SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of February, 2002
Enodis plc
Washington House, 40-41 Conduit Street
London, W1S 2YQ, United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F: X Form 40-F: ________
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Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes: _______ No: X
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On or about February 15, 2001, the Registrant distributed three press
releases and filed a Notice of Extraordinary Meeting together with an offering
circular concerning its proposed rights offering, its financial results for the
first fiscal quarter of the year ending September 28, 2002 and certain other
matters. The three press releases and the offering circular and notice follow.
PRESS RELEASE
20 FEBRUARY 2002
Enodis plc
Proposed Rights Issue of up to 150,861,463 New Ordinary Shares at 50 pence per
share on a 3 for 5 basis to Qualifying Shareholders and
New Financing Arrangements
.. Proposed 3 for 5 rights issue (the "Rights Issue") to raise approximately
(Pounds)71.5 million (net of expenses), fully underwritten.
.. Up to approximately 150.9 million new Enodis shares to be offered at a
price of 50 pence per new Enodis share.
.. New financing arrangements to replace existing credit facilities, including
(Pounds)100 million bond issue (the "Notes").
Neither the securities to be offered in the Rights Issue nor any eventual Notes
to be offered have been or will be registered under the United States Securities
Act of 1933, as amended (the "Securities Act"), and may not be offered or sold
in the United States or to U.S. persons absent registration or an applicable
exemption from registration requirements.
Introduction
The Enodis Group has a high level of debt, principally arising from acquisitions
in the last three years. With the recent downturn in the Group's end markets and
the current economic uncertainty, Enodis' Board of Directors has been
considering a number of financing alternatives to achieve a more appropriate
capital structure for the Group. After careful consideration and consultation
with its advisers, Enodis' Board has today announced new financing arrangements.
These financing arrangements include a rights issue of up to 150,861,463 new
Ordinary Shares at 50 pence per share on the basis of 3 new Ordinary Shares for
every 5 existing Ordinary Share held on the Record Date (as defined below) to
raise approximately (Pounds)71.5 million, after the expenses of the Rights
Issue. The Rights Issue has been fully underwritten.
In addition, the Board has announced the replacement of the Company's existing
credit facilities with the new credit facilities and the anticipated raising of
(Pounds)100 million, before expenses, through the issue of long term, fixed rate
Notes in the institutional market.
Background to the New Financing Arrangements
Enodis entered the food service equipment market in 1995, with the acquisition
of Welbilt Corporation, and implemented a series of complementary acquisitions,
which culminated in the purchase of Scotsman Industries, Inc. in 1999 for a
total consideration of $791.5 million, including assumed debt.
In March 2001, the Group entered into a new credit facility, with the
expectation that a loan syndication would follow. However, as a result of the
downturn in economic conditions, senior Enodis management changes and the
Group's strategic review undertaken in the Summer of 2001, the syndication was
not completed.
The Company has concluded, based on advice received, that a syndication could
only be achieved if the amount of senior debt was reduced by a much larger
offering of long term fixed rate notes than is contemplated under the new
financing arrangements. The costs associated with
these notes would have constituted a severe additional burden on the business in
already challenging economic circumstances and indications were that it would
have resulted in a substantially greater part of the Group's free cash flow
being used to service debt. In addition, once the Group had achieved its planned
reduction in net debt to more prudent levels, a substantially higher proportion
of the net debt remaining would have been expensive long term debt with
significant early redemption penalties.
Principal elements of the New Financing Arrangements
The Company has today signed agreements that replace the Group's former credit
facility and comprise the following:
(i) a bridge facility in the amount of (Pounds)150 million;
(ii) a term loan in the amount of approximately (Pounds)260 million ($370
million); and
(iii) a revolving credit facility in the amount of approximately (Pounds)60
million ($85 million).
The Company has today signed an underwriting agreement in respect of the Rights
Issue and expects the net proceeds of the Rights Issue to be approximately
(Pounds)71.5 million. The Company intends to use the net proceeds of the Rights
Issue, together with the net proceeds of the proposed issue of Notes, to repay
the bridge facility, with any remaining proceeds used to repay senior debt.
In order to provide certainty as to the amount of proceeds that will be raised
in the Rights Issue and to enable the offering of Notes and the senior credit
syndication to proceed, the Rights Issue has been fully underwritten.
Principal terms and conditions of the Rights Issue
Subject to the satisfaction of the conditions referred to below, up to
150,861,463 new Ordinary Shares will be provisionally allotted by way of rights,
to raise approximately (Pounds)71.5 million, after expenses. The issue price of
50 pence per new Ordinary Share represents a 46.2 per cent. discount to the
closing middle market price of 93.0 pence per Ordinary Share on 19 February
2002, the last business day before the announcement of the Rights Issue.
Qualifying shareholders are being offered new Ordinary Shares at a price of 50
pence per new Ordinary Share on the following basis:
3 new Ordinary Shares for every 5 existing Ordinary Shares
held at the close of business on 11 March 2002 and so in proportion for any
other number of existing Ordinary Shares then held. The rights to fractional
entitlements to new Ordinary Shares will not be allotted to qualifying
shareholders. Entitlements to fractions will be aggregated and sold in the
market for the benefit of the Company.
The Rights Issue is conditional upon:
(i) the passing of certain authorizing shareholder resolutions;
(ii) the underwriting agreement relating to the Rights Issue having become
unconditional in all respects (save for the condition relating to
admission of the new Ordinary Shares to
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the Official List and listing on the London Stock Exchange) and not
having been terminated in accordance with its terms; and
(iii) such admission having occurred by not later than 10.00 a.m. on 19 March
2002 (or such later time and/or date as the
underwriter and the Company may agree).
The new Ordinary Shares, when issued and fully paid, will rank pari passu in all
respects with the existing Ordinary Shares including the right to receive all
dividends or other distributions made or paid thereafter. The Rights Issue has
been fully underwritten.
Since outstanding options may be exercised before the record date for the Rights
Issue, the precise number of shares to be issued in the Rights Issue cannot be
determined until that date.
Holders of Ordinary Shares as at 11 March 2002 (the "Record Date"), will receive
their entitlements to Nil Paid Rights following shareholder approval of the
Rights Issue.
U.S. Shareholders
The Nil Paid Rights, Fully Paid Rights, New Ordinary Shares and the Provisional
Allotment Letters relating to the Rights Issue have not been and will not be
registered under the Securities, or under the securities laws of any state of
the United States. Accordingly, subject to certain exceptions, neither the New
Ordinary Shares nor the Provisional Allotment Letters nor any Nil Paid Rights or
Fully Paid Rights may be offered, sold, delivered, taken up, renounced or
transferred, directly or indirectly, in or into the U.S. at any time, except
pursuant to the terms of an applicable exemption under the Securities Act and
applicable securities laws of the United States.
Notwithstanding the foregoing, the Company reserves the right to make the Nil
Paid Rights, Fully Paid, Rights, New Ordinary Shares and the Provisional
Allotment Letters available to a limited number of Shareholders who are able to
take up their rights pursuant to an exception form the registration requirements
of the Securities Act.
Holders of our ADSs will not be eligible to participate in the Rights Issue.
However, the depositary under the Company's American Depositary Receipt facility
has confirmed that it will sell the rights relating to the Ordinary Shares
underlying the ADSs, and will distribute the net proceeds to ADS holders in
accordance with the depositary agreement.
Forward-looking statements
This press release contains "forward-looking statements," within the meaning of
the U.S. federal securities laws, that represent the Company's expectations or
beliefs regarding future events, based on currently available information,
including statements concerning its anticipated performance and plans. These
statements by their nature involve substantial risks and uncertainties, many of
which are beyond the Company's control. The Company's actual results could
differ materially from those expressed in the forward-looking statements due to
a variety of important factors. Factors that could cause the Company's results
to differ materially from its expectations include: the Company's susceptibility
to regional economic downturns, currency fluctuations, large customer order
slowdowns and other risks related to its U.S., U.K. and
foreign operations and financings; its ability to realize cost savings from its
cost reduction program; keen competition in its fragmented and consolidating
industry; and the other risk
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factors and more complete descriptions of these factors found under "Risk
Factors" in the Company's Form 20-F filed with the SEC.
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Press Release
20 February 2002
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION IN WHOLE OR IN PART IN OR INTO
THE UNITED STATES, CANADA, JAPAN, FRANCE, AUSTRALIA, SOUTH AFRICA,
SINGAPORE OR THE REPUBLIC OF IRELAND
Enodis plc
Recapitalisation
Proposed Rights Issue of up to 150,861,463 New Ordinary Shares at 50 pence
per share on a 3 for 5 basis to Qualifying Shareholders and
New Financing Arrangements
.. Proposed 3 for 5 Rights Issue to raise approximately(Pounds)71.5 million
(net of expenses); underwritten by Credit Suisse First Boston
.. Up to approximately 150.9 million new Enodis shares to be offered at a
price of 50 pence per new Enodis share.
.. New financing arrangements totalling approximately (Pounds)470m to replace
existing bank facilities including (Pounds)100m bond issue ("the Notes")
.. Global Food Service Equipment strategy on track; industry fundamentals
remain attractive
.. Full year trading outlook unchanged
Commenting, Peter Brooks, Chairman of Enodis, said:
"The proposals announced today will create a more appropriate capital
structure for the long term and will improve the financial stability of the
Group to enable it to effectively pursue its key objective of restoring
Shareholder value."
Andrew Allner, Chief Executive of Enodis, said:
"Since the new management team took over in March 2001, clear and decisive
actions have been taken to reduce debt, eliminate costs, establish an
effective management organisation and refocus our strategy.
"We are encouraged by the robust performance of our core business in Q1,
given the challenging macro economic environment, and we are confident our
strategy will lead to profitable market share gains.
"Our Global Food Service Equipment business is profitable and strongly cash
generative. The recapitalisation package announced today will ensure that
the operating profits we generate will no longer go primarily to our debt
providers."
An analyst meeting will be held today at 10:00AM at Credit Suisse First
Boston, 32nd Floor, Tower 42, 25 Old Broad Street, London EC2.
Enquiries:
Enodis plc
Andrew Allner, Chief Executive 020 7304 6006
Credit Suisse First Boston
George Maddison/Ed Matthews 020 7888 8888
Financial Dynamics
Richard Mountain/Andrew Lorenz 020 7269 7291
A document (the "Rights Issue Prospectus") will be dispatched to Shareholders in
relation to the Rights Issue as soon as practicable. Words and expression
defined in the Rights Issue Prospectus shall bear the same meanings in this
document. Set out below are extracts from a letter contained in the Rights Issue
Prospectus from the Chairman of the Company to shareholders.
EXTRACTS FROM CHAIRMAN'S STATEMENT
Introduction
The Group has a high level of debt, principally arising from acquisitions in the
last three years. With the recent downturn in the Group's end markets and the
current economic uncertainty, your Board has been considering a number of
financing alternatives to achieve a more appropriate capital structure for the
Group. After careful consideration and consultation with its advisers, your
Board has today announced New Financing Arrangements which it believes will
leave the Group better positioned for a market recovery when it comes. These
financing arrangements include a Rights Issue of up to 150,861,463 New Ordinary
Shares at 50 pence per share on the basis of 3 New Ordinary Shares for every 5
Existing Ordinary Shares held on the Record Date to raise approximately
(Pounds)71.5 million, after the expenses of the Rights Issue. The Rights Issue
has been fully underwritten by Credit Suisse First Boston.
In addition, the Board has announced the replacement of the Company's credit
facilities with the New Credit Facilities and the anticipated raising of
(Pounds)100 million, before expenses, through the issue of long term fixed rate
Notes in the institutional market.
The directors believe that together the above arrangements will create a more
appropriate capital structure, which should improve the financial stability of
the Group and enable it to pursue more effectively its key objective to restore
shareholder value.
In order to proceed with the Rights Issue, the Company needs to pass resolutions
to increase its authorised share capital, to grant the directors authority to
allot shares and to disapply statutory pre-emption rights.
Shareholders should note that unless they approve the Resolutions the Rights
Issue will not proceed and the proposed issue of Notes may not proceed, or may
proceed on terms that are materially different from those currently anticipated.
Background to the New Financing Arrangements
Enodis entered the food service equipment market in 1995 with the acquisition of
Welbilt Corporation, and developed a strategy of becoming one of the world's
leading manufacturers and distributors of a broad range of branded commercial
food equipment to quick service and full service restaurants, hotels and
institutions and other customers in key markets globally. This strategy was
implemented by a series of complementary acquisitions, the largest of which was
the purchase of Scotsman Industries, Inc. in 1999 for a total consideration of
$791.5 million including assumed debt.
In March 2001, the Group entered into a new credit facility, with the
expectation that a loan syndication would follow. However, as a result of the
downturn in economic conditions, senior Enodis management changes and the
Group's strategic review undertaken in the Summer of 2001, the syndication was
not completed.
The Company has concluded, based on advice received, that a syndication could
only have been achieved if the amount of senior debt was reduced by a much
larger offering of long term fixed rate subordinated notes than is contemplated
under the New Financing Arrangements. The costs associated with these notes
would have constituted a severe additional financial burden on the business in
already challenging economic circumstances, and indications were that the
issuance of such notes would have resulted in a substantially greater part of
the Group's free cash flow being used to service debt. In addition, once the
Group had achieved its planned reduction in net debt to more prudent levels a
substantially higher proportion of the net debt remaining would have been
expensive long term debt with significant early redemption penalties.
The Board believes that the Enodis share price has been significantly impacted
by the perceived financial uncertainty facing the Group given its current
capital structure.
Strategy
Your Board's primary objectives are to restore shareholder value and reduce
debt. As one of the world's leading manufacturers and distributors of food
service equipment globally, we intend to establish Enodis as clearly the world's
leading supplier of commercial food service equipment through product,
distribution and service excellence. The key elements of our strategy are to:
. exploit and develop our broad portfolio of leading food service
products and strong brands;
. capitalise on technological leadership and new product development
capabilities;
. partner with dealers, distributors and sales representatives to
increase market share; and
. improve operating efficiency through, among other things, cost
reduction and restructuring.
In addition, we are seeking to improve the performance of our food retail
business and divest non-core businesses in both the food retail equipment and
food service equipment businesses.
Since March 2001, when Andrew Allner was appointed leader of the executive team,
significant progress has been made in implementing this strategy. The Group has
achieved significant cost savings through a range of measures including
headcount reduction amounting to approximately 10 per cent. of the Group's
workforce, the closure of five manufacturing plants and discretionary cost
control. 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 per cent. in the first half of the 2001
financial year to 13.3 per cent. in the second half of the 2001 financial year.
Importantly, from a strategic viewpoint, we also made significant progress in
improving our relationship with our distribution network, enhancing our
performance with major buying groups and introducing a large number of
innovative new products.
The sales of the Group's building and consumer products business in June 2001
and of Sammic, our Spanish food service equipment business, in December 2001
have enabled us to reduce debt by approximately (pound)120 million. The Board is
pursuing the disposal of other non-core businesses and assets.
Despite the significant progress described above, the current outstanding amount
of debt and the associated future servicing costs are higher than the Board
considers acceptable, particularly in the current economic environment.
Reasons for the New Financing Arrangements
Long term growth trends in food service in the U.S. over the last 30 years show
growth driven by changes in consumer lifestyles with an increasing proportion of
food and beverage consumed outside the home, resulting in new restaurant
openings. A recent National Restaurant Association survey in the U.S. predicts
this trend will continue with substantial growth to 2010.
Despite the severe decline in the Group's end markets brought about by the
current adverse economic circumstances, the Board believes that the long-term
characteristics of the food service equipment industry remain attractive,
reflecting the positive long term trends in the food service industry. The Board
also believes that Enodis has a number of competitive advantages in its
industry, including:
.. a broad portfolio of leading food service products and strong brands;
.. technical expertise and new product development capabilities;
.. global food service equipment coverage;
.. global service and parts distribution capabilities; and
.. a strong and diversified customer base.
The Board believes that the Group's current capital structure does not provide
it with the financial stability to capitalise fully on these advantages. As
discussed above, the Company has concluded, based on advice received, that a
syndication of its March 2001 credit facility could only have been achieved if
the amount of senior debt was reduced by a much larger offering of long term
fixed rate subordinated notes than is contemplated under the New Financing
Arrangements. The costs associated with these notes would have significantly
increased the Group's long term cost of debt, and indications were that the
issuance of such notes would have resulted in a substantially greater part of
the Group's free cash flow being used to service debt. We estimate that under
the New Financing Arrangements the Group's annual interest costs, assuming the
issue of the Notes proceeds on the terms currently expected, would be in the
order of (Pounds)10 million lower than could reasonably have been anticipated
under the most likely alternative financing options.
Your Board has carefully reviewed, with its financial advisers, a wide range of
options for the most appropriate financing of the Group's operations. It has
concluded that Shareholders' interests would be best served by entering into the
New Credit Facilities, raising new equity through the Rights Issue and raising
long term subordinated debt through an offering of Notes. Following these
transactions:-
(i) approximately(Pounds)71.5 million of net proceeds will have been
received from the Rights Issue;
(ii) approximately (Pounds)100 million of the Group's debt will be long-term
fixed-rate Notes, structurally subordinated to the New Credit Facilities
and without the obligation to repay prior to maturity except upon
occurrence of certain specified events; and
(iii) as a result of (i) and (ii) above, the Group will have been able to
secure a more appropriately structured and better priced senior credit
facility.
Principal Elements of the New Financing Arrangements
The Company has today signed agreements with Credit Suisse First Boston and The
Royal Bank of Scotland plc that replace the Group's March 2001 credit facility
and comprise the following:
(i) a bridge facility in the amount of(Pounds)150 million;
(ii) a term loan in the amount of approximately(Pounds)260 million ($370
million); and
(iii) a revolving credit facility in the amount of approximately(pounds)60
million ($85 million).
The Company has also today signed the Underwriting Agreement and expects the net
proceeds of the Rights Issue to be approximately (Pounds) 71.5 million. The
Company intends to use the net proceeds of the Rights Issue, together with the
net proceeds of the proposed issue of the Notes, to repay the bridge facility,
with any remaining proceeds used to repay senior debt.
The Rights Issue has been fully underwritten by Credit Suisse First Boston in
order to provide greater certainty as to the amount of proceeds that will be
raised in the Rights Issue and to enable the offering of Notes and the senior
credit syndication to proceed.
It is intended that the Notes will be offered to certain institutional
investors. The precise terms of the Notes will not be finalised until pricing of
the Notes, which is expected to occur following the passing of the Resolutions.
The issue and terms of the Notes are subject to market conditions and as a
result the Board cannot assure Shareholders that the Notes issue will be
completed. In addition, the issue of the Notes on the terms contemplated is
effectively dependent on completion of the Rights Issue. If the Rights Issue
does not proceed for any reason, there can be no guarantee that the Company will
be able to issue the Notes and, if it can, it may do so on terms which are
materially different from those which could be achieved if the Company had
strengthened its equity base through the Rights Issue.
If either the Rights Issue or the offering of the Notes does not proceed for any
reason, then the bridge facility, which matures in 2012, will remain outstanding
in whole or in part.
The Rights Issue is not conditional on the offering of the Notes.
Current Trading and Prospects
The Group has today announced its unaudited results for the 13 weeks ended 29
December 2001, which are set out in a separate announcement, the financial
highlights of which are set out below. Assuming that the Notes are issued, the
Group will adopt a policy of reporting its results quarterly in future.
The results for the first quarter of the financial year ending 28 September 2002
reflect the more difficult trading conditions in our key markets, partly offset
by the benefits of the cost reduction actions that we have previously announced.
Food equipment operating profit before exceptional items and goodwill
amortisation was (Pounds)14.2 million compared to (Pounds)15.7 million for the
first quarter of the previous financial year. This was in line with our
expectations at the time of the preliminary announcement of the results made in
November 2001.
As we indicated in our preliminary results announcement in November 2001, we
expected a further significant decline in the food service equipment markets,
especially in North America. Whilst sales held up relatively well in October and
November, a further decline in sales became apparent in December. As previously
anticipated, this decline is therefore expected to have a greater impact on our
results for the second quarter of the financial year ending 28 September 2002 as
compared to the first quarter.
The duration of this difficult climate cannot be predicted, but the Board has
based its plans on the assumption that it will continue at least through to the
end of the current financial year. As previously announced the Board plans to
address the situation by taking action to reduce costs further, targeting
further cost savings of some (Pounds)10 million for the current financial year
through strategic headcount reductions, discretionary cost savings, leveraging
purchasing power and ongoing manufacturing restructuring. These cost savings are
in addition to the full year benefits of fixed and headcount cost savings
implemented in the second half of the financial year ended 29 September 2001.
The Company estimates exceptional costs of some (Pounds)6 million in the
financial year ending 28 September 2002 relating to these actions.
The Company is also pursuing market share gain opportunities to improve top line
performance. The directors believe that the Group's scale, broad product range,
technology, and industry relationships position the Company well to achieve
this.
The Board believes, despite the severe decline in the Group's end markets
brought about by the current adverse economic circumstances, that the long term
characteristics of the food service equipment industry remain attractive.
Management results for January 2002 are slightly ahead of our expectations at
the time of the Annual General Meeting, and our expectations for full year
operating profits remain unchanged from the time of our preliminary results
announcement in November. Compared to the first half of the current financial
year, results for the second half are expected to benefit from the seasonality
and management actions including cost savings, market share gain initiatives and
new product development.
The Group is 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 our 2001 financial year,
Kysor Warren has operated at a profit (exclusive of exceptional costs and
amortisation). However, Kysor Warren, along with its competitors, has been
adversely impacted by difficult market conditions. The unaudited results of this
operation for the first quarter of the financial year ending 28 September 2002
showed a small loss and were below expectations. The Group is currently
reviewing the operations of Kysor Warren with the objective of improving its
operating performance. If the result of our review is the conclusion that the
necessary 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. Such a potential impairment, if any, cannot be reasonably estimated at
this time. As at 29 December 2001 the carrying value of goodwill relating to
Kysor Warren was approximately (Pounds)50 million.
In light of the downturn in the Group's end-markets and uncertain economic
conditions, the 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 29 September 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 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 Group results. However as a result of the losses recognised on this
transfer, the Company does not currently have sufficient distributable reserves
to lawfully make dividend payments.
As and when the Board determines to resume dividend payments, the Company will
seek to take the steps necessary to enable it to increase its distributable
reserves so that it is able to lawfully pay dividends. Any such action is likely
to require the approval of Shareholders and the High Court. In addition the
Company's ability to make future dividend payments will depend on its profit and
cash flow performance and the need first to meet its obligations under the New
Credit Facilities and the proposed Notes.
The Board believes that the New Financing Arrangements will enable an earlier
resumption of dividend payments than would otherwise have been the case.
Principal terms and conditions of the Rights Issue
Subject to the satisfaction of the conditions referred to below, up to
150,861,463 New Ordinary Shares will be provisionally allotted by way of rights
to raise approximately (Pounds)71.5 million, after expenses. The Issue Price of
50 pence per New Ordinary Share represents a 46.2 per cent. discount to the
closing middle market price of 93.0 pence per Ordinary Share on 19 February
2002, the last practicable date before the announcement of the Rights Issue.
Qualifying Shareholders are being offered New Ordinary Shares at a price of 50
pence per New Ordinary Share on the following basis:
3 New Ordinary Shares for every 5 Existing Ordinary Shares
held at the close of business on 11 March 2002 and so in proportion for any
other number of Existing Ordinary Shares then held. The rights to fractional
entitlements to New Ordinary Shares will not be allotted to Qualifying
Shareholders. Entitlements to fractions will be aggregated and sold in the
market for the benefit of the Company.
The Rights Issue is conditional upon:
(i) the passing of the Resolutions;
(ii) the Underwriting Agreement having become unconditional in all respects
(save for the condition relating to Admission) and not having been
terminated in accordance with its terms; and
(iii) Admission having occurred by not later than 10.00 a.m. on 19 March 2002
(or such later time and/or date as Credit Suisse First Boston and the
Company may agree).
The New Ordinary Shares, when issued and fully paid, will rank pari passu in all
respects with the Existing Ordinary Shares including the right to receive all
dividends or other distributions made or paid thereafter. The Rights Issue has
been underwritten in full by Credit Suisse First Boston.
Since outstanding options may be exercised before the Record Date for the Rights
Issue, the precise number of shares to be issued in the Rights Issue cannot be
determined until that date. However, assuming no options are exercised prior to
the Record Date, 150,174,595 New Ordinary Shares will be issued. If all
outstanding options are exercised up to 686,868 additional New Ordinary Shares
will be issued.
Intentions of directors
Those directors who are Qualifying Shareholders, and hold in aggregate 46,800
Ordinary Shares (representing less than 1 per cent. of the Existing Ordinary
Shares of the Company), intend to take up rights in respect of 28,080 New
Ordinary Shares. Directors who hold Ordinary Shares in the form of Enodis ADSs
are not entitled to take up rights.
Employee Share Schemes
In accordance with the rules of the Employee Share Schemes, other than the 1993
Executive Scheme, the directors intend to make adjustments to the terms of the
options granted to take account of the Rights Issue. The options under the 1993
Executive Scheme were granted by the trustees of the Employee Share Trust (the
"Trustees") and the Company will recommend to the Trustees that they make
adjustments to the terms of the options granted to take account of the Rights
Issue. Such adjustments will, where necessary, be subject to a written
certificate from the auditors of the Company that such adjustments are in their
opinion fair and reasonable and also, where necessary, to the prior approval of
the Inland Revenue.
In order to comply with U.S. requirements, each of the 2001 Executive Share
Option Scheme (the "2001 Scheme") and the Employee Stock Purchase Plan (the
"Purchase Plan") contains a numerical limit on the number of Ordinary Shares and
the number of Enodis ADSs that may be issued as a result of options granted
under them. In line with the increase to the Company's issued share capital as a
result of the Rights Issue, it is proposed to increase the numerical limit in
the Purchase Plan from 12,000,000 to 19,200,000 in relation to Ordinary Shares
and from 3,000,000 to 4,800,000 in relation to Enodis ADSs. At the Company's
annual general meeting on 16 January 2002, the limit preventing more than 5 per
cent. of the Company's issued ordinary share capital being available for
executive incentives in any 10 year period under the 2001 Scheme was removed.
