average of
the spot rates for each business day of such period, or other average exchange
rate for the period reasonably derived and consistently applied by the holder.
Alternatively, an accrual basis U.S. holder can elect to translate stated
interest at the spot rate on the last day of the accrual period (and, in the
case of a partial accrual period, the spot rate on the last day of the taxable
year) or on the date the interest payment is received if such date is within
five business days of the end of the accrual period. A U.S. holder that makes
such an election must apply it consistently to all debt instruments from year to
year and cannot change the election without the consent of the IRS.
SALE AND REDEMPTION OF NOTES. A U.S. holder generally will recognize gain
or loss upon the sale, exchange, retirement or other disposition of a note in an
amount equal to the difference between the U.S. dollar value of the amount
realized upon such sale, exchange, retirement or other disposition (other than
amounts attributable to accrued interest, which will be taxable as such), and
such U.S. holder's adjusted tax basis in the note. For this purpose, an amount
received in pound sterling will be translated into U.S. dollars at the spot rate
in effect on the date of disposition of the notes. A U.S. holder's adjusted tax
basis in a note will generally equal the issue price of such note (translated
into U.S. dollars using the spot rate in effect on the date of a holder's
purchase of a note). Any gain or loss (other than foreign currency gain or loss,
described below) will be capital gain or loss and generally will be long term
capital gain or loss if the note is held for more than one year. Under current
law, net long term capital gains of a noncorporate U.S. holder are, under
certain circumstances, taxed at lower U.S. federal income tax rates than are
items of ordinary income. The deductibility of capital losses by a U.S. holder,
however, is subject to limitations.
EXCHANGE OFFER. In the opinion of U.S. tax counsel, the exchange pursuant
to the exchange offer will not be a taxable exchange for U.S. federal income tax
purposes. As a result, a current holder of the old notes will not recognize
taxable gain or loss upon exchanging the notes pursuant to the exchange offer. A
holder's initial ownership of an old note and of an exchange note upon the
exchange together will be treated as the ownership of the same note for U.S.
federal income tax purposes. It is possible, however, that the IRS may take a
different position, in which case holders might be required to treat the
exchange as a taxable disposition of the old notes and purchase of the exchange
notes, in which case holders may have to recognize taxable gain or loss for U.S.
federal income tax purposes.
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FOREIGN CURRENCY GAIN OR LOSS. U.S. holders of the notes may realize
foreign currency gain or loss, which generally will be treated as ordinary
income or loss, as the case may be, upon the receipt of payments on the notes
and upon the sale, exchange, retirement or other disposition of the notes, and
the realized foreign currency gain or loss generally will be recognized in
accordance with applicable provisions of the Internal Revenue Code. Generally,
the amount of foreign currency gain or loss realized with respect to payments of
interest will be equal to the difference between (x) the pound sterling amount
received as translated into U.S. dollars using the spot rate on the date of
receipt, and (y) the U.S. dollar amount previously included in income in respect
of the payment. The amount of foreign currency gain or loss realized with
respect to payments of principal will be equal to the difference between
(x) the pounds sterling amount of principal received as translated into U.S.
dollars using the spot rate on the date of receipt, and (y) the pounds sterling
amount of principal translated into U.S. dollars using the spot rate on the date
the note was acquired. However, the amount of any foreign currency gain or loss
realized upon a sale, exchange, retirement or disposition of a note with respect
to interest and principal shall be limited to the total amount of gain or loss,
as the case may be, realized on the transaction.
SALES OF POUNDS STERLING. A U.S. holder who receives pounds sterling as
principal or interest on a note and later sells such pounds sterling for U.S.
dollars will have taxable gain or loss equal to the difference between the
amount of U.S. dollars received and such U.S. holder's tax basis in the pounds
sterling. In addition, if a U.S. holder purchases notes with pounds sterling,
such U.S. holder will have taxable gain or loss if its tax basis in the pounds
sterling is different than the spot rate on the purchase date. Any such gain or
loss will be taxed as foreign currency gain or loss (described above).
FOREIGN TAX CREDIT
For U.S. foreign tax credit purposes, stated interest, and any additional
amounts or special interest with respect to a note will be treated as
foreign-source income and generally will be subject to the separate foreign tax
credit limitation for passive income. However, if such interest were to become
subject to a withholding tax at a rate of five percent or more, it would be
segregated in the separate foreign tax credit basket for high withholding tax
interest. If such interest is received by a U.S. holder engaged in the active
conduct of a banking, insurance, financing or similar business, it may be
segregated in the separate foreign tax credit basket for financial services
income.
Gain or loss realized on the sale, exchange, retirement or other disposition
of a note (including foreign currency gain or loss) generally will be treated as
U.S.-source income or loss for foreign tax credit purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments within the U.S. of stated interest, special interest and additional
amounts on the notes, including payments made by the U.S. office of a paying
agent, broker or other intermediary, and to proceeds of a sale, redemption or
other disposition of the notes through a U.S. branch of a U.S. or foreign
broker. Except in the case of an exempt recipient, such as a corporation, a
"backup withholding" tax may apply to such payments or proceeds if the
beneficial owner fails to provide a correct taxpayer identification number (on
Form W-9) or other appropriate documentation or, in the case of payments of
stated interest, special interest or additional amounts, fails to certify that
he is not subject to such withholding or fails to report interest and dividend
income in full. Any amounts withheld under the backup withholding rules from a
payment to a beneficial owner will be allowed as a refund or credit against such
beneficial owner's U.S. federal income tax liability provided the required
information is furnished to the IRS.
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PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Securities and Exchange
Commission set forth in no-action letters issued to third parties, including
"Exxon Capital Holdings Corporation," available April 13, 1988, "Morgan
Stanley & Co. Incorporated," available June 5, 1991, and "Shearman & Sterling,"
available July 2, 1993, we believe that exchange notes issued pursuant to the
exchange offer in exchange for the old notes may be offered for resale, resold
and otherwise transferred by holders so long as such holder is not (i) our
affiliate, (ii) a broker-dealer who acquired old notes directly from us or our
affiliate or (iii) a broker-dealer who acquired old notes as a result of
market-making or other trading activities. Offers, sales and transfers may be
made without compliance with the registration and prospectus delivery provisions
of the Securities Act of 1933, provided that such exchange notes are acquired in
the ordinary course of such holders' business, and such holders are not engaged
in, and do not intend to engage in, and have no arrangement or understanding
with any person to participate in, a distribution of such exchange notes and
that participating broker-dealers receiving exchange notes in the exchange offer
will be subject to a prospectus delivery requirement with respect to resales of
such exchange notes. To date, the staff of the Securities and Exchange
Commission has taken the position that participating broker-dealers may fulfil
their prospectus delivery requirements with respect to transactions involving an
exchange of securities such as the exchange pursuant to the exchange offer
(other than a resale of an unsold allotment from the sale of the old notes to
the initial purchasers) with the prospectus contained in the registration
statement relating to the exchange offer. Pursuant to the registration rights
agreement, we have agreed to permit participating broker-dealers and other
persons, if any, subject to similar prospectus delivery requirements to use this
prospectus in connection with the resale of such exchange notes. We have agreed
that, for a period of 180 days after the consummation of the exchange offer, we
will make this prospectus, and any amendment or supplement to this prospectus,
available to any broker-dealer that requests such documents. Each holder of the
old notes who wishes to exchange its old notes for exchange notes in the
exchange offer will be required to make certain representations to us as set
forth in "The Exchange Offer." In addition, each holder who is a broker-dealer
and who receives exchange notes for its own account in exchange for old notes
that were acquired by it as a result of market-making activities or other
trading activities will be required to acknowledge that it will deliver a
prospectus in connection with any resale by it of such exchange notes.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act of 1933, and any profit on any resale of
exchange notes and any commission or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act of 1933.
By acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act of 1933.
For a period of 180 days after the consummation of the exchange offer we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents.
We have agreed to pay all expenses incident to the exchange offer (including the
expenses of one counsel for the holders of the notes) other than commissions or
concessions of any brokers or dealers and will indemnify the holders of the
notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act of 1933.
141
LEGAL MATTERS
The validity of the notes will be passed upon for us by Clifford Chance
Limited Liability Partnership (with respect to matters of New York and U.S.
federal law and the laws of England and Wales).
EXPERTS
The financial statements as of September 30, 2000, and September 29, 2001,
and for each of the three years in the period ended September 29, 2001, included
in this prospectus and the related financial statement schedules included
elsewhere in the registration statement have been audited by Deloitte & Touche,
independent auditors, as stated in their report appearing herein and elsewhere
in the registration statement, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
Enodis plc is incorporated as a public limited company with limited
liability in England. A majority of our directors and executive officers are
non-residents of the U.S. and are located outside the United States. As a
result, it may not be possible for investors to effect service of process within
the U.S. on our directors and executive officers or to enforce against any of
them judgments obtained in U.S. courts predicated upon the civil liability
provisions of the U.S. federal securities laws of the United States. In
addition, it may be difficult for investors to enforce, in original actions
brought in courts in jurisdictions located outside the U.S., rights predicated
upon U.S. securities laws.
We have been advised by our legal counsel in England, Clifford Chance
Limited Liability Partnership, that there is a doubt as to the enforceability of
certain civil liabilities under U.S. federal securities laws in original actions
in English courts, and that, subject to certain exemptions and time limitations,
English courts will treat a final and conclusive judgment of a U.S. court for a
liquidated amount as a debt enforceable by fresh proceedings in the English
courts. Our counsel has expressed no opinion, however, as to whether the
enforcement by an English court of any judgment would be in pounds sterling or
as of which date, if any, the determination of the applicable exchange rate from
the U.S. dollars to pounds sterling would be made.
We have agreed that any suit, action or proceeding arising out of or based
upon the indenture or the notes may be instituted in any federal or state court
located in New York City, and we have irrevocably appointed Shack Siegel Katz
Flaherty & Goodman P.C. as our agent for service of process in any such suit,
action or proceeding.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the SEC on
Form F-4 under the Securities Act, with respect to the Exchange Notes. As is
permitted by the rules and regulations of the SEC, this prospectus omits certain
information, exhibits, schedules and undertakings set forth in the registration
statement. The statements in this prospectus as to the contents of any contract
or other document referred to in this prospectus are not necessarily complete
and, in each instance, please refer to the copy of such contract or other
document filed as an exhibit to the registration statement. Any of such
statements in this prospectus are qualified in all respects by reference to such
exhibit.
We are subject to the reporting requirements of the Exchange Act that are
applicable to foreign private issuers. In accordance with the Exchange Act, we
are required to file reports, including annual reports on Form 20-F, and other
information with the SEC. We are allowed to "incorporate by reference" the
information we file with the SEC. This permits us to disclose important
information to you by referring to these documents. Any information referenced
this way is considered part of this prospectus, and any
142
information filed subsequently with the SEC. The registration statement on
Form F-4, including the exhibits and schedules thereto, and reports and other
information that we filed with the SEC may be obtained upon written request from
us.
We file annual and current reports and other information with the SEC. You
may read and copy the registration statement and any materials that we file at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. Our documents may also be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005. The SEC
maintains an internet site that contains reports and other information that file
electronically with the SEC. The SEC's web site is located at: www.sec.gov.
As a foreign private issuer, we are exempt from the rules under the Exchange
Act prescribing the furnishing and content of proxy statements to shareholders.
In addition, our officers, directors and principal shareholders are exempt from
the "short-swing profits" reporting and liability provisions contained in
Section 16 of the Exchange Act and the rules promulgated thereunder. We have
agreed to under the indenture to file with the SEC and provide to the trustee
and the holders of the notes information, documents and reports as long as the
notes are outstanding.
While any notes remain outstanding, any requests for information or
agreements summarized in this prospectus should be directed to our Company
Secretary at Washington House, 40-41 Conduit Street, London W1S 2YQ, United
Kingdom.
In addition, copies of the purchase agreement, the indenture and the
registration rights agreement that have been prepared in connection with the
issuance of the notes will be available at the office of the Luxembourg paying
agent in Luxembourg, so long as any of the notes are outstanding.
LUXEMBOURG LISTING AND GENERAL INFORMATION
In connection with any application to list the notes on the Luxembourg Stock
Exchange, a legal notice relating to the issue of the notes and our documents of
formation will be deposited with the Chief Registrar of the District Court in
Luxembourg (Greffier en Chef du Tribunal d'Arrondissement a Luxembourg) where
such documents may be examined and copies obtained.
The exchange notes have been accepted for clearance by the Euroclear and
Clearstream clearing systems with Common Codes of 014995129 and ISIN numbers of
XS-014995129-4.
We have appointed The Bank of New York (Luxembourg) S.A. as our listing
agent and paying agent in Luxembourg. All documents mentioned in this prospectus
that have been prepared in connection with the issuance of the notes will be
available at the office of the Luxembourg paying agent in Luxembourg, so long as
any of the notes are outstanding. So long as the notes are listed on the
Luxembourg Stock Exchange, and the rules of the Luxembourg Stock Exchange so
require, a paying agent for the notes will be maintained in Luxembourg.
For as long as the notes are listed on the Luxembourg Stock Exchange, copies
of our annual reports for the years ended September 30, 2000, and September 29,
2001, and our interim reports for the six months ended April 1, 2000, and
March 31, 2001 and March 30, 2002, as well as all our future annual and
six-month interim reports, may be obtained free of charge at the office of our
Luxembourg Paying Agent. In addition, commencing with the second quarter of
fiscal year 2002, we will prepare quarterly reports, which may be obtained free
of charge at the office of our Luxembourg Paying Agent for as long as the notes
are listed on the Luxembourg Stock Exchange.
We have obtained all necessary consents, approvals and authorizations in
connection with the issuance of the notes. The issuance of the notes has been
authorized by resolutions of our board of directors passed on March 15, 2002.
143
Except as disclosed in this prospectus, we are not involved in litigation or
arbitration proceedings relating to claims on amounts that are material in the
context of the issuance of the notes, nor, so far as we are aware, is any such
litigation or arbitration pending or threatened.
We represent that there has been no material adverse change in our financial
position since September 29, 2001.
According to Chapter IV, article 3, point A/II/2 of the Rules and
Regulations of the Luxembourg Stock Exchange, the notes shall be freely
transferable and therefore no transaction made on the Luxembourg Stock Exchange
shall be cancelled.
We have appointed The Bank of New York (Luxembourg) S.A. as our Listing and
Paying and Transfer Agent in respect of the notes in Luxembourg. Transfers and
payments in relation to notes issued in definitive form may be made at the
office of our Luxembourg Paying and Transfer Agent.
Our articles of association provide that, subject to the U.K. Companies Act
of 1985 and 1989, any of our directors, any alternate director and the secretary
of the company shall be indemnified out of our assets against all costs,
charges, losses and liabilities incurred by him in the proper execution of his
duties or the proper exercise of his powers, authorities and discretion. Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to our directors and officers pursuant to the foregoing provisions,
we have been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
144
INDEX TO FINANCIAL STATEMENTS
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Independent Auditors' Report................................ F-2
Consolidated Statements of Profit and Loss Accounts......... F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Cash Flows and Notes to the
Consolidated Statements of Cash Flows..................... F-5
Consolidated Statements of Total Recognized Gains and
Losses.................................................... F-7
Consolidated Statements of Movements in Equity Shareholders'
Funds..................................................... F-7
Notes to the Consolidated Financial Statements.............. F-8
Financial Statement Schedule II--Valuation and Qualifying
Accounts.................................................. F-64
UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS:
Unaudited Consolidated Statements of Profit and Loss
Accounts.................................................. F-65
Unaudited Consolidated Balance Sheets....................... F-67
Unaudited Consolidated Statements of Cash Flows............. F-68
Notes to the Unaudited Consolidated Interim Financial
Statements................................................ F-69
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Enodis plc
We have audited the accompanying consolidated balance sheets of Enodis plc
and subsidiaries (collectively, "the Group") as of September 30, 2000, and
September 29, 2001, and the related consolidated statements of profit and loss
accounts, cash flows, total recognized gains and losses and movements in equity
shareholders' funds for each of the three years in the period ended
September 29, 2001, all expressed in pounds sterling. Our audits also included
the financial statement schedule listed in the Index at Item 18. These financial
statements and the financial statement schedule are the responsibility of the
Group's management. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United Kingdom and the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Group as
of September 30, 2000, and September 29, 2001, and the results of its operations
and its cash flows for each of the three years in the period ended
September 29, 2001, in conformity with accounting principles generally accepted
in the United Kingdom. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
Accounting principles generally accepted in the United Kingdom differ in
certain significant respects from accounting principles generally accepted in
the United States of America. The application of the latter would have affected
the determination of profit/(loss) for each of the three years in the period
ended September 29, 2001, and the determination of equity shareholders' funds as
of September 30, 2000, and September 29, 2001, to the extent summarized in
Note 29 to the consolidated financial statements.
DELOITTE & TOUCHE
Chartered Accountants and Registered Auditors
London, England
November 21, 2001, except for Notes 11 and 30 as to which the date is June 27,
2002
F-2
ENODIS PLC
CONSOLIDATED STATEMENTS OF PROFIT AND LOSS ACCOUNTS
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
1999 2000 2001
----------------------------------------------- --------------- --------------
EXCEPTIONAL
PRE- ITEMS PRE-
(IN MILLIONS EXCEPT SHARE DATA) NOTES EXCEPTIONAL (NOTE 5) TOTAL TOTAL EXCEPTIONAL
------------------------------- -------- -------------- -------------- ------------- --------------- --------------
TURNOVER 2
Food equipment............. L489.7 L-- L489.7 L884.5 L887.2
Property................... 1.0 -- 1.0 19.9 16.6
-------------- -------------- ------------- --------------- --------------
Continuing operations...... 490.7 -- 490.7 904.4 903.8
Discontinued operations.... 265.6 -- 265.6 275.7 177.3
-------------- -------------- ------------- --------------- --------------
756.3 -- 756.3 1,180.1 1,081.1
-------------- -------------- ------------- --------------- --------------
PROFIT FROM OPERATIONS
Food equipment............. 66.6 (6.0) 60.6 111.5 90.7
Property................... 0.2 -- 0.2 8.4 9.0
Corporate costs............ (6.2) -- (6.2) (7.3) (8.9)
-------------- -------------- ------------- --------------- --------------
Continuing operations...... 60.6 (6.0) 54.6 112.6 90.8
-------------- -------------- ------------- --------------- --------------
Discontinued operations.... 24.0 -- 24.0 27.1 9.1
-------------- -------------- ------------- --------------- --------------
84.6 (6.0) 78.6 139.7 99.9
-------------- -------------- ------------- --------------- --------------
Goodwill amortization/
impairment............... (2.7) -- (2.7) (21.4) (23.0)
-------------- -------------- ------------- --------------- --------------
OPERATING PROFIT/(LOSS) 2,4
Continuing operations...... 57.9 (6.0) 51.9 91.2 67.8
Discontinued operations.... 24.0 -- 24.0 27.1 9.1
-------------- -------------- ------------- --------------- --------------
81.9 (6.0) 75.9 118.3 76.9
-------------- -------------- ------------- --------------- --------------
Profit on disposal of
businesses............... 5 -- -- -- -- --
Profit on disposal of property
fixed assets............. 4.1 -- 4.1 3.0 --
-------------- -------------- ------------- --------------- --------------
86.0 (6.0) 80.0 121.3 76.9
-------------- -------------- ------------- --------------- --------------
Net interest payable and
similar charges.......... 8 (13.3) -- (13.3) (37.5) (36.1)
-------------- -------------- ------------- --------------- --------------
Profit/(loss) on ordinary
activities before taxation... 72.7 (6.0) 66.7 83.8 40.8
-------------- -------------- ------------- --------------- --------------
Tax on profit/(loss) on
ordinary activities...... 9 (5.9) -- (5.9) (14.2) (8.6)
-------------- -------------- ------------- --------------- --------------
Profit/(loss) on ordinary
activities after taxation.. 66.8 (6.0) 60.8 69.6 32.2
-------------- -------------- ------------- --------------- --------------
Equity minority interest... -- -- -- (0.3) (0.3)
-------------- -------------- ------------- --------------- --------------
Profit/(loss) for the period.. 66.8 (6.0) 60.8 69.3 31.9
-------------- -------------- ------------- --------------- --------------
Equity dividends........... 10 (24.1) -- (24.1) (33.9) (4.8)
-------------- -------------- ------------- --------------- --------------
Retained profit/(loss)..... L42.7 L(6.0) L36.7 L35.4 L27.1
============== ============== ============= =============== ==============
EARNINGS/(LOSS) PER SHARE 11 1999 2000 2001
------------- --------------- --------------
Basic earnings/(loss) per
share.................... 31.3p 24.0p (37.7)p
Adjusted basic earnings per
share.................... 33.7p 30.3p 17.8p
Diluted earnings/(loss) per
share.................... 22.4p 22.4p (37.7)p
Adjusted diluted earnings per
share.................... 23.9p 28.3p 17.7p
2001
-------------------------------------------
EXCEPTIONAL
ITEMS TOTAL
(IN MILLIONS EXCEPT SHARE DATA) (NOTE 5) TOTAL (NOTE 1)
------------------------------- -------------- --------------- --------
TURNOVER
Food equipment............. L-- L887.2 $1,303.4
Property................... -- 16.6 24.4
-------------- --------------- --------
Continuing operations...... -- 903.8 1,327.8
Discontinued operations.... -- 177.3 260.5
-------------- --------------- --------
-- 1,081.1 1,588.3
-------------- --------------- --------
PROFIT FROM OPERATIONS
Food equipment............. (43.4) 47.3 69.5
Property................... -- 9.0 13.2
Corporate costs............ (24.1) (33.0) (48.5)
-------------- --------------- --------
Continuing operations...... (67.5) 23.3 34.2
-------------- --------------- --------
Discontinued operations.... -- 9.1 13.4
-------------- --------------- --------
(67.5) 32.4 47.6
-------------- --------------- --------
Goodwill amortization/
impairment............... (100.0) (123.0) (180.7)
-------------- --------------- --------
OPERATING PROFIT/(LOSS)
Continuing operations...... (167.5) (99.7) (146.5)
Discontinued operations.... -- 9.1 13.4
-------------- --------------- --------
(167.5) (90.6) (133.1)
-------------- --------------- --------
Profit on disposal of
businesses............... 23.5 23.5 34.5
Profit on disposal of property
fixed assets............. -- -- --
-------------- --------------- --------
(144.0) (67.1) (98.6)
-------------- --------------- --------
Net interest payable and
similar charges.......... (5.8) (41.9) (61.5)
-------------- --------------- --------
Profit/(loss) on ordinary
activities before taxation... (149.8) (109.0) (160.1)
-------------- --------------- --------
Tax on profit/(loss) on
ordinary activities...... 2.0 (6.6) (9.7)
-------------- --------------- --------
Profit/(loss) on ordinary
activities after taxation.. (147.8) (115.6) (169.8)
-------------- --------------- --------
Equity minority interest... -- (0.3) (0.5)
-------------- --------------- --------
Profit/(loss) for the period.. (147.8) (115.9) (170.3)
-------------- --------------- --------
Equity dividends........... -- (4.8) (7.0)
-------------- --------------- --------
Retained profit/(loss)..... L(147.8) L(120.7) $(177.3)
============== =============== ========
2001
EARNINGS/(LOSS) PER SHARE (NOTE 1)
--------------
Basic earnings/(loss) per
share.................... $ (0.55)
Adjusted basic earnings per
share.................... $ 0.26
Diluted earnings/(loss) per
share.................... $ (0.55)
Adjusted diluted earnings per
share.................... $ 0.26
The accompanying notes form an integral part of these financial statements.
F-3
ENODIS PLC
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2000, AND SEPTEMBER 29, 2001
2001
(IN MILLIONS) NOTES 2000 2001 (NOTE 1)
------------- -------- ------------- ------------- ---------
FIXED ASSETS
Intangible fixed assets--goodwill........................... 12 L412.7 L310.2 $455.7
Tangible fixed assets....................................... 13 171.8 111.4 163.6
Investments................................................. 14 7.2 6.2 9.1
591.7 427.8 628.4
------------- ------------- -------
CURRENT ASSETS
Stocks...................................................... 15 153.1 105.6 155.1
Debtors..................................................... 16 221.1 200.7 294.9
Cash at bank and in hand.................................... 28.5 39.4 57.9
------------- ------------- -------
402.7 345.7 507.9
CREDITORS FALLING DUE WITHIN ONE YEAR
Borrowings.................................................. 17 (90.4) (2.4) (3.5)
Other creditors............................................. 17 (276.9) (225.1) (330.7)
------------- ------------- -------
(367.3) (227.5) (334.2)
------------- ------------- -------
NET CURRENT ASSETS.......................................... 35.4 118.2 173.7
------------- ------------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES....................... 2 627.1 546.0 802.1
------------- ------------- -------
FINANCED BY:
Creditors falling due after more than one year.............. 18 366.6 398.9 586.0
Provisions for liabilities and charges...................... 21 45.6 59.1 86.8
------------- ------------- -------
412.2 458.0 672.8
------------- ------------- -------
CAPITAL AND RESERVES
Called up share capital..................................... 22 125.0 125.1 183.8
Share premium account....................................... 23 238.9 239.0 351.1
Profit and loss account..................................... 23 (150.1) (276.9) (406.8)
EQUITY SHAREHOLDERS' FUNDS.................................. 213.8 87.2 128.1
------------- ------------- -------
Equity minority interests................................... 1.1 0.8 1.2
------------- ------------- -------
L627.1 L546.0 $802.1
============= ============= =======
The accompanying notes form an integral part of these financial statements.
F-4
ENODIS PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
2001
(IN MILLIONS) NOTES 1999 2000 2001 (NOTE 1)
------------- -------- -------------- ------------- -------------- --------
Net cash inflow from operating activities before
exceptional items..................................... a L88.3 L160.5 L120.8 $177.5
Net cash outflow from operating exceptional items....... a -- -- (27.8) (40.8)
-------------- ------------- -------------- -------
NET CASH FLOW FROM OPERATING ACTIVITIES................. a 88.3 160.5 93.0 136.7
-------------- ------------- -------------- -------
RETURN ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid........................................... (13.4) (37.5) (40.9) (60.1)
TAXATION
Overseas and U.K. tax paid.............................. (8.3) (10.2) (6.0) (8.8)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets............... (32.5) (32.1) (23.7) (34.8)
Receipts from sale of tangible fixed assets............. 15.7 8.2 7.4 10.9
Payments to acquire fixed asset investments............. (0.6) 0.6 -- --
Receipts from other disposals........................... 0.5 -- -- --
-------------- ------------- -------------- -------
(16.9) (23.3) (16.3) (23.9)
-------------- ------------- -------------- -------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings and minority
interests............................................. 24 (240.2) (47.8) (25.8) (37.9)
Net cash acquired with subsidiary undertakings.......... 9.5 -- -- --
Sale of subsidiary undertakings......................... -- -- 98.6 144.9
Investment in joint venture............................. 14 (2.3) (0.4) -- --
-------------- ------------- -------------- -------
(233.0) (48.2) 72.8 107.0
-------------- ------------- -------------- -------
EQUITY DIVIDENDS PAID................................... (15.7) (28.6) (28.2) (41.4)
-------------- ------------- -------------- -------
Cash (outflow)/inflow before use of liquid resources and
financing............................................. (199.0) 12.7 74.4 109.5
-------------- ------------- -------------- -------
MANAGEMENT OF LIQUID RESOURCES*
Cash transferred from term deposits..................... 25.2 1.0 -- --
FINANCING
Issue of shares......................................... 22 2.7 0.6 0.2 0.3
Redemption of CULS...................................... -- (1.1) -- --
Additional net borrowings............................... 15.8 0.6 398.3 585.1
(Repayment of)/increase in term loan.................... 373.8 (32.4) (385.7) (566.6)
Deferred financing costs................................ (6.5) -- -- --
Net increase/(decrease) in other loans.................. (201.7) 19.2 (72.8) (107.0)
Capital element of finance lease repayments............. (0.7) (0.7) (0.6) (0.9)
-------------- ------------- -------------- -------
183.4 (13.8) (60.6) (89.1)
-------------- ------------- -------------- -------
INCREASE/(DECREASE) IN CASH IN THE PERIOD............... L9.6 L(0.1) L13.8 $20.4
============== ============= ============== =======
------------------------------
* Enodis Group includes as liquid resources term deposits with a maturity less
than 90 days.
The accompanying notes form an integral part of these financial statements.
F-5
ENODIS PLC
NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
(A) RECONCILIATIONS OF OPERATING PROFIT/(LOSS) TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
2001
------------------------------------------------
EXCEPTIONAL
(IN MILLIONS) NOTES 1999 2000 PRE-EXCEPTIONAL ITEMS TOTAL
------------- -------- ------------- ------------- --------------- -------------- -------------
Operating profit/(loss)............. 2 L75.9 L118.3 L76.9 L(167.5) L(90.6)
Scotsman restructuring costs
(exceptional items)............... 6.0 -- -- -- --
Depreciation........................ 18.8 23.8 22.7 -- 22.7
Amortization of goodwill............ 2.7 21.4 23.0 100.0 123.0
Gain on sale of fixed assets........ (0.3) (0.3) (1.7) -- (1.7)
Provisions (net).................... (0.5) (4.6) (6.0) 16.5 10.5
Decrease/(increase) in stocks....... 1.1 (0.5) 12.1 0.5 12.6
(Increase)/decrease in debtors...... (2.8) 6.0 10.7 -- 10.7
(Decrease)/increase in creditors.... (12.6) (3.6) (16.9) 22.7 5.8
------------- ------------- ------------- -------------- -------------
NET CASH INFLOW/(OUT FLOW) FROM
OPERATING ACTIVITIES.............. L88.3 L160.5 L120.8 L(27.8) L93.0
============= ============= ============= ============== =============
(B) RECONCILIATIONS OF NET CASH FLOW TO MOVEMENT IN NET DEBT
(IN MILLIONS) 1999 2000 2001
------------- -------------- -------------- --------------
Increase/(decrease) in net cash in the period............... L9.6 L(0.1) L13.8
Cash inflow from decrease in liquid resources............... (25.2) -- --
Loans and finance leases acquired with subsidiary
undertakings.............................................. (228.2) (0.8) (0.7)
Cash outflow from capital element of finance lease
payments.................................................. 0.7 0.7 0.6
Repayment of/(increase in) other loans...................... 201.7 (19.2) 5.4
Borrowings repaid/(additional borrowings)................... (389.6) 31.8 54.8
Conversion of convertible unsecured loan stock ("CULS") to
ordinary shares........................................... 136.0 93.3 --
Cash redemption of CULS..................................... -- 1.1 --
Translation adjustment...................................... 16.2 (42.3) (5.6)
-------------- -------------- --------------
Movement in net debt........................................ (278.8) 64.5 68.3
Net debt at start of period................................. (219.9) (498.7) (434.2)
-------------- -------------- --------------
NET DEBT AT END OF PERIOD................................... L(498.7) L(434.2) L(365.9)
============== ============== ==============
(C) RECONCILIATIONS OF NET DEBT TO BALANCE SHEET
(IN MILLIONS) 1999 2000 2001
------------- -------------- -------------- --------------
Cash at bank and in hand.................................... L26.7 L28.5 L39.4
Current borrowing........................................... (78.2) (90.4) (2.4)
Exclude current proportion of deferred financing costs...... (1.4) (1.2) (1.1)
-------------- -------------- --------------
Current net debt............................................ (52.9) (63.1) 35.9
Long term lease obligations................................. (0.7) (0.5) (1.2)
Long term debt.............................................. (350.7) (370.6) (400.6)
CULS........................................................ (94.4) -- --
-------------- -------------- --------------
NET DEBT AT END OF PERIOD................................... L(498.7) L(434.2) L(365.9)
============== ============== ==============
(D) ANALYSIS OF MOVEMENTS IN NET DEBT
ACQUIRED
WITH TRANSLATION
(IN MILLIONS) 2000 CASH FLOW SUBSIDIARIES ADJUSTMENTS 2001
------------- -------------- -------------- ------------ ------------- --------------
Cash............................................ L28.5 L13.8 L-- L(2.9) L39.4
Borrowings due within one year.................. (92.1) 86.8 -- 1.8 (3.5)
Revolving multi-currency facilities
Old........................................... (64.5) 67.4 -- (2.9) --
New........................................... -- (398.3) -- 10.8 (387.5)
Term loan....................................... (287.3) 298.9 -- (11.6) --
Other long term debt............................ (18.8) 6.0 (0.7) (0.8) (14.3)
-------------- -------------- ------------ ------------- --------------
NET (DEBT)/FUNDS................................ L(434.2) L74.6 L(0.7) L(5.6) L(365.9)
============== ============== ============ ============= ==============
F-6
ENODIS PLC
CONSOLIDATED STATEMENTS OF TOTAL RECOGNIZED GAINS AND LOSSES
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
2001
(IN MILLIONS) 1999 2000 2001 (NOTE 1)
------------- ------------ ------------ -------------- --------
Profit/(loss) for the period................................ L60.8 L69.3 L(115.9) $(170.3)
Negative goodwill written back on disposals, previously
written off............................................... -- -- (4.4) (6.5)
Foreign currency translation adjustments.................... 1.1 1.3 (1.7) (2.5)
------------ ------------ -------------- -------
Total recognized gains and losses for the period............ L61.9 L70.6 L(122.0) $(179.3)
============ ============ ============== =======
CONSOLIDATED STATEMENTS OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
2001
(IN MILLIONS) 1999 2000 2001 (NOTE 1)
------------- ------------ ------------- -------------- --------
Profit/(loss) for the period................................ L60.8 L69.3 L(115.9) $(170.3)
Negative goodwill written back on disposals, previously
written off............................................... -- -- (4.4) (6.5)
Foreign currency translation adjustments.................... 1.1 1.3 (1.7) (2.5)
------------ ------------- -------------- -------
Total recognized gains and losses........................... 61.9 70.6 (122.0) (179.3)
Dividends................................................... (24.1) (33.9) (4.8) (7.0)
Shares issued............................................... 135.9 92.2 0.2 0.3
------------ ------------- -------------- -------
Net increase/(decrease) in equity shareholders' funds in the
period.................................................... 173.7 128.9 (126.6) (186.0)
Opening equity shareholders' funds.......................... (88.8) 84.9 213.8 314.1
------------ ------------- -------------- -------
Closing equity shareholders' funds.......................... L84.9 L213.8 L87.2 $128.1
============ ============= ============== =======
The accompanying notes form an integral part of these financial statements.
F-7
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
1. ACCOUNTING POLICIES
Enodis plc ("Enodis") and its subsidiaries (collectively the "Group")
operate in two principal areas: food service equipment--which manufactures and
distributes cooking, warming, ice, storage, preparation, ventilation and
warewashing equipment used by commercial and institutional food service
operators; and, food retail equipment--which manufactures and distributes
equipment used to store and display food in retail food outlets such as
supermarkets, convenience and specialty stores. The Group's customers are
dispersed throughout the world with the majority located in North America and
Western Europe.
BASIS OF ACCOUNTING. The financial statements have been prepared under the
historical cost method and comply in all respects with applicable Accounting
Standards in the United Kingdom. These principles differ in certain respects
from the accounting principles in the U.S., see Note 29.
Continuing operations include the results of those operations that are to be
retained by the Group. Discontinued operations are those businesses whose sale
or termination has been completed prior to the period end. During 2001, Enodis
disposed of its Building and Consumer Products Division ("BCP") and as such, the
results of operations and related disclosures have been restated to reflect BCP
as a discontinued operation.
BASIS OF CONSOLIDATION. These financial statements consolidate the
financial statements of Enodis and all its subsidiary companies. All
intercompany balances and transactions have been eliminated in consolidation.
Such consolidated financial statements include, as appropriate, the financial
position and the results of operations of acquired businesses since the dates of
such respective acquisitions. Unconsolidated companies that are 20% to 50% owned
are accounted for by the equity method.
FISCAL YEAR. The Group reports on a 52-53 week fiscal year ending on the
Saturday nearest to September 30. Fiscal years 2001 and 2000 contained
52 weeks. Fiscal year 1999 contained 53 weeks.
CONVENIENCE TRANSLATION. The consolidated financial statements are
presented in millions of Great Britain pounds ("L" or "GBP"). In addition, the
consolidated financial statements as of and for the 52 weeks ended
September 29, 2001 are also presented in U.S. dollars ("$" or "USD"). These USD
amounts are presented solely for the convenience of the reader at the rate of
L1.00 = USD 1.4691, the noon buying rate of the United States (U.S.) Federal
Reserve Bank as of December 28, 2001. No representation is made that the GBP
amounts shown could have been, or could be converted into USD at that or any
other rate.
OTHER FIXED ASSET INVESTMENTS. Other fixed asset investments represent
unlisted investments. Such investments are shown at cost less amounts written
off. Income, in the form of dividends, is recognized upon receipt.
ACQUISITIONS AND DISPOSALS. On the acquisition of a business, including an
interest in an associate, fair values are attributed to the Group's share of net
separable assets. Where the cost of the assets exceeds the fair values
attributable to such net assets, the difference is treated as purchased
goodwill. Following the implementation of Financial Reporting Standard
("FRS") 10, "Goodwill and Intangible Assets", goodwill arising on the
acquisition of subsidiaries is capitalized in the Group balance sheet in the
period of acquisition. Goodwill arising on associates is included with the
carrying value of the associate.
EARNINGS/(LOSS)PER SHARE. Basic earnings/(loss) per share exclude dilution
and is computed by dividing profit/(loss) for the period by the weighted-average
number of ordinary shares outstanding for the period. Diluted earnings/(loss)
per share reflect the potential dilution that could occur if securities or other
contracts
F-8
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
1. ACCOUNTING POLICIES (CONTINUED)
to issue ordinary shares were exercised or converted into ordinary shares or
resulted in the issuance of ordinary shares that then shared in the earnings of
the entity.
CASH AT BANK AND IN HAND. The Group considers all highly liquid investments
with maturities of three months or less to be cash at bank and in hand.
GOODWILL AND INTANGIBLE FIXED ASSETS. Goodwill arising on acquisitions has
been capitalized and is amortized on a straightline basis over a period of
20 years; the Directors regard 20 years as a reasonable maximum for the
estimated useful life of goodwill since it is difficult to make projections
exceeding this period. When it is apparent that the carrying value of goodwill
exceeds the estimated net present value of future cash flows less operating
assets, an impairment provision is charged against profit for the period.
FRS 10 does not require reinstatement of goodwill previously eliminated against
reserves; in accordance with FRS 10 such goodwill has been offset against the
profit and loss account reserves. Goodwill previously taken to reserves is
charged in the profit and loss account when the related business is sold.
TANGIBLE FIXED ASSETS. Tangible fixed assets are stated at cost less
depreciation. Depreciation is provided at rates calculated to write-off the cost
or valuation of each asset, predominantly on a straight line basis, over its
expected useful life as follows:
--Freehold land: nil.
--Freehold and long leasehold buildings: 1%-2%.
--Short leasehold properties: over the lesser of unexpired period of the
lease or economic life.
--Plant and equipment: 10%-33 1/3%.
LEASES. Assets acquired under finance leases are capitalized and
depreciated over the shorter of the lease term and the expected useful life of
the asset. Operating lease rentals are charged to the profit and loss account as
incurred.
STOCKS. Stocks are stated at the lower of cost and net realizable value
using the first-in, first-out method. The cost of work-in-progress and finished
goods includes an appropriate portion of manufacturing overheads. In addition,
included in stocks is land held for development and sale. This land is stated at
cost unless an impairment has occurred, in which case the land is reduced to its
estimated fair market value.
TURNOVER. Turnover is the gross value of sales, including shipping and
handling fees, less discounts and allowances, and excluding value added tax.
REVENUE RECOGNITION. Revenue from product sales is recognized when evidence
of an arrangement exists, title to finished goods has passed to the customer,
the price is fixed and determinable and collectibility is reasonably assured.
Service revenue is recognized when services are rendered. Property revenue is
recognized upon completion of the sale when the profit is determinable and the
earnings process is complete.
RESEARCH AND DEVELOPMENT. Research and development is written off as
incurred. Research and development expenditures for Fiscal 1999, 2000 and 2001
were L8.9 million, L13.6 million and L13.8 million, respectively.
MARKETING COSTS. Marketing costs are reported in cost of sales and include
costs of advertising and other marketing activities. Such costs are expensed as
incurred and were L6.5 million, L10.7 million and L10.9 million in Fiscal 1999,
2000 and 2001, respectively, as they relate to continuing operations.
F-9
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
1. ACCOUNTING POLICIES (CONTINUED)
TAXATION. Corporation tax payable is provided on taxable profits at the
current rate. Credit is taken for Advance Corporation Tax written off in
previous years when it is recoverable against current corporation tax
liabilities. Deferred taxation is provided using the liability method to the
extent that it is probable a liability will crystallize.
PENSION COSTS. It is the general policy of the Group to fund pension
liabilities, on the advice of professionally qualified actuaries, by payments to
independent trusts or to insurance companies. Independent actuaries' valuations
are carried out at regular intervals, on a projected unit funding or attained
age basis. In addition, the impact of any significant related events, such as
major changes in stock market values, are assessed through a formal review
process.
Charges in respect of defined benefit schemes are made to the profit and
loss account so as to spread the costs of pensions at a substantially level
percentage of payroll costs over employees' estimated service lives within the
Group. Contributions to defined contribution schemes are charged to the profit
and loss account on an accrual basis.
FOREIGN CURRENCY TRANSLATION. Transaction differences arising from exchange
rate variations on trading transactions are included in operating profit.
Overseas profits remitted to the U.K. during the period are dealt with at actual
rates of exchange.
The balance sheets of overseas subsidiary entities are translated into
sterling at rates of exchange ruling at the year end. Profit and loss accounts
are translated at the average rate for the month in which the profits were
earned. Differences arising from the restatement of opening foreign currency net
investments and net overseas profits or losses are dealt with through reserves,
as are differences on long term foreign currency borrowings used to finance
overseas investment.
RECOVERABILITY OF LONG-LIVED ASSETS. The Group evaluates the carrying
amounts and periods over which long-lived tangible and intangible assets are
depreciated or amortized, at each reporting period. An impairment loss is
recorded when the future discounted net cash flows expected to be generated by
the asset are less than the carrying amount of the asset.
DEBT ISSUANCE COSTS. Debt issuance costs are classified within net
borrowings and are amortized using the effective interest method over the
respective lives of the related debt.
WARRANTY PROVISION. The Group's warranty policy generally provides that its
products are free from defects in material and workmanship for a specified
period of time from the date of purchase or installation, which varies dependent
upon the product sold. The warranty does not cover any losses or damage that
occur as a result of improper use or neglect. The Group accrues for the
estimated cost of warranty coverage and returns at the time the sale is
recorded.
ENVIRONMENTAL LIABILITIES. The Group's operations and products are subject
to various international regulatory requirements relating to environmental
protection. It is the Group's policy to comply fully with all such applicable
requirements. The Group may be subject to potential liabilities for the costs of
environmental remediation at currently or previously owned or operated sites or
sites to which it, or predecessor owners, transported materials.
It is the Group's policy to accrue for the estimated cost of environmental
matters, on a nondiscounted basis, when it is probable that a liability has been
incurred and the amount of the liability can be reasonably
F-10
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
1. ACCOUNTING POLICIES (CONTINUED)
estimated. Such provisions and accruals exclude claims for recoveries from
insurance carriers or other third parties. Such claims are recognized as
receivables only if realization is probable.
RECLASSIFICATIONS. Certain reclassifications have been made to the 1999 and
2000 financials in order to conform to the 2001 presentation.
USE OF ESTIMATES. The preparation of financial statements 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 during the reporting period. Significant accounting estimates include
inventory provisions, allowance for bad debts, warranty provisions, useful
lives, sales returns and impairment calculations. Actual results could differ
from those estimates.
CONCENTRATION OF CREDIT RISK. Financial instruments which potentially
subject the Group to concentrations of credit risk consist primarily of cash at
bank and in hand, trade accounts receivable, interest rate agreements, and
foreign exchange contracts. The Group mitigates such risks by holding funds in
high-quality financial institutions, limiting counterparties to foreign exchange
and interest rate contracts to qualified financial institutions, and reduces
accounts receivable risk by performing periodic credit evaluations.
RECENTLY ISSUED U.K. ACCOUNTING STANDARDS. In November 2000, the U.K.
Accounting Standards Board ("ASB") issued FRS 17, "Retirement Benefits" relating
to accounting for pension costs and other post-retirement benefits, which
replaces Statement of Standard Accounting Practice ("SSAP") 24, "Accounting for
Pension Costs", and Urgent Issues Task Force ("UITF") Abstract 6, "Accounting
for post-retirement benefits other than pensions". FRS 17 changes the accounting
for defined benefit schemes as actuarial gains and losses are recognized
immediately and scheme assets are valued at fair values. The accounting
requirements of FRS 17 are mandatory for periods ending on or after June 22,
2003, however, the Group has adopted the applicable pre-implementation
disclosures during 2001. The effects of the adoption of this standard on net
assets has been disclosed in Note 25, and the effects of full adoption on the
profit and loss account is not expected to be material.
In December 2000, the ASB issued FRS 18, "Accounting Policies" which sets
out the principles to be followed in selecting accounting policies and the
disclosures needed to help users to understand the accounting policies adopted
and how they have been applied. FRS 18 also defines accounting policies and
estimation techniques used in implementing those policies. The Group adopted the
provisions of FRS 18 during 2001, and as a result, the Group has reassessed its
accounting estimates for warranty provisions and have provided an additional
L8.0 million during 2001.
In December 2000, the ASB issued FRS 19, "Deferred Tax" ("FRS 19"), which
replaces SSAP 15 "Accounting for Deferred Tax" and prescribes significant
changes to the existing accounting and disclosure for deferred tax. The
requirements of FRS 19 must be adopted for the first time in the Group financial
statements for the year ending September 28, 2002. FRS 19 requires full
provision to be made for deferred tax assets (to the extent that it is regarded
as more likely than not that they will be recovered) and liabilities arising
from timing differences between the recognition of gains and losses in the
financial statements and their recognition in a tax computation.
Pursuant to the guidance provided by FRS 3, "Reporting financial
performance," financial information for the Group prior to the adoption of
FRS 19 will be restated to reflect the adoption of FRS 19 only when
F-11
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
1. ACCOUNTING POLICIES (CONTINUED)
such financial information is reported as the comparatives for a period ending
after the implementation date. The adoption of FRS 19 is expected to result in
the recognition of a significant deferred tax asset.
2. SEGMENTAL ANALYSES FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30,
2000, AND SEPTEMBER 29, 2001
The Group's primary measure of segment profit or loss is earnings before
interest, taxes, goodwill amortization and exceptional items. Segments were
determined based on the products and services provided by each segment as well
as the geographic area and are on a basis consistent with the accounting
policies described in Note 1. Intersegment transfers of inventory are
immaterial. During 2001, the Group changed the reporting structure and the way
the business was managed, to reflect the following five operating segments: Food
Service Equipment--North America; Food Service Equipment--Europe & Rest of
World; Food Retail Equipment; Property and Corporate. As a result of these
changes, prior period disclosures have been reclassified to reflect the current
presentation.
(A) TURNOVER (IN MILLIONS)
1999 2000 2001
------------- --------------- ---------------
Food Service Equipment--North America....................... L342.6 L487.0 L476.6
--North American acquisitions......... -- -- 22.1
Food Service Equipment--Europe & Rest of World.............. 105.3 178.1 185.4
Food Retail Equipment....................................... 41.8 219.4 203.1
------------- --------------- ---------------
Food Equipment.............................................. 489.7 884.5 887.2
Corporate................................................... -- -- --
Property.................................................... 1.0 19.9 16.6
------------- --------------- ---------------
Continuing operations....................................... 490.7 904.4 903.8
Discontinued operations..................................... 265.6 275.7 177.3
------------- --------------- ---------------
L756.3 L1,180.1 L1,081.1
============= =============== ===============
(B) TURNOVER BY ORIGIN: GEOGRAPHICAL ANALYSIS (IN MILLIONS)
1999 2000 2001
------------- --------------- ---------------
United Kingdom.............................................. L300.1 L360.0 L262.0
North America............................................... 375.4 651.9 667.1
Rest of Europe.............................................. 67.9 117.7 112.3
Rest of the World........................................... 12.9 50.5 39.7
------------- --------------- ---------------
L756.3 L1,180.1 L1,081.1
============= =============== ===============
F-12
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
2. SEGMENTAL ANALYSES FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30,
2000, AND SEPTEMBER 29, 2001 (CONTINUED)
(C) TURNOVER BY DESTINATION: GEOGRAPHICAL ANALYSIS (IN MILLIONS)
1999 2000 2001
------------- --------------- ---------------
United Kingdom.............................................. L302.7 L362.2 L264.0
North America............................................... 333.3 611.1 622.7
Rest of Europe.............................................. 71.2 98.3 99.7
Rest of the World........................................... 49.1 108.5 94.7
------------- --------------- ---------------
L756.3 L1,180.1 L1,081.1
============= =============== ===============
(D) PRE-EXCEPTIONAL OPERATING PROFIT/(LOSS) AND RECONCILIATION TO TOTAL
OPERATING PROFIT/(LOSS) (IN MILLIONS)
1999 2000 2001
--------------------------------------------- ------------- -----------------------------
EXCEPTIONAL EXCEPTIONAL
ITEMS ITEMS
RECONCILIATION RECONCILIATION
PRE- TO TOTAL PRE- TO TOTAL
EXCEPTIONAL (NOTE 5) TOTAL TOTAL EXCEPTIONAL (NOTE 5)
------------- -------------- ------------ ------------- ------------ --------------
Food Service Equipment
--North America................. L49.3 L(3.2) L46.1 L66.3 L60.6 L(25.6)
--North American acquisitions... -- -- -- -- 2.0 --
Food Service Equipment
--Europe & Rest of World........ 12.0 -- 12.0 22.6 17.7 (5.2)
Food Retail Equipment............. 5.3 (2.8) 2.5 22.6 10.4 (12.6)
------------- ------------ ------------ ------------- ------------ --------------
66.6 (6.0) 60.6 111.5 90.7 (43.4)
------------- ------------ ------------ ------------- ------------ --------------
Food Equipment goodwill
amortization and impairment..... (2.7) -- (2.7) (21.4) (23.0) (100.0)
------------- ------------ ------------ ------------- ------------ --------------
Food Equipment.................... 63.9 (6.0) 57.9 90.1 67.7 (143.4)
Property.......................... 0.2 -- 0.2 8.4 9.0 --
Corporate costs................... (6.2) -- (6.2) (7.3) (8.9) (24.1)
------------- ------------ ------------ ------------- ------------ --------------
Continuing operations............. 57.9 (6.0) 51.9 91.2 67.8 (167.5)
Discontinued operations........... 24.0 -- 24.0 27.1 9.1 --
------------- ------------ ------------ ------------- ------------ --------------
Pre-exceptional operating
profit.......................... L81.9 L(6.0) L75.9 L118.3 L76.9 L(167.5)
============= ============ ============ ============= ============ ==============
2001
--------------
TOTAL
--------------
Food Service Equipment
--North America................. L35.0
--North American acquisitions... 2.0
Food Service Equipment
--Europe & Rest of World........ 12.5
Food Retail Equipment............. (2.2)
--------------
47.3
--------------
Food Equipment goodwill
amortization and impairment..... (123.0)
--------------
Food Equipment.................... (75.7)
Property.......................... 9.0
Corporate costs................... (33.0)
--------------
Continuing operations............. (99.7)
Discontinued operations........... 9.1
--------------
Pre-exceptional operating
profit.......................... L(90.6)
==============
F-13
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
2. SEGMENTAL ANALYSES FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30,
2000, AND SEPTEMBER 29, 2001 (CONTINUED)
(E) GEOGRAPHICAL ANALYSIS: OPERATING PROFIT (IN MILLIONS)
2001
----------------------------------------
1999 2000 EXCEPTIONAL
------------ ------------- PRE- ITEMS
TOTAL TOTAL EXCEPTIONAL (SEE NOTE 5) TOTAL
------------ ------------- ------------ -------------- --------
United Kingdom...................................... L23.9 L37.9 L11.9 L(13.7) L(1.8)
North America....................................... 51.4 81.9 72.0 (49.0) 23.0
Rest of Europe...................................... 8.4 16.8 14.9 (2.4) 12.5
Rest of the World................................... 0.9 3.1 1.1 (2.4) (1.3)
North America restructuring costs (exceptional
item)............................................. (6.0) -- -- -- --
Goodwill amortization............................... (2.7) (21.4) (23.0) (100.0) (123.0)
------------ ------------- ------------ -------------- ------
L75.9 L118.3 L76.9 L(167.5) L(90.6)
============ ============= ============ ============== ======
(F) TOTAL ASSETS LESS CURRENT LIABILITIES (IN MILLIONS)
2000 2001
------------- --------------
Food Service Equipment--North America....................... L93.3 L80.4
--North American acquisitions......... -- 4.3
Food Service Equipment--Europe & Rest of World.............. 50.9 50.5
Food Retail Equipment....................................... 60.7 45.9
Food Equipment Goodwill..................................... 412.7 310.2
------------- --------------
Food Equipment.............................................. 617.6 491.3
Property.................................................... 9.1 10.9
Investments................................................. 4.8 4.8
Discontinued operations..................................... 81.4 --
------------- --------------
712.9 507.0
Corporate................................................... (22.7) 2.0
Net (debt)/cash............................................. (63.1) 37.0
------------- --------------
L627.1 L546.0
============= ==============
(G) TOTAL ASSETS LESS CURRENT LIABILITIES: GEOGRAPHICAL ANALYSIS (IN MILLIONS)
2000 2001
------------- --------------
United Kingdom.............................................. L113.7 L58.7
North America............................................... 518.7 389.3
Rest of Europe.............................................. 40.0 44.4
Rest of the World........................................... 17.8 16.6
Net (debt)/cash............................................. (63.1) 37.0
------------- --------------
L627.1 L546.0
============= ==============
F-14
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
2. SEGMENTAL ANALYSES FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30,
2000, AND SEPTEMBER 29, 2001 (CONTINUED)
(H) TOTAL ASSETS (IN MILLIONS)
2000 2001
------------- --------------
Food Service Equipment--North America....................... L192.3 L198.6
--North American acquisitions......... -- 7.7
Food Service Equipment--Europe & Rest of World.............. 93.1 111.7
Food Retail Equipment....................................... 96.6 97.8
Food Equipment Goodwill..................................... 412.7 310.2
------------- --------------
Food Equipment.............................................. 794.7 726.0
Property & Corporate........................................ 67.4 47.5
------------- --------------
Continuing operations....................................... 862.1 773.5
Discontinued operations..................................... 132.3 --
------------- --------------
L994.4 L773.5
============= ==============
(I) TANGIBLE FIXED ASSETS (IN MILLIONS)
2000 2001
-------------- --------------
Food Service Equipment--North America....................... L67.3 L66.2
--North American acquisitions......... -- 1.9
Food Service Equipment--Europe & Rest of World.............. 15.3 13.6
Food Retail Equipment....................................... 31.8 25.3
-------------- --------------
Food Equipment.............................................. 114.4 107.0
Property & Corporate........................................ 5.2 4.4
-------------- --------------
Continuing operations....................................... 119.6 111.4
Discontinued operations..................................... 52.2 --
-------------- --------------
L171.8 L111.4
============== ==============
3. OPERATING COSTS
1999 2000 2001
-------------- ---------------- ----------------
(IN MILLIONS)
Cost of sales............................................... L588.6 L943.1 L888.2
Net operating expenses:
Distribution costs.......................................... 25.5 28.8 23.6
Administration expenses..................................... 59.6 85.2 90.8
Other operating expenses.................................... 0.7 4.7 1.6
-------------- ---------------- ----------------
Operating costs before exceptional items.................... 674.4 1,061.8 1,004.2
Operating exceptional items (see Note 5).................... 6.0 -- 167.5
-------------- ---------------- ----------------
Operating costs............................................. L680.4 L1,061.8 L1,171.7
============== ================ ================
F-15
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
3. OPERATING COSTS (CONTINUED)
Gross profit for the period was L161.7 million in 1999, L237.0 million in
2000 and L192.9 million in 2001. Bad debt provision for the period was
L0.5 million in 1999, L1.3 million in 2000, and L1.2 million in 2001.