The only remaining limit is that no more than 10 per cent. of the ordinary share
capital of the Company may be issued on the exercise of options granted in any
10 year period under any employees' share scheme adopted by the Company. In
order to allow for the whole of the 10 per cent. to be used for the purposes of
the 2001 Scheme, if it were thought appropriate, it is proposed that the
numerical limit in the 2001 Scheme be increased from 19,000,000 to 40,050,000.
The above changes would not affect the current overall anti-dilution protection
for Shareholders.
These proposed changes to the numerical limits on the number of Ordinary Shares
that may be issued under the 2001 Scheme and the Purchase Plan may only be
effected with the approval of Shareholders by ordinary resolution. Resolutions
to propose these changes, which will be conditional on the Rights Issue
proceeding, are set out in the Notice of EGM.
Overseas Shareholders
The ability of persons resident in, or who are citizens of, countries other than
the UK to participate in the Rights Issue may be affected by the laws of the
relevant jurisdiction.
Recommendation
Your Board, which has received financial advice in relation to the Proposals
from Credit Suisse First Boston, considers that the Rights Issue is in the best
interests of the Shareholders as a whole. In providing its advice to the Board,
Credit Suisse First Boston has placed reliance on the directors' commercial
assessment of the Proposals. In addition, your Board considers that the proposed
changes to the share option schemes are in the best interests of Shareholders as
a whole. The Board recommends that you vote in favour of the resolutions set out
in the notice of EGM, as those directors who hold Ordinary Shares (either
directly or in the form of Enodis ADSs) intend to do in respect of the 74,800
Existing Ordinary Shares that they beneficially own or otherwise control,
representing less than 1 per cent. of the Company's Existing Ordinary Shares.
Yours sincerely
Peter Brooks
Chairman
Credit Suisse First Boston is acting as sponsor, underwriter and financial
adviser to the Company with regard to the Rights Issue. The contents of this
announcement, which has been prepared and issued by, and is the sole
responsibility of Enodis plc, have been approved solely for the purposes of
section 21 of the Financial Services and Markets Act 2000 by Credit Suisse First
Boston. Credit Suisse First Boston does not have any authority whatsoever to
make any representation or warranty on behalf of Enodis plc or any other person
in connection with the proposed Rights Issue or any other investment in
securities of Enodis plc.
Credit Suisse First Boston, which is regulated in the U.K. by the Financial
Services Authority, is acting exclusively for Enodis plc and no-one else in
connection with the Rights Issue and will not be responsible to anyone other
than Enodis plc for providing the protections afforded to its clients of Credit
Suisse First Boston or for providing advice in relation to the Rights Issue or
any matter referred to herein.
The address of Credit Suisse First Boston is One Cabot Square, London E14 4QJ.
Prices and values of, and income from, shares may go down as well as up and an
investor may not get back the amount invested. It should be noted that past
performance is no guide to future performance. Persons needing advice should
consult an independent financial adviser.
This announcement does not constitute or form part of, and should not be
construed as, an offer for sale or subscription of, or solicitation of any offer
to buy or subscribe for, any securities of Enodis plc nor should it or any part
of it form the basis of, or be relied on in connection with, any contract or
commitment whatsoever. Any decision in connection with the proposed Rights Issue
should be made solely on the basis of the information contained in the Rights
Issue Prospectus to be issued in connection with the Rights Issue.
This announcement does not constitute an offer of securities for sale in Canada,
Japan, France, Australia, South Africa, Singapore or the Republic of Ireland.
This announcement does not constitute an offer of securities for sale in the
United States. Securities may not be offered or sold in the United States absent
registration or an exemption from registration requirements. Any public offering
of securities in the United States must be made by means of a prospectus which
would contain detailed information about the Company and its management, as well
as financial statements.
None of the Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares or
the Provisional Allotment Letters have been or will be registered under the
United States Securities Act of 1933, as amended, or under the applicable
securities laws of any state of the United States, any province or territory of
Canada, Japan, France, Australia, South Africa, Singapore or the Republic of
Ireland. Neither the New Ordinary Shares nor the Provisional Allotment Letters
may, subject to certain exceptions, be offered, sold, taken up, transferred,
renounced or delivered, directly or indirectly, within the United States,
Canada, Japan, France, Australia, South Africa, Singapore or the Republic of
Ireland, or their respective territories or possessions. Accordingly, neither
this announcement nor any copy of it may be taken, transmitted or distributed,
directly or indirectly, into those jurisdictions, their territories or
possessions or passed to residents, corporations or other entities organised
under the laws of those jurisdictions, their territories or possessions or
branches, agencies or affiliates of any such corporations or entities.
Certain statements made in this announcement are forward-looking statements.
Such statements are based on current expectations and, by their nature, are
subject to a number of risks and uncertainties that could cause actual results
and performance to differ materially from any expected future results or
performance, expressed or implied, by the forward-looking statement. The
information and opinions contained in this announcement are subject to change
without notice and Enodis assumes no responsibility to update any of the
forward-looking statements contained herein except to the extent required by
law.
Enodis plc
Andrew Allner, Chief Executive 020 7304 6006
Credit Suisse First Boston
George Maddison/Ed Matthews 020 7888 8888
Financial Dynamics
Richard Mountain/Andrew Lorenz 020 7269 7291
APPENDIX 1
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for the Rights Issue 11 March 2002
Latest time for receipt of Forms of Appointment of Proxy for the Extraordinary 10:00 a.m. on 16 March 2002
General Meeting
Extraordinary General Meeting 10:00 a.m. on 18 March 2002
Despatch of Provisional Allotment Letters (to Qualifying non-CREST Shareholders 18 March 2002
only)
Dealings in New Ordinary Shares, nil paid, commence on the London Stock Exchange 19 March 2002
Nil Paid Rights and Fully Paid Rights enabled in CREST 19 March 2002
Recommended latest time and date for requesting withdrawal of Nil Paid Rights 4:30 p.m. on 28 March 2002
from CREST (i.e. if your Nil Paid Rights are in CREST and you wish to convert
them into certificated form)
Latest time for depositing renounced Provisional Allotment Letters, nil paid (or 3:00 p.m. on 3 April 2002
fully paid), into CREST or for dematerialising Nil Paid Rights into a CREST stock
account
Latest time and date for splitting Provisional Allotment Letters, nil paid (or 3:00 p.m. on 4 April 2002
fully paid)
Latest time and date for acceptance, payment in full and registration of 10:30 a.m. on 8 April 2002
renunciation
Dealings in New Ordinary Shares, fully paid, commence on the London Stock Exchange by 8:00 a.m. on 9 April 2002
New Ordinary Shares credited to CREST stock accounts 9 April 2002
Expected despatch of definitive share certificates for New Ordinary Shares by 11 April 2002
Notes:
(1) The dates set out in the expected timetable of principal events above and
mentioned throughout this document and in the Provisional Allotment Letters
may be adjusted by Enodis, in which event, details of the new dates will be
notified to the U.K. Listing Authority and to the London Stock Exchange
and, where appropriate, Shareholders.
(2) References in this document are to London time unless otherwise stated.
Press Release, 20 February 2002
ANNOUNCEMENT OF FIRST QUARTER RESULTS FOR THE 13 WEEKS ENDED
29 DECEMBER 2001
Highlights
As reported at the time of our Annual General Meeting, Group performance for the
13 weeks ended 29 December 2001 ("First Quarter 2002") is in line with the
Board's expectations at the time of the preliminary announcement of our results
for the year ended 29 September 2001 (the "2001 financial year") made in
November 2001.
. Food equipment sales decreased by 4.6% to (Pounds)189.9 million
in First Quarter 2002 from (Pounds)199.0 million for the 13 weeks
ended 29 December 2000 ("First Quarter 2001"), reflecting the
deterioration of the food service equipment market in North
America and difficult trading conditions for our food retail
equipment group, particularly in display cases. At the time of
our preliminary results announcement in November, we expected a
further significant decline in the food service equipment
markets, especially in North America. Whilst sales held up
relatively well in October and November a further decline in
sales became apparent in December. As previously anticipated,
this decline is therefore expected to have a greater impact on
our results for the second quarter of the financial year ending
28 September 2002 compared to the first quarter.
. Food equipment operating profit before exceptional items and
goodwill amortisation decreased by 9.6% to (Pounds)14.2 million
in First Quarter 2002 from (Pounds)15.7 million in First Quarter
2001, reflecting the reduced sales volumes and pricing pressures,
particularly in our food retail equipment group, offset to a
significant extent by the cost savings generated by the
management actions taken in the second half of the 2001 financial
year.
. Group profit before tax, exceptional items and goodwill
amortisation decreased by 17.7% to (Pounds)5.1 million in First
Quarter 2002 from (Pounds)6.2 million in First Quarter 2001.
. Profit on disposal of businesses in First Quarter 2002 amounted
to (Pounds)2.7 million, due to the sale of Sammic for
consideration of (Pounds)20 million. Exceptional charges of
(Pounds)2.4 million in First Quarter 2002 were for the ongoing
restructuring and reorganisation. We also wrote off (Pounds)4.1
million of deferred financing costs as a result of entering into
the new financing arrangements described below.
. Adjusted diluted earnings per share were 1.7p in First Quarter
2002 compared with 2.0p in First Quarter 2001.
. Net debt was (Pounds)376.1 million at the end of First Quarter
2002 compared to (Pounds)439.2 million at the end of First
Quarter 2001 and (Pounds)365.9 million at the end of the 2001
financial year.
. Rights issue and new financing arrangements announced to provide
a more appropriate long term capital structure.
As covered in a separate announcement, we have entered into new financing
arrangements, including a proposed three for five underwritten rights issue and
a five year committed senior credit facility of approximately (Pounds)320
million (comprising a $370 million term loan and $85 million revolving credit
facility) and a (Pounds)150 million bridge loan facility. We intend to repay the
bridge loan with the net proceeds of the rights issue and the net proceeds of a
proposed issue of long term fixed rate notes. The long term fixed rate notes
will be offered to certain institutional investors. In connection with the sale
of the long term fixed rate notes, we expect to agree to announce interim
results on a quarterly basis and publicly file unaudited financial information
and an accompanying operating and financial review. Assuming the notes are
issued, we will adopt a policy of reporting our results quarterly in the future.
Andrew Allner, CEO of Enodis, said:
"The Group's performance in the first quarter, in extremely difficult market
conditions, is encouraging and the Board's expectations for the full year
operating profits are as they were at the time of our November 2001
announcement. Our global food service equipment strategy is firmly on track and
we believe that the long term fundamentals of the industry remain attractive."
For further information please contact
Enodis plc
Andrew Allner Chief Executive Officer 020 7304 6006
Financial Dynamics
Richard Mountain/Andrew Lorenz 020 7269 7291
Operating Review--First Quarter 2002 Compared to First Quarter 2001
Turnover (Net Sales) from Continuing Operations
Turnover comprises gross sales to third parties, including shipping and handling
fees, less allowances for sales returns, rebates, discounts and other items.
Revenue is recognised upon shipment of goods to customers.
Turnover from continuing operations decreased by (Pounds)9.1 million, or 4.6%,
to (Pounds)189.9 million in First Quarter 2002 from (Pounds)199.0 million in
First Quarter 2001. Our principal source of turnover consists of sales of food
service equipment, which comprised 75.4% of our turnover from continuing
operations in First Quarter 2002. Sales of food retail equipment comprised 24.6%
of our turnover from continuing operations. There were no sales of property
assets in either quarter.
Turnover in First Quarter 2002 benefited from approximately (Pounds)1.5 million
of foreign exchange translation movements compared to First Quarter 2001.
Global Food Service Equipment. The following table provides a summary of
turnover from our global food service equipment group.
First Quarter First Quarter
2001 2002 Change
---------------------- ---------------------- ---------------------
(in millions, except percentages)
North America .......................... (Pounds)110.6 73.1% (Pounds)106.3 74.2% (Pounds)(4.3) (3.9)%
Europe & Rest of World ................. 40.7 26.9% 36.9 25.8% (3.8) (9.3)%
------------- ------- ------------ ------ ------------ ------
Total Global Food Service Equipment .... (Pounds)151.3 100.0% (Pounds)143.2 100.0% (Pounds)(8.1) (5.4)%
============= ======= ============ ====== ============ ======
Turnover decreased by (Pounds)8.1 million, or 5.4%, to (Pounds)143.2 million in
First Quarter 2002 from (Pounds)151.3 million in First Quarter 2001. Turnover in
First Quarter 2002 benefited by (Pounds)1.2 million from foreign exchange
movements compared to First Quarter 2001.
Turnover from our North America operations decreased by (Pounds)4.3 million, or
3.9%, to (Pounds)106.3 million in First Quarter 2002 from (Pounds)110.6 million
in First Quarter 2001, as a result of the general deterioration of the food
service equipment market in North America. Whilst sales in October and November
held up relatively strongly, a decline in sales was felt more acutely in
December.
Turnover from Europe and the rest of the world decreased by (Pounds)3.8 million,
or 9.3%, to (Pounds)36.9 million in the First Quarter 2002 from (Pounds)40.7
million in First Quarter 2001. Excluding the effects of the disposal of Sammic
and other non-core businesses, the decrease was (Pounds)0.7 million, or 1.7%,
which was due to a decrease in sales volume in a depressed market.
Food Retail Equipment. Turnover decreased by (Pounds)1.0 million, or 2.1%, to
(Pounds)46.7 million in First Quarter 2002 from (Pounds)47.7 million in First
Quarter 2001, due to a very difficult market for display cases and refrigeration
systems in North America. Turnover in First Quarter 2002 benefited by
(Pounds)0.3 million from foreign exchange movements compared to First Quarter
2001.
Property. There were no sales of property assets in either First Quarter 2002 or
First Quarter 2001. Future revenues from sales of 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.
Property sales are expected to remain consistent with the prior year for the
upcoming year, with lower levels in future years.
Operating Profit from Continuing Operations before Goodwill Amortisation and
Exceptional Items
Operating profit from continuing operations before goodwill amortisation and
exceptional items represents turnover less operating costs. Operating costs
consist of cost of sales, administrative expenses, distribution costs, and other
operating expenses. Cost of sales includes raw material components, direct
labour costs, fixed and variable overhead costs, depreciation and amortisation
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 buildings and professional fees.
Operating profit from continuing operations before goodwill amortisation and
exceptional items decreased by (Pounds)1.6 million, to (Pounds)12.1 million in
First Quarter 2002 from (Pounds)13.7 million in First Quarter 2001.
Operating profit from continuing operations before goodwill amortisation and
exceptional items in First Quarter 2002 has benefited by approximately
(Pounds)0.1 million as a result of foreign exchange translation movements
compared to First Quarter 2001.
Global Food Service Equipment. The following table sets out a summary of our
operating profit from continuing operations before goodwill amortisation and
exceptional items from our global food service equipment group.
First Quarter First Quarter
2001 2002 Change
---------------------- ---------------------- -----------------------
(in millions, except percentages)
North America ..................... (Pounds)10.1 75.9% (Pounds)9.8 78.4% (Pounds)(0.3) (3.0)%
Europe & Rest of World ............ 3.2 24.1% 2.7 21.6% (0.5) (15.6)%
----------- ----- ------------ ------- ------------- -------
Total Global Food Service
Equipment ...................... (Pounds)13.3 100.0% (Pounds)12.5 100.0% (Pounds)(0.8) (6.0)%
============ ===== ============ ======= ============= =======
Operating profit from continuing operations before goodwill amortisation and
exceptional items decreased by (Pounds)0.8 million, or 6.0%, to (Pounds)12.5
million in First Quarter 2002 from (Pounds)13.3 million in First Quarter 2001.
Operating profit from continuing operations before goodwill amortisation and
exceptional items benefited by (Pounds)0.1 million from foreign exchange
movements compared to First Quarter 2001.
Operating profit from continuing operations before goodwill amortisation and
exceptional items in North America decreased by (Pounds)0.3 million, or 3.0%, to
(Pounds)9.8 million in First Quarter 2002 from (Pounds)10.1 million in First
Quarter 2001. Operating profit from continuing operations before goodwill
amortisation and exceptional items as a percentage of turnover from North
America increased by 0.1 percentage points to 9.2% in First Quarter 2002 from
9.1% in First Quarter 2001. The fall in operating profit from continuing
operations before goodwill amortisation and exceptional items reflected lower
sales volumes. The expected decline in gross margin has been partially offset by
the effect of the cost savings programme enacted in the second half of the 2001
financial year.
Operating profit from continuing operations before goodwill amortisation and
exceptional items in Europe and the rest of the world decreased by (Pounds)0.5
million, or 15.6%, to (Pounds)2.7 million in First Quarter 2002 from (Pounds)3.2
million in First Quarter 2001. Excluding the effects of the disposal of Sammic
and other non-core businesses, the decrease was (Pounds)0.2 million, or 6.3%.
Operating profit from continuing operations before goodwill amortisation and
exceptional items as a percentage of net sales from Europe and the rest of the
world decreased by 0.6 percentage points to 7.3% in First Quarter 2002 from 7.9%
in First Quarter 2001. The expected fall in operating profit from continuing
operations before goodwill amortisation and exceptional items arising from
reduced sales volume and a different product mix compared to the First Quarter
2001 has been offset in part by the effect of the cost savings programme enacted
in the second half of the 2001 financial year and First Quarter 2002.
Food Retail Equipment. Operating profit from continuing operations before
goodwill amortisation and exceptional items decreased by (Pounds)0.7 million, or
29.2%, to (Pounds)1.7 million in First Quarter 2002 from (Pounds)2.4 million in
First Quarter 2001. Operating profit from continuing operations before goodwill
amortisation and exceptional items in First Quarter 2002 benefited by
(Pounds)12,000 gain from positive foreign exchange movements compared to First
Quarter 2001. Operating profit from continuing operations before goodwill
amortisation and exceptional items as a percentage of net sales decreased by 1.4
percentage points to 3.6% in First Quarter 2002 from 5.0% in First Quarter 2001.
The decrease in operating profit from continuing operations before goodwill
amortisation and exceptional items principally reflected reduced sales of
refrigeration systems and display cases by Kysor Warren, offset in part by
stronger performance in refrigerated panels and walk-in freezers and coolers
sold by Kysor Panel Systems. The decline in gross margin was partially offset by
the effect of the cost savings programme enacted in the second half of the 2001
financial year and in First Quarter 2002.
Goodwill Amortisation
Amortisation and impairment of goodwill from continuing operations decreased by
(Pounds)0.4 million due to the effect of the (Pounds)100 million impairment in
the value of the Group's goodwill booked in September 2001, offset in part by
the full quarter effect of the amortisation of goodwill arising from the Jackson
acquisition in November 2000.
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 the 2001 financial year,
Kysor Warren has operated at a profit (exclusive of exceptional costs and
amortisation). However, Kysor Warren, along with its competitors, has been
adversely impacted by difficult market conditions. The unaudited results of this
operation for First Quarter 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 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 at 29
December 2001 the carrying value of goodwill relating to Kysor Warren was
approximately (Pounds)50 million.
Operating Exceptional Items
Exceptional operating charges from continuing operations totalled (Pounds)2.4
million for First Quarter 2002, resulting from the continued rationalisation of
administration functions and simplifying management structures. These items
relate principally to costs of redundancy in our food retail equipment group and
the European businesses within the global food service equipment group.
Profit on Disposal of Businesses and Other Assets
The profit on disposal of businesses in First Quarter 2002 amounted to
(Pounds)2.7 million, due to the sale of Sammic for consideration of (Pounds)20
million.
Net Interest Payable and Similar Charges
Net interest payable and similar charges increased by (Pounds)1.1 million, or
11.0%, to (Pounds)11.1 million in First Quarter 2002 from (Pounds)10.0 million
in First Quarter 2001. Primarily, the increase was due to the write off of
(Pounds)4.1 million in unamortised financing costs related to our previous
multi-currency facility entered into in March 2001, which has been replaced with
the new senior secured credit facility and bridge facility signed on 20 February
2002. Excluding this charge, net interest expense decreased by (Pounds)3.0
million, or 30.0% to (Pounds)7.0 million in First Quarter 2002 from (Pounds)10.0
million in First Quarter 2001, reflecting lower average principal outstanding
and interest rates.
Tax on Profit/(Loss) on Ordinary Activities.
Tax on profit/(loss) on ordinary activities decreased by (Pounds)0.7 million, or
53.8%, to (Pounds)0.6 million in First Quarter 2002 from (Pounds)1.3 million in
First Quarter 2001. There was no material change in deferred tax balances in
First Quarter 2002, as compared to movements in First Quarter 2001 when there
was a net utilisation of deferred tax assets. The effective rate of current tax
remained constant at approximately 14%, in both periods.
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 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. On
implementation of FRS 19, all prior period results should be adjusted as though
FRS 19 had been applied throughout the relevant period. Accordingly, results for
the 2001 financial year have been restated, recognising a deferred tax asset of
(Pounds)26.9 million at 29 September 2001, principally relating to timing
differences on tax losses and warranty reserves.
Operating Profit from Discontinued Operations
There was no net profit from discontinued operations for First Quarter 2002
compared to the First Quarter 2001, which included (Pounds)2.5 million from the
building and consumer products business which was sold in June 2001.
Debt and Liquidity
Net debt at the end of First Quarter 2002 was (Pounds)376.1 million, compared to
(Pounds)365.9 million at the end of the 2001 financial year and (Pounds)439.2
million at the end of First Quarter 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
(Pounds)20 million from the disposal of Sammic. The overall decrease from First
Quarter 2001 reflects the efforts made over the last year in reducing debt. The
following table summarises the movements in net debt from 29 September 2001 to
29 December 2001.
(in millions)
Net debt at 29 September 2001 ........................... (Pounds)(365.9)
Global FSE operating cash flow .......................... 15.4
FRE operating cash flow ................................. (8.1)
Corporate/Property operating cash flow .................. (7.7)
Interest expense ........................................ (5.7)
Tax ..................................................... (1.6)
Exceptional items ....................................... (11.2)
Disposal of businesses .................................. 16.6
Foreign Exchange ........................................ (7.9)
--------------
Net debt at 29 December 2001 ............................ (Pounds)(376.1)
==============
As also announced today, we have entered into new financing arrangements,
including a three for five underwritten rights issue, a committed senior credit
facility of $455 million (comprised of a $370 million term loan and a $85
million revolving credit facility) and a (Pounds)150 million bridge loan
facility. We intend to repay the bridge loan with the net proceeds of the rights
issue and the net proceeds of a proposed issue of
long term, fixed rate notes. As at 29 December 2001, all borrowings have been
reclassified as short term, giving the Group net current liabilities at that
date. The new financing arrangements (including the proposed long term fixed
rate note issue), will provide the Group with long term financing, with the
result that we expect the balance sheet will reflect a net current asset
position when the new financing arrangements are completed.
Outlook
The results for the first quarter of the financial year ending 28 September 2002
reflect the more difficult trading conditions in our key markets, partly offset
by the benefits of the cost reduction actions that we have previously announced.
Food equipment operating profit before exceptional items and goodwill
amortisation was (Pounds)14.2 million compared to (Pounds)15.7 million for the
first quarter of the previous financial year. This was in line with our
expectations at the time of the preliminary announcement of the results made in
November 2001.
As we indicated in our preliminary results announcement, we expected a further
significant decline in the food service equipment markets, especially in North
America. Whilst sales held up relatively well in October and November, a further
decline in sales became apparent in December. As previously anticipated, this
decline is therefore expected to have a greater impact on our results for the
second quarter of the financial year ending 28 September 2002 as compared to the
first quarter.
The duration of this difficult climate cannot be predicted, but the Board has
based its plans on the assumption that it will continue at least through to the
end of the current financial year. As previously announced, the Board is
addressing the situation by taking action to reduce costs further, targeting
further cost savings of some (Pounds)10 million for the current financial year
through strategic headcount reductions, discretionary cost savings, leveraging
purchasing power and ongoing manufacturing restructuring. These cost savings are
in addition to the full year benefits of fixed and headcount cost savings
implemented in the second half of the financial year ended 29 September 2001.
The Group estimates exceptional costs of some (Pounds)6 million in the financial
year ending 28 September 2002 relating to these actions.
The Group is also pursuing market share gain opportunities to improve top line
performance. The directors believe that the Group's scale, broad product range,
technology, and industry relationships position the Group well to achieve this.
The Board believes that, despite the severe decline in the Group's end markets
brought about by the current adverse economic circumstances, the long term
characteristics of the food service equipment industry remain attractive.
Management results for January 2002 are slightly ahead of our expectations at
the time of the Annual General Meeting, and our expectations for the full year
operating profits remain unchanged from the time of our preliminary results
announcement in November. Compared to the first half of the current financial
year, results for the second half are expected to benefit from seasonality and
management actions including cost savings, market share gain initiatives and new
product development.
Dividend Policy
In light of the downturn in the Group's end markets, and uncertain economic
conditions, the 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 29 September 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 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 Group results. However, as a result of the losses recognised on this
transfer, the Company does not currently have sufficient distributable reserves
to lawfully make dividend payments.
As and when the Board determines to resume dividend payments, the Company will
seek to take the steps necessary to enable it to increase its distributable
reserves so that it is able to lawfully pay dividends. Any such action is likely
to require the approval of Shareholders and the High Court. In addition, the
Company's ability to make future dividend payments will depend on its profit and
cash flow performance and the need to comply with the terms of the new credit
facilities and the proposed notes.