The total figures above include the following amounts relating to
discontinued operations: cost of sales L207.5 million in 1999, L213.1 million in
2000 and L145.3 million in 2001, distribution costs L17.9 million in 1999,
L19.1 million in 2000 and L13.3 million in 2001, administration expenses
L13.4 million in 1999, L14.8 million in 2000, L9.5 million in 2001 and other
operating expenses L0.1 million in 1999, L1.6 million in 2000 and L0.1 million
in 2001.
4. OPERATING PROFIT/(LOSS)
1999 2000 2001
------------- ---------------- ----------------
(IN MILLIONS)
OPERATING PROFIT/(LOSS) IS STATED AFTER
CHARGING/(CREDITING):
Depreciation of tangible fixed assets:
--owned..................................................... L18.4 L23.7 L22.6
--leased.................................................... 0.4 0.1 0.1
Scotsman restructuring costs................................ 6.0 -- --
Rental of plant and equipment under operating leases........ 4.2 5.9 2.6
Rental of land and buildings................................ 17.3 19.3 14.3
Rental income............................................... (0.6) (0.4) (0.7)
Research and development.................................... 8.9 13.6 13.8
Auditors' remuneration:
--audit fees................................................ 0.6 0.9 1.0
--other fees................................................ 0.4 1.1 2.2
Profit on sale of tangible fixed assets..................... (0.3) (0.3) (1.7)
In addition to the amounts disclosed above, a further L1.2 million was paid
to the auditors in 2001 in relation to professional services performed in
connection with the disposal of the BCP business. This has been charged against
the profit on disposal of L29.1 million (Note 5b).
F-16
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
5. EXCEPTIONAL ITEMS
(A) OPERATING EXCEPTIONAL ITEMS
2001
-----------------------------------------------------
FOOD
1999 2000 EQUIPMENT CORPORATE TOTAL
----------- ----------------- ---------------------- ------------ -------------
(IN MILLIONS)
Restructuring costs..................... L6.0 L-- L29.7 L3.4 L33.1
Revisions to working capital provisions
and other exceptional warranty
costs................................. -- -- 13.7 -- 13.7
Litigation costs........................ -- -- -- 12.2 12.2
Costs associated with the Board's review
of strategic options.................. -- -- -- 8.5 8.5
----------- ----------------- ---------------------- ------------ -------------
6.0 -- 43.4 24.1 67.5
Goodwill impairment..................... -- -- 100.0 -- 100.0
----------- ----------------- ---------------------- ------------ -------------
OPERATING EXCEPTIONAL ITEMS............. L6.0 L-- L143.4 L24.1 L167.5
=========== ================= ====================== ============ =============
Restructuring costs of L6.0 million in 1999 related to the acquisition of
Scotsman Industries Inc. and subsidiaries ("Scotsman") in August 1999.
Restructuring costs of L33.1 million in 2001 relate principally to the closure
of five plants, announced before September 29, 2001. As a result of this
decision, the Group accrued for severance and other employee termination costs
resulting from a headcount reduction of 870 (all such employees were terminated
by September 29, 2001) asset writedowns, and other related plant closure costs.
Such projects are expected to be complete within 2002 (Note 21).
Following the publication of FRS 18 "Accounting Policies," the Group has
changed its accounting estimates for warranty provisions and provided an
additional L8.0 million. Further exceptional warranty costs of L4.5 million have
arisen in the period and previously capitalized development costs of
L1.2 million have been written off.
The Group settled the long-standing Bomar cases for $17.5 million
(L12.2 million) to extinguish all claims. A payment of $10.0 million was made in
the period with a further $7.5 million in October 2001 (Note 26).
The Board undertook a review of the Group's strategic options during the
year, including sales of businesses and reviews of operations, with the
objective of maximizing shareholder value. Costs of L8.5 million, predominantly
professional fees, were incurred.
Following recent downturns in the U.S. economy, in particular in the retail
markets, it was necessary to reassess the carrying value of goodwill in respect
of the Scotsman acquisition. In accordance with the methodology prescribed in
FRS 11 "Impairment of Fixed Assets and Goodwill", which requires consideration
of the net present value of estimated future cash flows, the fair value was
reassessed and compared to the carrying value of net assets, including the
carrying value of goodwill. As a result, the carrying value of goodwill relating
to the Scotsman businesses has been written down by L100.0 million (Note 12).
F-17
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
5. EXCEPTIONAL ITEMS (CONTINUED)
(B) DISPOSAL OF BUSINESSES
2001
--------------------------------------------
BUILDING AND
CONSUMER SCOTSMAN
PRODUCTS RESPONSE TOTAL
------------- ------------ -------------
(IN MILLIONS)
Proceeds--cash.............................................. L114.0 L-- L114.0
--vendor loan note (Note 16)........................ 20.0 -- 20.0
------------- ------------ -------------
134.0 -- 134.0
Less:
Book value of net assets.................................... (85.7) (3.1) (88.8)
Payment into pension fund................................... (10.0) -- (10.0)
Costs....................................................... (13.6) (0.2) (13.8)
Goodwill.................................................... 4.4 (2.3) 2.1
------------- ------------ -------------
Profit/(loss) on disposal................................... L29.1 L(5.6) L23.5
============= ============ =============
On June 14, 2001, the Group completed the sale, announced on April 23, 2001,
of its BCP business to Nobia AB for gross consideration of L134.0 million
(subject to asset adjustments) together with warrants to acquire shares in
Nobia, for which the fair value was determined to be immaterial. Prior to
completion the Group paid a contribution of L10.0 million to Magnet in respect
of pension scheme funding. L4.4 million of negative goodwill previously written
off to reserves was credited to the profit and loss account on disposal.
On September 14, 2001, the Group disposed of Scotsman Response Limited for
consideration of up to L45,000.
(C) NET INTEREST PAYABLE AND SIMILAR CHARGES
2001
-------------
(IN MILLIONS)
Deferred finance fees written off........................... L5.8
On March 12, 2001, the Group entered into a new revolving multi-currency
facility to refinance the Scotsman acquisition debt. The capitalized,
unamortized costs of the previous financing arrangements relating primarily to
arrangement and other fees totaling L5.8 million have been written off.
6. STAFF COSTS (IN MILLIONS)
1999 2000 2001
------------- ------------- --------------
(A) STAFF COSTS, INCLUDING DIRECTORS, COMPRISED:
Wages and salaries.......................................... L147.3 L255.5 L217.6
Social security costs....................................... 17.7 29.8 26.5
Pension costs............................................... 5.1 7.5 4.5
------------- ------------- --------------
L170.1 L292.8 L248.6
============= ============= ==============
F-18
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
6. STAFF COSTS (IN MILLIONS) (CONTINUED)
1999 2000 2001
------------- ------------- --------------
(B) THE AVERAGE MONTHLY NUMBER OF EMPLOYEES WAS:
Food Service Equipment--North America....................... 2,839 4,319 3,870
--North American acquisitions......... -- -- 268
Food Service Equipment--Europe & Rest of World.............. 1,425 2,273 2,126
Food Retail Equipment....................................... 516 2,386 2,043
Corporate and Property...................................... 24 23 26
------------- ------------- --------------
4,804 9,001 8,333
Discontinued businesses..................................... 2,379 2,413 1,557
------------- ------------- --------------
7,183 11,414 9,890
============= ============= ==============
7. DIRECTORS' REMUNERATION (IN MILLIONS)
1999 2000 2001
------------ ------------ -------------
Fees as Directors........................................... L0.15 L0.18 L0.26
Salaries and benefits....................................... 1.16 0.97 0.91
Bonuses..................................................... 0.93 0.22 0.25
------------ ------------ -------------
2.24 1.37 1.42
Pension contributions....................................... 0.13 0.17 0.05
------------ ------------ -------------
2.37 1.54 1.47
Compensation for loss of office............................. -- 0.31 0.33
------------ ------------ -------------
L2.37 L1.85 L1.80
============ ============ =============
Compensation for loss of office represents severance payments and a
relocation bonus paid to directors who resigned in 2000 and 2001.
F-19
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
8. NET INTEREST PAYABLE AND SIMILAR CHARGES
1999 2000 2001
------------- ------------- -------------
(IN MILLIONS)
Interest payable and similar charges:
Loan stock repayable in more than five years................ L(8.2) L(0.3) L --
Amortization of deferred financing costs.................... (0.2) (2.6) (1.2)
Bank loans and overdrafts repayable within five years not by
installments.............................................. (1.8) -- --
Term loan and revolving multi-currency facility............. (3.9) (35.3) (36.7)
Other loans................................................. (0.4) (0.3) (0.7)
------------- ------------- -------------
(14.5) (38.5) (38.6)
Interest receivable:
Bank balances............................................... 1.1 0.9 L 1.8
Other....................................................... 0.1 0.1 0.7
------------- ------------- -------------
1.2 1.0 2.5
Net payable before exceptional write-offs................... (13.3) (37.5) (36.1)
Exceptional finance costs (see Note 5)...................... -- -- (5.8)
------------- ------------- -------------
NET INTEREST PAYABLE AND SIMILAR CHARGES.................... L(13.3) L(37.5) L(41.9)
============= ============= =============
9. TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES
1999 2000 2001
----------- ------------ -----------
(IN MILLIONS)
The tax charge for the period comprised:
U.K. taxation at 30% in 1999, 2000 and 2001:
--current year.............................................. L-- L0.7 L--
Foreign taxation (primarily U.S.) at 35% in 1999, 2000 and
2001:
--current year.............................................. 5.9 13.5 8.6
----------- ------------ -----------
5.9 14.2 8.6
----------- ------------ -----------
Tax relief on exceptional items............................. -- -- (2.0)
----------- ------------ -----------
Tax expense on profit/(loss) on ordinary activities......... L5.9 L14.2 L6.6
=========== ============ ===========
A substantial proportion of the Group's earnings are in jurisdictions where
tax losses are available to reduce the current year tax payable. The Group
currently does not have any recognized deferred tax assets or liabilities (refer
to Note 1 regarding implementation of FRS 19 in 2002), and all taxes are
therefore current.
Tax relief on exceptional items in the current year is limited to
L2.0 million due to costs being incurred in jurisdictions where there is little
or no current tax payable, principally the United States.
F-20
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
9. TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES (CONTINUED)
The components of profit/(loss) on ordinary activities before taxation are
as follows:
1999 2000 2001
------------ ------------ --------------
(IN MILLIONS)
U.K......................................................... L11.7 L27.3 L(88.1)
U.S......................................................... 43.2 36.9 (33.8)
Other jurisdictions......................................... 11.7 19.6 12.9
------------ ------------ --------------
Profit/(loss) on ordinary activities........................ L66.7 L83.8 L(109.0)
============ ============ ==============
The differences between the Group's effective tax rates and the statutory
income tax rates for the U.S. (as this is the primary region of taxable income)
were as follows:
1999 2000 2001
-------- -------- --------
Statutory income tax rate................................... 35.0 % 35.0 % (35.0)%
Increase in rate resulting from:
Permanent differences..................................... 7.9 % 4.5 % 10.3 %
Effect of brought forward losses utilized (U.K.).......... (9.5)% (10.7)% (3.8)%
Effect of brought forward losses utilized (U.S.).......... (35.2)% (27.3)% (14.6)%
U.S. State and local tax effects.......................... 3.0 % 3.1 % 3.6 %
Non U.S. tax effects...................................... 1.9 % (0.7)% 0.4 %
Exceptional items......................................... -- % -- % 49.9 %
Other, net................................................ 5.7 % 13.0 % (4.7)%
-------- -------- --------
Effective tax rate.......................................... 8.8 % 16.9 % 6.1 %
======== ======== ========
10. EQUITY DIVIDENDS
1999 2000 2001
------------ ------------ -----------
(IN MILLIONS)
Interim, 2.0p net per ordinary share (1999: 4.0p net, 2000:
4.4p net)................................................. L6.1 L10.8 L4.8
Final, nil p net payable per ordinary share (1999: 8.5p net,
2000: 9.35p).............................................. 18.0 23.1 --
------------ ------------ -----------
L24.1 L33.9 L4.8
============ ============ ===========
F-21
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
11. EARNINGS/(LOSS) PER SHARE
1999 2000 2001
------------- ------------- --------------
(IN MILLIONS)
Profit/(loss) for the period................................ L60.8 L69.3 L(115.9)
CULS finance costs.......................................... 8.4 0.1 --
------------- ------------- --------------
L69.2 L69.4 L(115.9)
============= ============= ==============
1999 2000 2001
------------- ------------- --------------
(IN MILLIONS)
BASIC WEIGHTED AVERAGE NUMBER OF SHARES..................... 193.9 287.2 307.4
Dilutive effect of:
--employee share options.................................... 2.1 1.5 0.1
--share save options........................................ 0.8 0.9 0.2
--CULS...................................................... 89.4 14.3 --
------------- ------------- --------------
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES................... 286.2 303.9 307.7
============= ============= ==============
1999 2000 2001
-------- -------- --------
(IN PENCE)
BASIC EARNINGS/(LOSS) PER SHARE............................. 31.3 24.0 (37.7)
Effect per share of exceptional items....................... 1.0 (1.1) 15.5
Effect per share of goodwill amortization and impairment.... 1.4 7.4 40.0
---- ---- -----
ADJUSTED BASIC EARNINGS PER SHARE........................... 33.7 30.3 17.8
==== ==== =====
DILUTED EARNINGS/(LOSS) PER SHARE........................... 22.4 22.4 (37.7)
Effect per share of exceptional items....................... 0.6 (1.0) 15.5
Effect per share of goodwill amortization and impairment.... 0.9 6.9 39.9
---- ---- -----
ADJUSTED DILUTED EARNINGS PER SHARE......................... 23.9 28.3 17.7
==== ==== =====
Adjusted earnings per share before exceptional items (Note 5) and goodwill
amortization (Note 2d) are disclosed to reflect the underlying performance of
the Group. The earnings/(loss) per share information presented above has been
restated in light of the Company's Rights Issue in March 2002.
F-22
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
12. INTANGIBLE FIXED ASSETS--GOODWILL
2000 2001
------------- -------------
(IN MILLIONS)
COST:
At the beginning of the period.............................. L373.7 L439.1
Additions
--acquisitions in the period (Note 24)...................... 19.4 20.4
--adjustments to prior period goodwill (Note 24)............ 3.4 --
Disposals of subsidiary entities............................ -- (2.7)
Currency realignment........................................ 42.6 3.8
------------- -------------
At the end of the period.................................... L439.1 L460.6
DEPRECIATION:
At the beginning of the period.............................. L2.7 L26.4
Provided during the period.................................. 21.4 23.0
Provision for impairment (see Note 5)....................... -- 100.0
Disposals of subsidiary entities............................ -- (0.4)
Currency realignment........................................ 2.3 1.4
------------- -------------
At the end of the period.................................... 26.4 150.4
------------- -------------
Net book value at end of the period......................... L412.7 L310.2
============= =============
F-23
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
13. TANGIBLE FIXED ASSETS
LAND ASSETS
2000 AND PLANT AND UNDER 2001
TOTAL BUILDINGS EQUIPMENT CONSTRUCTION TOTAL
------------- ------------- ------------- ------------- --------------
(IN MILLIONS)
(A) COST:
At the beginning of the period................... L306.0 L113.4 L221.1 L11.0 L345.5
Additions........................................ 32.1 3.9 11.6 8.2 23.7
Acquisitions..................................... 1.5 1.4 3.6 -- 5.0
Disposals........................................ (9.8) (5.8) (5.0) (2.2) (13.0)
Disposals of subsidiary entities or businesses... -- (31.7) (58.7) (11.5) (101.9)
Reclassifications................................ -- 1.3 1.4 (2.7) --
Transfer to current assets....................... -- (5.7) (2.8) -- (8.5)
Currency realignment............................. 15.7 0.3 0.4 -- 0.7
------------- ------------- ------------- ------------- --------------
At the end of the period......................... 345.5 77.1 171.6 2.8 251.5
DEPRECIATION:
At the beginning of the period................... 147.3 26.2 147.5 -- 173.7
Provided during the period....................... 23.8 4.7 18.0 -- 22.7
Acquisitions..................................... 0.4 0.3 2.3 -- 2.6
Disposals........................................ (4.9) (2.6) (4.7) -- (7.3)
Transfer to current assets....................... -- (1.6) (0.5) -- (2.1)
Disposals of subsidiary entities or businesses... -- (4.4) (45.4) -- (49.8)
Currency realignment............................. 7.1 0.1 0.2 -- 0.3
------------- ------------- ------------- ------------- --------------
At the end of the period......................... 173.7 22.7 117.4 -- 140.1
------------- ------------- ------------- ------------- --------------
Net book value at the end of the period.......... 171.8 54.4 54.2 2.8 111.4
------------- ------------- ------------- ------------- --------------
Net book value at the beginning of the period.... L158.7 L87.2 L73.6 L11.0 L171.8
------------- ------------- ------------- ------------- --------------
THE NET BOOK VALUE OF LAND AND BUILDINGS
COMPRISES:
Freehold......................................... L74.1 L48.5
Short leasehold.................................. 13.1 5.9
------------- --------------
L87.2 L54.4
============= ==============
Plant and equipment net book value includes L0.7 million (2000:
L1.4 million) of leased assets.
2000 2001
----------- -----------
(IN MILLIONS)
(B) CAPITAL COMMITMENTS:
Contracted commitments for future capital expenditure....... L2.2 L2.9
F-24
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
14. FIXED ASSETS INVESTMENTS
JOINT VENTURES
AND ASSOCIATES
---------------------------------------
SHARE OTHER
2000 OF NET UNLISTED OWN 2001
TOTAL ASSETS GOODWILL TOTAL INVESTMENTS SHARES TOTAL
------------ ----------- ----------- ----------- ------------ ----------- -------------
(IN MILLIONS)
At the beginning of the
period.................... L7.7 L 1.8 L 1.2 L 3.0 L2.1 L2.4 L7.5
Acquisitions and
additions/earnings........ 0.5 0.2 -- 0.2 -- -- 0.2
Disposals................... (0.7) -- -- -- (0.1) -- (0.1)
------------ ----------- ----------- ----------- ------------ ----------- -------------
AT THE END OF THE PERIOD.... 7.5 2.0 1.2 3.2 2.0 2.4 7.6
Amounts written off:
At the beginning of the
period.................. 0.1 -- -- -- 0.3 -- 0.3
Written off in the
period.................. 0.2 -- -- -- -- 1.1 1.1
------------ ----------- ----------- ----------- ------------ ----------- -------------
AT THE END OF THE PERIOD.... 0.3 -- -- -- 0.3 1.1 1.4
------------ ----------- ----------- ----------- ------------ ----------- -------------
NET BOOK VALUE AT THE END OF
THE PERIOD................ L7.2 L 2.0 L 1.2 L 3.2 L1.7 L1.3 L6.2
============ =========== =========== =========== ============ =========== =============
Own shares comprise 1,269,341 ordinary shares of the Group (2000:
1,337,341), held in an independently managed Employee Share Ownership Plan
("ESOP") trust. At September 29, 2001 the market value of the shares was less
than cost. Accordingly, a provision has been charged to restructuring costs in
respect of a diminution in value. The market value of the shares held by the
trust at September 29, 2001, was L1.0 million.
Details of principal subsidiaries and a significant investment are shown in
Note 28.
15. STOCKS
2000 2001
------------- --------------
(IN MILLIONS)
Raw materials and consumable................................ L45.9 L42.2
Work in progress............................................ 17.0 15.7
Finished goods.............................................. 81.5 36.4
------------- --------------
144.4 94.3
Property.................................................... 8.7 11.3
------------- --------------
L153.1 L105.6
============= ==============
At the period end the Directors are not aware of any significant difference
between book value and replacement value of stocks.
F-25
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
16. DEBTORS
2000 2001
------------- -------------
(IN MILLIONS)
Trade debtors (less allowance for doubtful accounts of
L8.3 million at 2000, and L5.7 million at 2001)........... L181.5 L149.6
Other debtors............................................... 21.8 23.6
Prepayments and accrued income.............................. 12.5 4.3
Current tax................................................. 5.3 3.2
------------- -------------
221.1 180.7
Vendor loan note............................................ -- 20.0
------------- -------------
L221.1 L200.7
============= =============
The vendor loan note (see Note 5b) is repayable in 2009 or on a sale or
public offering of Nobia AB. The loan is subordinated to Nobia AB's bank and
mezzanine debt and interest is payable to Enodis at 3.5% above London Inter-bank
Offered Rate ("LIBOR").
17. CREDITORS FALLING DUE WITHIN ONE YEAR
2000 2001
------------ ------------
(IN MILLIONS)
(A) BORROWINGS:
Term loan................................................... L84.6 L--
Deferred financing costs.................................... (1.2) (1.1)
Bank loans and overdrafts................................... 6.3 2.7
Other current borrowings.................................... -- 0.7
Obligations under finance leases (Note 27).................. 0.7 0.1
------------ ------------
Total (Note 19)............................................. L90.4 L2.4
============ ============
2000 2001
------------- -------------
(IN MILLIONS)
(B) OTHER CREDITORS:
Trade creditors............................................. L102.2 L81.8
Other creditors............................................. 31.4 27.2
Amounts due to subsidiary entities.......................... -- --
Current tax................................................. 20.8 21.5
Other taxes and social security............................. 6.2 2.9
Accruals and deferred income................................ 93.2 91.7
Dividend payable............................................ 23.1 --
------------- -------------
L276.9 L225.1
============= =============
F-26
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
18. CREDITORS FALLING DUE AFTER MORE THAN ONE YEAR
2000 2001
------------- -------------
(IN MILLIONS)
Term loan................................................... L287.3 L--
Revolving multi-currency loan facility...................... 64.5 387.5
Deferred financing costs.................................... (4.5) (2.9)
Other loans................................................. 18.8 13.1
Obligations under finance leases (Note 27).................. 0.5 1.2
------------- -------------
L366.6 L398.9
============= =============
19. TOTAL BORROWINGS
2000 2001
------------- -------------
(IN MILLIONS)
Term loan................................................... L371.9 L--
Revolving multi-currency loan facility...................... 64.5 387.5
Deferred financing costs.................................... (5.7) (4.0)
Bank loans and overdrafts................................... 6.3 3.2
Other loans................................................. 18.8 13.3
------------- -------------
455.8 400.0
Obligations under finance leases............................ 1.2 1.3
------------- -------------
457.0 401.3
------------- -------------
Due within one year......................................... 90.4 2.4
Due after more than one year................................ 366.6 398.9
------------- -------------
L457.0 L401.3
============= =============
An analysis of the maturity of debt is given in Note 20.
Bank loans and overdrafts are considered short term borrowings. The
weighted-average interest rate based on short term debt outstanding for the
fiscal years ended September 30, 2000, and September 29, 2001, was 2.86% and
2.4%, respectively.
On March 12, 2001, Enodis plc entered into a new L600 million revolving
multi-currency facility (the ``Facility"), to replace the previous facility that
commenced in August 1999. The Facility matures in March 2006, was partly drawn
down at the balance sheet date (L387.5 million) and bears interest at 1.375%
above LIBOR (increasing to 2.25% from October 2001). As a result, deferred
financing costs of L5.8 million relating to the previous syndicated loan
facility were written off (Note 5). The loans are guaranteed by Enodis and a
number of the major subsidiaries within the Group. This Facility of
L600 million was reduced by L100 million on July 10, 2001 following the disposal
of the BCP business. Interest rates as of September 29, 2001 ranged from 4.1% to
6.0%.
F-27
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
19. TOTAL BORROWINGS (CONTINUED)
The Facility is underwritten by two banks pending syndication. The
underwriting banks retain the right to alter the structure of the Facility to
achieve a successful syndication. The underwriting banks have confirmed they
will not exercise their right in such a way as to cause repayment within one
year.
On November 20, 2001, Enodis plc and its principal subsidiaries entered into
an agreement to grant the underwriting banks collateral over all the Group's
assets. In addition, the agreement governing the Facility contains restrictive
covenants that limit the Group's ability to incur other indebtedness and to make
acquisitions and other investments. It also requires the maintenance of
specified financial covenants, including a minimum net worth amount, a maximum
leverage ratio and a minimum interest coverage ratio on a semi-annual basis, as
well as a minimum guarantor cover ratio on an annual basis. The Group was in
compliance with such covenants as of September 29, 2001, except for the net
worth covenant following the write-down of goodwill arising on the Scotsman
acquisition. This covenant was reduced by the amount of the goodwill write-down
of L100 million as recorded in these financial statements. The Group is in
compliance with the amended covenant. At the same time, the total amount of the
Facility was converted to U.S. $685 million, split between a revolving
multi-currency facility repayable in March 2006 of U.S. $600 million and a
364 day revolving multi-currency credit facility of $85 million with an option
(expiring May 22, 2003), to convert to a one year loan.