Group profit and loss account
13 weeks to 29 December 2001 52 weeks to 29 September 2001
------------------------------------- -----------------------------------------
Before Exceptional 13 weeks to Before Exceptional
exceptional items 30 December exceptional items
Notes items (note 4) Total 2000 items (note 4) Total
----- ------------ ----------- ----------- ------------ ----------- ------------- --------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Restated) (Restated) (Restated)
(amounts in millions)
Turnover
Food Equipment ............ (Pound)189.9 -- (Pound)189.9 (Pound)199.0 (Pound)887.2 -- (Pound)887.2
Property .................. -- -- -- -- 16.6 -- 16.6
----------- ----------- ----------- ----------- ----------- ------------- -------------
Continuing operations ..... 2 189.9 -- 189.9 199.0 903.8 -- 903.8
Discontinued operations ... -- -- -- 61.3 177.3 -- 177.3
----------- ----------- ----------- ----------- ----------- ------------- -------------
189.9 -- 189.9 260.3 1,081.1 -- 1,081.1
----------- ----------- ----------- ----------- ----------- ------------- -------------
Profit from operations
Food Equipment ............ 14.2 (2.4) 11.8 15.7 90.7 (43.4) 47.3
Property .................. -- -- -- -- 9.0 -- 9.0
Corporate costs ........... (2.1) -- (2.1) (2.0) (8.9) (24.1) (33.0)
----------- ----------- ----------- ----------- ----------- ------------- -------------
Continuing operations ..... 12.1 (2.4) 9.7 13.7 90.8 (67.5) 23.3
Discontinued operations ... -- -- -- 2.5 9.1 -- 9.1
----------- ----------- ----------- ----------- ----------- ------------- -------------
12.1 (2.4) 9.7 16.2 99.9 (67.5) 32.4
Goodwill
amortisation/impairment. (5.0) -- (5.0) (5.4) (23.0) (100.0) (123.0)
----------- ----------- ----------- ----------- ----------- ------------- -------------
Operating profit/(loss) ... 3 7.1 (2.4) 4.7 10.8 76.9 (167.5) (90.6)
Profit on disposal of
businesses ............. -- 2.7 2.7 -- -- 23.5 23.5
Net interest payable and
similar charges ........ (7.0) (4.1) (11.1) (10.0) (36.1) (5.8) (41.9)
----------- ----------- ----------- ----------- ----------- ------------- -------------
Profit/(loss) on ordinary
activities before
taxation ............... 0.1 (3.8) (3.7) 0.8 40.8 (149.8) (109.0)
Tax on profit/(loss) on
ordinary activities .... 5 (0.6) -- (0.6) (1.3) (13.4) 2.0 (11.4)
----------- ----------- ----------- ----------- ----------- ------------- -------------
Profit/(loss) on ordinary
activities after
taxation ............... (0.5) (3.8) (4.3) (0.5) 27.4 (147.8) (120.4)
----------- ----------- ----------- ----------- ----------- ------------- -------------
Equity minority interest .. (0.1) -- (0.1) -- (0.3) -- (0.3)
----------- ----------- ----------- ----------- ----------- ------------- -------------
Profit/(loss) for the
period ................. (0.6) (3.8) (4.4) (0.5) 27.1 (147.8) (120.7)
Equity dividends .......... 6 -- -- -- -- (4.8) -- (4.8)
----------- ----------- ----------- ----------- ----------- ------------- -------------
Retained profit/(loss) .... (Pound)(0.6) (Pound)(3.8) (Pound)(4.4) (Pound)(0.5) (Pound)22.3 (Pound)(147.8) (Pound)(125.5)
=========== =========== =========== =========== =========== ============= =============
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
Notes 2001 2000 2001
--------- ------------ ----------- ------------
(Unaudited) (Unaudited) (Restated)
Earnings/(loss) per share
Basic loss per share ....................... 7 (1.8)p (0.2)p (48.5)p
Adjusted basic earnings per share .......... 7 1.7 p 2.0 p 20.1 p
Diluted loss per share ..................... 7 (1.8)p (0.2)p (48.4)p
Adjusted diluted earnings per share ........ 7 1.7 p 2.0 p 20.1 p
Statement of total recognised gains and losses
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
Notes 2001 2000 2001
--------- ------------ ----------- ------------
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
Loss for the period ..................................... (Pound)(4.4) (Pound)(0.5) (Pound)(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 (1.1) 1.8 (1.7)
---------- ----------- -------------
Total recognised gains and losses in the period ......... (Pound)4.9 (Pound)1.3 (Pound)(126.8)
========== =========== =============
Group balance sheet
29 December 30 December 29 September
Notes 2001 2000 2001
------- ------------ ------------ ------------
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
Fixed assets
Intangible assets: goodwill .......................... (Pound)310.9 (Pound)421.4 (Pound)310.2
Tangible assets ...................................... 108.7 170.3 111.4
Investments .......................................... 6.9 8.6 6.2
------------ ------------ ------------
426.5 600.3 427.8
------------ ------------ ------------
Current assets
Stocks ............................................... 8 105.4 166.1 105.6
Debtors .............................................. 184.6 192.2 200.7
Deferred tax ......................................... 27.0 31.3 26.9
Cash at bank and in hand ............................. 9 26.9 41.9 39.4
------------ ------------ ------------
343.9 431.5 372.6
------------ ------------ ------------
Creditors falling due within one year
Borrowings ........................................... 9 (388.5) (93.7) (2.4)
Other creditors ...................................... (189.3) (263.3) (225.1)
------------ ------------ ------------
Net current assets/(liabilities) ..................... (233.9) 74.5 145.1
------------ ------------ ------------
Total assets less current liabilities ................ (Pound)192.6 (Pound)674.8 (Pound)572.9
------------ ------------ ------------
Financed by:
Creditors falling due after more than one year
Borrowings ........................................... 9 (Pound)14.5 (Pound)382.2 (Pound)398.9
Provisions for liabilities and charges ............... 58.2 44.4 59.1
------------ ------------ ------------
72.7 426.6 458.0
------------ ------------ ------------
Capital and reserves
Called up share capital .............................. 125.1 125.0 125.1
Share premium account ................................ 239.0 238.9 239.0
Profit and loss account .............................. (245.1) (116.8) (250.0)
------------ ------------ ------------
Equity shareholders' funds ........................... 10 119.0 247.1 114.1
------------ ------------ ------------
Equity minority interests ............................ 0.9 1.1 0.8
------------ ------------ ------------
(Pound)192.6 (Pound)674.8 (Pound)572.9
============ ============ ============
Group cash flow statement
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
Notes 2001 2000 2001
----- ------------ ----------- -------------
(Unaudited) (Unaudited)
(amounts in millions)
Net cash flow from operations before
exceptional items ............................. (Pounds) 2.3 (Pounds) 31.4 (Pounds) 120.8
Net cash flow effect of exceptional items ........ (11.2) -- (27.8)
-------------- ------------- ---------------
Net cash inflow/(outflow) from operating
activities .................................... (8.9) 31.4 93.0
-------------- ------------- --------------
Return on investments and servicing of finance
Interest paid .................................... (5.7) (10.2) (40.9)
-------------- ------------- --------------
Taxation
Overseas and U.K. tax paid ....................... (1.6) (1.6) (6.0)
-------------- ------------- --------------
Capital expenditure and financial investment
Payments to acquire tangible fixed assets ........ (2.8) (2.9) (23.7)
Receipts from sale of tangible fixed assets ...... 0.1 0.1 7.4
-------------- ------------- --------------
(2.7) (2.8) (16.3)
-------------- ------------- --------------
Acquisitions and disposals
Purchase of subsidiary undertakings and
minority interests ............................ -- (24.7) (25.8)
Disposal of subsidiary undertakings .............. 4 16.6 -- 98.6
-------------- ------------- --------------
16.6 (24.7) 72.8
-------------- ------------- --------------
Equity dividends paid ............................ -- -- (28.2)
-------------- ------------- --------------
Cash inflow/(outflow) before financing ........... (2.3) (7.9) 74.4
-------------- ------------- --------------
Financing
Issue of shares .................................. -- -- 0.2
Additional net borrowings ........................ -- -- 398.3
Term loan repayment .............................. -- -- (385.7)
Repayment of other loans ......................... (10.1) 16.3 (72.8)
Capital element of finance lease payments ........ (0.1) (0.1) (0.6)
-------------- ------------- --------------
(10.2) 16.2 (60.6)
-------------- ------------- --------------
Increase/(decrease) in cash in the period ........ (Pounds) (12.5) (Pounds) 8.3 (Pounds) 13.8
============== ============= ==============
Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from
operating activities
13 weeks to 29 December 2001 52 weeks to 29 September 2001
----------------------------------------- ---------------------------------------------
Before Effect of 13 weeks to Before Effect of
exceptional Exceptional 30 December exceptional exceptional
items items Total 2000 items items Total
------------ ------------ ------------ ------------ ------------ ------------- --------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(amounts in
millions)
Operating profit/
(loss) ................ (Pounds) 7.1 (Pounds) (2.4) (Pounds) 4.7 (Pounds) 10.8 (Pounds) 76.9 (Pounds)(167.5) (Pounds) (90.6)
Depreciation ............. 4.5 -- 4.5 6.3 22.7 -- 22.7
Amortisation of
goodwill .............. 5.0 -- 5.0 5.4 23.0 100.0 123.0
Gain on sale of tangible
fixed assets .......... -- -- -- -- (1.7) -- (1.7)
Provisions (net) ......... (0.3) (1.2) (1.5) (1.0) (6.0) 16.5 10.5
(Increase)/decrease in
stock ................. (1.2) -- (1.2) (8.4) 12.1 0.5 12.6
Decrease in debtors ...... 16.9 -- 16.9 33.3 10.7 -- 10.7
(Decrease)/increase in
creditors ............. (29.7) (7.6) (37.3) (15.0) (16.9) 22.7 5.8
------------ -------------- ------------- ------------- -------------- -------------- --------------
Net cash inflow/(outflow)
from operating
activities ............ (Pounds) 2.3 (Pounds) (11.2) (Pounds) (8.9) (Pounds) 31.4 (Pounds) 120.8 (Pounds) (27.8) (Pounds) 93.0
============ ============== ============= ============= ============== ============== ==============
Notes to the quarterly financial statements
1 Basis of Preparation
The accompanying condensed financial statements ("quarterly 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
13 weeks ended 29 December 2001 may not necessarily be indicative of the
operating results that may be incurred for the entire fiscal year.
The quarterly financial information has been prepared on the basis of the
accounting policies set out in the Group's financial statements for the year
ended 29 September 2001, with the exception that the results reflect the
adoption of FRS 19 "Deferred Tax" and the 29 September 2001 comparative figures
have been restated accordingly.
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 summarised in Note 14 to
the quarterly financial statements.
These quarterly financial statements should be read in conjunction with the
consolidated balance sheets of Enodis plc and its subsidiaries as of 29
September 2001 and 30 September 2000, and the related consolidated statements of
profit and loss account, cash flows, recognised gains and losses and movement in
equity shareholders' funds for each of the three years in the period ended 29
September 2001, all expressed in British pounds, as filed with the U.S.
Securities and Exchange Commission on Form 20-F.
2 Turnover
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
------------ ------------ --------------
(Unaudited) (Unaudited)
(amounts in millions)
Food Service Equipment--North America ............. (Pounds) 106.3 (Pounds) 110.6 (Pounds) 498.7
Food Service Equipment--Europe and Rest of World .. 36.9 40.7 185.4
Food Retail Equipment ............................. 46.7 47.7 203.1
-------------- -------------- ----------------
Food Equipment .................................... 189.9 199.0 887.2
Property .......................................... -- -- 16.6
-------------- -------------- ----------------
Continuing operations ............................. 189.9 199.0 903.8
Discontinued operations ........................... -- 61.3 177.3
-------------- -------------- ----------------
(Pounds) 189.9 (Pounds) 260.3 (Pounds) 1,081.1
============== ============== ================
In the 13 weeks to 29 December 2001, group turnover has benefited from
favourable exchange rates by approximately (pound)1.5 million compared to the 13
weeks to 30 December 2000.
Turnover from discontinued operations represents the building and consumer
products business sold in June 2001.
Notes to the quarterly financial statements (continued)
3 Operating profit/(loss)
13 weeks to 29 December 2001 52 weeks to 29 September 2001
------------------------------------------ -------------------------------------------
Before 13 weeks to Before
exceptional Exceptional 30 December exceptional Exceptional
items items Total 2000 items items Total
----------- ------------ ----------- ------------ ------------ ------------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(amounts in millions)
Food Service Equipment--
North America ........... (Pounds)9.8 (Pounds)-- (Pounds)9.8 (Pounds)10.1 (Pounds)62.6 (Pounds)(25.6) (Pounds)37.0
Food Service
Equipment--Europe and
Rest of the World ....... 2.7 (1.3) 1.4 3.2 17.7 (5.2) 12.5
Food Retail Equipment ..... 1.7 (1.1) 0.6 2.4 10.4 (12.6) (2.2)
----------- ------------ ---------- ----------- ----------- ------------- ------------
14.2 (2.4) 11.8 15.7 90.7 (43.4) 47.3
Food Equipment goodwill
amortisation/impairment . (5.0) -- (5.0) (5.4) (23.0) (100.0) (123.0)
----------- ------------ ---------- ----------- ----------- ------------- ------------
Food Equipment ............ 9.2 (2.4) 6.8 10.3 67.7 (143.4) (75.7)
Property .................. -- -- -- -- 9.0 -- 9.0
Corporate costs ........... (2.1) -- (2.1) (2.0) (8.9) (24.1) (33.0)
----------- ------------ ---------- ----------- ----------- ------------- ------------
Continuing operations ..... 7.1 (2.4) 4.7 8.3 67.8 (167.5) (99.7)
Discontinued operations ... -- -- -- 2.5 9.1 -- 9.1
----------- ------------ ---------- ----------- ----------- ------------- ------------
(Pounds)7.1 (Pounds)(2.4) (Pounds)4.7 (Pounds)10.8 (Pounds)76.9 (Pounds)(167.5) (Pounds)(90.6)
=========== ============ ========== =========== =========== ============= ============
In the 13 weeks to 29 December 2001, Group operating profit has benefited from
favourable exchange rates by (Pounds)0.1 million compared to the 13 weeks to 30
December 2000.
Operating profit from discontinued operations represents the building and
consumer products business sold in June 2001.
4 Exceptional items
(a) Operating exceptional items
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
----------- ---------- -------------
(Unaudited) (Unaudited)
(amounts in millions)
Restructuring costs ............................................. (Pounds)2.4 (Pounds)-- (Pounds)33.1
Revisions to working capital provisions and other exceptional
warranty costs ............................................... -- -- 13.7
Litigation costs ................................................ -- -- 12.2
Costs associated with the Board's review of strategic options ... -- -- 8.5
----------- ---------- -------------
2.4 -- 67.5
Goodwill impairment ............................................. -- -- 100.0
----------- ---------- -------------
Operating exceptional items ..................................... (Pounds)2.4 (Pounds)-- (Pounds)167.5
=========== ========== =============
Restructuring costs in the 13 weeks to 29 December 2001 principally represent
costs associated with rationalising 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 13 December 2001, the Group disposed of Sammic SA and its subsidiary
undertakings for consideration of (pound)20 million realising a provisional
profit on disposal of (pound)2.7 million after costs. The net cash proceeds
of (pound)18.7 million have been used to repay debt.
Notes to the quarterly financial statements (continued)
During the period, (Pounds)2.1 million was paid to Nobia AB, the acquirers of
the building and consumer products business in respect of the value of net
assets transferred.
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
------------- ------------ --------------
(Unaudited) (Unaudited)
(amounts in millions)
Net cash flow from the disposal of Sammic SA ................. (Pounds)18.7 (Pounds)-- (Pounds)--
(Payment to Nobia AB)/net cash flow from the disposal
of Magnet ................................................. (2.1) -- 98.6
------------- ------------ --------------
Net cash flow from disposals ................................. (Pounds)16.6 (Pounds)-- (Pounds)98.6
============= ============ ==============
(c) Net interest payable and similar charges
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
------------- ------------ --------------
(Unaudited) (Unaudited)
(amounts in millions)
Deferred financing fees written off .......................... (Pounds)4.1 (Pounds)-- (Pounds)5.8
============= ============ ==============
5 Taxation
(a) Analysis of charge in period
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
------------- ------------ --------------
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
The tax charge comprised:
U.K. taxation at 30% ......................................... (Pounds)-- (Pounds)-- (Pounds)--
Foreign taxation ............................................. 0.7 0.8 8.6
------------- ------------ --------------
0.7 0.8 8.6
Tax relief on exceptional items .............................. -- -- (2.0)
------------- ------------ --------------
0.7 0.8 6.6
Deferred taxation--origination and reversal of timing
differences ............................................... (0.1) 0.5 4.8
------------- ------------ --------------
(Pounds)0.6 (Pounds)1.3 (Pounds)11.4
============= ============ ==============
(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.
29 September
2001
---------------
(Restated)
(amounts in
millions)
Deferred tax provision as previously reported .................................. (Pounds) --
Adjustment to recognise deferred tax in respect of timing differences .......... 26.9
---------------
Deferred tax asset as restated ................................................. (Pounds)26.9
===============
Notes to the quarterly financial statements (continued)
(d) Analysis of deferred tax asset
29 December 30 December 29 September
2001 2000 2001
-------------- --------------- ---------------
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
U.S. Revenue Losses .................................................. (Pounds)13.0 (Pounds)14.4 (Pounds)12.7
Warranties ........................................................... 8.2 8.2 8.2
Pension and SERP related reserves .................................... 4.1 3.2 4.0
Accrued compensation related items ................................... 3.2 0.3 3.2
Other short term timing differences .................................. 6.6 14.8 6.8
-------------- --------------- ---------------
35.1 40.9 34.9
Accelerated capital allowances ....................................... (8.1) (9.6) (8.0)
-------------- --------------- ---------------
(Pounds)27.0 (Pounds)31.3 (Pounds)26.9
============== =============== ===============
A deferred tax asset has only been recognised in respect of those losses where
there is sufficient certainty that they will be utilised within the immediate
future.
6 Equity dividends
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
-------------- --------------- ---------------
(Unaudited) (Unaudited)
(amounts in millions)
Interim and final dividend ........................................... (Pounds)-- (Pounds)-- (Pounds)4.8
Interim and final dividend (net per ordinary share) .................. --p --p 2.0p
============== =============== ===============
7 Earnings/(loss) per share
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
-------------- --------------- ---------------
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
Basic and diluted loss attributable to shareholders .................. (Pounds)(4.4) (Pounds)(0.5) (Pounds)(120.7)
-------------- --------------- ---------------
Basic weighted average number of shares .............................. 249.0 248.8 248.9
Employee share options ............................................... -- 0.5 0.1
Share save ........................................................... -- 0.4 0.2
============== =============== ===============
Diluted weighted average number of shares ............................ 249.0 249.7 249.2
Basic loss per share ................................................. (1.8)p (0.2)p (48.5)p
Effect per share of exceptional items ................................ 1.5p --p 19.2p
Effect per share of goodwill amortisation and impairment ............. 2.0p 2.2p 49.4p
-------------- --------------- ---------------
Adjusted basic earnings per share .................................... 1.7p 2.0p 20.1p
-------------- --------------- ---------------
Diluted loss per share ............................................... (1.8)p (0.2)p (48.4)p
Effect per share of exceptional items ................................ 1.5p --p 19.2p
Effect per share of goodwill amortisation and impairment ............. 2.0p 2.2p 49.3p
-------------- --------------- ---------------
Adjusted diluted earnings per share .................................. 1.7p 2.0p 20.1p
============== =============== ===============
Notes to the quarterly financial statements (continued)
8 Stocks
29 December 30 December 29 September
2001 2000 2001
--------------- --------------- ---------------
(Unaudited) (Unaudited)
(amounts in millions)
Raw materials and consumables ........................................ (Pounds)40.6 (Pounds)54.5 (Pounds)42.2
Work in progress ..................................................... 14.6 16.9 15.7
Finished goods ....................................................... 37.7 83.8 36.4
--------------- --------------- ---------------
92.9 155.2 94.3
Property ............................................................. 12.5 10.9 11.3
--------------- --------------- ---------------
(Pounds)105.4 (Pounds)166.1 (Pounds)105.6
=============== =============== ===============
9 Borrowings
(a) On 20 February 2002, the Group announced new financing arrangements
including a proposed three for five underwritten rights issue, to refinance
the existing revolving multi-currency loan facility that commenced on 12
March 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 (pound)150 million to be repaid from the proceeds of the
proposed rights issue 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.
(b) Reconciliation of net debt to Balance Sheet
29 December 30 December 29 September
2001 2000 2001
--------------- --------------- ---------------
(Unaudited) (Unaudited)
(amounts in millions)
Cash at bank ......................................................... (Pounds)26.9 (Pounds)41.9 (Pounds)39.4
Current borrowing .................................................... (388.5) (93.7) (2.4)
Exclude current portion of deferred financing costs .................. -- (1.3) (1.1)
--------------- --------------- ---------------
Current net cash/(borrowings) ........................................ (361.6) (53.1) 35.9
Long term lease obligations .......................................... (0.3) (0.3) (1.2)
Long term debt ....................................................... (14.2) (381.9) (397.7)
Exclude long term portion of deferred finance ........................ -- (3.9) (2.9)
--------------- --------------- ---------------
Net debt at end of period ............................................ (Pounds)(376.1) (Pounds)(439.2) (Pounds)(365.9)
=============== =============== ===============
10 Equity shareholders' funds
(a) Following the implementation of FRS 19 (note 5), equity shareholders' funds
at 29 September 2001 have been restated as follows:
29 September 2001
---------------------
(Restated)
(amounts in millions)
Equity shareholders' funds as previously reported ..................................... (Pounds)87.2
Cumulative effect on profit and loss account reserve of implementing FRS 19 ........... 26.9
---------------------
Equity shareholders' funds as restated ................................................ (Pounds)114.1
=====================
(b) Movements on reserves during the period were as follows:
Share Share Profit and
capital premium loss Total
--------------- -------------- -------------- --------------
(amounts in millions)
At 29 September 2001 (Restated) ................................ (Pounds)125.1 (Pounds)239.0 (Pounds)(250.0) (Pounds)114.1
Loss for the period ............................................ -- -- (4.4) (4.4)
Goodwill written back on disposals previously written off ...... -- -- 10.4 10.4
Currency realignment ........................................... -- -- (1.1) (1.1)
--------------- -------------- -------------- --------------
At 29 December 2001 ............................................ (Pounds)125.1 (Pounds)239.0 (Pounds)(245.1) (Pounds)119.0
=============== ============== ============== ==============
Notes to the quarterly financial statements (continued)
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 13 weeks to 29 December 2001, the weighted average exchange rate for sales
and profit being (Pound)1 = $1.45. Results to 30 December 2000 were translated
at the rate of (Pound)1 = $1.46 and full year results to 29 September 2001 at
(Pound)1 = $1.44. The closing rate for the U.S. dollar at 29 December 2001 was
(Pound)1 = $1.45, at 30 December 2000 was (Pound)1 = $1.49 and at 29 September
2001 was (Pound)1 = $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 29
September 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 29 September 2001 have been restated to reflect the adoption of
FRS 19 "Deferred tax". The figures for the 13 week periods to 29 December 2001
and 30 December 2000 have been extracted from underlying accounting records and
have not been audited.
13 Events occurring after the end of the financial period
We have entered into new financing arrangements, and have announced a three for
five underwritten rights issue and a proposed offering of (Pounds)100 million of
long term fixed rate notes. The new financing arrangements include a bridge
facility of (Pounds)150 million, and a committed facility of $455 million
(comprised of a $370 million term loan and a $85 million revolving credit
facility). As a result of the new financing arrangements, we have written off
the deferred financing costs of (Pounds)4.1 million (note 4) relating to the
previous multi-currency loan facility. The net proceeds of the rights issue and
the issue of long term notes will be used to repay the bridge facility. The long
term fixed rate notes will be offered to institutional investors and it is a
requirement of this market that we present quarterly financial statements along
with a review of operating results consistent with those traditionally seen in
the U.S. We intend to continue this practice for future quarters.
14 U.S. GAAP reconciliation
29 December 30 December 29 September
2001 2000 2001
------------------------------------------------------
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
Net Loss
Net loss in accordance with U.K. GAAP (Pounds)(4.4) (Pounds)(0.5) (Pounds)(120.7)
Items (increasing)/decreasing operating loss under U.K.
GAAP
--Goodwill amortisation (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 (Pounds)(9.5) (Pounds)(4.4) (Pounds)(113.7)
============== =============== =================
Under U.K. GAAP, approximately (pound)385 million of borrowings have been
classified as falling due within one year at 29 December 2001 as such borrowings
were repayable within 12 months from 29 December 2001. Under U.S. GAAP,
(pound)385 million would be classified as long term as such borrowings have been
refinanced on a long term basis subsequent to 29 December 2001, but prior to
issuing these financial statements.
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. When
considering what action you should take, you should seek your own personal
financial advice immediately from your stockbroker, bank, solicitor, accountant,
fund manager or other appropriate financial adviser authorised under the
Financial Services and Markets Act 2000.
Credit Suisse First Boston, which is regulated in the U.K. by the
Financial Services Authority, is acting for Enodis plc and for no-one else in
connection with the Rights Issue and will not be responsible to anyone other
than Enodis plc for providing the protections afforded to its clients or for
providing advice in relation to the Rights Issue or the contents of this
document or any matter referred to herein.
If you sell or have sold or otherwise transferred all of your Existing
Ordinary Shares (other than ex-rights) in certificated form before 19 March 2002
(the "ex-rights date"), please send this document, together with any
accompanying Form of Appointment of Proxy, at once to the purchaser or
transferee or to the bank, stockbroker or other agent through whom you sell or
transfer or have sold or transferred your Existing Ordinary Shares for delivery
to the purchaser or transferee. Neither this document nor the Provisional
Allotment Letter should be forwarded to or transmitted in or into the United
States, Canada, Japan, France, Australia, South Africa, Singapore or the
Republic of Ireland. If your transferred Existing Ordinary Shares were held in
uncertificated form, a claim transaction will automatically be generated by
CRESTCo which, on settlement, will transfer the appropriate number of Nil Paid
Rights to the purchaser or transferee.