A failure to meet financial covenants, if not waived or resolved through
negotiation with the lenders, or a change in control of the Group, would entitle
the lenders to accelerate maturity of the Facility.
In addition, the Group is required to make prepayments on the loan of 100%
of the proceeds of any equity or capital markets issue, 100% of the net proceeds
from the disposal of any assets (in excess of U.S. $1.0 million) and 75% of the
surplus cash generated at the end of each fiscal year, commencing with the
annual cashflow statement for the fiscal year ending September 28, 2002, above
specified leverage ratios, or in the event of a change in control of the
business.
Other loans consist primarily of L11.3 million of Industrial Revenue Bonds
(2000: L15.7 million). The Industrial Revenue Bonds are at favorable rates of
interest, set periodically by reference to market rates. These bonds incurred
rates of interest between 2.0% and 5.7% during the period and are collateralized
by certain properties of the Group.
20. FINANCIAL INSTRUMENTS
The Group treasury function is responsible for ensuring the availability and
flexibility of funding arrangements in order to meet the ongoing requirements of
the Group. In addition, it is responsible for managing the interest rate risks,
liquidity risks and foreign exchange risks of the Group. Appropriate policies
that regulate the activity of the Group treasury function are in place. The
Group treasury function, in turn, has implemented policies and guidelines to
regulate the activities of subsidiary companies. The Group does not trade in
financial instruments.
Foreign exchange transaction exposures are generally managed directly by
operating subsidiaries within policies and guidelines established by Group
treasury. Group treasury also enters into foreign exchange hedging transactions
on behalf of subsidiaries where this is beneficial to the Group. It is the
Group's policy not to enter into market transactions to hedge profit and loss
account foreign exchange translation exposures. The Group's U.S. dollar
denominated interest cost provides a partial hedge to the Group's results.
Enodis has significant capital employed in overseas operations. As a result, the
Group's balance sheet
F-28
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
20. FINANCIAL INSTRUMENTS (CONTINUED)
can be affected by movements in foreign exchange rates. The Group seeks to limit
the impact of these currency exposures by borrowing in the same currencies as
the capital employed in its main overseas operating units. Foreign exchange
contracts are also used to match the currency of the Group's borrowings to such
functional currencies.
The Group finances its operations through a mix of retained profits and
borrowings. Borrowings are made at both fixed and floating rates of interest.
The Group uses a combination of interest rate swaps, interest rate caps and
collars and forward rate agreements to generate the desired interest profile and
to manage the Group's exposure to interest rate fluctuations. As of
September 29, 2001, the Group had total net debt of L365.9 million. Using
interest rate swaps and forward rate agreements, L136.1 million (37%) was fixed
for a period greater than six months with a further L68.9 million (19%) fixed
for a period greater than one year. The remaining L160.9 million (44%) remains
floating. The interest rate profile is in line with the Group's objectives.
Short term debtors and creditors have been omitted from all disclosures
other than the currency profile due to their short term nature.
A) MATURITY PROFILE OF FINANCIAL LIABILITIES
BANK BANK
BORROWINGS BORROWINGS
AND 2000 AND 2001
DEBENTURES OTHER TOTAL DEBENTURES OTHER TOTAL
-------------- ------------- -------------- -------------- ------------- --------------
(IN MILLIONS)
Within one year or less or on
demand...................... L89.7 L0.7 L90.4 L1.6 L0.8 L2.4
More than one year but not
more than two years......... 83.5 0.3 83.8 384.6 1.1 385.7
More than two years but not
more than three years....... 82.1 5.3 87.4 0.5 0.2 0.7
More than three years but not
more than four years........ 181.7 0.7 182.4 -- -- --
More than four years but not
more than five years........ -- 0.7 0.7 -- 2.1 2.1
More than five years.......... -- 12.3 12.3 -- 10.4 10.4
-------------- ------------- -------------- -------------- ------------- --------------
Gross financial liabilities... L437.0 L20.0 L457.0 L386.7 L14.6 L401.3
============== ============= ============== ============== ============= ==============
In the maturity profile of financial liabilities above, "Other" includes
liabilities shown as other loans and obligations under finance leases. Debt more
than five years of L10.4 million (2000: L12.3 million) principally comprises
Industrial Revenue Bonds with maturities ranging between 2006 and 2020.
The Group had the following undrawn borrowing facilities at the end of the
period:
2000 2001
-------------- --------------
(IN MILLIONS)
EXPIRY DATE
In more than two years...................................... L138.4 L106.9
F-29
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
20. FINANCIAL INSTRUMENTS (CONTINUED)
B) INTEREST RATE PROFILE: FINANCIAL LIABILITIES
FIXED
WEIGHTED
SEMI- NON- AVERAGE
FLOATING FIXED FIXED INTEREST INTEREST
TOTAL RATE RATE RATE BEARING RATE
------------- ------------- ------------ ------------ ----------- --------
(IN MILLIONS, EXCEPT PERCENTAGES AND YEARS)
Financial liabilities
Sterling................................. L16.5 L15.3 L1.0 L-- L0.2 3.8%
U.S. dollar.............................. 429.7 267.8 91.3 67.6 3.0 6.5
Euro..................................... 10.0 9.0 1.0 -- -- 4.9
Other.................................... 0.8 0.6 0.2 -- -- 7.0
------------- ------------- ------------ ------------ ----------- -----
AT SEPTEMBER 30, 2000.................... L457.0 L292.7 L93.5 L67.6 L3.2 6.4
------------- ------------- ------------ ------------ ----------- -----
Sterling................................. 11.2 11.2 -- -- -- --
U.S. dollar.............................. 349.6 280.7 68.9 -- -- 6.3
Euro..................................... 39.4 39.4 -- -- -- --
Other.................................... 1.1 0.7 0.4 -- -- 8.5
------------- ------------- ------------ ------------ ----------- -----
AT SEPTEMBER 29, 2001.................... L401.3 L332.0 L69.3 L-- L-- 6.3%
============= ============= ============ ============ =========== =====
NON-
INTEREST
WEIGHTED BEARING
AVERAGE WEIGHTED
PERIOD AVERAGE
AT PERIOD
FIXED UNTIL
RATE MATURITY
-------- --------
(IN MILLIONS, EXCEPT PERCENTAGES AND YEARS) YEARS YEARS
Financial liabilities
Sterling................................. 4.1 2.0
U.S. dollar.............................. 2.1 1.0
Euro..................................... 7.0 --
Other.................................... 3.1 --
----- ---
AT SEPTEMBER 30, 2000.................... 2.2 1.1
----- ---
Sterling................................. -- --
U.S. dollar.............................. 1.2 --
Euro..................................... -- --
Other.................................... 2.2 --
----- ---
AT SEPTEMBER 29, 2001.................... 1.2 --
===== ===
The floating rate financial liabilities comprised bank loans and overdrafts
bearing interest at rates based on local money market rates.
The semi-fixed hedging principally comprised interest rate caps and interest
rate collars. The fixed rate hedging principally comprised interest rate swaps.
C) INTEREST RATE PROFILE: FINANCIAL ASSETS
NON-INTEREST
BEARING
NON- WEIGHTED
FLOATING INTEREST AVERAGE PERIOD
TOTAL RATE BEARINGS UNTIL MATURITY
------------ ------------ ------------ --------------
(IN MILLIONS) YEARS
Financial assets
Sterling................................................... L6.1 L5.7 L0.4 --
U.S. dollar................................................ 14.1 5.9 8.2 --
Euro....................................................... 8.8 1.4 7.4 --
Other...................................................... 1.6 1.2 0.4 --
------------ ------------ ------------ ---
AT SEPTEMBER 30, 2000...................................... L30.6 L14.2 L16.4 --
------------ ------------ ------------ ---
Sterling................................................... 27.0 22.7 4.3 --
U.S. dollar................................................ 12.1 11.5 0.6 --
Euro....................................................... 14.9 10.3 4.6 --
Other...................................................... 7.4 7.3 0.1 --
------------ ------------ ------------ ---
AT SEPTEMBER 29, 2001...................................... L61.4 L51.8 L9.6 --
============ ============ ============ ===
F-30
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
20. FINANCIAL INSTRUMENTS (CONTINUED)
The floating rate financial assets comprise a L20 million vendor loan note
to Nobia AB due June 2009 bearing interest at a rate of LIBOR plus 3.5% and bank
deposits bearing interest at rates based on local money market rates.
The non-interest bearing financial assets mainly comprise fixed asset
investments and cash in transit.
D) FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
Set out below is a comparison by category of book values and fair values of
all the Group's financial assets and financial liabilities at the period end.
2000 2001
--------------------------------- ---------------------------------
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
--------------- --------------- --------------- ---------------
(IN MILLIONS)
Primary financial instruments held or issued to finance
the Group's operations:
Short term borrowings and current portion of long term
borrowings.............................................. L(89.7) L(89.7) L(1.6) L(1.6)
Long term borrowings...................................... (347.3) (347.3) (385.1) (385.1)
Cash in bank and in hand.................................. 28.5 28.5 39.4 39.4
Other unlisted investments................................ 1.8 1.8 1.7 1.7
Vendor loan note.......................................... -- -- 20.0 20.0
Other loans and finance leases............................ (20.0) (20.0) (14.6) (14.6)
2000 2001
--------------------------------- ---------------------------------
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
--------------- --------------- --------------- ---------------
(IN MILLIONS)
Derivative financial instruments held or issued to manage
the interest rate and currency profile:
Interest rate swaps and similar instruments............... L-- L0.2 L-- L(4.9)
Interest rate caps and collars............................ -- -- -- --
Forward foreign currency contracts........................ -- -- 4.3 4.3
The fair value of short term deposits and current portion of long term
borrowings approximates to the carrying amount because of the short term
maturity of these instruments.
The fair value of the long term borrowings approximates the carrying value
due to the debt being subject to floating rates or short term fixed rates.
The fair value of cash at bank and in hand as well as trade debtors and
creditors approximates to the carrying value due to the short term nature of the
items.
The fair value of the interest rate swaps, caps and collars and foreign
exchange contracts has been estimated by reference to prices available from the
markets on which the instruments are traded. All other fair values shown above
have been calculated by discounting cash flows at prevailing interest rates.
F-31
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
20. FINANCIAL INSTRUMENTS (CONTINUED)
E) HEDGING
As explained above, the Group's policy is to hedge the following exposures:
--Interest rate risk--using interest rate swaps, caps and collars and
forward rate agreements.
--Balance sheet translation risk--using forward foreign exchange contracts
and borrowings in functional currencies.
Gains and losses on instruments used for hedging are not recognized until
the exposure that is being hedged is likely to be recognized.
Unrecognized gains and losses on instruments used for hedging are as
follows:
GAINS LOSSES
--------------------------- -----------------------------
2000 2001 2000 2001
------------ ------------ ------------- -------------
(IN MILLIONS)
Unrecognized gains and losses on hedges to the period end... L0.9 L4.3 L(0.7) L(4.9)
During 2001, the Group used various interest rate hedging instruments to
manage its exposure to interest rate changes on long term debt. These were
interest rate swaps, forward rate agreements and an interest rate collar.
The interest rate swaps involve the exchange of variable interest rate
payments for fixed, without exchanging the notional principal amount. At
September 29, 2001, the Group had outstanding interest rate swap agreements
denominated in U.S. dollars, maturing on November 29, 2002, with an aggregate
notional amount of $100 million (L68.0 million). Under these agreements, the
Group receives interest at floating rates based on three month LIBOR, which
approximated 2.6% at September 29, 2001, and pays fixed interest at 6.295%. The
Group enters into forward rate agreements ("FRAs") with three month terms. At
September 29, 2001, the Group had FRAs outstanding denominated in U.S. dollars,
maturing on various dates from November 8, 2001, through August 8, 2002, with
aggregate notional principal of $330.0 million (L224.5 million) and interest
rates ranging from 6.58% to 6.69%.
The fair value of such contracts is estimated based on quoted market prices
of the same or similar issues available. Unrealized losses on such agreements
were L0.2 million and L4.9 million at September 30, 2000, and September 29,
2001, respectively. The notional amount is used to measure the volume of these
contracts and does not represent exposure to credit loss. The Group is subject
to credit risk in the event of a default by a counterparty. The Group mitigates
this risk by using major financial institutions with high credit ratings.
At September 30, 2000 and September 29, 2001, the Group had foreign currency
forward contracts to sell L29.1 million and buy L96.6 million, respectively, in
foreign currency. The fair value of the forward contracts is the amount that the
Group would receive or pay to terminate the contracts. In order to terminate
these agreements, the Group would have incurred a gain of L0.3 million and gain
of L4.3 million at September 30, 2000 and September 29, 2001, respectively.
F) CURRENCY PROFILE
The main functional currencies of the Group are Sterling and U.S. dollar.
The following analysis of net monetary assets and liabilities shows the Group's
currency exposures after the effects of forward contracts
F-32
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
20. FINANCIAL INSTRUMENTS (CONTINUED)
used to manage currency exposure. The amounts shown represent the transactional
exposures that give rise to the net currency gains and losses recognized in the
profit and loss account. Such exposures comprise the monetary assets and
liabilities of the Group that are not denominated in the operating (or
"functional") currency of the operating units involved.
OTHER
U.S. EUROPEAN 2000
STERLING DOLLAR CURRENCIES OTHER TOTAL STERLING
------------ ------------ ------------ ------------ ------------------ ------------
(IN MILLIONS)
Sterling.................... L-- L0.2 L1.6 L-- L1.8 L--
U.S. dollar................. 0.2 -- -- -- 0.2 --
Currencies.................. 0.1 2.0 -- -- 2.1 --
Other....................... -- 1.0 0.1 0.2 1.3 --
------------ ------------ ------------ ------------ ------------------ ------------
L0.3 L3.2 L1.7 L0.2 L5.4 L--
============ ============ ============ ============ ================== ============
OTHER
U.S. EUROPEAN 2001
DOLLAR CURRENCIES OTHER TOTAL
------------ ------------ ------------------ ------------
(IN MILLIONS)
Sterling.................... L0.1 L1.2 L-- L1.3
U.S. dollar................. -- -- -- --
Currencies.................. 0.2 0.7 -- 0.9
Other....................... 1.6 -- -- 1.6
------------ ------------ ------------------ ------------
L1.9 L1.9 L-- L3.8
============ ============ ================== ============
21. PROVISIONS FOR LIABILITIES AND CHARGES
DEFERRED
EMPLOYEE
PROPERTY PENSIONS BENEFITS WARRANTY RESTRUCTURING TOTAL
------------- ------------- -------------- -------------- ------------- --------
(IN MILLIONS)
A) ANALYSIS OF MOVEMENT IN
PROVISIONS:
AT OCTOBER 1, 2000................... L1.0 L3.3 L23.1 L16.7 L1.5 L45.6
Charged to profit and loss account... 0.1 0.3 -- 0.6 -- 1.0
Charged to profit and loss account
exceptional items.................. 2.0 -- 0.2 8.5 31.1 41.8
Utilized............................. (0.3) (0.8) (0.1) -- (14.5) (15.7)
Transfer (to)/from other balance
sheet categories................... 1.8 -- (2.7) (3.4) (10.5) (14.8)
Currency realignment................. -- 0.1 0.7 0.1 0.3 1.2
------------- ------------- -------------- -------------- -------- -------
AT SEPTEMBER 29, 2001................ L4.6 L2.9 L21.2 L22.5 L7.9 L59.1
============= ============= ============== ============== ======== =======
Property provisions relate primarily to lease payments under onerous
contracts, primarily related to our discontinued operations.
Pension scheme details are set out in Note 25.
Deferred employee benefits relate primarily to deferred compensation plans,
supplemental retirement plans and post retirement benefit plans. It is not
possible to estimate, with certainty, the timing of payments.
Warranty provisions have been recognized for estimated claims under product
guarantees. It is not possible to estimate, with certainty, the timing of
payments.
Restructuring costs relate mainly to costs associated with the charges
described in Note 5 "Exceptional items", and are expected to be utilized within
one year. Cash payments of L14.5 million were made in 2001. A further
L6.5 million in cash payments are expected to be made, as well as non-cash
charges of L1.4 million.
F-33
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
21. PROVISIONS FOR LIABILITIES AND CHARGES (CONTINUED)
B) DEFERRED TAXATION
1. DEFERRED TAXATION NOT PROVIDED. Given the availability of losses and surplus
ACT within the Group, it is not expected that any tax would be payable if
the Group were to dispose of its land and buildings at their balance sheet
values. Enodis recognizes a deferred tax liability related to the
undistributed earnings of subsidiaries if Enodis expects that it will
recover those undistributed earnings in a taxable manner, such as through
receipt of dividends or sale of the investments. No liabilities have been
recognized in the accompanying financial statements, as Enodis either
intends to permanently reinvest all such undistributed earnings or to the
extent they may be repatriated, no further tax is expected due to
significant (unprovided) losses in the U.K. or foreign tax credits. These
losses could be used to offset any earnings that were remitted to the United
Kingdom.
2. TAX LOSSES. The Group has approximately L284 million of losses available for
offset against future profits, comprising L85 million in the U.K. and
L190 million in the U.S. with a further L9 million in other countries in
2001. The losses in the U.K. and other countries do not expire. The L190.0
million of losses in the U.S. expire as follows: L87.0 million (2006), L69.0
million (2007), L3.1 million (2008), L9.7 million (2009), and L22.1 million
(2010 and thereafter). In addition, the Group has surplus ACT carried
forward of L11.5 million.
22. CALLED UP SHARE CAPITAL
2000 2001 2000 2001
----------- ----------- -------- --------
(IN MILLIONS, EXCEPT SHARE DATA)
(A) NUMBER AND VALUE OF SHARES:
Ordinary shares of 50p each
Authorized............................................ 344,200,000 344,200,000 L172.1 L172.1
Allotted, called up and fully paid.................... 250,074,985 250,288,950 125.0 125.1
1,269,341 ordinary shares of the Enodis (2000: 1,337,341) are held in an
independently managed ESOP trust. The ESOP trust was established in 1994 when
Mourant & Co. were appointed as trustees to purchase shares in the Enodis to
meet some of the future obligations under employee option schemes. Shares are
distributed to employees upon exercise of options held by them and payment by
them of the exercise price. The Group finances the ESOP trust by way of an
interest free loan (Note 14) of L2.4 million.
The ESOP trust has waived the right to receive dividends on all shares held.
ORDINARY SHARES
---------------
(B) MOVEMENT OF ORDINARY SHARES DURING THE PERIOD:
At October 1, 2000.......................................... 250,074,985
Exercise of share options under the Sharesave Scheme
(1992).................................................... 193,965
Exercise of share options under the Executive Scheme
(1995).................................................... 20,000
-----------
At September 29, 2001....................................... 250,288,950
===========
The proceeds of the exercises of share options in the year to September 29,
2001 amounted to L264,816.
F-34
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
22. CALLED UP SHARE CAPITAL (CONTINUED)
(C) OPTION SCHEMES
During the year the Group has operated the following shareholder approved
employee option schemes using new shares:
NUMBER OF OPTIONS
--------------------------------
2000 GRANTED EXERCISED LAPSED 2001
--------- --------- --------- -------- ---------
Sharesave Scheme (1992)....................... 2,341,648 -- 193,965 911,144 1,236,539
Executive Scheme (1984)*...................... 116,870 -- -- -- 116,870
Executive Scheme (1995)....................... 3,003,470 221,065 20,000 225,020 2,979,515
Executive Scheme (2001)....................... -- 3,753,000 -- -- 3,753,000
The Group has outstanding at September 29, 2001, the following options to
subscribe for ordinary shares:
EXERCISE DATE FROM LAST
PRICE WHICH EXPIRY
YEAR PENCE EXERCISABLE DATE NUMBER
-------- -------- ----------- -------- ---------
SHARESAVE SCHEME (1992)............................ 1994 150.9 01.09.01 01.03.02 133,227
1995 181.8 01.09.02 01.03.03 38,626
1996 158.8 01.09.01 01.03.02 70,121
1996 158.8 01.09.03 01.03.04 20,379
1997 112.0 01.09.02 01.03.03 150,802
1997 112.0 01.09.04 01.03.05 148,325
1998 202.7 01.09.01 01.03.02 46,581
1998 202.7 01.09.03 01.03.04 60,745
1998 202.7 01.09.05 01.03.06 27,315
1999 192.7 01.09.02 01.03.03 106,134
1999 192.7 01.09.04 01.03.05 125,436
1999 192.7 01.09.06 01.03.07 21,317
2000 258.9 01.09.03 01.03.04 107,539
2000 258.9 01.09.05 01.03.06 119,000
2000 258.9 01.09.07 01.03.08 60,992
---------
1,236,539
=========
EXECUTIVE SHARE SCHEME (1984)*..................... 95.10 03.02.96 03.02.03 61,989
222.99 14.02.97 14.02.04 54,881
---------
116,870
=========
EXECUTIVE SHARE SCHEME (1995)...................... 230.50 31.03.98 31.03.05 18,080
186.00 22.07.99 22.07.06 167,655
144.00 01.07.00 01.07.07 390,000
187.50 28.11.00 28.11.07 254,802
180.00 17.11.01 17.11.08 137,935
262.90 28.07.02 28.07.09 900,000
314.00 24.11.02 24.11.09 90,197
322.20 03.07.03 03.07.10 799,781
210.00 21.12.03 21.12.10 201,065
216.28 21.12.03 21.12.10 20,000
---------
2,979,515
=========
F-35
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
22. CALLED UP SHARE CAPITAL (CONTINUED)
EXERCISE DATE FROM LAST
PRICE WHICH EXPIRY
YEAR PENCE EXERCISABLE DATE NUMBER
-------- -------- ----------- -------- ---------
EXECUTIVE SHARE SCHEME (2001)...................... 181.00 22.01.04 22.01.11 2,753,919
210.45 22.01.04 22.01.11 109,913
181.00 12.06.04 12.06.11 203,238
101.00 10.09.04 10.09.11 685,930
---------
3,753,000
=========
------------------------------
* No further options can be granted under this Scheme.
The maximum aggregate number of unissued shares over which options may
currently be granted under all Schemes in any ten year period cannot exceed 10%
of the nominal share capital of Enodis on the date of grant. At September 29,
2001, a total of 11,628,776 options were available for grant under all Schemes.
The maximum aggregate number of shares over which executive share options in any
ten year period can be granted cannot exceed 5% of the nominal share capital of
the Group on the date of grant. At September 29, 2001, a total of 1,452,785
options were available for grant under executive schemes.
23. RESERVES
Movements on reserves during the year were as follows:
SHARE PROFIT
PREMIUM REVALUATION AND LOSS
ACCOUNT RESERVE ACCOUNT
------------- ------------------ --------------
(IN MILLIONS)
At October 1, 2000.......................................... L238.9 L-- L(150.1)
Retained loss for the year.................................. -- -- (120.7)
Negative goodwill written back on disposal of
subsidiaries.............................................. -- -- (4.4)
Shares issued............................................... 0.1 -- --
Foreign currency translation adjustment (note a)............ -- -- (1.7)
------------- ------------------ --------------
AT SEPTEMBER 29, 2001....................................... L239.0 L-- L(276.9)
============= ================== ==============
(a) The foreign currency translation adjustment arises on the translation of
interests in the opening equity of overseas subsidiary entities and
associated undertakings, long term foreign borrowings used to finance
overseas investments, and on the translation of the profit and loss account
for the year to closing rate.
(b) Goodwill written off directly against profit and loss reserve amounts to
L335.9 million (2000: L331.5 million).
F-36
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
24. ACQUISITIONS
(A) 1999
1. SUBSIDIARIES ACQUIRED
During the 53 weeks ended October 2, 1999 the Group acquired the following
companies:
--Convotherm Elektrogerate, GmbH and subsidiaries ("Convotherm"),
December 1998.
--Scotsman, August 1999.
Both the Convotherm and Scotsman companies (together the "acquired
businesses") were accounted for using the purchase method of accounting.
2. NET ASSETS ACQUIRED, PURCHASE CONSIDERATION AND GOODWILL
The following table explains the adjustments to book value by major category
of assets and liabilities acquired to arrive at the fair values included in the
financial statements at the date of acquisition of Scotsman, the fair values
included in the financial statements at the date of acquisition of Convotherm,
the purchase consideration for the acquired businesses, and the goodwill arising
on acquisitions:
ALIGNMENT OF
BOOK VALUATION ACCOUNTING SCOTSMAN
VALUE ADJUSTMENTS POLICIES OTHER TOTAL CONVOTHERM
------------- -------------- ------------ ----------- -------------- -----------
(IN MILLIONS)
Goodwill............................. L189.4 L(189.4) L-- L-- L-- L--
Tangible fixed assets................ 61.6 (0.1) -- -- 61.5 1.8
Stocks............................... 53.8 (5.2) 2.5 -- 51.1 3.0
Trade debtors........................ 83.7 (2.1) -- -- 81.6 2.6
Net cash............................. 9.3 (0.3) -- -- 9.0 0.5
Trade creditors...................... (32.1) -- -- -- (32.1) (0.6)
Other liabilities.................... (37.5) (29.7) (3.1) 0.5 (69.8) (1.4)
Net debt............................. (219.9) (4.6) -- -- (224.5) (3.7)
Minority interest.................... (0.8) -- -- -- (0.8) --
------------- -------------- ------------ ----------- -------------- -----------
Net assets/(liabilities) acquired.... L107.5 L(231.4) L(0.6) L0.5 L(124.0) L2.2
Consideration:
Paid in cash......................... L225.0 L8.4
Deferred............................. 17.1 0.8
Fees................................. 11.5 0.4
-------------- -----------
Total................................ 253.6 9.6
-------------- -----------
Goodwill arising in 1999............. 377.6 7.4
-------------- -----------
Subsequent adjustment................ 3.4 --
-------------- -----------
FINAL GOODWILL 2000.................. L381.0 L--
============== ===========
TOTAL
--------------
(IN MILLIONS)
Goodwill............................. L--
Tangible fixed assets................ 63.3
Stocks............................... 54.1
Trade debtors........................ 84.2
Net cash............................. 9.5
Trade creditors...................... (32.7)
Other liabilities.................... (71.2)
Net debt............................. (228.2)
Minority interest.................... (0.8)
--------------
Net assets/(liabilities) acquired.... L(121.8)
Consideration:
Paid in cash......................... L233.4
Deferred............................. 17.9
Fees................................. 11.9
--------------
Total................................ 263.2
--------------
Goodwill arising in 1999............. 385.0
--------------
Subsequent adjustment................ 3.4
--------------
FINAL GOODWILL 2000.................. L388.4
==============
F-37
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
24. ACQUISITIONS (CONTINUED)
The adjustments to the pre-acquisition books of Scotsman are summarized as
follows:
-- Write-off of goodwill of L189.4 million carried on the balance sheet of
Scotsman as of the date of acquisition.
-- Recognition of some additional liabilities as well as valuation adjustments
to amounts already recorded, totaling L22.4 million.
-- Premium of L4.9 million on the repayment of Scotsman Senior Subordinated
debt as a result of a change of control clause.
-- Write up of inventory to a FIFO basis from a LIFO basis of L2.5 million.
-- Recalculation of the pension liability under U.K. GAAP amounting to
L2.1 million.
-- Recalculation of the deferred tax assets and liabilities under U.K. GAAP
amounting to L15.7 million.
-- The tax impact of all of the fair value adjustments is shown as "Other."
-- Adjustments of L3.4 million were recorded in 2000 relating to the amounts
estimated above.
Deferred consideration for Scotsman includes amounts payable in respect of
shares still outstanding and the consideration for the acquisition of the
minority interest in Austral Refrigeration PTY Ltd which was acquired as a
result of the minority shareholders exercising a change in control option to
sell their shares. All deferred consideration is expected to be paid within one
year. Fees of L0.9 million payable to the Group's auditors for work performed in
connection with acquisitions have been capitalized in goodwill.
Included in the balances for Convotherm are adjustments to align the
accounting policies in the amount of L0.2 million.
Deferred consideration for Convotherm is expected to be paid in 2004 and is
not subject to any performance criteria.
Deferred consideration of L0.3 million, accrued in 1998 in respect of
Aladdin Temp-Rite and New Ton, was paid in the current year. This amount has
been included in the "Acquisitions and disposals" section of the current year
cash flow statement.
The subsidiaries acquired during 1999 contributed L7.8 million to the
Group's net operating cash flows, paid L0.4 million in respect of interest, paid
L1.7 million in respect of taxation and utilized L0.2 million net for capital
expenditure.
3. PRE-ACQUISITION TRADING
Convotherm generated operating profit in its last financial year ended
December 31, 1998, amounting to L1.7 million. There was no trading activity
between its last financial year and the acquisition date of December 31, 1998.
The summarized profit and loss account of Scotsman for the period from
September 27, 1998, to August 12, 1999, (date of acquisition), as extracted from
the management financial statements, adjusted for the effects of goodwill
amortization and interest expense associated with financing the acquisition, as
if the financing had taken place on September 27, 1998, in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP"), is set out below:
F-38
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
24. ACQUISITIONS (CONTINUED)
PROFIT AND LOSS ACCOUNT
PRO FORMA
SCOTSMAN ADJUSTMENT TOTAL
------------- ------------- -------------
(IN MILLIONS)
TURNOVER.................................................... L357.0 L -- L357.0
------------- ------------- -------------
OPERATING PROFIT............................................ 30.6 (11.6) 19.0
Net interest payable and similar charges.................... (14.3) (22.3) (36.6)
------------- ------------- -------------
PROFIT BEFORE TAXATION...................................... 16.3 (33.9) (17.6)
Tax on profit on ordinary activities........................ (7.7) 7.8 0.1
------------- ------------- -------------
PROFIT ATTRIBUTABLE TO SHAREHOLDERS......................... L8.6 L(26.1) (17.5)
============= ============= =============
Basic earnings per share.................................... 5.5p (16.6)p (11.1)p
============= ============= =============
DILUTED EARNINGS PER SHARE.................................. 3.4p (16.6)p (11.1)p
============= ============= =============
Translation losses of L2.6 million, not stated in the profit and loss
account, arose in the period to August 13, 1999. These losses relate principally
to foreign exchange translation differences on the net investment in overseas
subsidiaries.
(B) 2000
1. SUBSIDIARIES ACQUIRED
During the 52 weeks ended September 30, 2000, the Group acquired the following
companies:
-- Merrychef Limited ("Merrychef") June 2000; and
-- Total Cellar System now named Scotsman Response Limited ("Scotsman
Response"), January 2000.
Both acquired companies were accounted for using the purchase method of
accounting.
2. NET ASSETS ACQUIRED, PURCHASE CONSIDERATION AND GOODWILL
The following table explains the fair value, by major category, and the
goodwill arising on the aforementioned acquisitions.
SCOTSMAN
MERRYCHEF RESPONSE TOTAL
------------ ----------- ------------
(IN MILLIONS)
Tangible fixed assets....................................... L0.4 L0.7 L1.1
Stocks...................................................... 0.6 0.3 0.9
Trade debtors............................................... 1.4 1.0 2.4
Trade creditors............................................. (0.9) (0.2) (1.1)
Other liabilities........................................... (1.2) (0.9) (2.1)
Net debt.................................................... (0.1) (0.8) (0.9)
------------ ----------- ------------
Fair value of assets acquired............................... L0.2 L0.1 L0.3
------------ ----------- ------------
Consideration:
Paid in cash................................................ L16.7 L2.1 L18.8
Fees........................................................ 0.2 -- 0.2
Loan notes issues........................................... -- 0.7 0.7
------------ ----------- ------------
Total....................................................... 16.9 2.8 19.7
------------ ----------- ------------
Goodwill arising............................................ L16.7 L2.7 L19.4
============ =========== ============
F-39
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
24. ACQUISITIONS (CONTINUED)
There were no significant adjustments to the book value of assets acquired.
Deferred consideration and costs of L28.8 million accrued in 1999 in respect of
the Scotsman acquisition, were paid in the 2000. This amount has been included
in the "Acquisitions and disposals" section of the 2000 cash flow. The impact of
the acquisitions in 2000 was not material to turnover, profit for the period, or
basic and diluted earnings per share.
(C) 2001
On November 11, 2000, the Group acquired the entire share capital of Jackson
MSC, Inc ("Jackson"), for consideration of $36.2 million including costs.
Jackson is principally involved in the manufacturing and supply of industrial
dishwashing equipment.
The Company was accounted for using the purchase method of accounting.
Details of the acquisition are shown in the table below. Provisional fair value
adjustments reflect the circumstances and conditions at the date of acquisition
and principally relate to the write-off of obsolete stock, additional cost
accruals and the write-off of goodwill carried on the balance sheet.
FAIR VALUE
BOOK VALUE ADJUSTMENT TOTAL
------------ ------------- -------------
(IN MILLIONS)
Goodwill.................................................... L0.6 L(0.6) L--
Fixed assets................................................ 2.4 -- 2.4
Stock....................................................... 5.0 (0.6) 4.4
Other current assets........................................ 1.4 (0.3) 1.1
Current liabilities......................................... (2.0) (0.3) (2.3)
Loans....................................................... (0.7) -- (0.7)
------------ ------------- -------------
Net assets/(liabilities) acquired........................... L6.7 L(1.8) L4.9
============ ============= =============
Consideration:
Paid in cash................................................ L24.4
Costs....................................................... 0.9
-------------
Total....................................................... 25.3
-------------
Goodwill arising............................................ L20.4
=============
The subsidiary acquired during the year contributed L2.9 million to the
Group's net operating cash flows, paid no interest or taxation and utilized
L0.4 million net for capital expenditure.
The Group made other acquisitions totaling L0.5 million in the 2001.
The impact of the acquisitions in 2001 was not material to turnover, profit
for the period or basic and diluted earnings per share.
25. GROUP PENSION SCHEMES
The Group operates a number of pension schemes of both the defined benefit
and defined contribution type. The total pension cost for 2001 was
L4.15 million (2000: L4.7 million). There is a provision for pension
F-40
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
25. GROUP PENSION SCHEMES (CONTINUED)
costs of L2.9 million (2000: L3.5 million) in the balance sheet as of
September 29, 2001 arising from the accumulated difference between the
contributions paid and the corresponding pension costs.
The total employer contributions payable to the Group's defined contribution
schemes over the year was L3.1 million (2000: L2.7 million). At September 29,
2001, there were no outstanding or prepaid contributions (2000: nil).
The Group currently accounts for pensions under SSAP 24. Under the
transitional arrangements for FRS 17, the Group is required to provide
additional disclosures relating to its pension schemes. These are provided
below.
SSAP 24
a) A number of the Group's full time U.K. employees as of September 29,
2001 are members of defined benefit arrangements with assets held in
separate trustee administered funds. The principal defined benefit scheme
in the U.K. is the Berisford (1948) Pension Scheme ("the Berisford
Scheme"). A valuation was carried out by a qualified independent actuary
at March 31, 2001 using the attained age method. Following the valuation
it was agreed that the employer would pay contributions at the rate of 0%
of pensionable salaries.
The assumptions which have the most significant effect on the results of
the valuation are those relating to the rate of return on investments and
the rates of increase in salaries and pensions. The assumptions used in
the valuation were:
Investment returns.................................. 5.5% p.a.
Increase in salaries................................ 4.5% p.a.
Present and future pensions......................... 5.0% p.a.
The total market value of the Berisford Scheme's assets at the last
valuation date, together with their funding level as a percentage of
accrued benefits after allowing for future increases in earnings, was
L86.4 million (117.9%).
b) Enodis Corporation maintains a 401(k) plan which covers most of its
employees. It had formerly maintained several frozen defined benefit
pension plans. These plans have been terminated with the approval of the
appropriate regulatory authorities, and all of the liabilities to
participants and beneficiaries have been settled.
c) Scotsman Industries maintained a number of pension and 401(k) plans
which cover substantially all of its employees. Benefits under defined
benefit plans for hourly paid employees are based on a fixed multiple of
the length of service and for salaried employees are based on a
percentage of earnings during the year of their employment. All pension
plans have been funded in accordance with the Employee Retirement Income
Security Act of 1974.
Following the last valuations of the plans at January 1, 2001, it was agreed
that the employer would pay contributions at the rate of 0% of pensionable
salaries.
F-41
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
25. GROUP PENSION SCHEMES (CONTINUED)
The following assumptions were used to develop net pension costs for pension
plans in the U.S. in the 52 weeks ended September 29, 2001:
Discount rate.................................. 8.5% p.a.
Future salary increases........................ not applicable
Future pension increases....................... nil
Actuarial gains and losses are amortized over the estimated future working
lifetime of employees.
The total market value of the U.S. plans' assets as of September 29, 2001
was L40.4 million. The funding level of the U.S. plans as a percentage of
accrued benefits, after allowing for future increases in earnings, was 136%.
FRS 17
The figures below for the Berisford Scheme have been based on a full
actuarial valuation as of March 31, 2001, updated to the current year end. For
the pension plans in the U.S., the figures have been based on full actuarial
valuations as of January 1, 2001, updated to the current year end.
The assets in the Group's defined benefit schemes and the expected rate of
return were:
BERISFORD SCHEME PENSION PLANS IN THE U.S.
------------------------------ ------------------------------
LONG TERM LONG TERM
RATE OF RETURN RATE OF RETURN
EXPECTED AT VALUE AT EXPECTED AT VALUE AT
SEPTEMBER 29, SEPTEMBER 29, SEPTEMBER 29, SEPTEMBER 29,
2001 2001 2001 2001
-------------- ------------- -------------- -------------
(IN MILLIONS, EXCEPT PERCENTAGES)
Asset:
Equities..................................... 6.49% L43.6 10.175% L17.2
Corporate Bonds.............................. 6.09% 12.8 6.5% 7.6
Government Bonds............................. 4.49% 9.8 5.6% 5.0
Property..................................... 6.49% 7.5 6.5% 2.3
Other........................................ 4.49% 1.7 6.5% 3.0
The liabilities of the Group's schemes at September 29, 2001 were calculated
on the following bases as required under FRS 17:
POST RETIREMENT PLANS IN THE U.S.
------------------------------------------------
BERISFORD
SCHEME PENSION OTHER
-------------- -------------- --------------
Assumptions at September 29, 2001
Discount rate...................................... 6.09% 6.75% 7.5%
Rate of increase in salaries....................... 4.5% Not applicable Not applicable
Rate of increase in pensions in payment............ 5.0% 0% Not applicable
Rate of increase in pensions in deferment.......... 3.0% 0% Not applicable
Medical cost inflation............................. Not applicable Not applicable 6.5%-5.0%
Price inflation.................................... 3.0% 2.75% Not applicable
F-42
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
25. GROUP PENSION SCHEMES (CONTINUED)
The balance sheet position for the Group's schemes as calculated under
FRS 17 at September 29, 2001 was as follows:
POST RETIREMENT BENEFIT PLANS IN THE U.S.
----------------------------------------------
PENSION
PLANS PENSION PLANS POST
WITH ASSETS IN WITH LIABILITIES RETIREMENT
BERISFORD EXCESS OF IN EXCESS OF MEDICAL
SCHEME LIABILITIES ASSETS PLANS
--------- -------------- ---------------- ----------
(IN MILLIONS)
Fair value of assets............................... L75.4 L35.1 L-- L--
Present value of scheme liabilities................ (69.5) (33.7) (3.9) (2.9)
Surplus or deficit in the scheme................... 5.9 1.4 (3.9) (2.9)
Unrecognizable surplus in the scheme............... -- (0.7) -- --
------ ------ ----- -----
Net pension asset/liability........................ L5.9 L0.7 L(3.9) L(2.9)
====== ====== ===== =====
26. CONTINGENCIES
Various lawsuits and claims arising in the ordinary course of business are
pending against the Group. The Group is vigorously contesting or pursuing, as
applicable, several lawsuits and claims where it believes that its positions are
sustainable. The Group has recorded accruals for losses that it considers to be
both probable and reasonably estimable. No accrual has been reported for
lawsuits and claims for which the outcome is not reasonably predictable or the
losses, if any, are not reasonably estimable. Based upon the Group's current
assessments of these lawsuits and claims (including those noted below) and the
capital resources available to it, the Group believes that the ultimate
resolution of these lawsuits and claims would not exceed, by a material amount,
the aggregate of the amounts accrued in respect of them. Therefore, the
resolution of these lawsuits should not have a material effect on the Group's
financial condition, liquidity or results of operations. However, due to the
uncertainties involved in litigation, there are cases, including some of the
claims involving Consolidated Industries Corp. of Lafayette, Indiana
("Consolidated"), in which either the outcome is not reasonably predictable or
losses, if any, are not reasonably estimable. If the Consolidated-related
lawsuits and claims were ultimately determined in a manner adverse to the Group,
and in amounts in excess of established accruals, it is reasonably possible that
those determinations could have a material effect on our profit. The term
"reasonably possible" means that the chance of a future transaction or event
occurring is more than remote but less than likely.
(i) One of Enodis' subsidiaries, Enodis Corporation, has been named in a number
of lawsuits throughout the U.S. in which the plaintiffs seek to hold it
liable for the alleged obligations of its former subsidiary, Consolidated,
by reason of Consolidated's alleged design and manufacture of some 870,000
defective home furnaces. Consolidated's alleged liability in respect of
these furnaces could potentially reach $600 million. Enodis Corporation
sold Consolidated to an unrelated party in 1998. The plaintiffs all contend
that Enodis Corporation is the alter ego of Consolidated and therefore
liable for its debts. The plaintiffs in these actions who are seeking to
hold Enodis Corporation accountable for the liabilities of Consolidated
include Daniel L. Freeland, in his capacity as trustee of the Chapter 7
bankruptcy estate of Consolidated, the Trane Company, a division of America
Standard, Amana, LLC, Bard Manufacturing Company and Janet Pearce, on
behalf of a class of homeowners claiming, among other things, to be
entitled to have their furnaces replaced free of charge.
F-43
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
26. CONTINGENCIES (CONTINUED)
Additionally, Consolidated is a defendant in a certified class action in
California, which claims that certain furnaces manufactured by Consolidated
were defective. The class action is currently ready for trial. Enodis
Corporation is not a party to that action but has an interest in the outcome
due to the alter ego claims described.
Finally, the bankruptcy trustee, Daniel L. Freeland, is also asserting a
variety of bankruptcy and equitable claims (the "trustee claims") seeking to
recover up to $30 million that was paid by Consolidated to Enodis
Corporation between 1988 and 1998.
Enodis Corporation has thoroughly investigated these claims and believes
that the claims based on the alter ego theory, as well as the trustee
claims, are without merit. Enodis Corporation is therefore defending them
vigorously. However, the damages alleged in the lawsuits could potentially
reach U.S. $600 million, which substantially exceeds the estimate of, and
accruals for, the potential exposure. Enodis Corporation has placed its
insurance carriers on notice of these claims, and they have uniformly
reserved their rights in respect of them while at the same time co-operating
with Enodis Corporation in attempts to resolve them. Accordingly, if these
lawsuits were ultimately decided in a manner adverse to the Company, and in
amounts in excess of the accruals, it is "reasonably possible" that those
determinations could have a material adverse effect on the Group.
(ii) In 1996 Bomar Resources Holdings, Inc. ("BRHI"), among others, brought an
action against Enodis in the U.S. Federal District Court for the Southern
District of New York for indemnification against various third party
claims which the Company was found liable for in September 1999. Enodis
granted the indemnity in connection with the 1988 sale of a former
subsidiary, Bomar Resources Inc. ("Bomar"), to BRHI's predecessors. During
the year the Group settled these federal and state court actions for
L12.2 million (Note 5).
(iii) There are customary tax and other warranties and indemnities in respect of
companies and businesses sold in previous years.
27. LEASE OBLIGATIONS
Commitments--The Group leases certain of its offices, buildings, plant and
equipment in some instances for periods in excess of 20 years with various
renewal options. Rental expense under operating leases related to continuing
businesses was L4.0 million in 1999, L7.5 million in 2000 and L7.3 million in
2001.
F-44
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
27. LEASE OBLIGATIONS (CONTINUED)
2000 2001
-------- --------
(IN MILLIONS)
A) THE FUTURE MINIMUM PAYMENTS TO WHICH THE GROUP IS
COMMITTED UNDER FINANCE LEASES ARE AS FOLLOWS:
Within one year............................................. L0.7 L0.1
Between one and two years................................... 0.5 1.2
Between two and three years................................. 0.1 0.1
Between three and four years................................ 0.1 0.1
Between four and five years................................. -- --
Thereafter.................................................. -- --
---- ----
1.4 1.5
---- ----
Finance charges allocated to future years................... (0.2) (0.2)
---- ----
L1.2 L1.3
---- ----
Disclosed in the financial statements as:
Creditors due within one year (Note 17)..................... L0.7 L0.1
Creditors due after more than one year (Note 18)............ 0.5 1.2
---- ----
L1.2 L1.3
==== ====
2000 2001
-------- --------
(IN MILLIONS)
B) OPERATING LEASE PAYMENTS WHICH THE GROUP IS COMMITTED TO
MAKE DURING THE NEXT FINANCIAL YEAR ARE ANALYZED AS FOLLOWS:
LEASES EXPIRING:
Within one year............................................. L2.9 L3.1
Between one and two years................................... 2.7 3.9
Between three and five years................................ 7.3 3.8
Thereafter.................................................. 17.1 9.5
----- -----
L30.0 L20.3
===== =====
2001
-------------
(IN MILLIONS)
C) OPERATING LEASE PAYMENTS WHICH THE GROUP IS COMMITTED TO
MAKE ARE ANALYZED AS FOLLOWS:
Within one year............................................. L20.3
Between one and two years................................... 9.0
Between two and three years................................. 6.4
Between three and four years................................ 5.1
Between four and five years................................. 4.4
Thereafter.................................................. 25.5
-----
L70.7
=====
F-45
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
28. PRINCIPAL SUBSIDIARIES AND SIGNIFICANT INVESTMENT
PERCENTAGE
COUNTRY OF HELD AND
INCORPORATION VOTING RIGHTS AT
AND SEPTEMBER 29,
FOOD EQUIPMENT OPERATION 2001 DETAILS OF HOLDING OF SHARE CAPITAL
-------------- ------------- ---------------- ----------------------------------------------
Aladdin Temp-Rite Canada, Inc. Canada 100 700,100 no par value common stock
Aladdin Temp-Rite LLC U.S. 100 n/a
Aladdin Temp-Rite Pty. Ltd Australia 100 1,184,115 AU$1 ordinary shares
Aladdin Temp-Rite Puerto Rico Inc. Puerto Rico 100 1,000 no par value common stock
Austral Refrigeration Pty. Ltd Australia 100 40,993 AU$1 ordinary shares
Belshaw Bros, Inc U.S. 100 200 no par value common stock
Booth, Inc. U.S. 100 1,000 no par value common stock
Castel MAC S.p.A. Italy 100 8,300,000 0.52 Euro shares
Cleveland Range, Inc. U.S. 100 3,000 no par value common stock
Cleveland Range Ltd Canada 100 32,449 Class A no par value shares
Convotherm Elektrogerate GmbH Germany 91 2,730,000 DM1 shares
Convotherm Limited England 91 6,000 L1 ordinary shares
Convotherm Singapore Pte Ltd Singapore 100 100,000 $1 shares
Cowley Refrigeration Ltd New Zealand 60 210,000 NZ$1 shares
Enodis Corporation U.S. 100 100 $.01 par value common stock
Enodis Deutschland GmbH Germany 100 50,000 DM shares
Enodis France SA France 100 7,500 FFr 100 shares
Enodis Iberia SA Spain 100 200 Pta 50,000 shares
Enodis UK Limited England 100 5,000 L1 ordinary shares
Frimont S.p.A. Italy 100 16,000 516.46 Euro shares
Frymaster L.L.C. U.S. 100 n/a
Garland Commercial Industries, Inc. U.S. 100 10 no par value common stock
Garland Commercial Ranges, Limited Canada 100 2,000 no par value common stock
Guyon Productions SA France 100 50,000 FFr 100 shares
Hartek Awagem Vertriebsges m.b.H. Austria 100 1 share of 1,500,000 ATS
Hartek Beverage Handling GmbH Germany 100 1 share of 1,150,000 DM
Jackson MSC Inc. U.S. 100 100 shares no par value common stock
Kysor Industrial Corporation U.S. 100 100 $1 common stock
Kysor/Warren Australia Pty. Limited Australia 100 275,003 AU$1 ordinary share
Lincoln Foodservice Products, Inc. U.S. 100 1,000 no par value common stock
Merco/Savory, Inc. U.S. 100 3,000 no par value common stock
Merrychef Holdings Limited England 100 295,000 Class A ordinary shares
100 205,000 L1 ordinary shares
Mile High Equipment Company U.S. 100 200 no par value common stock
New Ton Food Equipment Co Ltd. Thailand 97.2 1,905,120 10 Thai Baht Class A ordinary shares
Sammic SA Spain 100 1.000 Pta 1,000,000 shares
Sammic SARL France 100 3,000 FFr 1,000 shares
Sammic-Equipamientos de Hotelaria, L.d. Portugal 99.5 1 participation of Escudos 3,980,000
Scotsman Beverage Systems Limited England 100 8,397,517 L1 preference shares
Scotsman Group Inc. U.S. 100 1,000 $1 common stock
Scotsman Ice Systems (Shanghai) Company China 100 1 share of $2,150,000
Ltd
Technyform Production SA France 100 2,500 FFr 100 shares
Temp-Rite International GmbH Germany 100 500,000 DM 1 shares
Temp-Rite International Holding B.V. Netherlands 100 40 NLG 1,000 shares
F-46
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
28. PRINCIPAL SUBSIDIARIES AND SIGNIFICANT INVESTMENT (CONTINUED)
PERCENTAGE
COUNTRY OF HELD AND
INCORPORATION VOTING RIGHTS AT
AND SEPTEMBER 29,
FOOD EQUIPMENT OPERATION 2001 DETAILS OF HOLDING OF SHARE CAPITAL
-------------- ------------- ---------------- ----------------------------------------------
Temp-Rite International SA France 100 4,300,000 FF 100 shares
Temp-Rite Kft Hungary 100 3,000,000 HUF 1 shares
The Delfield Company U.S. 100 100 $0.01 par value common stock
Vent Master (Europe) Limited England 100 49,000 L1 ordinary shares
Viscount Catering Limited England 100 1,500,000 L1 ordinary shares
Welbilt Manufacturing (Thailand) Ltd* Thailand 50+ 9,333,333 10 Thai Baht Class A ordinary shares
Welbilt Walk-Ins, LP U.S. 100 n/a
Whitlenge Drink Equipment Limited England 100 406,500,000 1p ordinary shares
100 500,000 L1 deferred shares
PROPERTY
Enodis Property Developments Limited England 100 38,343,713 L1 ordinary shares
Enodis Investments Limited* England 100 65,775,400 50p ordinary shares
100 145,805,094 50p preferred ordinary shares
INVESTMENT
C. Czarnikow Limited England 15++ 150,000 L1 ordinary shares
------------------------------
+ Joint venture accounted for using the equity method.
++ Unlisted fixed asset investment accounted for using the cost method.
* These subsidiaries and the investment are held by Enodis. All other
operating subsidiaries are held through other subsidiaries. Consolidated
subsidiaries not listed above are either dormant or used only as vehicles to
hold the shares of certain non-operating companies.
F-47
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS
RECONCILIATION TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the U.K. ("U.K. GAAP"), which differ
in certain significant respects from U.S. GAAP.
The following is a summary of the significant adjustments to profit/(loss)
for the period and equity shareholders' funds required when reconciling such
amounts recorded in the consolidated financial statements to the corresponding
amounts in accordance with U.S. GAAP, considering the significant differences
between U.K. GAAP and U.S. GAAP.
2001
PROFIT/(LOSS) NOTE 1999 2000 2001 (NOTE 1)
------------- -------- ------------ ------------ -------------- --------
(IN MILLIONS)
Profit/(loss) as reported in accordance with U.K. GAAP..... L60.8 L69.3 L(115.9) $(170.3)
Items increasing/(decreasing) profit/(loss)(*):
Goodwill amortization...................................... (a) (17.2) (16.5) (16.6) (24.3)
Depreciation............................................... (b) 3.1 1.6 -- --
Goodwill impairment........................................ (a) -- -- 9.8 14.4
Deferred taxation.......................................... (c) (23.3) (27.0) 3.3 4.8
Pension cost............................................... (d) 2.5 3.6 5.9 8.7
Sales/leaseback transactions............................... (e) (2.6) (2.7) (1.3) (1.9)
Gain on sale of BCP business (discontinued operation)...... (f) -- -- 0.8 1.2
Purchase accounting........................................ (g) 4.0 -- -- --
Stock option plans......................................... (h) -- (3.0) -- --
Restructuring.............................................. (i) -- -- 0.4 0.6
Cumulative effect of accounting change..................... (j) -- -- 0.2 0.2
Derivatives................................................ (j) -- -- (0.8) (1.2)
Other...................................................... -- -- 0.5 0.7
------------ ------------ -------------- -------
Net profit/(loss) in accordance with U.S. GAAP............. L27.3 L25.3 L(113.7) $(167.0)
============ ============ ============== =======
Net profit/(loss) in accordance with U.S. GAAP
represented by:
Continuing operations.................................... L10.6 L9.1 L(150.7) $(221.4)
Discontinued operations (less applicable taxation)....... (m) 16.7 16.2 7.1 10.5
Gain on sale of discontinued operations.................. (m) -- -- 29.9 43.9
------------ ------------ -------------- -------
Net profit/(loss) in accordance with U.S. GAAP........... L27.3 L25.3 L(113.7) $(167.0)
============ ============ ============== =======
Other comprehensive income--Foreign Currency items......... 1.1 4.7 2.4 3.5
------------ ------------ -------------- -------
Total comprehensive income................................. L28.4 L30.0 L(111.3) $(163.5)
============ ============ ============== =======
Included within the above results is:
Operating income/(loss) under U.S. GAAP of............... L43.1 L77.6 L(106.8) $(159.9)
------------------------------
(*) All adjustments are stated gross of tax, with all tax related adjustments
included within the deferred taxation line item.