The distribution of this document and/or the accompanying documents,
and/or the transfer of Nil Paid Rights or Fully Paid Rights through CREST in
jurisdictions other than the U.K. may be restricted by law and therefore persons
into whose possession this document comes should inform themselves about and
observe any of those restrictions. Any failure to comply with any of those
restrictions may constitute a violation of the securities laws of any such
jurisdiction.
A copy of this document, which comprises a prospectus relating to
Enodis plc prepared in accordance with the listing rules made under section
74(4) of the Financial Services and Markets Act 2000, has been delivered to the
Registrar of Companies in England and Wales for registration as required by
section 83 of that act.
Application has been made to the U.K. Listing Authority and to the
London Stock Exchange for the New Ordinary Shares to be admitted to the Official
List and to trading on the London Stock Exchange's market for listed securities
respectively. It is expected that admission will become effective and dealings
commence, nil paid, in the New Ordinary Shares at 8.00 a.m. on 19 March 2002.
----------
(Incorporated under the laws of England and Wales with registered no. 109849)
Proposed Rights Issue of up to
150,861,463 New Ordinary Shares at 50 pence per share
on a 3 for 5 basis to Qualifying Shareholders and
New Financing Arrangements
----------
The latest time and date for acceptance of the Rights Issue is expected
to be 10.30 a.m. on 8 April 2002.
Your attention is drawn to the letter of recommendation from the
Chairman of Enodis plc which appears in Part I of this document.
In addition to this document, subject to the passing of the
Resolutions, qualifying non-CREST Shareholders will be sent a Provisional
Allotment Letter on 18 March 2002. Qualifying CREST Shareholders (none of whom
will receive a Provisional Allotment Letter) are expected to receive a credit to
their appropriate stock accounts in CREST in respect of the Nil Paid Rights to
which they are entitled on 19 March 2002. The Nil Paid Rights so credited are
expected to be enabled for settlement by CRESTCo as soon as practicable after
admission of the New Ordinary Shares to the Official List has become effective.
Qualifying CREST Shareholders who are CREST sponsored members should refer to
their CREST sponsors regarding the action to be taken in connection with this
document and the Rights Issue.
None of the Nil Paid Rights, the Fully Paid Rights, the New Ordinary
Shares or the Provisional Allotment Letters have been or will be registered
under the U.S. Securities Act of 1933, as amended, or under the applicable
securities laws of any state of the U.S., any province or territory of Canada,
Japan, France, Australia, South Africa, Singapore or the Republic of Ireland.
Neither the New Ordinary Shares nor the Provisional Allotment Letters may,
subject to certain exceptions, be offered, sold, taken up, transferred,
renounced or delivered, directly or indirectly, within the United States,
Canada, Japan, France, Australia, South Africa, Singapore or the Republic of
Ireland, or their respective territories or possessions. Further details in this
regard are contained in Part III of this document at paragraph 5.
Holdings of Ordinary Shares in certificated and uncertificated form
will be treated as separate holdings for the purpose of calculating entitlements
under the Rights Issue.
Qualifying non-CREST Shareholders should retain this document for
reference pending receipt of a Provisional Allotment Letter. Qualifying CREST
Shareholders should note that they will receive no further written communication
from the Company in respect of the Rights Issue. They should accordingly retain
this document for, amongst other things, details of the action they should take
in respect of the Rights Issue.
Notice of an Extraordinary General Meeting of Enodis plc, to be held at
the Westbury Hotel, Bond Street, London W1S 2YF at 10.00 a.m. on 18 March 2002,
is set out at the end of this document. A Form of Appointment of Proxy for use
at the Extraordinary General Meeting is enclosed and, to be valid, should be
completed in accordance with the instructions printed thereon and returned as
soon as possible, but in any event so as to be received by the Company's
Registrars, Computershare Investor Services PLC, PO Box 1075, The Pavilions,
Bridgwater Road, Bristol, BS99 3FA not later than 10.00 a.m. on 16 March 2002.
--------
CONTENTS
Page
Expected Timetable of Principal Events................................................................................. 4
Part I Letter from the Chairman of Enodis......................................................................... 5
Part Ii Information About the Company and Financial Information Comprising Extracts From the Form 20-F............. 12
Part Iii Information Relating to the Rights Issue................................................................... 115
Part Iv Announcement of Quarterly Results for the 13 Weeks Ended 29 December 2001.................................. 127
Part V Unaudited Pro Forma Statement of Net Assets................................................................ 142
Part Vi Additional Information..................................................................................... 144
Part Vii Definitions................................................................................................ 163
Notice of Extraordinary General Meeting................................................................................ 166
--------
Cautionary statement regarding the United States
This document does not constitute an offer of securities for sale in
the United States or to U.S. Persons. None of the Nil Paid Rights, the Fully
Paid Rights, the New Ordinary Shares, the Provisional Allotment Letters nor the
Notes described in this document have been registered under the United States
Securities Act of 1933, as amended, and none of the Nil Paid Rights, the Fully
Paid Rights, the New Ordinary Shares, the Provisional Allotment Letters nor the
Notes may be offered or sold in the United States or to U.S. Persons absent
registration or an applicable exemption from registration requirements.
Cautionary statement regarding forward-looking statements
This document contains "forward-looking" statements. Forward-looking
statements include, among others, statements concerning:
. the anticipated growth of the demand for the Group's products,
. plans to devote significant management time and capital
resources to business strategy,
. the Group's ability to successfully implement its business
strategy,
. the Group's future capital needs,
. the Board's expectations with respect to changes in general
economic and business conditions,
. the Group's 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 the Group's business,
operations and financial performance and condition.
The words "believe", "anticipate", "aim", "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" set out in Part II of this
document.
Forward-looking statements should not be relied upon to the same degree
as historical statements because they reflect the Board's judgment at the date
of this document. Forward-looking statements are not intended to give any
assurances as to future results. Save as
required by law or the Listing Rules, the Company will not normally publicly
release any revisions it may make to these forward-looking statements that may
result from events or circumstances arising after the date of this document or
otherwise.
Currencies
Unless otherwise indicated or otherwise required by the context, all
references in this document to "British pounds sterling", "pounds sterling",
"sterling", "pounds" or "(Pounds)" 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.
Financial Information
The financial information set out in this document relating to the
Group does not constitute statutory accounts of the Group within the meaning of
Section 240 of the Act. The auditors of the Company, Deloitte & Touche
(Chartered Accountants and registered auditors) of Hill House, 1 Little New
Street, London EC4A 3TR have audited and reported on the annual accounts of the
Group for the three financial years ended 2 October 1999, 30 September 2000 and
29 September 2001, respectively, within the meaning of section 235 of the Act.
Each such report was unqualified and did not contain a statement under section
238(2) or (3) of the Act. Statutory accounts for the Group for each of such
financial years have been delivered to the Registrar of Companies in England and
Wales pursuant to section 242 of the Act.
The Company reports its financial results on a 52-53 week financial
year ending on the Saturday nearest to 30 September. The financial years ended
in 1998, 2000 and 2001 contained 52 weeks. The financial year ended in 1999
contained 53 weeks.
Other Data
Certain numerical figures included in this document 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.
Further Information
The information set out in Part II of this document comprises extracts
from the Company's Annual Report on Form 20-F dated 21 February 2002 and filed
with the United States Securities and Exchange Commission. This includes, inter
alia, information on the Group's business and strategy, a review of its
financial results and certain risk factors relating to the Group. The extracts
from the Form 20-F provide information which may be relevant to a Shareholder's
decision to vote in favour of the Resolutions or to take up rights under the
Rights Issue.
Shareholders are advised to read the document in whole and not to rely
on any summary information.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for the Rights Issue........................................................... 11 March 2002
Latest time for receipt of Forms of Appointment of Proxy for the Extraordinary General
Meeting................................................................................. 10:00 a.m. on 16 March 2002
Extraordinary General Meeting.............................................................. 10:00 a.m. on 18 March 2002
Despatch of Provisional Allotment Letters (to Qualifying non-CREST Shareholders only)...... 18 March 2002
Dealings in New Ordinary Shares, nil paid, commence on the London Stock Exchange........... 19 March 2002
Nil Paid Rights and Fully Paid Rights enabled in CREST..................................... 19 March 2002
Recommended latest time and date for requesting withdrawal of Nil Paid Rights from CREST
(i.e. if your Nil Paid Rights are in CREST and you wish to convert them into
certificated form)...................................................................... 4:30 p.m. on 28 March 2002
Latest time for depositing renounced Provisional Allotment Letters, nil paid (or fully
paid), into CREST or for dematerialising Nil Paid Rights into a CREST stock account..... 3:00 p.m. on 3 April 2002
Latest time and date for splitting Provisional Allotment Letters, nil paid (or fully paid). 3:00 p.m. on 4 April 2002
Latest time and date for acceptance, payment in full and registration of renunciation...... 10:30 a.m. on 8 April 2002
Dealings in New Ordinary Shares, fully paid, commence on the London Stock Exchange......... by 8:00 a.m. on 9 April 2002
New Ordinary Shares credited to CREST stock accounts....................................... 9 April 2002
Expected despatch of definitive share certificates for New Ordinary Shares................. by 11 April 2002
-----------
Notes:
(1) The dates set out in the expected timetable of principal events above
and mentioned throughout this document and in the Provisional Allotment
Letters may be adjusted by Enodis, in which event, details of the new
dates will be notified to the U.K. Listing Authority and to the London
Stock Exchange and, where appropriate, Shareholders.
(2) References in this document are to London time unless otherwise stated.
PART I: LETTER FROM THE CHAIRMAN
Directors:
P.M. Brooks (Chairman (Non-executive))
A.J. Allner (Chief Executive Officer)
D.S. McCulloch (President Global Food Service Equipment Group)
D.W. Odum (President Food Retail Equipment Group)
G.E. Morris (Non-executive)
R.E. Briggs (Non-executive)
W. Schmidt (Non-executive)
To Shareholders and, for information purposes only, to participants in
the Employee Share Schemes.
21 February 2002
Dear Shareholder,
Proposed Rights Issue of up to 150,861,463 New Ordinary Shares at
50 pence per share, on a 3 for 5 basis to Qualifying Shareholders,
New Financing Arrangements and
Unaudited Results for the 13 Weeks Ended 29 December 2001
Introduction
The Group has a high level of debt, principally arising from
acquisitions in the last three years. With the recent downturn in the Group's
end markets and the current economic uncertainty, your Board has been
considering a number of financing alternatives to achieve a more appropriate
capital structure for the Group. After careful consideration and consultation
with its advisers, your Board has announced New Financing Arrangements which it
believes will leave the Group better positioned for a market recovery when it
comes. These financing arrangements include a Rights Issue of up to 150,861,463
New Ordinary Shares at 50 pence per share on the basis of 3 New Ordinary Shares
for every 5 Existing Ordinary Shares held on the Record Date to raise
approximately (Pounds)71.5 million, after the expenses of the Rights Issue. The
Rights Issue has been fully underwritten by Credit Suisse First Boston.
In addition, the Board has announced the replacement of the Company's
credit facilities with the New Credit Facilities and the anticipated raising of
(Pounds)100 million, before expenses, through the issue of long term fixed rate
Notes in the institutional market.
The directors believe that together the above arrangements will create
a more appropriate capital structure, which should improve the financial
stability of the Group and enable it to pursue more effectively its key
objective to restore shareholder value.
The purpose of this document is to provide you with details of the
Rights Issue and the New Credit Facilities which the Group has entered into, and
to explain why the directors believe that the Rights Issue is in the best
interests of Shareholders. The document also contains the Group's unaudited
results for the thirteen weeks ended 29 December 2001.
In order to proceed with the Rights Issue, the Company needs to pass
resolutions to increase its authorised share capital, to grant the directors
authority to allot shares and to disapply statutory pre-emption rights.
Accordingly, set out at the end of this document is a notice convening an
extraordinary general meeting to be held at 10.00 a.m. on 18 March 2002 to pass
such resolutions.
Shareholders should note that unless they approve the Resolutions the
Rights Issue will not proceed and the proposed issue of Notes may not proceed,
or may proceed on terms that are materially different from those currently
anticipated.
Background to the New Financing Arrangements
Enodis entered the food service equipment market in 1995 with the
acquisition of Welbilt Corporation, and developed a strategy of becoming one of
the world's leading manufacturers and distributors of a broad range of branded
commercial food equipment to quick service and full service restaurants, hotels
and institutions and other customers in key markets globally. This strategy was
implemented by a series of complementary acquisitions, the largest of which was
the purchase of Scotsman Industries, Inc. in 1999 for a total consideration of
$791.5 million including assumed debt.
In March 2001, the Group entered into a new credit facility, with the
expectation that a loan syndication would follow. However, as a result of the
downturn in economic conditions, senior Enodis management changes and the
Group's strategic review undertaken in the Summer of 2001, the syndication was
not completed.
The Company has concluded, based on advice received, that a syndication
could only have been achieved if the amount of senior debt was reduced by a much
larger offering of long term fixed rate notes than is contemplated under the New
Financing Arrangements. The costs associated with these notes would have
constituted a severe additional financial burden on the business in already
challenging economic circumstances, and indications were that the issuance of
such notes would have resulted in a substantially greater part of the Group's
free cash flow being used to service debt. In addition, once the Group had
achieved its planned reduction in net debt to more prudent levels, a
substantially higher proportion of the net debt remaining would have been
expensive long term debt with significant early redemption penalties.
The Board believes that the Enodis share price has been significantly
impacted by the perceived financial uncertainty facing the Group given its
current capital structure.
Strategy
Your Board's primary objectives are to restore shareholder value and
reduce debt. As one of the world's leading manufacturers and distributors of
food service equipment globally, we intend to establish Enodis as clearly the
world's leading supplier of commercial food service equipment through product,
distribution and service excellence. The key elements of our strategy are to:
. exploit and develop our broad portfolio of leading food
service products and strong brands;
. capitalise on technological leadership and new product
development capabilities;
. partner with dealers, distributors and sales representatives
to increase market share; and
. improve operating efficiency through, among other things, cost
reduction and restructuring.
In addition, we are seeking to improve the performance of our food
retail equipment business and divest non-core businesses in both the food retail
equipment and global food service equipment businesses.
Since March 2001, when Andrew Allner was appointed leader of the
executive team, significant progress has been made in implementing this
strategy. The Group has achieved substantial cost savings through a range of
measures including headcount reduction amounting to approximately 10 per cent.
of the Group's workforce, the closure of five manufacturing plants and
discretionary cost control. 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 per cent. in the
first half of the 2001 financial year to 13.3 per cent. in the second half of
the 2001 financial year. Importantly, from a strategic viewpoint, we also made
significant progress in improving our relationships with our distribution
network, enhancing our performance with major buying groups and introducing a
large number of innovative new products.
The sale of the Group's building and consumer products business,
Magnet, in June 2001, and of Sammic, our Spanish food service equipment
business, in December 2001, has enabled us to reduce debt by approximately
(Pounds)120 million. The Board is pursuing the disposal of other non-core
businesses and assets.
Despite the significant progress described above, the current
outstanding amount of debt and the associated future servicing costs are higher
than the Board considers acceptable, particularly in the current economic
environment.
Reasons for the New Financing Arrangements
Long term growth trends in food service in the U.S. over the last 30
years show growth driven by changes in consumer lifestyles with an increasing
proportion of food and beverage consumed outside the home, resulting in new
restaurant openings. A recent National
Restaurant Association survey in the U.S. predicts this trend will continue with
substantial growth to 2010.
Despite the severe decline in the Group's end markets brought about by
the current adverse economic circumstances, the Board believes that the long
term characteristics of the food service equipment industry remain attractive,
reflecting the positive long term trends in the food service industry. The Board
also believes that Enodis has a number of competitive advantages in its
industry, including:
. a broad portfolio of leading food service products and strong
brands;
. technical expertise and new product development capabilities;
. global food service equipment coverage;
. global service and parts distribution capabilities; and
. a strong and diversified customer base.
The Board believes that the Group's current capital structure does not
provide it with the financial stability to capitalise fully on these advantages.
As discussed above, the Company has concluded, based on advice received, that a
syndication of its March 2001 credit facility could only have been achieved if
the amount of senior debt was reduced by a much larger offering of long term
fixed rate notes than is contemplated under the New Financing Arrangements. The
costs associated with these notes would have significantly increased the Group's
long term cost of debt, and indications were that the issuance of such notes
would have resulted in a substantially greater part of the Group's free cash
flow being used to service debt. We estimate that under the New Financing
Arrangements the Group's annual interest costs, assuming the issue of the Notes
proceeds on the terms currently expected, would be in the order of (Pounds)10
million lower than could reasonably have been anticipated under the most likely
alternative financing option.
Your Board has carefully reviewed, with its financial advisers, a wide
range of options for the most appropriate financing of the Group's operations.
It has concluded that Shareholders' interests would be best served by entering
into the New Credit Facilities, raising new equity through the Rights Issue and
raising long term debt through an offering of Notes. Following these
transactions:
(i) approximately (Pounds)71.5 million of net proceeds will have been
received from the Rights Issue;
(ii) approximately (Pounds)100 million of the Group's debt will be long term
fixed rate Notes, structurally subordinated to the New Credit
Facilities and without the obligation to repay prior to maturity except
upon the occurrence of certain specified events; and
(iii) as a result of (i) and (ii) above, the Group will have been able to
secure a more appropriately structured and better priced senior credit
facility.
Details of fees and expenses payable in connection with the New
Financing Arrangements are set out in Part VI of this document at paragraph 11.
Principal Elements of the New Financing Arrangements
The Company signed agreements on 20 February 2002 with Credit Suisse
First Boston and The Royal Bank of Scotland plc that replace the Group's March
2001 credit facility and comprise the following:
(i) a bridge facility in the amount of(Pounds)150 million;
(ii) a term loan in the amount of approximately(Pounds)260 million ($370
million); and
(iii) a revolving credit facility in the amount of approximately (Pounds)60
million ($85 million).
The Company also signed the Underwriting Agreement on 20 February 2002
and expects the net proceeds of the Rights Issue to be approximately (Pounds)
71.5 million. The Company intends to use the net proceeds of the Rights Issue,
together with the net proceeds of the proposed issue of the Notes, to repay the
bridge facility, with any remaining proceeds used to repay senior debt.
The Rights Issue has been fully underwritten by Credit Suisse First
Boston in order to provide greater certainty as to the amount of proceeds that
will be raised in the Rights Issue and to enable the offering of Notes and the
senior credit syndication to proceed.
It is intended that the Notes will be offered to certain institutional
investors. The precise terms of the Notes will not be finalised until pricing of
the Notes, which is expected to occur following the passing of the Resolutions.
The issue and terms of the Notes are subject to market conditions and
as a result the Board cannot assure Shareholders that the Notes issue will be
completed. In addition, the issue of the Notes on the terms contemplated is
effectively dependent on completion of the Rights Issue. If the Rights Issue
does not proceed for any reason, there can be no guarantee that the Company will
be able to issue the Notes and, if it can, it may do so on terms which are
materially different from those which could be achieved if the Company had
strengthened its equity base through the Rights Issue.
If either the Rights Issue or the offering of the Notes does not
proceed for any reason, then the bridge facility, which matures in 2012, will
remain outstanding in whole or in part. Further details of the bridge facility
are set out in Part VI of this document at paragraph 7(c).
The Rights Issue is not conditional on the offering of the Notes.
Financial effects of the Rights Issue
Part V of this document contains a pro forma statement of the net
assets of the Group as at 29 December 2001, as adjusted for the Rights Issue and
the New Credit Facilities.
Current Trading and Prospects
The Group yesterday announced its unaudited results for the 13 weeks
ended 29 December 2001, which are set out in Part IV of this document, the
financial highlights of which are set out below. Assuming that the Notes are
issued, the Group will adopt a policy of reporting its results quarterly in
future.
The results for the first quarter of the financial year ending 28
September 2002 reflect the more difficult trading conditions in our key markets,
partly offset by the benefits of the cost reduction actions that we have
previously announced. Food equipment operating profit before exceptional items
and goodwill amortisation was (Pounds)14.2 million compared to (Pounds)15.7
million for the first quarter of the previous financial year. This was in line
with our expectations at the time of the preliminary announcement of the results
made in November 2001.
As we indicated in our preliminary results announcement in November
2001, we expected a further significant decline in the food service equipment
markets, especially in North America. Whilst sales held up relatively well in
October and November, a further decline in sales became apparent in December. As
previously anticipated, this decline is therefore expected to have a greater
impact on our results for the second quarter of the financial year ending 28
September 2002 as compared to the first quarter.
The duration of this difficult climate cannot be predicted, but the
Board has based its plans on the assumption that it will continue at least
through to the end of the current financial year. As previously announced the
Board plans to address the situation by taking action to reduce costs further,
targeting further cost savings of some (Pounds)10 million for the current
financial year through strategic headcount reductions, discretionary cost
savings, leveraging purchasing power and ongoing manufacturing restructuring.
These cost savings are in addition to the full year benefits of fixed and
headcount cost savings implemented in the second half of the financial year
ended 29 September 2001. The Company estimates exceptional costs of some
(Pounds)6 million in the financial year ending 28 September 2002 relating to
these actions.
The Company is also pursuing market share gain opportunities to improve
top line performance. The directors believe that the Group's scale, broad
product range, technology, and industry relationships position the Company well
to achieve this.
The Board believes, despite the severe decline in the Group's end
markets brought about by the current adverse economic circumstances, that the
long term characteristics of the food service equipment industry remain
attractive.
Management results for January 2002 are slightly ahead of our
expectations at the time of the Annual General Meeting, and our expectations for
full year operating profits remain unchanged from the time of our preliminary
results announcement in November. Compared to the first half of the current
financial year, results for the second half are expected to benefit from
seasonality and management actions including cost savings, market share gain
initiatives and new product development.
The Group is 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 our 2001
financial year, Kysor Warren has operated at a profit (exclusive of exceptional
costs and amortisation). However, Kysor Warren, along with its competitors, has
been adversely impacted by difficult market conditions. The unaudited results of
this operation for the first quarter of the financial year ending 28 September
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
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 a potential impairment, if
any, cannot be reasonably
estimated at this time. As at 29 December 2001 the carrying value of goodwill
relating to Kysor Warren was approximately (Pounds)50 million.
Dividend Policy
In light of the downturn in the Group's end markets and uncertain
economic conditions, the 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 29 September 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 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 Group results. However, as a result of the losses
recognised on this transfer, the Company does not currently have sufficient
distributable reserves to lawfully make dividend payments.
As and when the Board determines to resume dividend payments, the
Company will seek to take the steps necessary to enable it to increase its
distributable reserves so that it is able to lawfully pay dividends. Any such
action is likely to require the approval of Shareholders and the High Court. In
addition, the Company's ability to make future dividend payments will depend on
its profit and cash flow performance and the need to comply with the terms of
the New Credit Facilities and the proposed Notes.
The Board believes that the New Financing Arrangements will enable an
earlier resumption of dividend payments than would otherwise have been the case.
Principal terms and conditions of the Rights Issue
Subject to the satisfaction of the conditions referred to below, up to
150,861,463 New Ordinary Shares will be provisionally allotted by way of rights
to raise approximately (Pounds)71.5 million, after expenses. The Issue Price of
50 pence per New Ordinary Share represents a 46.2 per cent. discount to the
closing middle market price of 93.0 pence per Ordinary Share on 19 February
2002, the last practicable date before the announcement of the Rights Issue.
Qualifying Shareholders are being offered New Ordinary Shares at a
price of 50 pence per New Ordinary Share on the following basis:
3 New Ordinary Shares for every 5 Existing Ordinary Shares
held at the close of business on 11 March 2002 and so in proportion for any
other number of Existing Ordinary Shares then held. The rights to fractional
entitlements to New Ordinary Shares will not be allotted to Qualifying
Shareholders. Entitlements to fractions will be aggregated and sold in the
market for the benefit of the Company.
The Rights Issue is conditional upon:
(i) the passing of the Resolutions;
(ii) the Underwriting Agreement (a summary of which is contained in Part VI
of this document at paragraph 7(a)) having become unconditional in all
respects (save for the condition relating to Admission) and not having
been terminated in accordance with its terms; and
(iii) Admission having occurred by not later than 10.00 a.m. on 19 March 2002
(or such later time and/or date as Credit Suisse First Boston and the
Company may agree).
The New Ordinary Shares, when issued and fully paid, will rank pari
passu in all respects with the Existing Ordinary Shares including the right to
receive all dividends or other distributions made or paid thereafter. The Rights
Issue has been underwritten in full by Credit Suisse First Boston.
Since outstanding options may be exercised before the Record Date for
the Rights Issue, the precise number of shares to be issued in the Rights Issue
cannot be determined until that date. Assuming no options are exercised prior to
the Record Date, 150,174,595 New Ordinary Shares will be issued. However, if
outstanding options are exercised, up to 686,868 additional New Ordinary Shares
will be issued.
Intentions of directors
Those directors who are Qualifying Shareholders hold in aggregate
46,800 Ordinary Shares (representing less than 1 per cent. of the Existing
Ordinary Shares of the Company) and intend to take up rights in respect of
28,080 New Ordinary Shares. Directors who hold Ordinary Shares in the form of
Enodis ADSs are not entitled to take up rights, as discussed in Part III of this
document at paragraph 5.
Employee Share Schemes
In accordance with the rules of the Employee Share Schemes, other than
the 1993 Executive Scheme, the directors intend to make adjustments to the terms
of the options granted to take account of the Rights Issue. The options under
the 1993 Executive Scheme were granted by the trustees of the Employee Share
Trust (the "Trustees") and the Company will recommend to the Trustees that they
make adjustments to the terms of the options granted to take account of the
Rights Issue. Such adjustments will, where necessary, be subject to a written
certificate from the auditors of the Company that such adjustments are in their
opinion fair and reasonable and also, where necessary, to the prior approval of
the Inland Revenue.