F-48
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
2001
EARNINGS PER SHARE NOTE 1999 2000 2001 (NOTE 1)
------------------ -------- -------- -------- -------- --------
Basic profit/(loss) per ordinary share in accordance with
U.S. GAAP:
Income from continuing operations......................... (k) 5.4p 3.2p (49.0)p $(0.72)
Gain on sale of discontinued operations................... (m) -- -- 9.7p 0.14
Income from discontinued operations....................... (k,m) 8.7p 5.6p 2.3p 0.03
----- ------ ------ -------
14.1p 8.8p (37.0)p $(0.55)
===== ====== ====== =======
Diluted profit/(loss) per ordinary share in accordance
with U.S. GAAP:
Income from continuing operations......................... (k) 5.4p 2.9p (49.0)p $(0.72)
Gain on sale of discontinued operations................... (m) -- -- 9.7p 0.14
Income from discontinued operations....................... (k,m) 6.2p 5.3p 2.3p 0.03
----- ------ ------ -------
11.6p 8.2p (37.0)p $(0.55)
===== ====== ====== =======
2001
EQUITY SHAREHOLDER'S FUNDS NOTE 2000 2001 (NOTE 1)
-------------------------- -------- -------------- -------------- --------
(IN MILLIONS)
Equity shareholders' funds as reported in accordance with
U.K. GAAP................................................. L 213.8 L 87.2 $ 128.1
Items increasing/(decreasing) equity shareholders' funds(*):
Goodwill.................................................... (a) 331.5 335.9 493.5
Goodwill associated with purchase accounting adjustments.... (a,b,g) (22.5) (17.6) (25.9)
Amortization on goodwill.................................... (a) (85.3) (99.5) (146.2)
Goodwill impairment......................................... (a) -- 9.8 14.4
Deferred taxation........................................... (c) 96.2 99.2 145.7
Gain on sale/leaseback...................................... (e) (5.3) (1.2) (1.8)
Pension costs............................................... (d) 37.6 31.1 45.7
Stock option plans.......................................... (h) (2.3) (2.2) (3.2)
Dividends................................................... (l) 23.1 -- --
Derivative instruments...................................... (j) -- (0.8) (1.1)
Restructuring............................................... (i) -- 0.4 0.6
Other....................................................... -- 0.7 1.0
-------------- -------------- -------
SHAREHOLDERS' EQUITY IN ACCORDANCE WITH U.S. GAAP........... L 586.8 L 443.0 $ 650.8
============== ============== =======
------------------------------
(*) All adjustments are stated gross of tax, with all tax related adjustments
included within the deferred taxation line item.
DESCRIPTION OF DIFFERENCES
GOODWILL AMORTIZATION AND IMPAIRMENT(a)
Under U.K. GAAP, the policy followed prior to the introduction of FRS 10,
(which is effective for accounting periods ended on or after December 23, 1998,
and was adopted on a prospective basis) was to write off goodwill against equity
shareholders' funds in the year of acquisition. On the subsequent disposal or
termination of a previously acquired business, the profit or loss is calculated
after charging the amount of related goodwill previously charged to reserves.
FRS 10 requires goodwill to be capitalized and amortized
F-49
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
over its estimated useful economic life. Under U.S. GAAP, goodwill arising on
all acquisitions must be capitalized and amortized over the estimated period of
benefit, but not in excess of 40 years. As a result, a difference between U.K.
GAAP and U.S. GAAP arises on goodwill balances on acquisitions
pre-implementation of FRS 10. The Group has adopted a 20 year estimated useful
life with respect to goodwill established under both U.S. GAAP and U.K. GAAP.
Under U.S. GAAP and U.K. GAAP, goodwill (and other long-lived assets) are
evaluated for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. Under
U.S. GAAP, recoverability of such assets is measured by a comparison of the
carrying amount of the asset (as adjusted for the U.K. GAAP to U.S. GAAP
adjustments) to future undiscounted net cash flows expected to be generated from
the assets' use at the lowest level at which identifiable cash flows are
generated. When the cash flow analysis indicates an asset is impaired, the
impairment loss to be recognized is measured by the amount by which the carrying
amount of the asset exceeds the fair value of the asset. Fair value is
determined by quoted market prices, discounted cash flows or other valuation
techniques. In September 2001, the Group recognized goodwill impairment under
U.K. GAAP of L100 million in respect of Scotsman (Note 5). Under U.S. GAAP, the
aforementioned undiscounted net cash flow analysis was performed and it was
determined that an impairment should also be recognized under U.S. GAAP.
Differences in the impairment loss recognized of L9.8 million arise as a result
of the differences in the carrying value of the underlying goodwill and net
assets under U.K. GAAP and U.S. GAAP.
DEPRECIATION(b)
Under U.K. GAAP negative goodwill arising on acquisitions prior to the
adoption of FRS 10 was written off against equity shareholders' funds.
Under U.S. GAAP negative goodwill arising on an acquisition is first applied
to reduce the value assigned to noncurrent assets to zero; any remaining credit
excess, after reduction of non current assets not to be disposed of, is
classified as a deferred credit and amortized systematically to income over the
period to be benefitted. The application of negative goodwill against fixed
assets, as a result of prior year purchase price allocations, results in
depreciation expense being greater under U.K. GAAP. As a result, depreciation
expense must be reduced to reflect the U.S. GAAP depreciation expense.
DEFERRED TAXATION(c)
Under U.K. GAAP deferred taxation is provided under the liability method
where timing differences are expected to reverse in the foreseeable future.
Under U.S. GAAP, income taxes are accounted for under the asset and liability
method of accounting. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to all differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases as well as operating loss and tax credit carryforwards.
Valuation allowances are established when it is "more likely than not" than some
or all of the deferred tax assets will not be realized.
PENSION COST(d)
In the Group's consolidated financial statements, pension costs are
accounted for in accordance with SSAP 24, with costs being charged to income
over employees' estimated working lives. Under U.S. GAAP, pension costs are
determined in accordance with the requirements of SFAS No. 87--"Employers'
Accounting for Pensions" and SFAS No. 88--"Employers' Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination Benefits".
Differences between the U.K. and U.S. GAAP figures
F-50
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
arise from the requirement to use different methods and assumptions for valuing
scheme assets and a different method of amortizing surpluses or deficits.
SALE/LEASEBACK TRANSACTIONS(e)
Under U.K. GAAP a gain or loss on the sale of an asset that is leased back
is deferred if the leaseback is a finance lease and is recognized immediately
when the leaseback is an operating lease. Under U.S. GAAP, a gain or loss on the
sale of property which is leased back and does not meet certain criteria, is
deferred and amortized over future periods. The resulting adjustment from U.K.
GAAP to U.S. GAAP relates to the deferral of current period gains recorded for
U.K. GAAP which do not comply with U.S. GAAP criteria, and the amortization of
such deferred gains over the life of the lease.
GAIN ON SALE OF BCP BUSINESS(f)
Differences in the carrying amount of the net assets of the BCP business
under U.S. GAAP give rise to a different calculation of the gain on sale.
PURCHASE ACCOUNTING(g)
Under both U.K. and U.S. GAAP the purchase price of a transaction accounted
for as an acquisition is based on the fair value of the consideration. Under
U.K. GAAP, provisions or accruals for reorganization and integration costs
including closing duplicate facilities within the acquired company are treated
as post acquisition expenditures and flow through the profit and loss account.
Under U.S. GAAP, costs related to closing duplicate facilities or reducing
excess capacity within the acquired company may be considered part of the
acquisition price if management commences to assess and formulate an adequately
detailed exit plan as of the date of the consummation of the acquisition and
thereby the determination of goodwill arising on acquisition.
STOCK OPTION PLANS(h)
Under U.K. GAAP options issued under the Group's 1995 Executive Share Option
Scheme, which includes certain performance criteria, give rise to an accounting
entry when the option is exercised. Shareholders' funds are increased by the
product of the number of options multiplied by the original option price.
Under U.S. GAAP, in situations in which it is probable that specified
performance criteria will be met, estimates of compensation cost are recorded in
the profit and loss account before the measurement date. The resulting
adjustment between U.K. GAAP and U.S. GAAP relates to the recognition of
compensation cost related to the 1995 Executive share option plan, for
U.S. GAAP purposes, following a determination that the attainment of the related
performance criteria is probable.
RESTRUCTURING(i)
Under U.K. GAAP the timing criteria for recording restructuring provisions
are different to those under U.S. GAAP. During 2001, certain accrued losses
allowable for recognition under U.K. GAAP did not meet the definition of an
accruable restructuring charge for U.S. GAAP and a timing difference
consequently arose.
F-51
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
DERIVATIVES(j)
Derivative financial instruments are utilized by the Group to reduce foreign
currency and interest rate risks. The Group does not hold or issue financial
instruments for trading purposes. The Group enters into forward exchange
contracts to hedge certain firm purchase commitments and existing assets or
liabilities. Under U.K. GAAP, gains and losses related to qualifying hedges of
firm commitments are deferred, and are recognized in income or as adjustments of
carrying amounts when the hedged transaction occurs. The Group also enters into
agreements to manage certain exposures to fluctuations in interest rates.
Interest rate contracts generally involve the exchange of fixed and floating
rate interest payments without the exchange of the underlying principal. Under
U.K. GAAP, net amounts paid or received are reflected as adjustments to interest
rate expense.
Under U.S. GAAP in October 2000, the Group adopted SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). This standard
requires the fair values of derivative instruments to be recorded on the balance
sheet, and any changes in such fair values which do not meet the criteria for
hedge accounting under SFAS 133 to be recorded in the statement of profit and
loss account. Therefore, differences between U.K. GAAP and U.S. GAAP arise which
are recorded in net income for U.S. GAAP. The Group adopted the provisions of
these statements in October 2000 and recorded a gain of L0.2 million as a
cumulative effect of accounting change to reflect the fair value of those
instruments which do not meet the hedging criteria under SFAS 133 as the
standard does not permit retroactive restatement. This charge was immaterial to
basic and diluted earnings per share for the year. Subsequent to the adoption of
SFAS 133, the Group has recorded an L0.8 million loss related to changes in the
fair value of such derivative instruments.
EARNINGS PER ORDINARY SHARE(k)
Earnings per ordinary share information is calculated based on:
2001
1999 2000 2001 (NOTE 1)
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Basic earnings/(loss) attributable to ordinary shares in
accordance with U.S. GAAP................................. L27.3 L25.3 L(113.7) $(167.0)
Effect of diluted securities--CULS.......................... 8.4 0.1 -- --
------ ------ -------- --------
Dilutive earnings/(loss) attributable to ordinary shares in
accordance with U.S. GAAP................................. 35.7 25.4 (113.7) (167.0)
====== ====== ======== ========
Weighted average number of ordinary shares in issue
(Note 11)................................................. 193.9 287.2 307.4 307.4
Basic earnings/(loss) per ordinary share.................... 14.1p 8.8p (37.0)p $(0.55)
Diluted weighted average number of ordinary shares
(Note 11)................................................. 307.5 308.8 307.4 307.4
Diluted earnings/(loss) per ordinary share.................. 11.6p 8.2p (37.0)p $(0.55)
Share options have not been included in the computation of dilutive loss per
ordinary share calculation in 2001 because such inclusion would be antidilutive.
Earnings per share have been restated for all periods as a result of the
three-for-five Rights Issue which was approved in March 2002.
F-52
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
DIVIDENDS(l)
U.K. GAAP requires dividends to be accrued when declared, with a charge to
the retained profit/(loss) through the profit and loss account. Under U.S. GAAP
dividends are charged to shareholders' funds only when approved.
DISCONTINUED OPERATIONS(M)
The BCP Division has been classified as a discountinued operation under both
U.K. GAAP and U.S. GAAP. However, under U.K. GAAP the comparable balance sheet
figures are not restated to reflect the discontinued operations which is
required under U.S. GAAP. A summary of balance sheet data for the BCP business
under U.K. GAAP as of 2000, is as follows:
2000
-------------
(IN MILLIONS)
Current assets.............................................. L80.1
Fixed assets................................................ 52.2
-------------
Total Assets.............................................. 132.3
Creditors falling due within one year....................... 50.9
Creditors falling due after one year........................ 1.5
-------------
52.4
-------------
Net assets of discontinued operations....................... L79.9
=============
OTHER PRESENTATIONAL ITEMS
EXCEPTIONAL ITEMS
Under U.K. GAAP exceptional items are material items which derive from
events or transactions that fall within the ordinary activities of a reporting
entity and which individually or, if of a similar type in aggregate, need to be
disclosed by virtue of their size or incidence if the financial statements are
to give a true and fair view. U.S. GAAP does not allow the presentation of
exceptional items and such items would not be presented as such under U.S. GAAP.
NON-OPERATING PROFITS
Under U.K. GAAP profits on disposals of businesses and property fixed assets
are treated as non-operating profit. Under U.S. GAAP such items would be
presented as a component of discontinued operations and operating profit,
respectively.
RECENTLY ADOPTED U.S. ACCOUNTING PRONOUNCEMENTS
In June 2000, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"). SAB 101 provides the SEC staff's views in applying generally accepted
accounting principles to selected revenue recognition issues. The Group adopted
the applicable provisions of SAB 101 during Fiscal 2001. The adoption of the
provisions of SAB 101 had no impact.
F-53
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
NEW U.S. ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued two new pronouncements: SFAS No. 141,
"Business Combinations" ("SFAS 141"), and SFAS No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141 prohibits the use of the
pooling-of-interest method for business combinations initiated after June 30,
2001 and also applies to all business combinations accounted for by the purchase
method that are completed after June 30, 2001. There are also transition
provisions that apply to business combinations completed before July 1, 2001,
that were accounted for by the purchase method. Enodis has had no business
combinations subsequent to June 30, 2001.
SFAS 142 is effective for fiscal years beginning after December 15, 2001 for
all goodwill and other intangible assets recognized in an entity's statement of
financial position at that date, regardless of when those assets were initially
recognized. SFAS 142 requires, among other things, the discontinuance of
goodwill amortization and an annual test for impairment. In addition, the
standard includes provisions for the reclassification of certain existing
recognized intangibles as goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the identification of reporting units for
purposes of assessing potential future impairments of goodwill. SFAS 142 also
requires the Group to complete a transitional goodwill impairment test six
months from the date of adoption. The Group is currently assessing but has not
yet determined the impact of SFAS 142 on its financial position and results of
operations.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"), which requires that the fair value of an
asset retirement obligation be recorded as a liability in the period in which it
incurs the obligation. SFAS 143 is effective for fiscal years beginning after
June 15, 2002. The Group is currently assessing but has not yet determined the
impact of SFAS 143 on its financial position and results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets" ("SFAS 144"), which serves to
clarify and further define the provisions of SFAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
SFAS 144 does not apply to goodwill and other intangible assets that are not
amortized. SFAS 144 is effective for fiscal years beginning after December 15,
2001. The Group is currently assessing but has not yet determined the impact of
SFAS 144 on its financial position and results of operations.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The consolidated statements of cash flows prepared under U.K. GAAP differ in
certain presentational respects from the format required under SFAS No. 95
"Statement of Cash Flows." Under U.K. GAAP, a reconciliation of profit from
operations to cash flows from operating activities is presented in a note, and
cash paid for interest and income taxes are presented separately from cash flows
from operating activities.
Under SFAS No. 95, cash flows from operating activities are based on net
profit, include interest and income taxes, and are presented on the face of the
statement.
F-54
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
Summary consolidated cash flow information as presented in accordance with
U.S. GAAP:
1999 2000 2001
-------- -------- --------
(IN MILLIONS)
Cash was (used in)/provided by:
Operating activities........................................ L35.9 L87.9 L37.9
Investing activities........................................ (237.6) (60.6) 59.9
Financing activities........................................ 167.1 (42.6) (88.8)
Discontinued operations..................................... 19.0 15.2 4.8
Exchange movement........................................... 3.3 1.9 (2.9)
------- ------ ------
Net increase/(decrease) in cash............................. (12.3) 1.8 10.9
Cash and cash equivalents at the beginning of year.......... 39.0 26.7 28.5
------- ------ ------
Cash and cash equivalents at the end of year................ L26.7 L28.5 L39.4
======= ====== ======
A reconciliation between the consolidated statements of cash flows presented
in accordance with U.K. GAAP and U.S. GAAP is set out below:
1999 2000 2001
-------------- ------------- -------------
(IN MILLIONS)
Operating activities:
Net cash inflow from operating activities................... L88.3 L160.5 L93.0
Return on investments and servicing of finance.............. (13.4) (37.5) (40.9)
Taxation.................................................... (8.3) (10.2) (6.0)
Other....................................................... -- 1.2 --
Net cash flow from operating activities of discontinued
operations................................................ (30.7) (26.1) (8.2)
-------------- ------------- -------------
Net cash flow from operating activities in accordance with
U.S. GAAP................................................. L35.9 L87.9 L37.9
============== ============= =============
Investing activities:
Capital expenditure and financial investment................ L(16.9) L(23.3) L(16.3)
Acquisitions and disposals.................................. (233.0) (48.2) 72.8
Repurchase of EXSOP shares.................................. 0.6 -- --
Net cash flow from investing activities of discontinued
operations................................................ 11.7 10.9 3.4
-------------- ------------- -------------
Net cash flow from investing activities in accordance with
U.S. GAAP................................................. L(237.6) L(60.6) L59.9
============== ============= =============
Financing activities:
Financing................................................... L183.4 L(13.8) L(60.6)
Equity dividends paid....................................... (15.7) (28.8) (28.2)
Repurchase of EXSOP shares.................................. (0.6) -- --
-------------- ------------- -------------
Net cash flow from financing activities in accordance with
U.S. GAAP................................................. L167.1 L(42.6) L(88.8)
============== ============= =============
F-55
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
ADDITIONAL FINANCIAL INFORMATION
WARRANTY PROVISION
For U.K. GAAP purposes, the Group adopted the provisions of FRS 18 during
2001. As a result of the adoption of this standard, the Group reassessed its
accounting estimates for warranty provisions and provided an additional
L8.0 million during 2001. Under U.S. GAAP, the reassessment of the warranty
provision represents a change in estimate and as such, would be recorded in the
period of change (i.e. also 2001). Accordingly, no adjustment has been
recognized for this item.
PENSION COSTS
Defined Benefit Plans--The Group sponsors defined benefit pension plans for
certain employees. Generally, benefits are based on a formula recognizing length
of service and final average earnings.
The majority of the Group's full time U.K. employees as of September 29,
2001, are members of defined benefit arrangements with assets held in separate
trustee administered funds. The pension plans relating to Enodis were terminated
in 1999 with the approval of the appropriate regulatory authorities and all of
the liabilities to participants and beneficiaries have been settled.
The pension assets acquired as part of the Scotsman acquisition are invested
in institutional mutual funds which contain both equities and fixed investments.
The Group complies with funding requirements under the Employee Retirement
Income Security Act of 1974. Also, several of the other non-U.S. subsidiaries
acquired as part of the Scotsman acquisition sponsor defined benefit plans.
These plans are funded in compliance with local requirements, if any. Effective
December 31, 1999, all of the U.S. qualified defined benefit plans were merged
into a single plan, the Consolidated Pension Plan for Scotsman Industries, Inc.
Benefits under the plan were frozen for all salaried employees and certain
hourly employees. In addition, all of the U.S. 401(k) plans were merged into the
Welbilt 401(k) plan effective December 31, 1999.
F-56
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
Information for the Group's major defined benefit plans is as follows:
PENSION PLANS
---------------------------------------------------------------------------------------------------
1999 2000 2001
------------------------------- ------------------------------- -------------------------------
U.S. NON-U.S. U.S. NON-U.S. U.S. NON-U.S.
-------------- -------------- -------------- -------------- -------------- --------------
(IN MILLIONS)
Change in benefit
obligation:
Benefit obligation,
beginning of year....... L7.8 L63.2 L34.5 L65.7 L35.2 L68.6
Service cost.............. 0.2 0.4 0.6 0.6 0.3 0.7
Interest cost............. 0.3 3.6 2.3 4.0 2.6 3.8
Newly acquired group...... 35.3 3.9 -- 3.4 -- --
Plan curtailment.......... -- -- (4.1) -- -- --
Plan amendment............ -- -- -- -- 1.2 --
Net actuarial
loss/(gain)............. -- (2.2) -- 1.0 0.2 7.9
Benefits paid............. (9.1) (3.2) (1.6) (6.1) (2.3) (4.0)
Foreign exchange.......... -- -- 3.5 -- 0.3 --
-------------- -------------- -------------- -------------- -------------- --------------
Benefit obligation, end of
year...................... L34.5 L65.7 L35.2 L68.6 L37.5 L77.0
-------------- -------------- -------------- -------------- -------------- --------------
Change in plan assets:
Fair value of plan assets,
beginning of year....... L10.0 L78.9 L33.4 L88.4 L40.4 L96.4
Actual return on plan
assets.................. (0.5) 12.7 4.3 11.6 (4.0) (14.8)
Newly acquired group...... 31.8 -- -- 2.4 -- --
Employer contributions.... 1.2 -- 0.5 0.1 0.3 0.2
Benefits paid............. (9.1) (3.2) (1.6) (6.1) (2.3) (4.0)
Foreign exchange.......... -- -- 3.8 -- 0.6 --
-------------- -------------- -------------- -------------- -------------- --------------
Fair value of plan assets,
end of year............... L33.4 L88.4 L40.4 L96.4 L35.0 L77.8
-------------- -------------- -------------- -------------- -------------- --------------
Funded status............... L(1.1) L22.7 L5.2 L27.8 L(2.5) L0.8
Unrecognized prior year
service................... -- -- -- -- 1.1 --
Unrecognized transition
asset..................... -- (7.3) -- (5.8) -- (4.4)
Unrecognized net actuarial
loss/(gain)............... 1.3 1.9 -- (0.4) 7.5 29.8
-------------- -------------- -------------- -------------- -------------- --------------
Prepaid/(accrued) pension
cost...................... L0.2 L17.3 L5.2 L21.6 L6.1 L26.2
-------------- -------------- -------------- -------------- -------------- --------------
Amounts recognized in the
balance sheet consist of:
Prepaid/(accrued) benefit
cost.................... L4.7 L21.3 L10.0 L25.7 L10.9 L30.7
Accrued benefit
liability............... (4.5) (4.0) (4.8) (4.1) (4.8) (4.5)
-------------- -------------- -------------- -------------- -------------- --------------
Net amount recognized....... L0.2 L17.3 L5.2 L21.6 L6.1 L26.2
============== ============== ============== ============== ============== ==============
F-57
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
PENSION BENEFITS
1999 2000 2001
------------------------------- ------------------------------- -------------------------------
U.S. NON-U.S. U.S. NON-U.S. U.S. NON-U.S.
-------------- -------------- -------------- -------------- -------------- --------------
(IN MILLIONS, EXCEPT PERCENTAGES)
Components of net periodic
cost:
Service cost.............. L0.2 L0.4 L0.6 L0.6 L0.3 L0.7
Interest cost............. 0.3 3.5 2.3 3.9 2.6 3.8
Expected return on plan
assets.................. (0.4) (6.1) (3.2) (7.3) (3.6) (7.7)
Amortization of
unrecognized prior
service costs........... -- -- -- -- 0.1 --
Net amortization of
transition obligation... -- (1.5) -- (1.5) -- (1.5)
Settlement credit......... (0.6) -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- --------------
Net periodic pension cost... L(0.5) L(3.7) L(0.3) L(4.3) L(0.6) L(4.7)
============== ============== ============== ============== ============== ==============
Weighted average
assumptions:
Discount rate............. 6.8% 5.9% 6.8% 6.1% 6.8% 6.1%
Expected return on
assets.................. 8.0% 7.9% 8.5% 8.1% 8.5% 8.1%
Rate of compensation
increase................ 4.0% 4.0% n/a 4.5% n/a 4.5%
The following heathcare trend rates were used:
FOR YEAR END 1999:
-- Gross healthcare trend rates used for the 1999 benefits were 7.0% pre 65
and 6.3% post 65. Trend rates were assumed to decrease gradually to 5.0%
in 2005 and remain at this level beyond.
-- a 1 percentage point change in assumed healthcare cost trend rates would
have the following effect on 1999 expense and year end liabilities:
INCREASE (DECREASE)
------------ -------------
(IN MILLIONS)
Effect on total of service and interest cost components..... -- --
Effect on post retirement benefit obligation................ L0.4 (L0.3)
FOR YEAR END 2000:
-- Gross healthcare trend rates used for the 2000 benefits were 7.0% pre 65
and 6.3% post 65. Trend rates were assumed to decrease gradually to 5.0%
in 2005 and remain at this level beyond.
-- a 1 percentage point change in assumed healthcare cost trend rates would
have the following effect on 2000 expense and year end liabilities:
INCREASE (DECREASE)
------------ -------------
(IN MILLIONS)
Effect on total of service and interest cost components..... -- --
Effect on post retirement benefit obligation................ L0.3 (L0.3)
F-58
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
FOR YEAR END 2001:
-- A gross healthcare trend rate of 6.5% was used for 2001 pre 65 and post
65 benefits. Trend rates were assumed to decrease gradually to 5.0% in
2005 and remain at this level beyond.
-- a 1 percentage point change in assumed healthcare cost trend rates would
have the following effect on 2001 expense and year end liabilities:
INCREASE (DECREASE)
------------ -------------
(IN MILLIONS)
Effect on total of service and interest cost components..... -- --
Effect on post retirement benefit obligation................ L0.4 (L0.3)
Defined contribution plan--The Group also sponsors defined contribution
pension plans. Participation in one of these plans is available to substantially
all U.S. employees. Group contributions to these plans are based on either a
percentage of employee contributions or a specified amount depending on the
provisions of the plan. Total costs incurred under the plans were,
L3.8 million, L3.1 million and L3.1 million for Fiscal 1999, 2000 and 2001,
respectively.
F-59
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
Other post retirement benefits--The Group maintains plans that provide
certain healthcare benefits to certain employees retiring from the Group on or
after attaining a certain age and who have rendered at least 10 years of service
to the Group. These plans are unfunded. The Group reserves the right to change
or terminate the benefits at any time.