In order to comply with U.S. requirements, each of the 2001 Executive
Share Option Scheme (the "2001 Scheme") and the Employee Stock Purchase Plan
(the "Purchase Plan") contains numerical limits on the number of Ordinary Shares
and the number of Enodis ADSs that may be issued as a result of options granted
under them. In line with the increase to the Company's issued share capital as a
result of the Rights Issue, it is proposed to increase the numerical limit in
the Purchase Plan from 12,000,000 to 19,200,000 in relation to Ordinary Shares
and from 3,000,000 to 4,800,000 in relation to Enodis ADSs. At the Company's
annual general meeting on 16 January 2002, the limit preventing more than 5 per
cent. of the Company's issued ordinary share capital being available for
executive incentives in any 10 year period under the 2001 Scheme was removed.
The only remaining limit is that no more than 10 per cent. of the ordinary share
capital of the Company may be issued on the exercise of options granted in any
10 year period under any employees' share scheme adopted by the Company. In
order to allow for the whole of the 10 per cent. to be used for the purposes of
the 2001 Scheme, if it were thought appropriate, it is proposed that the
numerical limit in the 2001 Scheme be increased from 19,000,000 to 40,050,000.
The above changes would not affect the current overall anti-dilution protection
for Shareholders.
These proposed changes to the numerical limits on the number of
Ordinary Shares that may be issued under the 2001 Scheme and the Purchase Plan
may only be effected with the approval of Shareholders by ordinary resolution.
Resolutions to propose these changes, which will be conditional on the Rights
Issue proceeding, are set out in the Notice of EGM at the end of this document.
Details of outstanding grants of options and commitments to grant
options are set out in Part VI of this document at paragraph 9. The Board
believes strongly that it is in the Shareholders' interests that management
should be appropriately incentivised through equity related rewards and intends
to make further grants of options to Messrs Allner, McCulloch and Odum and key
management as soon as practicable following the Extraordinary General Meeting.
Details of the intended further grants are set out in Part VI of this document
at paragraph 3(d).
Overseas Shareholders
The attention of Qualifying Shareholders who have registered addresses
outside the United Kingdom or who are citizens, residents or nationals of
countries other than the United Kingdom is drawn to Part III of this document at
paragraph 5.
Taxation
Information on U.K. taxation with regard to the Rights Issue is set out
in Part III of this document at paragraph 4. This information is intended only
as a general guide to the current U.K. tax position. If you are in any doubt as
to your tax position, or are subject to tax in a jurisdiction other than the
U.K., you should consult your own independent professional adviser without
delay.
Further information
Your attention is drawn to the further information set out in Parts I
to VI of this document. Part II comprises extracts from the Company's Annual
Report on Form 20-F as filed with the U.S. Securities and Exchange Commission
today. This includes, among other things, information on the Group's business
and strategy, a review of its financial results and certain risk factors
relating to the Group. The extracts from the Form 20-F dated 21 February 2002
and filed with the U.S. Securities and Exchange Commission are included in this
document to give Shareholders further information about the Group, in order that
they may take this into account in voting on the Resolutions and in deciding
whether to take up their rights under the Rights Issue.
Extraordinary General Meeting
At the end of this document is a notice of the Extraordinary General
Meeting to be held at the Westbury Hotel, Bond Street, London W1S 2YF at 10.00
a.m. on 18 March 2002, at which resolutions necessary to increase the Company's
authorised share capital, to
grant the directors authority to allot shares and to disapply statutory
pre-emption rights in relation to the Rights Issue will be put to the
Shareholders for approval. These resolutions are necessary to implement the
Rights Issue.
In addition, resolutions to amend the number of shares that may be
issued under some of the Company's Employee Share Schemes will be proposed.
These resolutions are described above and will be conditional upon the Rights
Issue proceeding.
Action to be taken
You will find enclosed a Form of Appointment of Proxy for use in
relation to the EGM. Whether or not you intend to be present in person at the
EGM, you are requested to complete, sign and return the Form of Appointment of
Proxy by post or by hand to the Company's Registrar, Computershare Investor
Services PLC, PO Box 1075, The Pavilions, Bridgwater Road, Bristol, BS99 3FA as
soon as possible, but in any event so as to arrive by no later than 10.00 a.m.
on 16 March 2002. Completion and return of the Form of Appointment of Proxy will
not preclude you from attending the EGM and voting in person should you wish to
do so.
You are not required to take any action at present in respect of the
Rights Issue. It is intended that if the Resolutions are passed at the
Extraordinary General Meeting:
(i) if you are a Qualifying non-CREST Shareholder (unless you have a
registered address in, or are resident in, the U.S., Canada, Japan,
France, Australia, South Africa, Singapore or the Republic of Ireland)
you will be sent a Provisional Allotment Letter giving details of your
entitlements to New Ordinary Shares by post on 18 March 2002; and
(ii) if you are a Qualifying CREST Shareholder (unless you have a registered
address in, or are resident in, the U.S., Canada, Japan, France,
Australia, South Africa, Singapore or the Republic of Ireland) your
CREST stock account will be credited with your entitlement to Nil Paid
Rights on 19 March 2002.
Please see Part III of this document at paragraph 2 for further
details.
If you sell or have sold or otherwise transferred all of your Existing
Ordinary Shares before 19 March 2002 (the "ex-rights date") you will not be
entitled to participate in the Rights Issue. However, the purchaser or
transferee of your Existing Ordinary Shares may be entitled to participate in
the Rights Issue in your place. In this case, please send this document together
with the accompanying Form of Appointment of Proxy immediately to the purchaser
or transferee or to the bank, stockbroker or other agent through whom you sell
or transfer or have sold or transferred your Existing Ordinary Shares for
delivery to the purchaser or transferee. However, neither this document nor the
Provisional Allotment Letter should be forwarded to or transmitted in or into
the United States, Canada, Japan, France, Australia, South Africa, Singapore or
the Republic of Ireland.
The latest time for acceptance under the Rights Issue will, unless
otherwise announced to the Company Announcements Office of the London Stock
Exchange by the Company, be 10.30 a.m. on 8 April 2002. The procedure for
acceptance and payment depends on whether, at the time at which acceptance and
payment is made, the Nil Paid Rights are in certificated form (that is, are
represented by a Provisional Allotment Letter) or are in uncertificated form
(that is, are in CREST). The procedures for acceptance and payment are set out
in Part III of this document. Further details will also appear in the
Provisional Allotment Letters that will be sent to Qualifying non-CREST
Shareholders on 18 March 2002.
If you are a Qualifying CREST Shareholder you should note that you may
not receive any further written communication from the Company and accordingly,
you should retain this document throughout the period of the Rights Issue for
details of the action you should take.
Qualifying CREST Shareholders who are CREST sponsored members should
refer to their CREST sponsors regarding the action to be taken in connection
with this document and the Rights Issue.
Recommendation
Your Board, which has received financial advice in relation to the
Proposals from Credit Suisse First Boston, considers that the Rights Issue is in
the best interests of the Shareholders as a whole. In providing its advice to
the Board, Credit Suisse First Boston has placed reliance on the directors'
commercial assessment of the Proposals. In addition, your Board considers that
the proposed changes to the share option schemes are in the best interests of
Shareholders as a whole. The Board recommends that you vote in favour of the
resolutions set out in the notice of EGM at the end of this document, as those
directors who hold Ordinary Shares (either directly or in the form of Enodis
ADSs) intend to do in respect of the 74,800 Existing Ordinary Shares that they
beneficially own or otherwise control, representing less than 1 per cent. of the
Company's Existing Ordinary Shares.
Yours sincerely
Peter Brooks
Chairman
PART II: INFORMATION ABOUT THE COMPANY AND FINANCIAL INFORMATION
The following information has been extracted without material
adjustment from the Company's Annual Report on Form 20-F dated 21 February 2002
and filed with the SEC, the full text of which can be obtained from the SEC (at
the United States Securities and Exchange Commission, Washington, DC 20549) or
the SEC's website (at www.sec.gov). A copy of the Form 20-F is also on display
at the places and during the period stated in Part VI of this document at
paragraph 14.
Please note that this extract contains references to Item 10 of and
Exhibit 8.1 to the Company's Annual Report on Form 20-F, which are not included
in this extract. Equivalent information is contained in Part VI of this document
at paragraph 7 and paragraph 2, respectively.
References in this Part II to "Fiscal 1999" are references to the 53
week period ended 30 September 1999, to "Fiscal 2000" are to the 52 week period
ended 30 September 2000 and to "Fiscal 2001" are to the 52 week period ended 29
September 2001.
Item 3. Key Information
Selected Financial Data
The following selected financial data should be read in conjunction
with "Item 5. Operating and Financial Review and Prospects" and our consolidated
financial statements, including the notes thereto, and other financial
information appearing in this report. The selected profit and loss account data
set forth below for Fiscal 1999, 2000 and 2001, and the balance sheet data at
September 30, 2000 and September 29, 2001 are derived from our consolidated
financial statements, which have been prepared in accordance with U.K. GAAP and
differ in certain respects from U.S. GAAP. A reconciliation of certain amounts
from U.K. GAAP as well as a description of principal differences between U.K.
GAAP and U.S. GAAP applicable to us are presented in Note 29 of the notes to the
consolidated financial statements included elsewhere in this annual report. The
selected profit and loss account data for Fiscal 1997 and 1998, and the balance
sheet data at September 27, 1997, September 26, 1998 and October 2, 1999, are
derived from the audited financial statements appearing in our historical annual
reports as filed with the Registrar of Companies in the U.K. or as filed on Form
20-F with the U.S. Securities and Exchange Commission.
Fiscal year ended
-----------------
Sept. 27, Sept. 26, Oct. 2, Sept. 30, Sept. 29, Sept. 29,
1997 1998 1999 2000 2001 2001/(1)/
---- ---- ---- ---- ---- ---------
(amounts in millions, except ratios and per share data)
U.K. GAAP
Profit and loss account data:
Turnover (net sales):
Global Food Service Equipment............. (Pounds)289.3 (Pounds)322.4 (Pounds)447.9 (Pounds)665.1 (Pounds)684.1 $1,005.0
Food Retail Equipment..................... 11.8 10.5 41.8 219.4 203.1 298.4
Property.................................. 1.6 3.0 1.0 19.9 16.6 24.4
------------- ------------ ------------- ------------- ------------- --------
Continuing operations..................... 302.7 335.9 490.7 904.4 903.8 1,327.8
Discontinued operations/(2)/.............. 247.0 255.3 265.6 275.7 177.3 260.5
------------- ------------ ------------- ------------- ------------- --------
Total turnover....................... 549.7 591.2 756.3 1,180.1 1,081.1 1,588.3
Operating profit/(loss) before goodwill
amortization and exceptional items:
Global Food Service Equipment.......... 36.1 43.8 61.3 88.9 80.3 118.0
Food Retail Equipment.................. 4.0 3.7 5.3 22.6 10.4 15.3
Property............................... 0.1 0.4 0.2 8.4 9.0 3.2
Corporate costs........................ (5.3) (5.3) (6.2) (7.3) (8.9) (13.1)
------------- ------------ ------------- ------------- ------------- --------
Continuing operations.................. 34.9 42.6 60.6 112.6 90.8 133.4
Discontinued operations/(2)/........... 11.7 17.2 24.0 27.1 9.1 13.4
------------- ------------ ------------- ------------- ------------- --------
Total operating profit/(loss) before
exceptional items and goodwill
amortization...................... 46.6 59.8 84.6 139.7 99.9 146.8
Operating exceptional items/(3)/............. (1.5) -- (6.0) -- (167.5) (246.1)
Goodwill amortization........................ -- -- (2.7) (21.4) (23.0) (33.8)
------------- ------------ ------------- ------------- ------------- --------
Operating profit/(loss)
Continuing operations..................... 33.4 42.6 51.9 91.2 (99.7) (146.5)
Discontinued operations/(2)/.............. 11.7 17.2 24.0 27.1 9.1 13.4
------------- ------------ ------------- ------------- ------------- --------
Operating profit/(loss)...................... (Pounds) 45.1 (Pounds) 59.8 (Pounds) 75.9 (Pounds)118.3 (Pounds)(90.6) $ (133.1)
Profit on disposal of businesses and
property fixed assets..................... (Pounds) -- (Pounds) -- (Pounds) 4.1 (Pounds) 3.0 (Pounds)23.5 $ 34.5
Net interest payable and similar charges/(4)/ (9.6) (9.6) (13.3) (37.5) (41.9)/(5)/ (61.6)
Non-operating exceptional gain/(6)/.......... 24.9 -- -- -- -- --
Profit/(loss) for the period................. 56.8 46.7 60.8 69.3 (115.9) (170.3)
Basic earnings/(loss) per share.............. 37.3p 30.8p 38.7p 29.6p (46.5)p $(0.68)
Diluted earnings/(loss) per share............ 27.3p 23.5p 27.7p 27.7p (46.5)p $(0.68)
Dividends declared per share................. 6.5p 9.5p 12.5p 13.8p 2.0p $0.03
Balance sheet data:
Total assets.............................. (Pounds)338.1 (Pounds)338.0 (Pounds)921.1 (Pounds)994.4 (Pounds)773.5 $1,136.3
Net assets/(liabilities).................. (65.3) (88.7) 85.9 214.9 88.0 129.3
Cash in bank and in hand.................. 57.8 39.0 26.7 28.5 39.4 57.9
Net current assets/(liabilities)/(7)/..... 83.8 61.5 25.6 35.4 118.2 173.6
Total borrowings/(8)/..................... 246.3 258.8 525.4 462.7 405.3 595.4
Called up share capital................... 76.3 76.6 105.8 125.0 125.1 183.8
Number of ordinary shares outstanding..... 152.7 153.2 211.6 250.1 250.3 250.3
Other financial information:
Depreciation.............................. (Pounds) 12.6 (Pounds) 13.3 (Pounds) 18.8 (Pounds) 23.8 (Pounds) 22.7 $ 33.4
Capital expenditures/(9)/................. 7.9 8.0 20.8 20.6 19.3 28.4
Fiscal year ended
-----------------
Sept. 27, Sept. 26, Oct. 2, Sept. 30, Sept. 29, Sept. 29,
1997 1998 1999 2000 2001 2001/(1)/
---- ---- ---- ---- ---- ---------
(amounts in millions, except ratios and per share data)
U.S. GAAP
Profit and loss account data:
Turnover (net sales)................... (Pounds)302.7 (Pounds)335.9 (Pounds)490.7 (Pounds)904.4 (Pounds)903.8 $1,327.8
Operating profit/(loss) from continuing
operations.......................... 23.8 28.6 43.1 77.6 (106.8) (156.9)
Profit/(loss) from continuing
operations.......................... 4.7 2.2 10.6 9.1 (150.7) (221.4)
Profit/(loss) for the period........... 37.5 16.3 27.3 25.3 (113.7) (167.0)
Earnings per share:
Basic earnings per ordinary share
(pence):
Profit from continuing operations...... 3.1p 1.5p 6.7p 3.9p (60.5) $ (0.89)
Profit from discontinued
operations/(2)/..................... 5.2p 9.3p 10.7p 6.9p 2.8p $ 0.04
Gain on sale of discontinued
operations/(2)/..................... -- -- -- -- 12.0p $ 0.18
Extraordinary gain/(6)/................ 16.4p -- -- -- -- --
------------- ------------- --------------- --------------- --------------- --------
Profit/(loss) for the period........... 24.7p 10.8p 17.4p 10.8p (45.7p) $ (0.67)
============= ============= =============== =============== =============== ========
Diluted earnings per ordinary share
(pence):
Profit from continuing operations...... 3.1p 1.4p 6.7p 3.6p (60.5p) $ (0.89)
Profit from discontinued
operations/(2)/..................... 5.1p 9.2p 7.6p 6.5p 2.8p $ 0.04
Gain on sale of discontinued
operations/(2)/..................... -- -- -- -- 12.0p $ 0.18
Extraordinary gain/(6)/................ 16.2p -- -- -- -- --
------------- ------------- --------------- --------------- --------------- --------
Profit/(loss) for the period........... 24.4p 10.6p 14.3p 10.1p (45.7p) $ (0.67)
============= ============= =============== =============== =============== ========
Balance sheet data:
Total assets........................... n/a (Pounds)728.2 (Pounds)1,281.9 (Pounds)1,314.2 (Pounds)1,151.5 $1,691.7
Net assets............................. n/a 344.1 492.7 586.8 443.0 650.8
Net current assets/(liabilities)/(7)/.. n/a 146.5 126.2 133.3 123.6 181.6
Other financial information:
Depreciation from continuing
operations.......................... (Pounds)6.5 (Pounds)5.1 (Pounds)11.1 (Pounds)17.5 (Pounds)18.9 $ 48.3
Goodwill amortization from continuing
operations.......................... 14.1 15.7 19.3 37.7 39.0 57.3
_____________
(1) U.S. dollar amounts have been translated solely for the convenience of the
reader at the exchange rate of USD 1.4691 = (Pound)1.00, the noon buying
rate of the U.S. Federal Reserve Bank as at September 28, 2001.
(2) 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.
(3) 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
1997, 1999 and 2001:
1997 1999 2001
---- ---- ----
(amounts in millions)
Restructuring costs....................................................................... (Pounds)1.5 (Pounds)6.0 (Pounds) 33.1
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 amortization and impairment.................... 1.5 6.0 67.5
----------- ----------- -------------
Goodwill impairment....................................................................... -- -- 100.0
----------- ----------- -------------
Total operating exceptional items................................................. (Pounds)1.5 (Pounds)6.0 (Pounds)167.5
=========== =========== =============
(4) Net interest payable and similar charges consists of interest income,
interest expense and amortization and write-off of deferred financing
costs.
(5) Fiscal year 2001 includes a charge of (Pounds)5.8 million related to the
write-off of unamortized costs of previous financing arrangements that were
replaced on March 12, 2001.
(6) For Fiscal 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.
(7) U.S. GAAP includes (Pounds)39.9 million (1998), (Pounds)40.4 million (1999)
and (Pounds)39.3 million (2000) of non-current assets and liabilities
related to discontinued operations that are classified as current.
(8) Total borrowings consists of all borrowings but excludes deferred financing
costs.
(9) Capital expenditure consists of cash paid for the purchase of tangible
fixed assets and includes cash paid by our discontinued building and
consumer products division.
Risk Factors
In addition to the other information contained in this report, you should
carefully consider the following risk factors. Additional risks and
uncertainties that we are not aware of or that we currently believe are
immaterial may also adversely affect our business, financial condition,
liquidity or results of operations. If any of the possible events described
below occurs, our business, financial condition or results of operations could
be materially and adversely affected.
Our substantial leverage and debt service obligations could adversely affect our
business.
We are, and will continue to be after completing the new financing
arrangements, highly leveraged. For a description of the new financing
arrangements, including the rights offering, the new senior secured credit
facilities and the bridge loan, see "Item 5. Operating and Financial Review and
Prospects--The New Financing Arrangements" and "Item 10. Additional
Information--Material Contracts."
The degree to which we will be leveraged after completing the new financing
arrangements 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.
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.
We are subject to restrictive debt covenants, which limit our operating
flexibility.
Our senior secured credit facilities contain, and any indenture governing
our potential issue of notes would 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 "Item 5. Operating and
Financial Review and Prospects--Liquidity and Capital Resources."
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.
Our business could be adversely affected if the current economic downturn
worsens.
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.
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 "Item 4. Information on the Company--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 as 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 quarter of Fiscal 2002 showed a small loss and were below expectations. We
are currently reviewing the operations of Kysor Warren with the objective of
improving its operating performance. If we conclude that the necessary 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. Such a potential
impairment, if any, cannot be reasonably estimated at this time. As at December
29, 2001, the carrying value of goodwill relating to Kysor Warren was
approximately (pound)50 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.
Our business may be disrupted as we continue to integrate recent acquisitions
and implement changes and improvements to our businesses, management
organizational structure and reporting systems.
Over the last several years, we have completed a number of acquisitions
of food service equipment and food retail equipment businesses. We are in the
process of integrating those businesses, disposing of certain non-core
operations and assets, executing cost reduction initiatives and reorganizing our
management structure and reporting systems. Our results of operations and cash
flow could suffer if we fail to integrate those businesses or implement those
changes successfully.
Although our corporate headquarters is located in London, England, we
are consolidating our global operational headquarters and technology center in
New Port Richey, Florida. In connection with that consolidation, several senior
executives have recently moved to Florida, we are increasing the number of
senior operational staff at that location and we are investing in significant
improvements in our management information reporting systems. We expect that the
continuing implementation of these changes will occur over at least the next
year. We could be adversely affected if we are delayed in consolidating and
improving our management information reporting systems or if we do not
successfully consolidate the operational supervision of our European and Asian
operations with our North American operations. In addition, implementing a
restructuring of this nature inevitably requires management time and attention.
To the extent that management time and attention are significantly diverted from
day-to-day operations, our business operations and financial results could be
adversely affected.
The loss of key management personnel could adversely affect our business.
Our executive officers and our operating company senior executives are
important to our business. Collectively, these individuals have extensive
financial experience and knowledge of our business, industry and customers. The
loss of the services of these individuals, some of whom have been appointed to
their current positions only recently, could adversely affect our ability to
maintain the loyalty of certain key customers, to continue to develop important
product improvements or to implement our global marketing and sales strategy.
This could have a material adverse impact on our business operations and
financial results.
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 nine 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 61% 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 "Item 11. 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 are issued and in circulation 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 Group
profits.
We may incur losses in connection with certain litigation.
One of our current subsidiaries, Enodis Corporation, is a party to
several lawsuits relating to a company, Consolidated Industries Corp., which was
formerly owned by our subsidiary. Consolidated is currently in bankruptcy. The
plaintiffs contend that our subsidiary is the alter ego of Consolidated and
therefore is liable for its 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 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
effect on us.
If we fail to complete the rights offering and the notes offering, our bridge
loan will remain outstanding.
Pending completion of the rights offering and the note offering, we
have borrowed (pound)150 million of bridge loans under a bridge loan facility.
Of this amount, we intend to repay the bridge loan with the net proceeds of the
rights offering and the net proceeds of the note offering.
Completion of the rights offering is currently subject to certain
conditions, including approval by our shareholders. If shareholder approval is
obtained and those other conditions are fulfilled, we will be obligated to issue
the rights shares and, following commencement of trading of the nil paid rights
shortly thereafter, Credit Suisse First Boston Equities Limited, the underwriter
of the rights offering, will be unconditionally obligated to subscribe for and
take up any rights that are not taken up by our shareholders. Our plan of
financing also includes raising approximately (pound)100 million from an
offering of long term fixed rate notes in the institutional market. If our
shareholders fail to approve the rights offering, or the rights offering
otherwise fails to become unconditional, or if we are unable to find investors
willing to purchase the notes, we may be unable to repay the bridge loans. To
the extent the bridge loans remain outstanding, they would bear interest at a
higher interest rate than the notes we propose to offer, and would have a final
maturity in February 2012. These additional interest payments would further
restrict our cash flows and affect our operating results. See "Item 5. Operating
and Financial Review and Prospects--The New Financing Arrangements." "
"
Item 4. Information on the 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 net sales 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 net sales 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 over 30 manufacturing facilities located in nine
countries in North America, Europe, Australia 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 Note 2 to our
financial statements included in this annual report.
We also have property development activities (1.8% of total net sales
from continuing operations in Fiscal 2001) that 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 principal executive office is located at Washington House, 40-41
Conduit Street, London W1S 2YQ, United Kingdom, telephone number: (44)
207-304-6000. Our global operations office is located at 2227 Welbilt Boulevard,
New Port Richey, Florida 34655, telephone number: (727) 375-7010.
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
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.
. 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.
. 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 net sales from continuing operations.
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 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.
. 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(R) 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(R) 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 the
greater likelihood of future sales to these customers.
. Partner with Dealers, Distributors and Sales Representatives
to Increase Market Share. We are currently integrating our
food service equipment sales forces in order to increase
market share. In the U.S., we have recently 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 United States, 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 distributors and
end-customers a wide range of enhanced services and solutions,
we aim to increase their loyalty and strengthen these
relationships.
. 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 ongoing execution
of a range of cost reduction initiatives in our European
operations. We have targeted additional cost savings of
approximately (pound)10 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.
. 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.
. Divest Non-Core Businesses. We intend to continue to divest
non-core assets and eliminate non-core products, brands and
models in order to focus on our core competencies. Most
significantly, we recently disposed of our former building and
consumer products business (unrelated to our food equipment
business) for gross consideration of (pound)134 million
(subject to an adjustment of approximately (pound)2.1 million)
and Sammic, our Spanish food service equipment business, for
consideration of (pound)20 million. We are continuing our
efforts to sell our remaining real property segment holdings.
We believe this strategy will enable us to concentrate on our
core food service equipment business and reduce our
outstanding debt, placing us in a stronger financial and
competitive position.
. Reduce Debt. We intend to continue reducing our debt burden by
increasing cash available to pay debt through cost savings,
improving manufacturing plant utilization, reducing our cash
conversion days and applying the proceeds of our non-core
disposals. We believe that using cash generated through more
efficient operations to reduce debt whenever possible will
increase our operating flexibility in the long term.
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.
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.
In the last four years, we have also acquired other businesses,
including Jackson, Merrychef, Convotherm and Viscount Catering, improving our
food service equipment product range and geographical coverage.
In Fiscal 2001, we disposed of our former building and consumer
products business (unrelated to our food equipment business) for gross
consideration of (pound)134 million (subject to an adjustment of approximately
(pound)2.1 million). In December 2001, we sold Sammic, a Spanish food service
equipment business, for consideration of (pound)20 million.
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 (pound)684.1 million, or approximately 75.7% of
our net sales from continuing operations. Our food service equipment business is
conducted in over 100 countries. Sales of food service equipment in North
America constituted 46.2% of our Fiscal 2001 food service equipment net sales
from continuing operations.
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 and 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 those 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(R), U.S. Range(TM), Technyform(R) and Moorwood Vulcan(R) brand
names, and we sell microwave and combination microwave/convection ovens under
the Merrychef(R) and Garland(R) brand names. Our cooking equipment products are
manufactured at plants in the U.S., Canada, the U.K. and France. Our Merrychef
combination microwave/conventional 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(R), Electroway(R), Merco(R)
and Savory(R).
Frying Equipment
We design, manufacture and sell commercial fryers and frying systems,
including open pot fryers under the Frymaster(R) brand name and tube fryers
under the Dean(R) brand name. We also manufacture commercial fryers in the U.K.
under the Henry Nuttall(R) and Moorwood Vulcan(R) 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(R), Castelmac(R) and Guyon(R) 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(R), Ice-O-Matic(R), Icematic(R),
Bar-Line(R), Simag(R), Mile High(R) and New Ton(R). 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
health care facilities, convenience stores, quick service restaurants, full
service restaurants, bars, hotels, convenience stores 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 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(R) and Airtech(R). The production of our facilities in Canada, the
U.S. and the U.K. is complemented by the production of 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.
Meal Preparation Systems
We design, manufacture and sell meal preparation systems, primarily
food delivery systems and serving products such as insulated trays, trolleys,
carts, cook-chill systems and disposable serving products. These products enable
hospitals and institutions to prepare and serve a large quantity of meals at the
proper temperature both hygienically and efficiently. We have a strong presence
in the meal preparation systems market in the United States. Our brand names for
meal preparation products include Aladdin Temp-Rite(R), Seco(R), Guyon(R),
Shelleyglas(R), Shelleymatic(TM) and Delfield(R).
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(R) and we distribute a flight type
dishwasher under the brand Meiko by Jackson(R).
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. 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(R), Whitlenge(R) and Hartek(R).
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(R), Wearever(R) and Redco(R).
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
-------------- ------ ------------- ---------
Mississauga, Canada
Freeland, Pennsylvania
Ranges, convection ovens, conveyor Fort Wayne, Indiana
Garland, Lincoln, U.S. Range, ovens, microwave and combination Aldershot, U.K.
Merrychef, Moorwood Vulcan, ovens, grills, boilers, toasters, Sheffield, U.K.
Cooking Equipment Technyform, Merco Savoy rotisserie ovens Moneteau, France
Shreveport, Louisiana
Frying Equipment Frymaster, Dean, Henry Nuttall Tube type and open top fryers Sheffield, U.K.
Custom refrigeration, Mount Pleasant, Michigan
Delfield, Advanced, Castelmac, reach-in refrigeration, Covington, Tennessee
Guyon, Shellymatic, display systems/counters, Moneteau, France
Refrigeration Equipment Shelleyglas cook-chill systems Sheffield, U.K.
Fairfax, South Carolina
Denver, Colorado
Milan, Italy
Scotsman, Ice-O-Matic, Simag,
Icematic, Barline, Mile High,
Ice Machines New Ton Cube, flake and nugget ice machines
Castelfranco, Italy
Bangkok, Thailand
Shanghai, China
Mississauga, Canada
Air Purification and Rochester, U.K.
Ventilation Equipment Ventmaster, Airtech Exhaust and air purification systems Mount Pleasant, Michigan
Concord, Canada
Cleveland, Ohio
Steam kettles, pressure steamers, Eglfing, Germany
Steam Equipment Cleveland, Convotherm skillets, combination ovens
Aladdin Temp-Rite, Food delivery systems, insulated tray Nashville, Tennessee
Temp-Rite, Seco, Shelleymatic, trolleys, carts, disposable serving Mississauga, Canada
Meal Preparation Systems Shelleyglas products Bremen, Germany
Undercounter, conveyor and flight
Warewashing Equipment Jackson type dishwashers Barbourville, Kentucky
Pre-mix, post-mix, undercounter and
remote beverage dispensing Radevormwald, Germany
Beverage Systems Scotsman, Hartek, Whitlenge equipment Halesowen, U.K.
Fort Wayne, Indiana
Wearever, Redco, Prolon, Pots and pans, small food preparation Shreveport, Louisiana
Food Preparation Products Varimixer equipment, dishes Port Gibson, Mississippi
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 Group's
total net sales from continuing operations in Fiscal 2001, revenues from certain
food service equipment customers slightly exceeded 5% of our food service
equipment net sales.
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 45% of all equipment sold. Approximately 45% 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 26% 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 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.
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. The sales and
marketing activities of our master distributors are supported by our regional
vice presidents. In Europe, we also 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 such 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 further products in our range. 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 further support these
service agencies with 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 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 the Northern Hemisphere. 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, 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
(Pound)203.1 million, or approximately 22.5% of our net sales from continuing
operations. Our food retail equipment business is conducted in North America,
Australia and New Zealand. Sales of food retail equipment in North America
constituted 81.7% of our total food retail equipment net sales 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 south eastern U.S. and have
relied on a small number of major supermarket and retail chain customers for the
bulk of their sales. In addition, we have operations in major cities in
Australia and New Zealand through our Austral Refrigeration subsidiary, which
manufactures, services and installs refrigerated display cases and systems.
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 brands Kysor Warren(R) and Austral(R). In Fiscal 2001, Kysor Warren
and Austral generated, respectively, approximately 43% and 17% of revenues and
approximately 20% and 6% 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. Austral Refrigeration recently launched the Millennium
line for the Australian and New Zealand markets. The Millennium line
incorporates similar features and technology as the E-line, but is generally
smaller in scale to suit the Australian market.
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.
Automated Donut Systems
Through our Belshaw subsidiary, we manufacture and sell automated donut
making machines. Belshaw makes a number of automated donut systems. The smaller
units, which produce approximately 1,000 donuts per hour, are manufactured
primarily for supermarkets. The larger units are manufactured primarily for
commercial bakeries. We also manufacture and sell open kettle systems and
glazing and decorating equipment for donuts. In Fiscal 2001, Belshaw generated
approximately 7% of revenue and 34% 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
-------------- ------ ------------- ---------
Standard and specialty refrigerated
display merchandisers,
refrigeration systems and glass Columbus, Georgia
Refrigerated display cases Kysor Warren, Delfield, Austral doors Glendenning, Australia
Pre-fabricated cooler and freezer Fort Worth, Texas
panels for refrigerated storing Goodyear, Arizona
Walk-in freezers and coolers Kysor Panel Systems rooms Piney Flats, Tennessee
Automated donut systems Belshaw Automated donut cooking systems Seattle, Washington
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 Group's total net sales 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 recently 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.
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; Hussman, 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. Austral Refrigeration competes in Australia primarily with
Frigerite, Sanyo, Hussman and Linde. Belshaw competes primarily with Hobart, as
well as a variety of smaller companies.
Real Property
We currently hold approximately 100 acres of real estate located in
Felsted and Coventry, England, of which approximately 90 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 plan to sell
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 net sales from continuing
operations from property development activities.
Product Development
Food Service Equipment
Many restaurants, especially quick service restaurants, seek to
differentiate their products by changing their menu and format. In addition, our
end-customers 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 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 Dual View Display Case Allows simultaneous display of refrigerated and dry merchandise.
Five stage refrigeration unit allowing multi-product display.
Nordic Zone Cold Food Bar Flexible two section blast chiller.
Compact tabletop unit that uses induction technology to transfer
Garland Induction Unit heat to pan and not surrounding air.
Fully programmable, extra capacity combination oven to
Mealstream Series Five accommodate high volume catering.
Jackson Horizon Services Dishwashers Compact water and energy efficient dishwasher.
Lincoln Insta Slice Vegetable User Quick cutting one-stroke vegetable slicer.
E-Flow Brand Ovens Multi-size ovens ranging from countertop to high capacity models.
Merco 2-Fried Food Holding Unit Provides precise warming for individual items.
Innovative range of combination microwave ovens allowing chefs
Merrychef Mealstream Series to regenerate multi-portion dishes.
Treats contaminated air with high efficiency pre- filters and
Vent Master Reactocell ultraviolet enhanced oxidation technology.
Upgraded steam combination ovens with de-condensation and manual
Convotherm Plus 2 Range moisturizing systems, a serial interface and improved aesthetics.
Touch Free(TM)Automatic Ice and
Water Dispenses ice and water without physical contact.
Scotsman Dispensers
Food Retail Equipment
In the food retail equipment group, Kysor Warren, Austral Refrigeration
and Belshaw have laboratories located within their facilities, where new product
development is conducted. We recently launched two new product lines--the E-line
and the Millennium 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.
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(R) 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 130 subsidiaries, all but a few of which are
wholly-owned, directly or indirectly. Our largest subsidiaries are Enodis
Corporation, which owns Scotsman Industries, Inc., Aladdin Temp-Rite LLC,
Lincoln Foodservice Products, Inc., Cleveland Range, Inc., Frymaster L.L.C.,
Garland Commercial Industries, Inc., Mile High Equipment Company, Jackson MSC
Inc. and Belshaw Bros., Inc., among others. Scotsman Industries, Inc. owns The
Delfield Company and Kysor Industrial Corp., among others.
Our significant subsidiaries are listed in Exhibit 8.1 to this report,
which shows their jurisdiction of incorporation or formation and our own
ownership interest in them.
Property, Plant and Equipment
Following the closure of five plants in Fiscal 2001 as part of our
rationalization efforts, we currently have over 30 manufacturing facilities
located in nine 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; Austral Refrigeration has a
facility in Glendenning, Australia; and Belshaw has a facility located in
Seattle, Washington.
As of December 29, 2001, we owned or leased 44 commercial properties in
the U.S., the U.K., Europe, Canada, Australia 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 the Group's principal operational real properties.
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
Manufacturing plant and Walk-in coolers and
Goodyear, AZ, U.S. ...................... office 50,000 freezers Leased
Manufacturing plant,
engineering, facilities and
Denver, CO, U.S. ........................ office 168,000 Ice machines Owned/(1)/
Manufacturing plant and
Columbus, GA, U.S. ...................... office 300,000 Refrigerated display cases Owned
Manufacturing plant and
Columbus, GA, U.S. ...................... office 140,000 Refrigeration systems Owned
Conyers, GA, U.S......................... Manufacturing plant 411,000 Vacant Owned
Vernon Hills, IL, U.S.................... Office 15,000 -- Leased
Conveyor ovens,
Manufacturing plant and rotisseries and
Fort Wayne, IN, U.S. .................... office 358,000 kitchenware Leased
Corbin, KY, U.S. ........................ Warehouse 19,550 Dishwashers Leased
Manufacturing plant, office,
Barbourville, KY, U.S. .................. land 115,000 Dishwashers Owned
Manufacturing plant, 249,000 Fryers Owned
engineering facilities and 91,000 Vacant Owned
Shreveport, LA, U.S. .................... office 135,054 Non-fryer products Owned
Manufacturing plant and
Mt. Pleasant, MI, U.S. .................. office 330,000 Food preparation Owned/(2)/
Manufacturing plant and
Port Gibson, MS, U.S. ................... office 120,000 Plastic tableware Owned
Manufacturing plant and Steam cooking equipment
Cleveland, OH, U.S. ..................... office 97,600 and cookchill Owned/(3)/
Portland, OR, U.S. ...................... Manufacturing plant 84,000 Vacant Owned
Manufacturing plant and
Freeland, PA, U.S. ...................... office 225,000 Ovens and ranges Owned
Manufacturing plant and
Fairfax, SC, U.S. ....................... warehouse 360,000 Ice machines Owned/(4)/
Manufacturing plant and Food preparation and
Covington, TN, U.S. ..................... office 188,000 storage equipment Owned/(5)/
Manufacturing plant and
Nashville, TN, U.S. ..................... office 90,000 Meal delivery systems Leased
Nashville, TN, U.S. ..................... Warehouse 108,000 Meal delivery systems Leased
Nashville, TN, U.S. ..................... Office 5,000 -- Leased
Manufacturing plant and Walk-in coolers and
Piney Flats, TN, U.S. ................... office 110,000 freezers Leased
Manufacturing plant and Walk-in coolers and
Fort Worth, TX, U.S. .................... office 118,000 freezers Owned
Fort Worth, TX, U.S. .................... Office 5,000 -- Leased
Manufacturing plant and
Dallas, TX, U.S. ........................ office 170,000 Vacant Leased/(6)/
Manufacturing plant and
Seattle, WA, U.S. ....................... office 71,000 Donut making equipment Owned
Manufacturing plant and
Glendenning N.S.W., Australia............ office 154,000 Refrigerated display cases Owned
Manufacturing plant and Steam cookers and
Concord, Ontario, Canada................. office 116,000 cook-chill Leased
Manufacturing plant and
office
Manufacturing plant and 155,000 Ovens and ranges Leased
Mississauga, Ontario, Canada............. office 35,000 Ventilation equipment Leased
Manufacturing plant and
Shanghai, China.......................... office 17,000 Ice machines Leased
Manufacturing plant and
Moneteau, France......................... office 100,000 Cooking equipment Leased
Bremen, Germany.......................... Office and warehouse 34,000 Meal delivery systems Leased
Manufacturing plant, office
Eglfing, Germany......................... and warehouse 130,000 Combination ovens Leased
Manufacturing plant and
Radevormwald, Germany.................... office 35,000 Beverage systems Leased
Manufacturing plant and
Castelfranco, Italy...................... office 242,000 Ice machines Owned
Manufacturing plant,
Milan, Italy............................. warehouse and office 150,000 Ice machines Leased
Manufacturing plant and
Bangkok, Thailand........................ office 45,000 Ice machines Leased
Manufacturing plant and
Aldershot, U.K. ......................... office 20,000 Microwave ovens Leased
Manufacturing plant and
Halesowen, U.K. ......................... office 84,000 Beverage systems Leased
Manufacturing plant and
Rochester, U.K. ......................... office 27,000 Ventilation systems Leased
Manufacturing plant and Ovens, ranges and
Sheffield, U.K. ......................... office 100,000 refrigeration products Leased
___________
(1) Subject to industrial revenue bond financing in the aggregate principal
amount of $4.1 million due in 2007.
(2) Subject to a security interest in equipment granted pursuant to a Loan
Agreement, dated as of August 1, 1983, between The Delfield Company and
The Economic Development Corporation of the County of Isabella. The
loan and security interest expire in 2003.
(3) 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.
(4) Subject to industrial revenue bond financing in the aggregate principal
amount of $9.3 million due in 2020.
(5) 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.
(6) 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.
For information concerning our rental expenses and commitments under
operating leases, see Note 27 to our consolidated financial statements included
elsewhere in this report. We believe our properties are generally suitable and
adequate for the purposes for which they are intended.
Metal fabrication, finishing, sub-assembly and assembly operations are
conducted at our food equipment manufacturing facilities. Among the major
categories of equipment installed at individual locations are numerically
controlled turret presses, robotic and conventional welding equipment,
numerically controlled machining centers, computer assisted design systems and
product testing and quality assurance measurement devices.
We review the capacity and utilization of our facilities on an ongoing
basis and make adjustments where appropriate so as to absorb excess capacity in
underutilized facilities and expand facilities where needed.
For information concerning our rental expenses and commitments under
operating leases, see Note 27 to our consolidated financial statements.
In addition to the above properties, we have agreed to lease certain
other non-operational properties (including four former Magnet properties for
which the Group 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 (Pounds)2.7 million per annum, and rents
currently receivable amount to (Pounds)1.4 million per annum. Provision has been
made of an amount that is considered appropriate to cover potential liability
under these leases.
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 or financial
condition."
"
Item 5. Operating and Financial Review and Prospects
The following is a discussion of our results of operations for, and
financial condition as at the end of, the 53 week period ended September 30,
1999 ("Fiscal 1999"), the 52 week period ended September 30, 2000 ("Fiscal
2000"), and the 52 week period ended September 29, 2001 ("Fiscal 2001"). You
should read this discussion in conjunction with the sections entitled "Item 3.
Key Information--Risk Factors," "Item 3. Key Information--Selected Consolidated
Financial and Operating Data" and our consolidated financial statements and the
accompanying notes included elsewhere in this annual report.
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 and 2001 we also prepared consolidated financial statements
in accordance with U.S. GAAP, which we filed with the SEC on this form. 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 annual report
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 annual report.
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 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, that
we believe is one of the most advanced in our 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 net sales from continuing operations in
Fiscal 2001 (55.2% in North America and 20.5% in Europe and rest of world).
Sales of food retail equipment comprised 22.5% of our turnover from continuing
operations. 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.
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 (Pounds)254
million plus assumed debt of approximately (Pounds)225
million;
. In November 2000, we acquired Jackson MSC Inc., a U.S.
manufacturer of dishwashers and ovens, for approximately $36.2
million (approximately (Pounds)25.0 million); and
. In June 2000, we acquired Merrychef Holdings Limited, a U.K.
manufacturer of commercial microwaves and combination
microwave/convection ovens, for approximately (Pounds)16.7
million. See "Item 4. Information on the Company--Our History
and Recent Acquisitions."
We are currently seeking to divest non-core assets and eliminate
non-core products, brands and models, 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 (Pounds)114 million
and a loan receivable of (Pounds)20 million. 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. We are currently evaluating our remaining businesses
with the goal of divesting additional non-core businesses. See "Item 4.
Information on the Company--Our Operating Strategy." Divestiture of these
businesses may take longer than expected, and may not occur at all, due to
current market conditions.
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. Our net debt (total debt less cash and cash equivalents)
reached (Pounds)434.2 million at the end of Fiscal 2000, but was reduced to
(Pounds)365.9 million at the end of Fiscal 2001, principally as a result of the
sale of our building and consumer products division in June 2001.
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 (Pounds)8.5 million of professional fees
and other expenses.
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, and we anticipate the industry
downturn will continue through at least the end of Fiscal 2002. 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, has 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 (Pounds)33.1 million of exceptional
restructuring charges in Fiscal 2001, primarily related to employee
terminations, plant closure costs and asset writedowns. Of such amounts,
(Pounds)14.5 million were cash payments made in Fiscal 2001, with a further
(Pounds)8.5 million expected cash outlay in Fiscal 2002. The remaining
(Pounds)10.1 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 a range of cost reduction initiatives in our
European operations. We have targeted additional cost savings of approximately
(Pounds)10 million in Fiscal 2002. We estimate that we will recognize
approximately (Pounds)6 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.
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 (Pounds)100 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 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 quarter 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 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 December 29, 2001, the carrying value of goodwill relating to Kysor Warren
was approximately (Pounds)50 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, 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 September 29, 2001, we held properties with an
aggregate historical cost basis of (Pounds)11.3 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.
The New Financing Arrangements
We have commenced a rights offering, pursuant to which qualifying
existing shareholders will be granted pre-emptive rights to subscribe for up to
150,861,463 of our ordinary shares at a price of (Pounds)0.50 per share. In
connection with the rights offering, we have entered into a rights issue
underwriting agreement with Credit Suisse First Boston Equities Limited, as
underwriter, under which the underwriter will subscribe for and take up, or
procure persons to subscribe for and take up, the rights to purchase ordinary
shares that are not taken up by our shareholders, pursuant to the terms of the
rights offering. Completion of the rights offering is subject to certain
conditions, including approval by our shareholders. Accordingly, if shareholder
approval is obtained and other conditions are satisfied, we will be
unconditionally obligated to issue the rights and absent any termination by the
underwriter, the underwriter for the rights offering will be unconditionally
obligated to subscribe for and take up any rights that are not taken up by our
shareholders. The rights, and the ordinary shares issuable upon exercise
thereof, will not be registered under the U.S. Securities Act of 1933, as
amended. Accordingly, the rights offering is not being made in the United States
or to U.S. persons, except pursuant to an exemption under such Act.
The rights offering is part of a refinancing (the "new financing
arrangements") of the senior secured credit facilities entered into in March
2001. We had (Pounds)387.5 million outstanding under the facilities on September
29, 2001. We have entered into agreements with Credit Suisse First Boston and
The Royal Bank of Scotland plc that replace the March 2001 senior credit
facility and comprise the following:
. a bridge facility in the amount of(Pounds)150 million all of
which has been drawn;
. a term loan in the amount of $370 million all of which has been
drawn; and
. a revolving credit facility in the amount of $85 million, none of
which has been drawn.
The Company intends to repay the bridge facility referred to above
through:
. the net proceeds of the rights offering; and
. the net proceeds of a proposed offering of approximately(Pounds)100
million of long term fixed rate notes.
The net proceeds from the rights offering and the issue of the notes
will be used to repay senior debt.
We currently expect the last date for acceptance of the rights offering
to be on or about April 8, 2002. We expect to close the note offering as soon as
practicable, but prior to the last date for acceptance of the rights offering,
subject to market conditions. If the rights offering does not proceed for any
reason, there can be no guarantee that we will be able to issue the notes and,
if we can, it may be on terms that are materially different from those that
could have been achieved if we had completed the rights offering. If either or
both the rights offering or the offering of the notes does not proceed for any
reason, all or a portion of the bridge loan will remain outstanding. The bridge
loan has a final maturity date in February 2012.
Fees and expenses associated with the rights offering are expected to
total approximately (Pounds)3.6 million, which will be written off against the
share premium account. Fees and expenses relating to the bridge facility, term
loan and revolving credit facility as well as the proposed offering of notes are
expected to total approximately (Pounds)13.9 million; these fees and expenses
will be capitalized and amortized over the life of the related debt. In
addition, fees associated with the unwinding of our previous financing
arrangements of (Pounds)2.5 million will be 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 and 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 group. Subsequent to Fiscal 2001, as part of our
restructuring, we have combined Food Service Equipment--North America and Food
Service Equipment--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 annual report, and as a percentage of
turnover (net sales) of our continuing operations for Fiscal 1999, Fiscal 2000
and Fiscal 2001.
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.................. (Pounds)447.9 91.3% (Pounds)665.1 73.5% (Pounds)684.1 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%) (6.6) (0.7%)
------------ ---- ------------ ---- -------------- -----
Equity minority interest............................... - - (0.3) - (0.3) -
------------ ---- ------------ ---- -------------- -----
Profit/(loss) for the period........................... (Pounds)60.8 12.4% (Pounds)69.3 7.7% (Pounds)(115.9) (12.8%)
============ ==== ============ ==== ============== =====
Fiscal 2001 Compared to Fiscal 2000
Turnover (Net Sales) from Continuing Operations
Total turnover from continuing operations decreased by (Pounds)0.6
million, or 0.1%, to (Pounds)903.8 million in Fiscal 2001 from (Pounds)904.4
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................................................. (Pounds)487.0 73.2% (Pounds)498.7 72.9% (Pounds)11.7 2.4%
Europe & Rest of World........................................ 178.1 26.8% 185.4 27.1% 7.3 4.1%
------------- ----- ------------- ----- ------------ ---
Total Global Food Service Equipment........................... (Pounds)665.1 100.0% (Pounds)684.1 100.0% (Pounds)19.0 2.9%
============= ===== ============= ===== ============ ===
Turnover increased by (Pounds)19.0 million, or 2.9%, to (Pounds)684.1
million in Fiscal 2001 from (Pounds)665.1 million in Fiscal 2000.
Turnover from our North America operations increased by (Pounds)11.7
million, or 2.4%, to (Pounds)498.7 million in Fiscal 2001 from (Pounds)487.0
million in Fiscal 2000. The increase reflected both the effects of positive
foreign exchange movements of approximately (Pounds)33.1 million due to the
strength of the dollar against pounds sterling and additional revenues of
(Pounds)22.1 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 (Pounds)43.5 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 (Pounds)7.3
million, or 4.1%, to (Pounds)185.4 million in Fiscal 2001 from (Pounds)178.1
million in Fiscal 2000. This resulted primarily from an increase of
approximately (Pounds)8.6 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 (Pounds)100,000. These
increases were offset in part by a decrease in comparable sales of approximately
(Pounds)1.4 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 (Pounds)16.3 million, or
7.4%, to (Pounds)203.1 million in Fiscal 2001 from (Pounds)219.4 million in
Fiscal 2000. This was due to decreases in comparable sales of approximately
(Pounds)25.4 million, or 11.6%, attributable to decreased sales levels at Kysor
Warren, offset in part by positive foreign exchange movements of approximately
(Pounds)9.1 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 (Pounds)3.3 million,
to (Pounds)16.6 million in Fiscal 2001 from (Pounds)19.9 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 (Pounds)21.8 million, or 19.4%,
to (Pounds)90.8 million in Fiscal 2001 from (Pounds)112.6 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............................................... (Pounds)66.3 74.6% (Pounds)62.6 78.0% (Pounds)(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......................... (Pounds)88.9 100.0% (Pounds)80.3 100.0% (Pounds)(8.6) (9.7%)
============ ===== ============ ===== ============ =====
Operating profit from continuing operations before goodwill
amortization and exceptional items decreased (Pounds)8.6 million, or 9.7%, to
(Pounds)80.3 million in Fiscal 2001 from (Pounds)88.9 million in Fiscal 2000.
Operating profit from continuing operations before goodwill
amortization and exceptional items in North America decreased by (Pounds)3.7
million, or 5.6%, to (Pounds)62.6 million in Fiscal 2001 from (Pounds)66.3
million in Fiscal 2000. Operating profit from continuing operations before
goodwill amortization and exceptional items as a percentage of net sales from
North America decreased by 1.0% 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 (Pounds)9.6 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
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 (Pounds)2.0 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
(Pounds)3.9 million.