POST-RETIREMENT
MEDICAL PLANS (U.S. ONLY)
------------------------------------------------
1999 2000 2001
-------------- -------------- --------------
(IN MILLIONS, EXCEPT
PERCENTAGES)
Change in benefit obligation:
Benefit obligation, beginning of year....................... L-- L4.0 L3.7
Service cost.............................................. -- 0.1 0.1
Interest cost............................................. 0.1 0.2 0.2
Plan participants' contributions.......................... -- -- 0.1
Plan curtailment.......................................... 4.3 (0.5) --
Plan amendment............................................ -- (0.3) (1.1)
Net actuarial loss (gain)................................. (0.3) (0.1) 0.1
Benefits paid............................................. (0.1) (0.2) (0.3)
Foreign exchange.......................................... -- 0.5 0.1
-------------- -------------- --------------
Benefit obligation, end of year............................. L4.0 L3.7 L2.9
-------------- -------------- --------------
Change in plan assets:
Employer contributions.................................... L0.1 L0.2 L0.2
Plan participants' contributions.......................... -- -- 0.1
Benefits paid............................................. 0.1 (0.2) (0.3)
-------------- -------------- --------------
Fair value of plan assets, end of year...................... L-- L-- L--
-------------- -------------- --------------
Funded status............................................... L(4.0) L(3.7) L(2.9)
Unrecognized prior year service............................. -- (0.3) (0.2)
Unrecognized net actuarial gain............................. (0.3) (0.4) (0.4)
-------------- -------------- --------------
Accrued pension cost........................................ L(4.3) L(4.4) L(3.5)
-------------- -------------- --------------
Amounts recognized in the balance sheet consist of:
Accrued benefit liability................................. L(4.3) L(4.4) L(3.5)
============== ============== ==============
Components of net periodic benefit cost:
Service cost.............................................. L0.1 L0.1 L0.1
Interest cost............................................. -- 0.2 0.2
Amendment credit.......................................... -- -- (1.1)
-------------- -------------- --------------
Net periodic pension cost................................... L0.1 L0.3 L(0.8)
============== ============== ==============
Weighted average assumptions:
Discount rate............................................. 7.5% 7.5% 7.5%
Expected return on assets................................. n/a n/a n/a
Rate of compensation...................................... n/a n/a n/a
F-60
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
STOCK BASED COMPENSATION
The Group has long term incentive programs which provide for granting
employees options to purchase Enodis's ordinary shares. Under the programs,
options are exercisable at a rate set by the Board of Directors of Enodis. An
option may not be exercisable after more than 10 years and one day from the date
of the grant.
The individual schemes which comprise the Group's long term incentive
programs and have outstanding grants are as follows: the Sharesave Scheme
(1984), Sharesave Scheme (1992), the Executive Scheme (1984), the Executive
Scheme (1995) and the Executive Scheme 2001. Options granted under the Group's
Executive Scheme (1995) and (2001) are subject to certain performance criteria.
Performance conditions are designed to make options exercisable only if there
has been a significant and sustained improvement in the financial performance of
the Group. The current performance criteria as described in the Executive Scheme
(1995) provides that options are not exercisable until the third anniversary
from the date of grant and unless the earnings per share of the Group has
exceeded the Retail Price Index by percentages stipulated within the Executive
Scheme (1995). The current performance criteria as described in the Executive
Scheme (2001) provides that options are not exercisable until the Group's total
shareholder return is ranked in the upper quartile relative both to other Mid
250 companies (excluding Investment Trusts) and to a group of about 20 other
quoted companies in the U.K. and overseas with analagous businesses. Options
will be exercisable on a sliding-scale basis if the Group's total shareholder
return falls beween the median and upper quartile levels, as compared with the
two comparator groups.
In addition, to the aforementioned plans, shareholder approval has also been
obtained for the Share Matching Scheme, a new Sharesave Scheme and an employee
stock purchase plan for its ADRs (the "employee stock purchase plan") (although
none of these plans has yet been implemented). Under the Share Matching Scheme,
executives may be awarded matching free shares linked to the deferral of their
annual cash bonuses. No awards have been made under this scheme and the Board
has decided not to operate it for the time being. The employee stock purchase
plan has been designed to qualify under Section 423 of the U.S. Internal Revenue
Code of 1986. As such, the plan is non-compensatory. No options have been
granted under this plan in the current year. Grants of options are limited to
3,000,000 ADRs, which equates to 12,000,000 ordinary shares.
For U.S. GAAP purposes the Group applies the intrinsic value method of
accounting for its share options under APB 25, as permitted under SFAS No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). As a result, no
compensation cost has been recognized with respect to the Group's share
compensation plans except for options which have met the performance criteria
for the Executive Scheme (1995). The compensation expense in connection with
this long term incentive program was Lnil million in 2001, L2.8 million in 2000
and Lnil million in 1999. No further options can be granted under the Sharesave
Scheme (1984) and the Executive Scheme (1984). Had compensation cost for all
option plans been determined consistent with SFAS 123, the Group's net income
and earnings per share in accordance with
F-61
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
U.S. GAAP would have been reduced to the pro forma amounts detailed below. These
amounts have been calculated using the Black-Scholes option pricing model and
the following assumptions:
FISCAL YEARS ENDED
---------------------------------------------------------
SWAP AND REMOVE HEADERS OCTOBER 2, 1999 SEPTEMBER 30, 2000 SEPTEMBER 29, 2001
----------------------- --------------- ------------------ ------------------
Dividend yield................................... 2.1% 2.0% 2.2%
Volatility....................................... 40.0% 38.0% 52.2%
Risk-free interest rate.......................... 6.7% 6.6% 5.0%
Expected life in years........................... 4.6 3.7 3.2
Net income (in millions)
As reported.................................... L27.3 L25.3 L(113.7)
Pro forma...................................... 27.1 25.2 (114.8)
Basic earnings per ordinary share:
As reported.................................... 17.4p 10.8p (45.7)p
Pro forma...................................... 17.4p 10.8p (46.1)p
Diluted earnings per ordinary share:
As reported.................................... 14.3p 10.1p (45.7)p
Pro forma...................................... 14.3p 10.1p (46.1)p
A summary of the status of the Group's four share option plans during the
periods October 2, 1999, September 30, 2000, and September 29, 2001 is presented
in the following table:
SHARESAVE SCHEME EXECUTIVE SCHEME EXECUTIVE SCHEME EXECUTIVE SCHEME
(1992) (1984) (1995) (2001)
----------------------- ----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Outstanding at
September 26,
1998............... 2,220,599 L1.48 2,438,753 L0.82 2,064,450 L1.87 -- L--
Granted.............. 611,729 1.93 -- -- 1,362,737 2.40 -- --
Exercised............ (417,553) 1.51 (2,259,894) 0.78 (175,387) 1.98 -- --
Forfeited............ (263,217) 1.67 -- -- (829,404) 2.13 -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Outstanding at
October 2, 1999.... 2,151,558 1.58 178,859 1.34 2,422,396 2.05 -- --
Granted.............. 650,452 2.59 -- -- 916,074 3.21 -- --
Exercised............ (218,932) 1.26 (61,989) 0.95 (140,000) 1.52 -- --
Forfeited............ (241,430) 1.77 -- -- (195,000) 1.78 -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Outstanding at
September 30,
2000............... 2,341,648 1.87 116,870 1.55 3,003,470 2.45 -- --
Granted.............. -- -- -- -- 221,065 2.11 3,753,000 1.67
Exercised............ (193,965) 1.22 -- -- (20,000) 1.44 -- --
Forfeited............ (911,144) 2.08 -- -- (225,020) 2.02 -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Outstanding at
September 29,
2001............... 1,236,539 1.82 116,870 1.55 2,979,515 2.46 3,753,000 1.67
========== ========== ========== ========== ========== ========== ========== ==========
Exercisable at end of
period............. 218,707 L1.56 116,870 L1.55 830,537 L1.68 -- L--
F-62
ENODIS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR FISCAL YEARS ENDED OCTOBER 2, 1999, SEPTEMBER 30, 2000, AND SEPTEMBER 29,
2001
29. SUPPLEMENTARY INFORMATION FOR U.S. INVESTORS (CONTINUED)
The weighted average fair value of shares granted was L1.02, L1.11, L0.81 in
1999, 2000, and 2001 respectively.
30. POST BALANCE SHEET EVENTS
Subsequent to September 29, 2001, and prior to the issuance of these
financial statements, the Group entered into new credit facilities which provide
for a L150 million bridge loan, all of which has been drawn, a $370 million term
loan, all of which has been drawn, and a $85 million revolving credit facility.
The proceeds of the bridge loan and the term loan will be used to repay the
outstanding indebtedness under the former credit facility. The bridge loan, term
loan and revolving credit facility bear interest at LIBOR or EURIBOR plus an
applicable margin. The credit facilities, with the exception of the bridge loan,
are guaranteed by Enodis and its material subsidiaries. The revolving credit
facility and $300 million of the term loan mature in 2007 while $70 million of
the term loan matures in 2008. The bridge loan matures in 2012. Deferred costs
relating to the previous facility of approximately L4.1 million were written off
in the first quarter of the 2002 financial year.
At March 30, 2002, the Company was not in compliance with the minimum
consolidated net worth covenant related to its senior secured credit facilities,
due to the timing of the receipt of the rights offering proceeds, and obtained a
waiver. The Company is now in compliance with this covenant.
We completed a rights offering on April 9, 2002, pursuant to which
qualifying existing shareholders subscribed for 139,551,567 of our ordinary
shares at a price of L0.50 per share. In addition, institutional and other
investors subscribed for 10,623,028 ordinary shares not purchased by
shareholders in the rights offering at a price of L0.92 per share. In accordance
with the terms of the rights offering, the premium over the rights offering
price (after deducting the expenses of the procuring subscribers) has been
distributed pro rata to the shareholders entitled thereto. The gross proceeds of
the rights offering were L75.1 million and were used principally to repay all
amounts that remained outstanding under the bridge loan facility, with the
remainder used for general corporate purposes.
On April 24, 2002, we announced the sale of Belshaw Bros., a subsidiary that
manufactures automated donut cooking systems, for a cash consideration of
L16.7 million. The expected loss on the disposal of Belshaw Bros., after write
back of non-cash goodwill of L25.0 million and costs will be L15.9 million.
On May 21, 2002, we announced the sale of Austral, a subsidiary that
manufactures refrigeration equipment, for a cash consideration of L7.5 million.
The expected loss on disposal of Austral, after costs will be L6.8 million.
On May 23, 2002 we announced the sale of Aladdin Temprite ('ATR'), a
subsidiary that manufactures meal delivery systems for a net cash consideration
of L27.0 million. The expected loss in disposal of ATR, after costs and the
write back of non-cash goodwill of L29.7 million will be L15.7 million. The
disposal of ATR completes our current program of non-core disposals.
On June 14, 2002, we sold the assets of Prolon, a subsidiary that
manufactures plastic tableware and other plastic wares, for net cash
consideration of L1.0 million. The expected loss on the disposal of Prolon,
after costs, will be L0.8 million.
On June 25, 2002, we received approximately L3.9 million from the sale of
our 750,000 shares in Nobia AB which we had held previously in the form of
warrants. On June 27, 2002, we received repayment of the L20 million loan issued
by us to Nobia together with an early redemption penalty of L400,000 and
interest accrued from last interest payment date.
F-63
FINANCIAL STATEMENT SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCES FOR
DOUBTFUL
ACCOUNTS AND INVENTORY WARRANTY
SALES RETURNS RESERVE ACCRUALS
-------------- ------------- -------------
(IN MILLIONS)
1998/99:
September 27, 1998.......................................... L4.0 L8.1 L13.5
Foreign currency translation................................ 1.3 1.1 0.2
Additions--acquisitions..................................... 3.8 6.8 11.1
Additions--charged.......................................... 0.5 0.6 11.8
Utilized.................................................... (1.5) (0.6) (11.7)
------------- ------------- -------------
October 2, 1999............................................. L8.1 L16.0 L24.9
1999/2000:
Foreign currency translation................................ L(0.2) L1.1 L2.4
Additions--acquisitions..................................... -- -- 3.5
Additions--charged.......................................... 1.3 0.7 19.7
Utilized.................................................... (0.9) (1.8) (20.7)
------------- ------------- -------------
September 30, 2000.......................................... L8.3 L16.0 L29.8
2000/2001:
Foreign currency translation................................ L-- L-- L0.1
Additions--acquisitions..................................... -- 0.7 --
Additions--charged.......................................... 1.2 1.6 27.4
Dispositions................................................ (1.1) (2.6) --
Utilized.................................................... (2.7) (0.7) (21.1)
------------- ------------- -------------
September 29, 2001.......................................... L5.7 L15.0 L36.2
============= ============= =============
F-64
ENODIS PLC
UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT AND LOSS ACCOUNTS
26 WEEKS ENDED MARCH 30, 2002
----------------------------------------------- 26 WEEKS
BEFORE EXCEPTIONAL ENDED
EXCEPTIONAL ITEMS MARCH 31,
NOTES ITEMS (NOTE 4) TOTAL 2001
-------- -------------- ------------- -------------- --------------
(AMOUNTS IN MILLIONS)
TURNOVER
Food Equipment................. L390.0 -- L390.0 L419.7
Property....................... -- -- -- 0.9
-------------- ------------- -------------- --------------
Continuing operations.......... 2 390.0 -- 390.0 420.6
Discontinued operations........ -- -- -- 132.9
-------------- ------------- -------------- --------------
390.0 -- 390.0 553.5
-------------- ------------- -------------- --------------
PROFIT FROM OPERATIONS
Food Equipment................. 30.4 (3.7) 26.7 11.9
Property....................... -- -- -- --
Corporate costs................ (4.2) -- (4.2) (20.2)
-------------- ------------- -------------- --------------
Continuing operations.......... 26.2 (3.7) 22.5 (8.3)
Discontinued operations........ -- -- -- 7.6
-------------- ------------- -------------- --------------
26.2 (3.7) 22.5 (0.7)
Goodwill
amortization/impairment...... (10.1) -- (10.1) (11.7)
-------------- ------------- -------------- --------------
OPERATING PROFIT/(LOSS)........ 3 16.1 (3.7) 12.4 (12.4)
Profit on disposal of
businesses................... -- 2.7 2.7 --
Net interest payable and
similar charges.............. (14.9) (8.4) (23.3) (26.9)
-------------- ------------- -------------- --------------
Profit/(loss) on ordinary
activities before taxation... 1.2 (9.4) (8.2) (39.3)
Tax on profit/(loss) on
ordinary activities.......... 5 (1.4) -- (1.4) (3.9)
-------------- ------------- -------------- --------------
Profit/(loss) on ordinary
activities after taxation.... (0.2) (9.4) (9.6) (43.2)
Equity minority interest....... (0.2) -- (0.2) --
-------------- ------------- -------------- --------------
Profit/(loss) for the period... (0.4) (9.4) (9.8) (43.2)
Equity dividends............... 6 -- -- -- (5.0)
-------------- ------------- -------------- --------------
Retained profit/(loss)......... L(0.4) L(9.4) L(9.8) L(48.2)
============== ============= ============== ==============
FISCAL YEAR ENDED SEPTEMBER 29, 2001
-----------------------------------------------------
BEFORE EXCEPTIONAL
EXCEPTIONAL ITEMS
ITEMS (NOTE 4) TOTAL
---------------- --------------- ----------------
(RESTATED) (RESTATED) (RESTATED)
(AMOUNTS IN MILLIONS)
TURNOVER
Food Equipment................. L887.2 -- L887.2
Property....................... 16.6 -- 16.6
---------------- --------------- ----------------
Continuing operations.......... 903.8 -- 903.8
Discontinued operations........ 177.3 -- 177.3
---------------- --------------- ----------------
1,081.1 -- 1,081.1
---------------- --------------- ----------------
PROFIT FROM OPERATIONS
Food Equipment................. 90.7 (43.4) 47.3
Property....................... 9.0 -- 9.0
Corporate costs................ (8.9) (24.1) (33.0)
---------------- --------------- ----------------
Continuing operations.......... 90.8 (67.5) 23.3
Discontinued operations........ 9.1 -- 9.1
---------------- --------------- ----------------
99.9 (67.5) 32.4
Goodwill
amortization/impairment...... (23.0) (100.0) (123.0)
---------------- --------------- ----------------
OPERATING PROFIT/(LOSS)........ 76.9 (167.5) (90.6)
Profit on disposal of
businesses................... -- 23.5 23.5
Net interest payable and
similar charges.............. (36.1) (5.8) (41.9)
---------------- --------------- ----------------
Profit/(loss) on ordinary
activities before taxation... 40.8 (149.8) (109.0)
Tax on profit/(loss) on
ordinary activities.......... (13.4) 2.0 (11.4)
---------------- --------------- ----------------
Profit/(loss) on ordinary
activities after taxation.... 27.4 (147.8) (120.4)
Equity minority interest....... (0.3) -- (0.3)
---------------- --------------- ----------------
Profit/(loss) for the period... 27.1 (147.8) (120.7)
Equity dividends............... (4.8) -- (4.8)
---------------- --------------- ----------------
Retained profit/(loss)......... L22.3 L(147.8) L(125.5)
================ =============== ================
26 WEEKS 26 WEEKS FISCAL YEAR
ENDED ENDED ENDED
MARCH 30, MARCH 31, SEPTEMBER 29,
NOTES 2002 2001 2001
-------- ---------- ---------- -------------
(RESTATED) (RESTATED)
EARNINGS/(LOSS) PER SHARE
Basic loss per share.................................... 7 (3.2)p (14.1)p (48.5)p
Adjusted basic earnings per share....................... 7 3.2 p 4.8 p 20.1 p
Diluted loss per share.................................. 7 (3.2)p (14.1)p (48.4)p
Adjusted diluted earnings per share..................... 7 3.2 p 4.8 p 20.1 p
F-65
ENODIS PLC
UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT AND LOSS ACCOUNTS (CONTINUED)
STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
26 WEEKS 26 WEEKS FISCAL YEAR
ENDED ENDED ENDED
MARCH 30, MARCH 31, SEPTEMBER 29,
NOTES 2002 2001 2001
-------- -------------- -------------- ---------------
(RESTATED)
(AMOUNTS IN MILLIONS)
Loss for the period...................................... L(9.8) L(43.2) L(120.7)
Goodwill/(negative goodwill) written back on disposals,
previously written off................................. 10.4 -- (4.4)
Currency translation differences on foreign currency net
investments............................................ 11 1.6 1.5 (1.7)
-------------- -------------- ---------------
Total recognized gains and losses in the period.......... L2.2 L(41.7) L(126.8)
============== ============== ===============
Following the implementation of FRS 19 (Note 5), total recognized gains and
losses for the fiscal year ended September 29, 2001 have been restated as
follows:
FISCAL YEAR ENDED
SEPTEMBER 29,
2001
-----------------
(RESTATED)
(AMOUNTS IN
MILLIONS)
Total recognized gains and losses as previously reported.... L(122.0)
Cumulative effect on total recognised gains and losses of
implementing FRS 19....................................... (4.8)
Total recognized gains and losses as restated............... L(126.8)
F-66
ENODIS PLC
UNAUDITED CONSOLIDATED BALANCE SHEETS
MARCH 30, MARCH 31, SEPTEMBER 29,
NOTES 2002 2001 2001
-------- --------------- --------------- ---------------
(RESTATED)
(AMOUNTS IN MILLIONS)
FIXED ASSETS
Intangible assets: goodwill......................... L312.9 L434.5 L310.2
Tangible assets..................................... 108.8 172.6 111.4
Investments......................................... 6.2 8.0 6.2
--------------- --------------- ---------------
427.9 615.1 427.8
--------------- --------------- ---------------
CURRENT ASSETS
Stocks.............................................. 8 103.8 160.3 105.6
Debtors............................................. 183.6 222.3 200.7
Deferred tax........................................ 27.3 30.3 26.9
Cash at bank and in hand............................ 9 49.9 58.0 39.4
--------------- --------------- ---------------
364.6 470.9 372.6
--------------- --------------- ---------------
CREDITORS FALLING DUE WITHIN ONE YEAR
Borrowings.......................................... 9 (10.1) (0.4) (2.4)
Other creditors..................................... (210.4) (281.5) (225.1)
--------------- --------------- ---------------
NET CURRENT ASSETS/(LIABILITIES).................... 144.1 189.0 145.1
--------------- --------------- ---------------
TOTAL ASSETS LESS CURRENT LIABILITIES............... L572.0 L804.1 L572.9
--------------- --------------- ---------------
FINANCED BY:
CREDITORS FALLING DUE AFTER MORE THAN ONE YEAR
Borrowings.......................................... 9 L404.4 L549.8 L398.9
Provisions for liabilities and charges.............. 55.1 54.7 59.1
--------------- --------------- ---------------
459.5 604.5 458.0
--------------- --------------- ---------------
CAPITAL AND RESERVES
Called up share capital............................. 125.1 125.0 125.1
Share premium account............................... 234.2 238.9 239.0
Profit and loss account............................. (247.8) (165.0) (250.0)
--------------- --------------- ---------------
EQUITY SHAREHOLDERS' FUNDS.......................... 10 111.5 198.9 114.1
--------------- --------------- ---------------
Equity minority interests........................... 1.0 0.7 0.8
--------------- --------------- ---------------
L572.0 L804.1 L572.9
=============== =============== ===============
F-67
ENODIS PLC
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
26 WEEKS 26 WEEKS FISCAL YEAR
ENDED ENDED ENDED
MARCH 30, MARCH 31, SEPTEMBER 29,
NOTES 2002 2001 2001
-------- -------------- -------------- ---------------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN MILLIONS)
Net cash flow from operations before exceptional
items.............................................. L36.5 L39.3 L120.8
Net cash flow effect of exceptional items............ (16.1) (4.3) (27.8)
-------------- -------------- ---------------
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES......................................... 20.4 35.0 93.0
-------------- -------------- ---------------
RETURN ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid........................................ (16.4) (22.8) (40.9)
Financing fees paid.................................. (14.7) -- --
-------------- -------------- ---------------
(31.1) (22.8) (40.9)
TAXATION
Overseas and U.K. tax paid........................... (0.4) (0.9) (6.0)
-------------- -------------- ---------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets............ (6.3) (8.2) (23.7)
Receipts from sale of tangible fixed assets.......... 0.6 3.1 7.4
-------------- -------------- ---------------
(5.7) (5.1) (16.3)
-------------- -------------- ---------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings and minority
interests.......................................... -- (25.0) (25.8)
Disposal of subsidiary undertakings.................. 4 16.4 -- 98.6
-------------- -------------- ---------------
16.4 (25.0) 72.8
-------------- -------------- ---------------
EQUITY DIVIDENDS PAID................................ -- (23.3) (28.2)
-------------- -------------- ---------------
Cash inflow/(outflow) before financing............... (0.4) (42.1) 74.4
-------------- -------------- ---------------
FINANCING
Issue of shares...................................... -- 0.1 0.2
Additional net borrowings............................ 310.8 591.9 398.3
Term loan repayment.................................. (400.4) (521.1) (385.7)
Issue of 10 3/8% senior subordinated notes........... 100 -- --
Repayment of other loans............................. -- -- (72.8)
Capital element of finance lease payments............ -- 0.7 (0.6)
-------------- -------------- ---------------
10.4 71.6 (60.6)
-------------- -------------- ---------------
INCREASE/(DECREASE) IN CASH IN THE PERIOD............ L10.0 L29.5 L13.8
============== ============== ===============
26 WEEKS ENDED MARCH 30, 2002
------------------------------------------------ 26 WEEKS
BEFORE EFFECT OF ENDED
EXCEPTIONAL EXCEPTIONAL MARCH 31,
ITEMS ITEMS TOTAL 2001
-------------- -------------- -------------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(AMOUNTS IN MILLIONS)
Operating profit/(loss)...... L16.1 L(3.7) L12.4 L(12.4)
Depreciation................. 8.7 -- 8.7 12.6
Amortization of goodwill..... 10.1 -- 10.1 11.7
Gain on sale of tangible
fixed assets............... -- -- -- (1.7)
Provisions (net)............. (0.7) (2.5) (3.2) 11.5
(Increase)/decrease in
stock...................... (0.8) 2.4 1.6 (2.3)
Decrease in debtors.......... 16.3 -- 16.3 1.6
(Decrease)/increase in
creditors.................. (13.2) (12.3) (25.5) (14.0)
-------------- -------------- -------------- --------------
NET CASH INFLOW/(OUTFLOW)
FROM OPERATING
ACTIVITIES................. L36.5 L(16.1) L20.4 L35.0
============== ============== ============== ==============
FISCAL YEAR ENDED
SEPTEMBER 29, 2001
---------------------------------------------------
BEFORE EFFECT OF
EXCEPTIONAL EXCEPTIONAL
ITEMS ITEMS TOTAL
--------------- --------------- ---------------
(AMOUNTS IN MILLIONS)
Operating profit/(loss)...... L76.9 L(167.5) L(90.6)
Depreciation................. 22.7 -- 22.7
Amortization of goodwill..... 23.0 100.0 123.0
Gain on sale of tangible
fixed assets............... (1.7) -- (1.7)
Provisions (net)............. (6.0) 16.5 10.5
(Increase)/decrease in
stock...................... 12.1 0.5 12.6
Decrease in debtors.......... 10.7 -- 10.7
(Decrease)/increase in
creditors.................. (16.9) 22.7 5.8
--------------- --------------- ---------------
NET CASH INFLOW/(OUTFLOW)
FROM OPERATING
ACTIVITIES................. L120.8 L(27.8) L93.0
=============== =============== ===============
F-68
ENODIS PLC
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The accompanying condensed financial statements ("interim financial
statements") have been prepared in accordance with accounting principles
generally accepted in the United Kingdom ("U.K. GAAP"). The quarterly financial
statements are unaudited but include all adjustments (consisting of normal
recurring adjustments) that the Group's management considers necessary for a
fair presentation of the financial position as of such dates and the operating
results and cash flows for those periods. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with U.K. GAAP have been condensed or omitted. The results of operations for the
26 week period ended March 30, 2002 may not necessarily be indicative of the
operating results that may be incurred for the entire fiscal year.
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's financial statements for the year
ended September 29, 2001, with the exception that the results reflect the
adoption of FRS 19 "Deferred Tax" ("FRS 19"). The Group adopted FRS 19 with
effect from September 30, 2001. FRS 19, which replaces Statement of Standard
Accounting Pratice 15, "Accounting for Deferred Tax", requires full provision to
be made for deferred tax assets and liabilities arising from timing differences
between the recognition of gains and losses in the financial statements and
their recognition in a tax computation. Comparative financial information
included within these interim financial statements, as of and for the 26 weeks
ended March 31, 2001 (unaudited) and the fiscal year ended September 29, 2001
(audited) have been restated in accordance with the guidance provided by FRS 3,
"Reporting financial performance." This guidance requires that comparative
financial information be restated to reflect the adoption of a new accounting
standard only when such financial information is reported as the comparative for
a period ending after the implementation date.