Operating profit from continuing operations before goodwill
amortization and exceptional items in Europe and the rest of the world decreased
by (Pounds)4.9 million, or 21.7%, to (Pounds)17.7 million in Fiscal 2001 from
(Pounds)22.6 million in Fiscal 2000. Operating profit from continuing operations
before goodwill amortization and exceptional items as a percentage of net sales
from Europe and the rest of the world decreased by 3.2% 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 (Pounds)6.3 million from Fiscal 2000, principally due to lower
volumes and margins at our beverage businesses and losses at Scotsman Response
Limited (approximately (Pounds)1.3 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 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
(Pounds)1.4 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 (Pounds)12.2
million, or 54.0%, to (Pounds)10.4 million in Fiscal 2001 from (Pounds)22.6
million in Fiscal 2000. Operating profit from continuing operations before
goodwill amortization and exceptional items as a percentage of net sales from
the food retail equipment group decreased by 5.2% 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 (Pounds)12.8 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 (Pounds)0.6 million of favorable foreign exchange movements.
Property. Operating profit increased by (Pounds)0.6 million, or 7.1%,
to (Pounds)9.0 million in Fiscal 2001, from (Pounds)8.4 million in Fiscal 2000.
Corporate Costs. Corporate costs increased by (Pounds)1.6 million, or
21.9%, to (Pounds)8.9 million in Fiscal 2001 from (Pounds)7.3 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
(Pounds)1.6 million to (Pounds)23.0 million in Fiscal 2001 from (Pounds)21.4
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
(Pounds)167.5 million in Fiscal 2001. These charges consisted of a writedown of
(Pounds)100.0 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 (Pounds)33.1 million and (Pounds)8.5
million of professional fees incurred in connection with a review of our
strategic options. In addition, we recorded charges of (Pounds)13.7 million
relating to revisions of working capital provisions and exceptional warranty
costs as well as (Pounds)12.2 million related to the settlement of the Bomar
litigation. See "Item 10. Additional Information--Material Contracts."
Profit on Disposal of Businesses and Other Assets
Profit on disposal of businesses and other assets in Fiscal 2001
amounted to (Pounds)23.5 million and related to a (Pounds)29.1 million gain
recognized on the sale of our building and consumer products division in June
2001, partially offset by a loss of (Pounds)5.6 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 (Pounds)4.4
million, or 11.7%, to (Pounds)41.9 million in Fiscal 2001 from (Pounds)37.5
million in Fiscal 2000. The increase was due primarily to the write-off of
(Pounds)5.8 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
(Pounds)1.4 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 decreased by (Pounds)7.6 million, or 53.5%,
to (Pounds)6.6 million in Fiscal 2001 from (Pounds)14.2 million in Fiscal 2000.
Despite reporting a loss in Fiscal 2001, we still incurred a tax charge due to
the effects of non-deductible items, such as goodwill amortization and
impairment. Our effective tax rate was 16.9% in Fiscal 2000. Our effective
income tax rate is significantly lower than the statutory rate in the U.K. and
the U.S. Federal statutory rate of 35% and 30%, respectively, due primarily to
the benefit of net operating loss carryforwards. At September 29, 2001, we had
approximately (Pounds)190.0 million, (Pounds)85.0 million and (Pounds)9.0
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 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
(Pounds)9.1 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 (Pounds)413.7
million, or 84.3%, to (Pounds)904.4 million in Fiscal 2000 from (Pounds)490.7
million in Fiscal 1999, primarily due to sales generated by the Scotsman
businesses acquired ((Pounds)382.8 million), as well as favorable foreign
exchange gains of approximately (Pounds)19.0 million, partially offset by a
decrease in comparable sales of approximately (Pounds)8.0 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....... (Pounds)342.6 76.6% (Pounds)487.0 73.2% (Pounds)144.4 42.1%
Europe & Rest of World......................................... 105.3 23.4% 178.1 26.8% 72.8 69.1%
------------- ----- ------------- ----- ------------- ----
Total Global Food Service Equipment......................... (Pounds)447.9 100.0% (Pounds)665.1 100.0% (Pounds)217.2 48.5%
============= ===== ============= ===== ============= ====
Turnover increased by (Pounds)217.2 million, or 48.5%, to (Pounds)665.1
million in Fiscal 2000 from (Pounds)447.9 million in Fiscal 1999.
Turnover from our North America operations increased by (Pounds)144.4
million, or 42.1%, to (Pounds)487.0 million in Fiscal 2000 from (Pounds)342.6
million in Fiscal 1999. The majority of the increase, approximately
(Pounds)119.8 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 (Pounds)20.8 million. The remaining increase,
approximately (Pounds)3.8 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
(Pounds)72.8 million, or 69.1%, to (Pounds)178.1 million in Fiscal 2000 from
(Pounds)105.3 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 (Pounds)79.1 million. In addition, comparable
sales increased by approximately (Pounds)5.0 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 (Pounds)11.3 million.
Food Retail Equipment. Turnover increased by (Pounds)177.6 million, or
424.9%, to (Pounds)219.4 million in Fiscal 2000 from (Pounds)41.8 million in
Fiscal 1999. The majority of the increase, (Pounds)183.9 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 (Pounds)9.5 million.
Property. Sales of property assets were(Pounds)19.9 million in Fiscal
2000, compared to(Pounds)1.0 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 (Pounds)52.0 million, or 85.8%,
to (Pounds)112.6 million in Fiscal 2000 from (Pounds)60.6 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........................... (Pounds)49.3 80.4% (Pounds)66.3 74.6% (Pounds)17.0 34.5%
Europe & Rest of World.................. 12.0 19.6% 22.6 25.4% 10.6 88.3%
------------ ----- ------------ ----- ------------ ----
Total Global Food Service Equipment..... (Pounds)61.3 100.0% (Pounds)88.9 100.0% (Pounds)27.6 45.0%
============ ===== ============ ===== ============ ====
Operating profit from continuing operations before goodwill
amortization and exceptional items increased by (Pounds)27.6 million, or 45.0%,
from (Pounds)61.3 million in Fiscal 1999 to (Pounds)88.9 million in Fiscal 2000.
Operating profit from continuing operations before goodwill
amortization and exceptional items from our North America operations increased
by (Pounds)17.0 million, or 34.5%, from (Pounds)49.3 million in Fiscal 1999 to
(Pounds)66.3 million in Fiscal 2000. The largest portion of the increase,
approximately (Pounds)13.2 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 (Pounds)2.9 million in favorable foreign
exchange movements. Operating profit from continuing operations before goodwill
amortization and exceptional items as a percentage of net sales in North America
decreased by 0.8% 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 (Pounds)10.6 million to (Pounds)22.6 million in Fiscal 2000 from (Pounds)12.0
million in Fiscal 1999. Operating profit from continuing operations before
goodwill amortization and exceptional items as a percentage of net sales of
Europe and the rest of the world increased by
1.3% to 12.7% in Fiscal 2000 from 11.4% in Fiscal 1999. The majority of the
increase, approximately (Pounds)10.3 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 (Pounds)1.9 million due to improved margins. These
measures were partially offset by adverse foreign exchange movements of
approximately (Pounds)1.6 million.
Food Retail Equipment. Operating profit from continuing operatings
before goodwill amortization and exceptional items increased by (Pounds)17.3
million from (Pounds)5.3 million in Fiscal 1999 to (Pounds)22.6 million in
Fiscal 2000. The majority of the increase, (Pounds)16.5 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 (Pounds)1.0 million. This was offset by a decrease in
operating profit from continuing operations before goodwill amortization and
exceptional items from comparable sales of (Pounds)0.2 million due to sales
declines at Kysor Warren. Operating profit from continuing operations before
goodwill amortization and exceptional items as a percentage of net sales
decreased by 2.4% to 10.3% in Fiscal 2000 from 12.7% in Fiscal 1999.
Property. Operating profit increased by (Pounds)8.2 million, from
(Pounds)0.2 million in Fiscal 1999 to (Pounds)8.4 million in Fiscal 2000,
reflecting the higher level of property sales in Fiscal 2000.
Corporate Costs. Corporate costs increased by (Pounds)1.1 million from
(Pounds)6.2 million in Fiscal 1999 to (Pounds)7.3 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
(Pounds)18.7 million to (Pounds)21.4 million in Fiscal 2000 from (Pounds)2.7
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.
Exceptional Items
We did not incur any exceptional costs in Fiscal 2000. The exceptional
costs of (Pounds)6.0 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
(Pounds)1.1 million from (Pounds)4.1 million to (Pounds)3.0 million, due to
timing and nature of sales.
Net Interest Payable and Similar Charges
Net interest payable and similar charges increased by (Pounds)24.2
million from (Pounds)13.3 million in Fiscal 1999 to (Pounds)37.5 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 (Pounds)8.3 million from
(Pounds)5.9 million in Fiscal 1999 to (Pounds)14.2 million in Fiscal 2000. The
increase resulted primarily from higher income during Fiscal 2000 in tax
jurisdictions where we did not have the benefit of prior year losses.
Accordingly, our effective tax rate increased by 8.1% to 16.9% in Fiscal 2000
from 8.8% in Fiscal 1999.
Operating Profit from Discontinued Operations
Operating profit from discontinued operations for Fiscal 2000 was
(Pounds)24.0 million relating to our building and consumer products division
sold in June 2001.
U.S. GAAP Reconciliation
Net loss under U.S. GAAP for Fiscal 2001 was (Pounds)113.7 million,
compared to a net loss for the same period of (Pounds)115.9 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 (of (Pounds)16.6 million), as well
as differences in net
asset values under U.S. GAAP which resulted in a reduced impairment charge of
(Pound)9.8 million.
Net income under U.S. GAAP for Fiscal 2000 was (Pound)25.3 million,
compared to net income for the same period of (Pound)69.3 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 ((Pound)16.5 million)
resulting from acquisitions completed before March 31, 1998, as well as
movements in deferred taxation not recognized under U.K. GAAP ((Pound)27.0
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 report.
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 (Pound)98.6 million from the sale of businesses in 2001,
which we utilized to pay down existing debt.
Historical Cash Flows
The following table sets forth a summary of cash flow items for the
periods presented:
Fiscal Fiscal Fiscal
1999 2000 2001
---- ---- ----
(amounts in millions)
Net cash inflow from operating activities before exceptional items..... (Pound)88.3 (Pound)160.5 (Pound)120.8
Net cash outflow from operating exceptional items...................... -- -- (27.8)
----------- ------------ ------------
Net cash inflow from operating activities.............................. 88.3 160.5 93.0
=========== ============ ============
Capital expenditure and financial investment........................... (16.9) (23.3) (16.3)
Acquisitions and disposals............................................. (233.0) (48.2) 72.8
Financing.............................................................. 183.4 (13.8) (60.6)
Operating Activities
Net cash provided by operating activities before exceptional items
decreased by (Pound)39.7 million to (Pound)120.8 million in Fiscal 2001 from
(Pound)160.5 million in Fiscal 2000. This was primarily attributable to the
decrease in operating profit of (Pound)41.4 million, partially offset by
improvements in working capital of (Pound)4.0 million. The increase of
(Pound)72.2 million to (Pound)160.5 million in Fiscal 2000 from (Pound)88.3
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.
Capital Expenditure and Financial Investment and Acquisitions and Disposals
Cash provided by such activities was (Pound)56.5 million in Fiscal
2001, compared to cash used in such activities of (Pound)71.5 million in Fiscal
2000, an increase of (Pound)128.0 million. This change was primarily the result
of a decrease in cash expended for acquisitions and equipment of (Pound)30.4
million in Fiscal 2001, and cash received from the sale of our building and
consumer products division of (Pound)98.6 million, offset partially by a
decrease in cash received from the sale of assets of (Pound)0.8 million in
Fiscal 2001. Cash used in such activities decreased by (Pound)178.4 million, to
(Pound)71.5 million in Fiscal 2000 from (Pound)249.9 million in Fiscal 1999, due
primarily to the decrease in cash payments to acquire businesses of (Pound)182.9
million, offset partially by a decrease in proceeds from sale of fixed assets of
(Pound)8.0 million.
Financing Activities
Cash used in financing activities increased by (Pound)46.8 million, to
(Pound)60.6 million in Fiscal 2001, compared to cash used in financing
activities of (Pound)13.8 million for Fiscal 2000. This change was primarily due
to a decrease in net borrowings. Cash used in financing activities increased by
(Pound)197.2 million to cash used of (Pound)13.8 million in Fiscal 2000 from
cash provided of (Pound)183.4 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 (Pound)19.3
million, (Pound)20.6 million and (Pound)20.8 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. The total cost of acquiring,
building and equipping the Frymaster facility was (Pound)9.7 million. The cost
of the initial acquisition, building and equipping of the technology center was
(Pound)2.2 million, and the cost of the addition to the technology center was
(Pound)0.9 million. In addition, we have completed construction of a new factory
for our Convotherm subsidiary in Germany, which cost about (Pound)3.0 million,
and a new factory for our Viscount Catering subsidiary in the U.K., which cost
about (Pound)5.0 million.
At September 29, 2001, we had (pound)2.9 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 (pound)13.8 million, (pound)13.6 million, and (pound)8.9 million,
respectively.
Working Capital
The Company is of the opinion that, having regard to the credit
facilities available to the Group and the net proceeds of the rights offering,
the working capital available to the Group is sufficient for the Group's present
requirements, that is, for at least the next twelve months from the date of
publication of this annual report.
Material Financial Requirements
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, London Branch and The Royal Bank of Scotland plc as
arrangers and The Royal Bank of Scotland plc, issuing bank and as agent. The
senior secured credit facilities are comprised of a $300 million 5 year "A" term
loan facility (the "A Term Loan Facility") and a $70 million 6 year "B" term
loan facility (the "B Term Loan Facility" and together the "Term Loan Facility")
and a $85 million 5 year revolving credit facility (the "Revolving 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
A Term Loan Facility and the Revolving Facility both mature five years from the
date of the facility. The indebtedness under the senior secured credit
facilities is secured by fixed and floating charges over substantially all the
assets of the borrowers and 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, cashflow to total funding costs, total net debt to EBITDA, total net
senior debt to EBITDA and minimum tangible net worth, each term as defined in
the senior secured credit agreement. The senior secured credit facilities also
include covenants relating to limitations on sales of assets, 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 plus a margin.
The margins are adjusted after September 30, 2002, based on the Group's 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 the Company or a disposal of substantially all of the assets of the
Company and its subsidiaries. Certain mandatory partial repayments are required
to be made out of proceeds from asset sales, other than in the ordinary course
of business, not immediately reinvested in replacement assets or 75% of surplus
cash of the Company 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
(Pound)5 million, insolvency, bankruptcy or similar events, change of control
and material adverse change.
On February 20, 2002, we entered into a bridge loan facility with The
Royal Bank of Scotland plc and Credit Suisse First Boston, London Branch as
arrangers and Credit Suisse First Boston, as agent. The facility consists of a
(Pound)150 million bridge loan with an initial maturity of 364 days. We used the
bridge proceeds to repay outstanding indebtedness under our prior credit
facility. We expect to repay the bridge loan facility (and any exchange notes
that are issued, as described below) with the net proceeds from the proposed
issue of Notes and the net proceeds of the rights offering. Each lender of the
bridge loans has the right, three months after February 20, 2002, to receive, in
exchange for its bridge loan or a portion thereof, exchange notes of the Company
that will rank pari passu with the bridge loans. The exchange notes will mature
on February 20, 2012. If any lender under the bridge loan facility does not
exchange its bridge loan for exchange notes on or prior to February 20, 2003,
such lender will be required to extend the maturity of such loan to February 20,
2012. The bridge loan facility and the exchange notes contain operating and
financial covenants that are applicable during the first 364 days in
substantially the same form as those governing the Term Loan Facility and the
Revolving Facility including, without limitation, minimum ratios of EBITDA to
total interest costs, cashflow to total funding costs, total net debt to EBITDA,
total net senior debt to EBITDA and minimum tangible net worth, each term as
described in the bridge loan facility. The bridge loan facility and the exchange
notes also include covenants relating to limitations on sales of assets,
dividends and other restricted payments, mergers, indebtedness, acquisitions and
liens. Prior to February 20, 2003, advances under the bridge loan facility and
the exchange notes bear interest at LIBOR plus a margin plus mandatory costs.
The margin will increase by 0.5% each three month period thereafter, up to
February 20, 2003. After February 20, 2003, if advances under the bridge loan
facility remain outstanding, the interest rate on the bridge loans or the
exchange notes will become fixed based on a formula which references a number of
market indices plus a margin. Interest on the bridge loan facility (and any
exchange notes) is capped at 16% per annum. The bridge loan facility and the
exchange notes contain customary events of default including failure to make
payments under the bridge loan facility, breach of covenants, including
financial covenants, breach of representations, cross-default in respect of
indebtedness in excess of (Pound)5 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 (Pound)11.3 million and
(Pound)15.7 million was outstanding under the industrial revenue bonds. We also
have loans aggregating (Pound)3.1 million payable under senior promissory notes.
Current Financial and Trend Information
Subsequent to the end of Fiscal 2001, we have taken further actions to
reduce costs and target market share gain opportunities. Nevertheless, the
trading climate has become more difficult and we have planned on the basis that
it will remain difficult through the balance of Fiscal 2002. We plan to address
the situation by taking action to reduce costs further, targeting further cost
savings of some (Pound)10 million for the new financial year through strategic
headcount reductions, discretionary cost savings, leveraging purchasing power
and ongoing manufacturing restructuring. We estimate exceptional items of some
(Pound)6 million in Fiscal 2002 relating to these actions. We are also taking
actions to improve top line performance, and we believe that our scale, broad
product range, technology, and industry relationships position us well to
achieve this.
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 Group company. 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 proposed notes.
New Accounting Pronouncements
U.K. GAAP
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 annual report, and the effects of adoption on the profit and loss
account is not expected to be material.
In November 2000, the U.K. Accounting Standards Board ("ASB") issued
Financial Reporting Standard ("FRS") 17, "Retirement Benefits" relating to
accounting for pension costs and other post-retirement benefits, which replaces
Statement of Standard Accounting Practice ("SSAP") No. 24, "Accounting for
Pension Costs," and Urgent Issues Task Force Abstract ("UITF") No. 6,
"Accounting for post-retirement benefits other than pensions." FRS17 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.
In December 2000, the ASB issued FRS 19, "Deferred Tax," 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 accounts for the year ending
September 28, 2002. FRS 19 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, to the extent that it is regarded as more likely than not that they
will be recovered. On implementation of FRS 19, a prior period adjustment will
be required to reflect the change in basis of accounting for all periods
presented. This adjustment is expected to result in the recognition of a
significant deferred tax asset.
U.S. GAAP
Adopted in 2001
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"). 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 (Pound)0.2
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 (Pound)0.8 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"). 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", ("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. 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. 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" ("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. 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" ("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. We are currently assessing but have not yet determined the impact of SFAS
144 on our financial position and results of operations."
"
Item 6. Directors, Senior Management and Employees
The following table sets forth information regarding our directors and
executive officers as of the date of this report:
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
David S. McCulloch.............. 55 Director and President of the Global Food Service Equipment Group
G. Eryl Morris.................. 58 Director
David W. Odum................... 48 Director and President of the Food Retail Equipment Group
Waldemar Schmidt................ 61 Director
Executive Officers:
Robert C. Eimers................ 54 Vice President, Global Human Resources
Stuart P. Miller................ 52 Chief Financial Officer, Group
W. David Wrench................. 55 Chief Financial Officer, Global Operations
Andrew J. Allner, 48, 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, 54, 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. Prior to
joining Kaiser Permanente, Mr. Briggs was Senior Vice President and Chief
Financial Officer of The Pillsbury Company, since January 1998. 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, 55, 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 is also a consultant to
Clifford Chance, LLP, where he has acted as Chairman of European Corporate
Coverage since June 1999. 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.
David S. McCulloch, 55, President, Global Food Service Equipment Group,
joined Enodis in 1987. Mr. McCulloch was appointed to the Board in November
2001. 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 (Enodis) from August 1998 to March 2001 and
President, Food Service Equipment--North America from March 2001 to September
2001. In September 2001, he was
appointed President, Global Food Service Equipment Group. 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, 58, 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.
David W. Odum, 48, President, Food Retail Equipment Group, joined
Enodis as President--Food Retail Equipment Group in September 2000 and was
appointed to the Board in November 2001. He has been in the refrigeration
industry for over 23 years and held numerous manufacturing, marketing and
managerial positions within the industry. Before joining Enodis he was President
of the Krack Corporation from 1996 to 2000. Prior to that, he was President,
Hussman Canada, from 1992-1996. Mr. Odum was elected by the shareholders for a
term of service that expires in January 2005.
Waldemar Schmidt, 61, 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 AS 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.
Robert C. Eimers, 54, was appointed Vice President, Global Human
Resources in July 2001. Prior to joining Enodis, he was Vice President, Global
Organization Development of APW, Ltd. from January 2001 to July 2001. From
November 1998 to November 1999, Mr. Eimers was Vice 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.
Stuart P. Miller, 52, was appointed our Deputy Chief Financial Officer
in April 2001 and Chief Financial Officer-Group in November 2001. Prior to
joining Enodis, he was Group Finance Director of Dexion Group Ltd., an
international storage and material handling business that was acquired by Apax
Partners in 1997. From January 1996 to May 1997, Mr. Miller was Finance
Director, International Packaging of Rexam PLC. From January 1990 to December
1995, Mr. Miller held various senior financial positions at Grand Met plc. Mr.
Miller is also a director of Rumble Consultants Limited.
W. David Wrench, 55, was appointed Chief Financial Officer of our
Global Food Service Equipment Group in March 2001 and Chief Financial Officer,
Global Operations in November 2001. 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. In June 1996, Mr. Wrench was appointed President, Noma
Consumer Products. In March 1995, he was appointed Executive Vice President and
Chief Financial Officer. In August 1994, he was appointed President, Fleck
Manufacturing Inc. Mr. Wrench is a member of the Financial Executives Institute.
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............................... (Pound)293,686/(3)/ (Pound)-- (Pound)250,000 (Pound)21,496 (Pound)565,182
Robert E. Briggs............................... -- 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............................. (Pound)820,568 (Pound)263,544 (Pound)250,000 (Pound)84,991 (Pound)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 (Pound)62,437 in lieu of Company
contribution to Company 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 (Pound)327,302 (plus one year's benefits) in severance
payments.
Compensation Plans
No more than 10% of our new issue 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 (pound)2.4 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 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 7.1 million ordinary shares were outstanding on January
30, 2002. Of these, options to purchase 1.14 million shares were exercisable on
January 30, 2002.
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
"Item 10. Additional Information--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 January 30, 2002, or their resignation date if
earlier. All of the option grants described in the table and the following text
will be adjusted in respect of the rights offering.
The exercise prices have been rounded to the nearest 0.1p.
Number of Earliest date
--------- -------------
Directors and Senior Executives Date of grant options granted Exercise price exercisable Expiration date
------------------------------- ------------- --------------- -------------- ----------- ---------------
Andrew J. Allner........................... -- 0 -- -- --
Robert C. Eimers........................... 07/03/00 31,056 322.0p 07/03/03 07/02/10
David S. McCulloch......................... 07/01/97 40,000 144.0p 07/01/00 06/30/07
07/28/99 35,000 262.9p 07/28/02 07/27/09
09/10/01 359,560 101.0p 09/10/04 09/09/11
Stuart P. Miller........................... -- 0 -- -- --
David W. Odum.............................. 12/21/00 121,065 210.0p 12/21/03 12/21/10
09/10/01 326,370 101.0p 09/10/04 09/10/11
Andrew F. Roake............................ 11/28/97 254,802 187.5p 12/31/01 02/03/04
(resigned December 31, 2001) 11/17/98 137,935 180.0p 12/31/01 02/03/04
11/24/99 90,197 314.0p 12/31/01 02/03/04
07/03/00 77,640 322.0p 12/31/01 02/03/04
David W. Williams.......................... 07/22/96 123,655 186.0p 03/31/01 03/31/02
(resigned March 23, 2001) 07/01/97 159,722/(1)/ 144.0p 03/31/01 03/31/02
06/26/98 52,173/(1)/ 230.0p 03/31/01 03/31/02
09/03/99 83,333/(1)/ 301.5p 03/31/01 03/31/02
07/03/00 93,170 322.0p 03/31/01 03/31/02
W. David Wrench............................ 07/03/00 30,000 322.0p 07/03/03 07/02/10
01/22/01 49,773 181.0p 01/22/04 01/21/11
___________
(1) Options granted by the Trustees of our 1993 Executive Share Option
Scheme are over Ordinary Shares acquired by the Trustees in the market
for the purpose.
On April 5, 2001, we agreed to grant to Mr. Allner an option under our
2001 Executive Share Option Scheme, with a value of (Pounds)490,000, based on an
exercise price of (Pounds)1.81 per ordinary share. If the price of the shares
exceeds (Pounds)1.81 on the date of grant, options will be granted at the higher
share price, and Mr. Allner is entitled upon exercise to the difference between
the actual exercise price and (Pounds)1.81 per share. If there is a change of
control of Enodis prior to the date of grant, Mr. Allner will receive a cash
payment of the amount that would have been paid to him if he had been granted
and had exercised the option at an exercise price of (Pounds)1.81 per share and
sold the shares at the purchase price paid by the acquiror. On December 21,
2001, we also agreed to grant to Mr. Allner an option under our 2001 Executive
Share Option Scheme over 380,435 shares based on an exercise price of
(Pounds)0.92 per ordinary share. If the price of the shares exceeds (Pounds)0.92
on the date of the grant, options will be granted at the higher share price, and
Mr. Allner is entitled upon exercise to the difference between the actual
exercise price and (Pounds)0.92 per share. If there is a change of control of
Enodis prior to the date of grant, Mr. Allner will receive a cash payment of the
amount that would have been paid to him if he had been granted and had exercised
the option at an exercise price of (Pounds)0.92 per share and sold the shares at
the purchase price paid by the acquiror. On February 14, 2002, we further agreed
to grant Mr. Allner options over 819,565 Ordinary Shares at an exercise price to
be based on the market price of the Ordinary Shares on or about the date of
grant.
On February 1, 2001, we also agreed to grant to Mr. McCulloch an option
over 219,613 shares based on an exercise price of (Pounds)1.81 per share. If
there is a change of control of Enodis prior to the date of the grant, Mr.