U.K. GAAP differs in certain significant respects from accounting principles
generally accepted in the United States of America ("U.S. GAAP"). The
application of the latter would have affected the determination of profit/(loss)
for each of the periods presented herein to the extent summarized in Note 14 to
the interim financial statements.
These interim financial statements should be read in conjunction with the
consolidated balance sheets of Enodis plc and its subsidiaries as of
September 29, 2001 and September 30, 2000, and the related consolidated
statements of profit and loss account, cash flows, recognized gains and losses
and movement in equity shareholders' funds for each of the three years in the
period ended September 29, 2001, all expressed in British pounds, as filed with
the U.S. Securities and Exchange Commission on Form 20-F.
F-69
ENODIS PLC
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
2. TURNOVER
26 WEEKS 26 WEEKS FISCAL YEAR
ENDED ENDED ENDED
MARCH 30, MARCH 31, SEPTEMBER 29,
2002 2001 2001
-------------- -------------- ----------------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN MILLIONS)
Food Service Equipment--North America....................... L228.3 L234.8 L498.7
Food Service Equipment--Europe & Rest of World.............. 72.8 87.4 185.4
Food Retail Equipment....................................... 88.9 97.5 203.1
-------------- -------------- ----------------
Food Equipment.............................................. 390.0 419.7 887.2
Property.................................................... -- 0.9 16.6
-------------- -------------- ----------------
Continuing operations....................................... 390.0 420.6 903.8
Discontinued operations..................................... -- 132.9 177.3
-------------- -------------- ----------------
L390.0 L553.5 L1,081.1
============== ============== ================
Turnover from discontinued operations represents the building and consumer
products business sold in June 2001.
3. OPERATING PROFIT/(LOSS)
26 WEEKS ENDED
MARCH 30, 2002
---------------------------------------------- 26 WEEKS
BEFORE ENDED
EXCEPTIONAL EXCEPTIONAL MARCH 31,
ITEMS ITEMS TOTAL 2001
-------------- ------------- ------------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(AMOUNTS IN MILLIONS)
Food Service Equipment--North
America..................... L24.6 -- L24.6 L6.1
Food Service Equipment--
Europe & Rest of World...... 4.3 (1.7) 2.6 8.3
Food Retail Equipment......... 1.5 (2.0) (0.5) (2.5)
-------------- ------------- ------------- --------------
30.4 (3.7) 26.7 11.9
Food Equipment goodwill
amortization/impairment..... (10.1) -- (10.1) (11.7)
-------------- ------------- ------------- --------------
Food Equipment................ 20.3 (3.7) 16.6 0.2
Property...................... -- -- -- --
Corporate costs............... (4.2) -- (4.2) (20.2)
-------------- ------------- ------------- --------------
Continuing operations......... 16.1 (3.7) 12.4 (20.0)
Discontinued operations....... -- -- -- 7.6
-------------- ------------- ------------- --------------
L16.1 L(3.7) L12.4 L(12.4)
============== ============= ============= ==============
FISCAL YEAR ENDED
SEPTEMBER 29, 2001
------------------------------------------
BEFORE
EXCEPTIONAL EXCEPTIONAL
ITEMS ITEMS TOTAL
------------- --------------- --------
(AMOUNTS IN MILLIONS)
Food Service Equipment--North
America..................... L62.6 L(25.6) L37.0
Food Service Equipment--
Europe & Rest of World...... 17.7 (5.2) 12.5
Food Retail Equipment......... 10.4 (12.6) (2.2)
------------- --------------- ------
90.7 (43.4) 47.3
Food Equipment goodwill
amortization/impairment..... (23.0) (100.0) (123.0)
------------- --------------- ------
Food Equipment................ 67.7 (143.4) (75.7)
Property...................... 9.0 -- 9.0
Corporate costs............... (8.9) (24.1) (33.0)
------------- --------------- ------
Continuing operations......... 67.8 (167.5) (99.7)
Discontinued operations....... 9.1 -- 9.1
------------- --------------- ------
L76.9 L(167.5) L(90.6)
============= =============== ======
In the 13 week period ended December 29, 2001, Group operating profit has
benefited from favorable exchange rates by L0.1 million compared to the 13 week
period ended December 30, 2000.
Operating profit from discontinued operations represents the building and
consumer products business sold in June 2001.
F-70
ENODIS PLC
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
4. EXCEPTIONAL ITEMS
(A) OPERATING EXCEPTIONAL ITEMS
26 WEEKS 26 WEEKS FISCAL YEAR
ENDED ENDED ENDED
MARCH 30, MARCH 31, SEPTEMBER 29,
2002 2001 2001
------------ ------------- --------------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN MILLIONS)
Restructuring costs......................................... L3.7 L14.5 L33.1
Revisions to working capital provisions and other
exceptional warranty costs................................ -- 13.7 13.7
Litigation costs............................................ -- 12.3 12.2
Costs associated with the Board's review of strategic
options................................................... -- -- 8.5
------------ ------------- --------------
3.7 40.5 67.5
Goodwill impairment......................................... -- -- 100.0
------------ ------------- --------------
Operating exceptional items................................. L3.7 L40.5 L167.5
============ ============= ==============
Restructuring costs in the 26 week period ended March 30, 2002, principally
represent costs associated with rationalizing administration functions and
simplifying management structures. These items principally relate to the costs
of redundancy in our food retail equipment group and the European businesses
within the global food service equipment group.
(B) DISPOSAL OF BUSINESSES
On December 13, 2001, the Group disposed of Sammic S.A. and its subsidiary
undertakings for consideration of L20 million realizing a provisional profit on
disposal of L2.7 million after costs. The net cash proceeds of L18.7 million
have been used to repay debt.
During the period, L2.1 million was paid to Nobia AB, the acquirers of the
building and consumer products business in respect of the value of net assets
transferred.
26 WEEKS 26 WEEKS FISCAL YEAR
ENDED ENDED ENDED
MARCH 30, MARCH 31, SEPTEMBER 29,
2002 2001 2001
------------- ------------------ --------------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN MILLIONS)
Net cash flow from the disposal of Sammic SA................ L18.5 L-- L--
(Payment to Nobia AB)/net cash flow from the disposal of
Magnet.................................................... (2.1) -- 98.6
------------- ------------------ -------------
Net cash flow from disposals................................ L16.4 L-- L98.6
============= ================== =============
F-71
ENODIS PLC
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
4. EXCEPTIONAL ITEMS (CONTINUED)
(C) NET INTEREST PAYABLE AND SIMILAR CHARGES
26 WEEKS 26 WEEKS FISCAL YEAR
ENDED ENDED ENDED
MARCH 30, MARCH 31, SEPTEMBER 29,
2002 2001 2001
------------ ------------ --------------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN MILLIONS)
Deferred financing fees written off......................... L4.2 L5.8 L5.8
============ ============ ============
Refinancing fees............................................ 4.2 -- --
------------ ------------ ------------
L8.4 L5.8 L5.8
============ ============ ============
5. TAXATION
(A) ANALYSIS OF CHARGE IN PERIOD
26 WEEKS 26 WEEKS FISCAL YEAR
ENDED ENDED ENDED
MARCH 30, MARCH 31, SEPTEMBER 29,
2002 2001 2001
------------ ------------ --------------
(UNAUDITED) (UNAUDITED) (RESTATED)
(AMOUNTS IN MILLIONS)
The tax charge comprised:
U.K. taxation at 30%........................................ L-- L-- L--
Foreign taxation............................................ 1.8 2.5 8.6
------------ ------------ -------------
1.8 2.5 8.6
Tax relief on exceptional items............................. -- -- (2.0)
------------ ------------ -------------
1.8 2.5 6.6
Deferred taxation--origination and reversal of timing
differences............................................... (0.4) 1.4 4.8
------------ ------------ -------------
L1.4 L3.9 L11.4
============ ============ =============
(B) The group tax rate benefits from the effect of tax losses brought forward. A
current tax charge arises principally because of profits arising in overseas
countries where there are no available losses.
(C) The adoption of FRS 19 "Deferred Tax" has required changes in the method of
accounting for deferred tax assets and liabilities. As a result of these
changes, the comparative periods have been restated as follows, principally
in respect of tax losses and warranty reserves.
SEPTEMBER 29,
2001
-------------
(RESTATED)
(AMOUNTS IN
MILLIONS)
Deferred tax provision as previously reported............... L--
Adjustment to recognize deferred tax in respect of timing
differences............................................... 26.9
-------------
Deferred tax asset as restated.............................. L26.9
=============
F-72
ENODIS PLC
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
5. TAXATION (CONTINUED)
(D) ANALYSIS OF DEFERRED TAX ASSET
MARCH 30, MARCH 31, SEPTEMBER 29,
2002 2000 2001
------------- ------------- --------------
(UNAUDITED) (UNAUDITED) (RESTATED)
(AMOUNTS IN MILLIONS)
U.S. Revenue Losses........................................ L13.4 L14.0 L12.7
Warranties................................................. 8.2 8.2 8.2
Pension and SERP related reserves.......................... 4.3 3.4 4.0
Accrued compensation related items......................... 3.2 1.0 3.2
Other short term timing differences........................ 6.6 12.9 6.8
------------- ------------- -------------
35.7 39.5 34.9
Accelerated capital allowances............................. (8.4) (9.2) (8.0)
------------- ------------- -------------
L27.3 L30.3 L26.9
============= ============= =============
A deferred tax asset has only been recognized in respect of those losses
where there is sufficient certainty that they will be utilized within the
immediate future.
6. EQUITY DIVIDENDS
26 WEEKS 26 WEEKS FISCAL YEAR
ENDED ENDED ENDED
MARCH 30, MARCH 31, SEPTEMBER 29,
2002 2001 2001
------------------ ------------------ --------------
(UNAUDITED) (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Interim and final dividend................................. L-- L-- L4.8
Interim and final dividend (net per ordinary share)........ --p --p 2.0p
F-73
ENODIS PLC
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
7. EARNINGS/(LOSS) PER SHARE
26 WEEKS 26 WEEKS FISCAL YEAR
ENDED ENDED ENDED
MARCH 30, MARCH 31, SEPTEMBER 29,
2002 2001 2001
----------- -------------- ---------------
(UNAUDITED) (UNAUDITED) (RESTATED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Basic and diluted loss attributable to shareholders......... L(9.8) L(43.2) L(120.7)
===== ============== ===============
Basic weighted average number of shares..................... 307.5 307.3 248.9
Employee share options...................................... -- 0.6 0.1
Share save.................................................. -- 0.4 0.2
----- -------------- ---------------
Diluted weighted average number of shares................... 307.5 308.3 249.2
===== ============== ===============
Basic loss per share........................................ (3.2)p (14.1)p (48.5)p
Effect per share of exceptional items....................... 3.1p 15.1p 19.2p
Effect per share of goodwill amortization and impairment.... 3.3p 3.8p 49.4p
----- -------------- ---------------
Adjusted basic earnings per share........................... 3.2p 4.8p 20.1p
===== ============== ===============
Diluted loss per share...................................... (3.2)p (14.1)p (48.4)p
Effect per share of exceptional items....................... 3.1p 15.1p 19.2p
Effect per share of goodwill amortization and impairment.... 3.3p 3.8p 49.3p
----- -------------- ---------------
Adjusted diluted earnings per share......................... 3.2p 4.8p 20.1p
===== ============== ===============
8. STOCKS
MARCH 30, MARCH 31, SEPTEMBER 29,
2002 2001 2001
-------------- -------------- --------------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN MILLIONS)
Raw materials and consumables............................... L36.9 L51.9 L42.2
Work in progress............................................ 15.7 17.7 15.7
Finished goods.............................................. 40.9 81.3 36.4
-------------- -------------- --------------
93.5 150.9 94.3
Property.................................................... 10.3 9.4 11.3
-------------- -------------- --------------
L103.8 L160.3 L105.6
============== ============== ==============
9. BORROWINGS
(A) On February 20, 2002, the Group announced new financing arrangements
including a proposed three for five underwritten rights offering, to
refinance the existing revolving multi-currency loan facility that commenced
on March 12, 2001. The new five year committed facility consists of a
$370 million term loan and $85 million revolving credit facility, along with
a bridge loan facility of L150 million to be repaid from the proceeds of the
proposed rights offering and an offering of long term, fixed rate notes in
the institutional market. All debt drawings under the existing
multi-currency facility have been classified as falling due in less than one
year.
F-74
ENODIS PLC
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
9. BORROWINGS (CONTINUED)
(B) RECONCILIATION OF NET DEBT TO BALANCE SHEET
MARCH 30, MARCH 31, SEPTEMBER 29,
2002 2001 2001
--------------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN MILLIONS)
Cash at bank................................................ L49.9 L58.0 L39.4
Current borrowing........................................... (10.1) (0.4) (2.4)
Exclude current portion of deferred financing costs......... (4.5) (0.8) (1.1)
--------------- --------------- ---------------
Current net cash/(borrowings)............................... 35.3 (56.8) 35.9
Long term lease obligations................................. (0.4) (0.8) (1.2)
10 3/8% Senior subordinated notes........................... (100.0) -- --
Long term debt.............................................. (304.0) (549.0) (397.7)
Exclude long term portion of deferred finance............... (11.4) (0.8) (2.9)
--------------- --------------- ---------------
Net debt at end of period................................... L(380.5) L(493.8) L(365.9)
=============== =============== ===============
10. EQUITY SHAREHOLDERS' FUNDS
(A) Following the implementation of FRS 19 (Note 5), equity shareholders' funds
at September 29, 2001 have been restated as follows:
SEPTEMBER 29,
2001
--------------
(RESTATED)
(AMOUNTS IN
MILLIONS)
Equity shareholders' funds as previously reported........... L87.2
Cumulative effect on profit and loss account reserve of
implementing FRS 19....................................... 26.9
--------------
Equity shareholders' funds as restated...................... L114.1
==============
(B) Movements on reserves during the period were as follows:
SHARE SHARE PROFIT
CAPITAL PREMIUM AND LOSS TOTAL
-------------- -------------- --------------- --------------
(AMOUNTS IN MILLIONS)
At September 29, 2001 (Restated)............................ L125.1 L239.0 L(250.0) L114.1
Loss for the period......................................... -- -- (9.8) (9.8)
Share issue costs........................................... -- (4.8) -- (4.8)
Goodwill written back on disposals previously written off... -- -- 10.4 10.4
Currency realignment........................................ -- -- 1.6 1.6
-------------- -------------- --------------- --------------
At March 30, 2002........................................... L125.1 L234.2 L(247.8) L111.5
============== ============== =============== ==============
11. FOREIGN CURRENCY TRANSLATION
The results of subsidiary companies reporting in currencies other than the
pound sterling have been translated at the average rate prevailing for each
month for the 26 weeks to March 30, 2002, the weighted average exchange rate for
sales and profit being L1 = $1.44. Results to December 30, 2000 were translated
at the rate of L1 = $1.46 and full year results to September 29, 2001 at L1 =
$1.44. The closing rate for the
F-75
ENODIS PLC
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
11. FOREIGN CURRENCY TRANSLATION (CONTINUED)
U.S. dollar at March 30, 2002 and March 31, 2001 was L1 = $1.142 and at
September 29, 2001 was L1 = $1.47.
12. RESULTS FOR 2001
The accounts in this statement do not comprise full accounts within the
meaning of section 240 of the Companies Act 1985. The figures for the 52 weeks
to September 29, 2001 have been extracted from the 2001 annual report but do not
comprise statutory accounts for that period. The audited financial statements
have been delivered to the Registrar of Companies. The Auditors gave an
unqualified report on those accounts and their report did not contain any
statement under section 237(2) or (3) of the Companies Act 1985. The figures for
the 52 weeks to September 29, 2001 have been restated to reflect the adoption of
FRS 19 "Deferred tax". The figures for the 26 week periods to March 30, 2002 and
March 31, 2001 have been extracted from underlying accounting records and have
not been audited.
13. EVENTS OCCURRING AFTER THE END OF THE FINANCIAL PERIOD
On February 20, 2002, the Company announced a rights issue which was
subsequently approved by the shareholders at the Extraordinary General Meeting
held on March 18, 2002. On April 9, 2002, 150,174,595 new ordinary shares were
issued at 50p per share on the basis of three new ordinary shares for every five
existing ordinary shares.
On April 24, 2002 the Group sold Belshaw Bros, Inc ("Belshaw") for a cash
consideration of L16.7 million ($24.2 million) payable in full upon completion.
The cash consideration, net of expenses, has been used to reduce debt.
On May 21, 2002 the Group sold Austral Refrigeration Pty Limited ("Austral")
for a net cash consideration of L7.5 million payable in full on completion. The
consideration, net of expenses, will be used to reduce debt.
On May 23, 2002 we announced the sale of Aladdin Temprite ('ATR'), a
subsidiary that manufactures meal delivery systems for a net cash consideration
of L27.0 million. The expected loss in disposal of ATR, after costs and the
write back of non-cash goodwill of L29.7 million will be L15.7 million. The
disposal of ATR completes our current program of non-core disposals.
On June 14, 2002, we sold the assets of Prolon, a subsidiary that
manufactures plastic tableware and other plastic wares, for net cash
consideration of L1.0 million. The expected loss on the disposal of Prolon,
after costs, will be L0.8 million.
On June 25, 2002, we received approximately L3.9 million from the sale of
our 750,000 shares in Nobia AB which we had held previously in the form of
warrants. On June 27, 2002, we received repayment of the L20 million loan issued
by us to Nobia together with an early redemption penalty of L400,000 and
interest accrued from last interest payment date.
F-76
ENODIS PLC
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
14. U.S. GAAP RECONCILIATION
MARCH 30, MARCH 31, SEPTEMBER 29,
2002 2001 2001
------------- ------------- ---------------
(UNAUDITED) (UNAUDITED) (RESTATED)
(AMOUNTS IN MILLIONS)
NET LOSS
Net loss in accordance with U.K. GAAP....................... L(4.4) L(0.5) L(120.7)
Items (increasing)/decreasing operating loss under U.K. GAAP
--Goodwill amortization..................................... (3.8) (4.2) (16.6)
--Goodwill impairment....................................... -- 9.8
--Pension cost.............................................. 0.3 1.5 5.9
--Sale/leaseback transactions............................... -- 0.1 (1.3)
--Restructuring and other accruals.......................... (0.9) -- 0.9
--Derivatives............................................... (1.8) (0.7) (0.6)
Items increasing/(decreasing) other non-operating profit
under U.K. GAAP
--Deferred taxation......................................... (1.3) (0.6) 8.1
--Gain on sale of businesses................................ 2.4 -- 0.8
------------- ------------- ---------------
Net loss in accordance with U.S. GAAP....................... L(9.5) L(4.4) L(113.7)
============= ============= ===============
F-77
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ENODIS PLC
OFFER FOR ALL OUTSTANDING
10 3/8% SENIOR NOTES DUE 2012
IN EXCHANGE FOR
10 3/8% SENIOR EXCHANGE NOTES DUE 2012
--------------------------
PROSPECTUS
, 2002
--------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS
ENODIS PLC. Enodis plc is incorporated under the laws of England and Wales
as a public limited company with limited liability. Article 165 of Enodis plc's
Articles of Association provides:
(A) Subject to the U.K. Companies Act of 1985 and 1989 (the "Acts"), but
without prejudice to an indemnity to which he may otherwise be entitled,
every person who is or was a director, alternate director or Secretary of
the Company shall be indemnified out of the assets of the Company against
all costs, charges, losses and liabilities incurred by him in the proper
execution of his duties or the proper exercise of his powers, authorities
and discretions including, without limitation, a liability incurred:
(i) defending proceedings (whether civil or criminal) in which judgment
is given in his favor or in which he is acquitted, or which are
otherwise disposed of without a finding or admission of material
breach of duty on his part; or
(ii) in connection with any application in which relief is granted to him
by the court from liability for negligence, default, breach of duty or
breach of trust in relation to the affairs of the Company.
(B) Subject to the Acts, the board may exercise all the powers of the
Company to purchase and maintain insurance for the benefit of a person
who is or was:
(i) a director, alternate director or secretary of the Company or of a
company which is or was a subsidiary undertaking of the Company or in
which the Company has or had an interest (whether direct or indirect);
or
(ii) trustee of a retirement benefits scheme or other trust in which a
person referred to in Article 165(A)(i) is or has been interested,
indemnifying him against liability for negligence, default, breach of
duty or breach of trust or other liability which may lawfully be insured
against by the Company.
ITEM 21: EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
(a) Exhibits
1.1 Purchase Agreement, dated as of March 19, 2002, by and
between the Purchasers, as defined therein, and Enodis plc.*
3.1 Memorandum of Association of Enodis plc.*
3.2 Articles of Association of Enodis plc.*
4.1 Indenture, dated as of March 26, 2002, between Enodis plc
and The Bank of New York in respect of Enodis plc's
L100,000,000 10 3/8% notes due 2012.*
4.2 Form of notes (included in Exhibit 4.1).*
5.1 Opinion of Clifford Chance, U.S. counsel to Enodis plc, as
to the validity of the notes.
5.2 Opinion of Clifford Chance, U.K. counsel to Enodis plc, as
to the validity of the notes.
8.1 Opinion of Clifford Chance, U.S. tax counsel to Enodis plc,
as to United States tax matters (included in Exhibit 5.1).
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8.2 Opinion of Clifford Chance, U.K. tax counsel to Enodis plc,
as to United Kingdom tax matters (included in Exhibit 5.2).
10.1 The Registrant's Executive Share Option Scheme (1984).**
10.2 The Registrant's Executive Share Option Scheme (1993).**
10.3 The Registrant's Executive Share Option Scheme (1995).**
10.4 The Registrant's Executive Performance Incentive Plan
(2002).
10.5 Form of Deposit Agreement among the Registrant, The Bank of
New York, as Depositary, and all owners and holders from
time to time of ADRs issued thereunder, including the form
of ADR.**
10.6 The Registrant's Employee Stock Purchase Plan and Form of
Subscription Agreement.***
10.7 The Registrant's Share Matching Scheme.***
10.8 Agreement for purchase of Merrychef among the Registrant, 3I
Nominees Limited and other dated June 14, 2000.****
10.9 Stock Purchase Agreement for Jackson MSC between the
Registrant and Ecolab Inc. dated November 9, 2000.****
10.10 The Registrant's 2001 Executive Share Option Scheme, as
amended.****
10.11 Credit Facilities Agreement among the Registrant, Credit
Suisse First Boston and the Royal Bank of Scotland plc and
others dated February 20, 2002.**
10.12 Supplemental Agreement for Credit Facilities Agreement among
the Registrant, Credit Suisse First Boston and the Royal
Bank of Scotland plc among others dated April 25, 2002.*
10.13 Agreement for sale of Magnet Limited and related entities
among the Registrant, Inhoco 2297 Limited and Nobia AB,
among others, dated April 20, 2001 and amendments to that
agreement dated June 14, 2001 and December 17, 2001.****
10.14 Vendor Loan Agreement between the Registrant and Nobia AB
dated June 14, 2001.****
10.15 Settlement agreement among International Minerals and
Resources SA, Bomar Resources Inc., Bomar Resources
Holdings, Inc. and the Registrant, dated as of May 14,
2001.****
10.16 Service Contract between the Registrant and Andrew Allner,
effective November 2, 2001.****
10.17 Letter agreements between the Registrant and Andrew Allner
dated February 14, 2002, amending the Service Contract
between the Registrant and Andrew Allner, effective
November 2, 2001.
10.18 Employment agreement between the Registrant and David
McCulloch, dated as of October 1, 2001.****
10.19 Employment agreement between the Registrant and David Odum,
dated as of October 1, 2001.****
10.20 The Registrant's Sharesave Scheme 2002.****
10.21 Intercreditor agreement among Nobia AB, the Registrant and
others dated April 20, 2001.****
10.22 Registration Rights Agreement dated March 19, 2002, by and
between the Initial Purchasers, as defined therein, and
Enodis plc.*
10.23 Employment agreement between Registrant and W. David Wrench,
dated as of July 1, 2002.*****
10.24 Employment agreement between Registrant and Robert C.
Eimers, dated as of July 1, 2002.
10.25 Employment agreement between Registrant and David Odum,
dated as of October 1, 2001.*
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12.1 Statement re: Computation of Ratios.*
21.1 List of Subsidiaries.*
23.1 Consent of Clifford Chance.*
23.2 Consent of Deloitte & Touche.
24.1 Power of Attorney for Peter M. Brooks was included on the
signature page of the Registration Statement filed on
March 28, 2002.
25.1 Statement of eligibility of Trustee on Form T-1.*
--------------------------
* As previously filed.
** Incorporated by reference to our registration statement on Form 20-F (File
No. 1-15032), filed on June 9, 2000, as amended by Amendment No. 1, filed
on June 28, 2000 and as amended by Amendment No. 2, filed on July 5, 2000.
*** Incorporated by reference to our registration statement on Form S-8 (File
No. 333-61638), filed on May 25, 2001.
**** Incorporated by reference to our annual report on Form 20-F (File
No. 001-15032), filed on February 21, 2002.
***** To be filed by amendment.
ITEM 22: UNDERTAKINGS
Enodis plc hereby undertakes (1) to file, during any period in which offers
or sales are being made, a post-effective amendment to this Registration
Statement: (i) to include any prospectus required by Section 10(a)(3) of the
Securities Act; (ii) to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment thereto) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement; and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in the Registration Statement;
(2) that, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; (3) to remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering; and (4) to file a post-effective amendment to this Registration
Statement to include any financial statements required by Rule 3-19 of
Regulation S-X at the start of any delayed offering or throughout a continuous
offering.
Enodis plc undertakes to supply by means of a post-effective amendment all
information concerning a transaction and the company being acquired involved
therein, that was not the subject of and included in the registration statement
when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act, Enodis plc has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of London, England, on
July 15, 2002.
ENODIS PLC
By: /s/ PETER M. BROOKS
---------------------------------------------
Name: Peter M. Brooks
Title: Director
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Pursuant to the requirements of the Securities Act of 1933, the registration
statement has been signed by the following persons in the capacities and as of
the dates indicated.
NAME TITLE DATE
---- ----- ----
*
------------------------------------------------ Chief Executive Officer and July 15, 2002
Andrew J. Allner Director
Chief Financial Officer--
* (Principal Financial and
------------------------------------------------ Accounting Officer) and July 15, 2002
W. David Wrench Director
------------------------------------------------ Director
Robert E. Briggs
*
------------------------------------------------ Director July 15, 2002
Peter M. Brooks
* Director and Authorized
------------------------------------------------ Representative in the July 15, 2002
David S. McCulloch United States
*
------------------------------------------------ Director July 15, 2002
G. Eryl Morris
------------------------------------------------ Director
Robert C. Eimers
*
------------------------------------------------ Director July 15, 2002
Waldemar Schmidt
*By /s/ PETER M. BROOKS
------------------------------------------
Name: Peter M. Brooks
Title: Attorney-in-Fact
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