McCulloch will receive a cash payment of the amount that would have been paid to
him had he been granted and exercised the option of an exercise price of
(Pounds)1.81 per share and sold the shares at the purchase price paid by the
acquiror.
We have also agreed to grant to Mr. Miller an option at a value of one
and a half times his annual salary, based on an exercise price of (Pounds)1.81
per ordinary share. If there is a change of control of Enodis prior to the date
of the grant, Mr. Miller will receive a cash payment of the amount that would
have been paid to him had he been granted and exercised the option at an
exercise price of (Pounds)1.81 per share and sold the shares at the purchase
price paid by the acquiror.
On February 1, 2002, we agreed to grant to Mr. Odum an option over
141,905 shares based on an exercise price of (Pounds)1.81 per share. If there is
a change of control of Enodis prior to the date of the grant, Mr. Odum will
receive a cash payment of the amount that would have been paid to him had he
been granted and exercised the option at an exercise price of (Pounds)1.81 per
share and sold the shares at the purchase price paid by the acquiror.
In addition, the Board has agreed in principle to grant options over an
aggregate of approximately 2.4 million shares to a group of senior executives at
an exercise price based on the market price on or about the date of grant. These
include the following: each of David McCulloch and David Odum will be granted
options over a number of shares whose value equals his annual salary; and each
of Robert Eimers, Stuart Miller and David Wrench will be granted options over a
number of shares whose value equals 67% of his annual salary. It is intended
that all of the options described in this paragraph will be granted in the
period following shareholder approval of the rights offering.
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 (Pounds) 1,200 (Pounds)15,700 (Pounds)13,800
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 (Pounds)22,003 and
(Pounds)31,410 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 (Pounds)2.9
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. The period during which each
director has served and the date of expiration of his term are shown above under
the heading "Board of Directors."
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.
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 the Group is undertaken by an Executive
Committee, which is currently composed of: Andrew Allner, David McCulloch, David
Odum, David Wrench, Stuart Miller and Robert Eimers. The Committee meets
physically or by telephone conference call on a weekly basis. The former Chief
Operating Officer, Andrew Roake, who left the Group on December 31, 2001, was
also a member of the Executive Committee in Fiscal 2001.
Employees
At the end of Fiscal 1999, 2000 and 2001 we had the following number of
employees:
October 2, 1999 September 30, 2000 September 29, 2001
--------------- ------------------ ------------------
Food Service Equipment............................................ 6,036 5,917 5,655
Food Retail Equipment............................................. 2,536 2,352 1,934
Other Employees................................................... 2,679 2,965 516
Total............................................................. 11,251 11,234 8,105
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. About 1,880 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.
Share Ownership of Management
As of January 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 of
----------
Shares ADSs class
------ ---- -----
Andrew J. Allner................................................................ 4,500 0 *
Robert E. Briggs................................................................ 0 2,000 *
Peter M. Brooks................................................................. 20,000 0 *
Robert C. Eimers................................................................ 0 0 *
Penny L. Hughes (resigned on January 17, 2001).................................. 2,000 0 *
David S. McCulloch.............................................................. 0 5,000 *
Stuart P. Miller................................................................ 0 0 *
G. Eryl Morris.................................................................. 20,000 0 *
David W. Odum................................................................... 0 0 *
Andrew F. Roake (resigned December 31, 2001).................................... 100,000 10,000 *
Waldemar Schmidt................................................................ 2,300 0 *
David W. Williams (resigned on March 23, 2001).................................. 8,353 100 *
W. David Wrench................................................................. 0 0 *
___________
* Not material.
"
"
Item 11. 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. Our long term
floating rate borrowings amounted to (Pounds)398.9 million at September 29,
2001.
To reduce the impact of changes in interest rates on these borrowings,
we 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 September 29, 2001, and September 30, 2000, respectively,
approximately 82.6% and 79.8% of our long term indebtedness accrued interest at
rates that fluctuate with prevailing interest rates and, accordingly, increases
in these rates may increase our interest payment obligations. At September 29,
2001, after adjusting for the effect of the above agreements, we had long term
fixed and floating rate borrowings of (Pounds)69.2 million and (Pounds)329.6
million, respectively. A hypothetical 100-basis point increase in the interest
rates associated with our borrowings, as of September 29, 2001, would reduce our
net income by (Pounds)3.3 million.
Following completion of the new financing arrangements, we intend to
hedge approximately 75% of our outstanding long term floating rate borrowings.
The long term notes we propose to offer will bear interest at a fixed rate.
Foreign Currency Risk
Substantial portions of our revenues and expenses are denominated in
currencies other than pounds sterling, particularly the U.S. dollar.
Fluctuations in the values of these currencies compared to the pound sterling
may affect our financial condition and results of operations and ability to
repay debt required to be paid in British pounds sterling. In order to mitigate
the impact of fluctuations in foreign currencies, 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 also 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, euro and Canadian dollar. We also face exposure arising from the
impact of translating our global foreign currency assets into pounds at balance
sheet dates. Wherever possible, we seek to minimize this exposure through the
matching of local currency borrowings and assets.
At September 29, 2001, and September 30, 2000, we had foreign currency
forward contracts maturing at various dates to sell (Pounds)96.6 million and
(Pounds)29.1 million, respectively, in various foreign currencies. The fair
of the forward contracts is the amount that we would receive or pay to terminate
value the contracts. In order to terminate these agreements at September 29,
2001, and September 30, 2000, we would have recognized gains of (Pounds)4.3
million and of (Pounds)0.3 million, respectively.
At September 29, 2001, 92.2% of our net debt was denominated in U.S.
dollars, 2.8% was denominated in British pounds sterling, and 5.0% 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 (Pounds)1.7 million. This
adjustment is included in our statement of shareholders' equity under the
heading "Accumulated Other Comprehensive Loss."
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 September 29, 2001, by(Pounds)2.6 million,
mainly due to U.S. dollar exposure; and
. reduce our net assets at September 29, 2001, by(Pounds)3.7 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 September 29, 2001, by(Pounds)2.6
million, mainly due to U.S. dollar exposure; and
. increase our net assets at September 29, 2001, by(Pounds)3.7
million, mainly due to U.S. dollar and euro exposure.
In connection with the new financing arrangements, we will seek to 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, while borrowings under the bridge loan agreement
are denominated in British pounds sterling. We plan to hedge a portion of the
bridge loan 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."
The financial statements described below are included in this document and have
been extracted without material adjustment from the Company's Annual Report on
Form 20-F dated 21 February 2002 and filed with the SEC, the full text of which
can be obtained from the SEC (at the United States Securities and Exchange
Commission, Washington, DC 20549) or the SEC's website (at www.sec.gov).
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report.................................................................................... 59
Consolidated Statements of Profit and Loss Accounts............................................................. 60
Consolidated Balance Sheets..................................................................................... 61
Consolidated Statements of Cash Flows and Notes to the Consolidated Statements of Cash Flows.................... 62-63
Consolidated Statements of Total Recognized Gains and Losses.................................................... 64
Consolidated Statements of Movement in Equity Shareholders' Funds............................................... 64
Notes to the Consolidated Financial Statements.................................................................. 65
Schedule II--Valuation and Qualifying Accounts.................................................................. 111
"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 at 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 at 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
at September 30, 2000, and September 29, 2001, to the extent summarized in Note
29 to the consolidated financial statements.
DELOITTE & TOUCHE
Charted Accountants and Registered Auditors
London, England
November 21, 2001, except for Note 30 as to which the date is February 20, 2002
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
------------------------- ----
Exceptional
Pre- items
(in millions except share data) Notes exceptional (Note 5) Total Total
----------------------------- ----- ----------- -------- ----- -----
Turnover 2
Food equipment................. (Pounds)489.7 (Pounds)-- (Pounds)489.7 (Pounds)884.5
Property....................... 1.0 -- 1.0 19.9
------------- ---------- ------------- -------------
Continuing operations.......... 490.7 -- 490.7 904.4
Discontinued operations........ 265.6 -- 265.6 275.7
------------- ---------- ------------- -------------
756.3 -- 756.3 1,180.1
============= ========== ============= =============
Profit from operations
Food equipment................. 66.6 (6.0) 60.6 111.5
Property....................... 0.2 -- 0.2 8.4
Corporate costs................ (6.2) -- (6.2) (7.3)
------------- ---------- ------------- -------------
Continuing operations.......... 60.6 (6.0) 54.6 112.6
Discontinued operations........ 24.0 -- 24.0 27.1
------------- ---------- ------------- -------------
84.6 (6.0) 78.6 139.7
============= ========== ============= =============
Goodwill
amortization/impairment (2.7) -- (2.7) (21.4)
Operating profit/(loss) 2,4
Continuing operations.......... 57.9 (6.0) 51.9 91.2
Discontinued operations........ 24.0 -- 24.0 27.1
------------- ---------- ------------- -------------
81.9 (6.0) 75.9 118.3
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
Net interest payable and
similar charges............. 8 (13.3) -- (13.3) (37.5)
------------- ---------- ------------- -------------
Profit/(loss) on ordinary
activities before
taxation.................... 72.7 (6.0) 66.7 83.8
Tax on profit/(loss) on
ordinary activities......... 9 (5.9) -- (5.9) (14.2)
------------- ---------- ------------- -------------
Profit/(loss) on ordinary
activities after taxation... 66.8 (6.0) 60.8 69.6
Equity minority interest....... -- -- -- (0.3)
------------- ---------- ------------- -------------
Profit/(loss) for the period 66.8 (6.0) 60.8 69.3
Equity dividends............... 10 (24.1) -- (24.1) (33.9)
------------- ---------- ------------- -------------
Retained profit/(loss)......... (Pounds)42.7 (Pounds)(6.0) (Pounds)36.7 (Pounds)35.4
============= ========== ============= =============
2001
--------------------------
Exceptional
Pre- items Total
exceptional (Note 5) Total (Note 1)
----------- -------- ----- --------
Turnover
Food equipment................. (Pounds)887.2 (Pounds)-- (Pounds)887.2 $1,303.4
Property....................... 16.6 -- 16.6 24.4
------------- ---------- ------------- --------
Continuing operations.......... 903.8 -- 903.8 1,327.8
Discontinued operations........ 177.3 -- 177.3 260.5
------------- ---------- ------------- --------
1,081.1 -- 1,081.1 1,588.3
============= ========== ============= ========
Profit from operations
Food equipment................. 90.7 (43.4) 47.3 69.5
Property....................... 9.0 -- 9.0 13.2
Corporate costs................ (8.9) (24.1) (33.0) (48.5)
------------- ---------- ------------- --------
Continuing operations.......... 90.8 (67.5) 23.3 34.2
Discontinued operations........ 9.1 -- 9.1 13.4
------------- ---------- ------------- --------
99.9 (67.5) 32.4 47.6
============= ========== ============= ========
Goodwill
amortization/impairment .... (23.0) (100.0) (123.0) (180.7)
Operating profit/(loss)
Continuing operations.......... 67.8 (167.5) (99.7) (146.5)
Discontinued operations........ 9.1 -- 9.1 13.4
------------- ---------- ------------- --------
76.9 (167.5) (90.6) (133.1)
Profit on disposal of
businesses.................. -- 23.5 23.5 34.5
Profit on disposal of
property fixed assets....... -- -- -- --
------------- ---------- ------------- --------
76.9 (144.0) (67.1) (98.6)
Net interest payable and
similar charges............. (36.1) (5.8) (41.9) (61.5)
------------- ---------- ------------- --------
Profit/(loss) on ordinary
activities before
taxation.................... 40.8 (149.8) (109.0) (160.1)
Tax on profit/(loss) on
ordinary activities......... (8.6) 2.0 (6.6) (9.7)
------------- ---------- ------------- --------
Profit/(loss) on ordinary
activities after taxation .. 32.2 (147.8) (115.6) (169.8)
Equity minority interest....... (0.3) -- (0.3) (0.5)
------------- ---------- ------------- --------
Profit/(loss) for the period .. 31.9 (147.8) (115.9) (170.3)
Equity dividends............... (4.8) -- (4.8) (7.0)
------------- ---------- ------------- --------
Retained profit/(loss)......... (Pounds)27.1 (Pounds)(147.8) (Pounds)(120.7) $ (177.3)
============= ========== ============= ========
2001
Earnings/(loss) per share 11 1999 2000 2001 (Note 1)
---- ---- ---- --------
Basic earnings/(loss) per
share....................... 38.7p 29.6p (46.5)p $(0.68)
Adjusted basic earnings per
share....................... 41.6p 37.4p 22.1p $ 0.32
Diluted earnings/(loss) per
share....................... 27.7p 27.7p (46.5)p $(0.68)
Adjusted diluted earnings
per share................... 29.6p 35.0p 22.0p $ 0.32
The accompanying notes form an integral part of these financial statements.
Enodis plc CONSOLIDATED BALANCE SHEETS As at September 30, 2000, and September
29, 2001
(in millions) Notes 2000 2001 2001 (Note 1)
------------- ----- ---- ---- -------------
Fixed assets
Intangible fixed assets--goodwill............................... 12 (Pounds)412.7 (Pounds)310.2 $ 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
------------- ------------- --------
(Pounds)627.1 (Pounds)546.0 $ 802.1
============= ============= ========
The accompanying notes form an integral part of these financial statements.
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 (Pounds)88.3 (Pounds)160.5 (Pounds)120.8 $ 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........................... (Pounds)9.6 (Pounds)(0.1) (Pounds)13.8 $ 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.
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 (Pounds)75.9 (Pounds)118.3 (Pounds)76.9 (Pounds)(167.5) (Pounds)(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............................... (Pounds)88.3 (Pounds)160.5 (Pounds)120.8 (Pounds)(27.8) (Pounds)93.0
============ ============= ============= ============== =============
(b) Reconciliations of net cash flow to movement in net debt
(in millions) 1999 2000 2001
------------- ---- ---- ----
Increase/(decrease) in net cash in the period................................... (Pounds)9.6 (Pounds)(0.1) (Pounds)13.8
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....................................................... (Pounds)(498.7) (Pounds)(434.2) (Pounds)(365.9)
============== ============== ==============
(c) Reconciliations of net debt to balance sheet
(in millions) 1999 2000 2001
------------- ---- ---- ----
Cash at bank and in hand........................................................ (Pounds)26.7 (Pounds)28.5 (Pounds)39.4
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.......................................................... (Pounds)(498.7) (Pounds)(434.2) (Pounds)(365.9)
============== ============== ==============
(d) Analysis of movements in net debt
Acquired
with Translation
(in millions) 2000 Cash flow subsidiaries adjustments 2001
------------- ---- --------- ------------ ----------- ----
Cash............................................... (Pounds)28.5 (Pounds)13.8 (Pounds)-- (Pounds)(2.9) (Pounds)39.4
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................................... (Pounds)(434.2) (Pounds)74.6 (Pounds)(0.7) (Pounds)(5.6) (Pounds)(365.9)
============== ============ ============ ============ ==============
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.......................................... (Pound)60.8 (Pound)69.3 (Pound)(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...................... (Pound)61.9 (Pound)70.6 (Pound)(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................................................ (Pound)60.8 (Pound) 69.3 (Pound)(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.......................................... (Pound)84.9 (Pound)213.8 (Pound) 87.2 $ 128.1
=========== ============ ============= =======
The accompanying notes form an integral part of these financial statements.
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 United States of America, 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 ("(Pound)" or "GBP"). In addition,
the consolidated financial statements as at 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
(Pound)1.00 = USD 1.4691, the noon buying rate of the United States (U.S.)
Federal Reserve Bank as at 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 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 (Pound)8.9 million, (Pound)13.6 million and (Pound)13.8 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 (Pound)6.5 million, (Pound)10.7 million and
(Pound)10.9 million in Fiscal 1999, 2000 and 2001, respectively, as they relate
to continuing operations.
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
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
(Pound)8.0 million during 2001.
In December 2000, the ASB issued FRS 19, "Deferred Tax", 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. On implementation of FRS 19, a prior
period adjustment will be required to reflect the change in basis of accounting
for all periods presented. Such adjustment 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 and 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................................. (Pound)342.6 (Pound) 487.0 (Pound) 476.6
--North American acquisitions.................... -- -- 22.1
Food Service Equipment--Europe and Rest of the 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
------------ -------------- --------------
(Pound)756.3 (Pound)1,180.1 (Pound)1,081.1
============ ============== ==============
(b) Turnover by origin: geographical analysis (in millions)
1999 2000 2001
---- ---- ----
United Kingdom........................................................ (Pound)300.1 (Pound) 360.0 (Pound) 262.0
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
------------ -------------- --------------
(Pound)756.3 (Pound)1,180.1 (Pound)1,081.1
============ ============== ==============
(c) Turnover by destination: geographical analysis (in millions)
1999 2000 2001
---- ---- ----
United Kingdom................................................................ (Pounds)302.7 (Pounds)362.2 (Pounds)264.0
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
------------ -------------- --------------
(Pounds)756.3 (Pounds)1,180.1 (Pounds)1,081.1
============ ============== ==============
(d) Pre-exceptional operating profit/(loss) and reconciliation to total
operating profit/(loss) (in millions)
1999 2000
---- ----
Exceptional
Items
Reconciliation
Pre- to Total
Exceptional (Note 5) Total Total
------------- -------- ----- -----
Food Service Equipment
--North America............... (Pounds)49.3 (Pounds)(3.2) (Pounds)46.1 (Pounds)66.3
--North American
acquisitions ............... -- -- -- --
Food Service Equipment
--Europe and Rest of the
World ...................... 12.0 -- 12.0 22.6
Food Retail Equipment........... 5.3 (2.8) 2.5 22.6
------------- -------------- -------------- -------------
66.6 (6.0) 60.6 111.5
------------- -------------- -------------- -------------
Food Equipment goodwill
amortization and
impairment ................... (2.7) -- (2.7) (21.4)
------------- -------------- -------------- -------------
Food Equipment.................. 63.9 (6.0) 57.9 90.1
Property........................ 0.2 -- 0.2 8.4
Corporate costs................. (6.2) -- (6.2) (7.3)
------------- -------------- -------------- -------------
Continuing operations........... 57.9 (6.0) 51.9 91.2
Discontinued operations......... 24.0 -- 24.0 27.1
------------- -------------- -------------- -------------
Pre-exceptional operating
profit ....................... (Pounds)81.9 (Pounds)(6.0) (Pounds)75.9 (Pounds)118.3
============= ============== ============== =============
2001
----
Exceptional
Items
Reconciliation
Pre- to Total
Exceptional (Note 5) Total
------------- ---------- ------
Food Service Equipment
--North America............... (Pounds)60.6 (Pounds)(25.6) (Pounds)35.0
--North American
acquisitions ............... 2.0 -- 2.0
Food Service Equipment
--Europe and Rest of the
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 and
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
------------ -------------- -------------
Pre-exceptional operating
profit ....................... (Pounds)76.9 (Pounds)(167.5) (Pounds)(90.6)
============ ============== =============
(e) Geographical analysis: operating profit (in millions)
1999 2000 2001
---- ---- ----
Exceptional items
-----------------
Total Total Pre-exceptional (see Note 5) Total
----- ----- --------------- ------------ -----
United Kingdom............................. (Pounds)23.9 (Pounds)37.9 (Pounds)11.9 (Pounds)(13.7) (Pounds)(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)
------------ ------------- ------------ -------------- -------------
(Pounds)75.9 (Pounds)118.3 (Pounds)76.9 (Pounds)(167.5) (Pounds)(90.6)
============ ============= ============ ============== =============
Enodis plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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
(f) Total assets less current liabilities (in millions)
2000 2001
---- ----
Food Service Equipment--North America.......................................................... (Pounds)93.3 (Pounds)80.4
--North American acquisitions......................................................... -- 4.3
Food Service Equipment--Europe and Rest of the 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
------------- -------------
(Pounds)627.1 (Pounds)546.0
============= =============
(g) Total assets less current liabilities: geographical analysis (in millions)
2000 2001
---- ----
United Kingdom................................................................................. (Pounds)113.7 (Pounds)58.7
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
------------- -------------
(Pounds)627.1 (Pounds)546.0
============= =============
(h) Total assets (in millions)
2000 2001
---- ----
Food Service Equipment--North America.................................. (Pounds)192.3 (Pounds)198.6
--North American acquisitions..................... -- 7.7
Food Service Equipment--Europe and Rest of the 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 --
------------- -------------
(Pounds)994.4 (Pounds)773.5
============= =============
(i) Tangible fixed assets (in millions)
2000 2001
---- ----
Food Service Equipment--North America.......................... (Pounds)67.3 (Pounds)66.2
--North American acquisitions............. -- 1.9
Food Service Equipment--Europe and Rest of the 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 --
------------- ---------------
(Pounds)171.8 (Pounds)111.4
============= ===============
3. Operating costs
1999 2000 2001
---- ---- ----
(in millions)
Cost of sales.................................................. (Pounds)588.6 (Pounds)943.1 (Pounds)888.2
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................................................ (Pounds)680.4 (Pounds)1,061.8 (Pounds)1,171.7
============= =============== ===============
Gross profit for the period was (Pounds)161.7 million in 1999,
(Pounds)237.0 million in 2000 and (Pounds)192.9 million in 2001. Bad debt
provision for the period was (Pounds)0.5 million in 1999, (Pounds)1.3 million in
2000, and (Pounds)1.2 million in 2001.
The total figures above include the following amounts relating to
discontinued operations: cost of sales (Pounds)207.5 million in 1999,
(Pounds)213.1 million in 2000 and (Pounds)145.3 million in 2001, distribution
costs (Pounds)17.9 million in 1999, (Pounds)19.1 million in 2000 and
(Pounds)13.3 million in 2001, administration expenses (Pounds)13.4 million in
1999, (Pounds)14.8 million in 2000, (Pounds)9.5 million in 2001 and other
operating expenses (Pounds)0.1 million in 1999, (Pounds)1.6 million in 2000 and
(Pounds)0.1 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............................................................................. (Pounds)18.4 (Pounds)23.7 (Pounds)22.6
--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 (Pounds)1.2
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 (Pounds)29.1 million (note 5b).
5. Exceptional items
(a) Operating exceptional items
2001
----
Food
----
1999 2000 equipment Corporate Total
---- ---- --------- --------- -----
(in millions)
Restructuring costs................................................. (Pounds)6.0 (Pounds)-- (Pounds)29.7 (Pounds)3.4 (Pounds)33.1
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......................................... (Pounds)6.0 (Pounds)-- (Pounds)143.4 (Pounds)24.1 (Pounds)167.5
========== ========= ============ =========== ============
Restructuring costs of (Pounds)6.0 million in 1999 related to the
acquisition of Scotsman Industries Inc. and subsidiaries ("Scotsman") in August
1999. Restructuring costs of (Pounds)33.1 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 FRS18 "Accounting Policies", the Group has
changed its accounting estimates for warranty provisions and provided an
additional (Pounds)8.0 million. Further exceptional warranty costs of
(Pounds)4.5 million have arisen in the period and previously capitalized
development costs of (Pounds)1.2 million have been written off.
The Group settled the long-standing Bomar cases for $17.5 million
((Pounds)12.2 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 (Pounds)8.5 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 FRS11 "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 (Pounds)100.0
million (note 12).
(b) Disposal of businesses
2001
----
Building and Scotsman
------------ --------
Consumer Products Response Total
----------------- -------- -----
(in millions)
Proceeds--cash.................................................................. (Pounds)114.0 (Pounds)-- (Pounds)114.0
--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....................................................... (Pounds)29.1 (Pounds)(5.6) (Pounds)23.5
============= ============= =============
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 (Pounds)134.0
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 (Pounds)10.0 million to Magnet in
respect of pension scheme funding. (Pounds)4.4 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 (Pounds)45,000.
(c) Net interest payable and similar charges
2001
----
Deferred finance fees written off............................. (Pounds)5.8
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 (Pounds)5.8 million have been
written off.
6. Staff costs (in millions)
1999 2000 2001
---- ---- ----
(a) Staff costs, including Directors, comprised:
Wages and salaries..................................................................... (Pounds)147.3 (Pounds)255.5 (Pounds)217.6
Social security costs.................................................................. 17.7 29.8 26.5
Pension costs.......................................................................... 5.1 7.5 4.5
------------- ------------- -------------
(Pounds)170.1 (Pounds)292.8 (Pounds)248.6
============= ============= =============
(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 and Rest of the 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...................................................................... (Pounds)0.15 (Pounds)0.18 (Pounds)0.26
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
------------- ------------- -------------
(Pounds)2.37 (Pounds)1.85 (Pounds)1.80
============= ============= =============
Compensation for loss of office represents severance payments and a
relocation bonus paid to directors who resigned in 2000 and 2001.
Enodis plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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........................................... (Pounds)(8.2) (Pounds)(0.3) (Pounds)--
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 (Pounds)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............................................... (Pounds)(13.3) (Pounds)(37.5) (Pounds)(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......................................................................... (Pounds)-- (Pounds)0.7 (Pounds)--
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.................................... (Pounds)5.9 (Pounds)14.2 (Pounds)6.6
=========== ============ ===========
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
(Pounds)2.0 million due to costs being incurred in jurisdictions where there is
little or no current tax payable, principally the U.S.
The components of profit/(loss) on ordinary activities before taxation
are as follows:
1999 2000 2001
---- ---- ----
(in millions)
U.K. ........................................................................... (Pounds)11.7 (Pounds)27.3 (Pounds)(88.1)
U.S. ........................................................................... 43.2 36.9 (33.8)
Other jurisdictions............................................................. 11.7 19.6 12.9
------------ ------------ --------------
Profit/(loss) on ordinary activities............................................ (Pounds)66.7 (Pounds)83.8 (Pounds)(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)........... (Pounds) 6.1 (Pounds)10.8 (Pounds)4.8
Final, nil p net payable per ordinary share (1999: 8.5p net, 2000: 9.35p)....... 18.0 23.1 --
------------ ------------ -----------
(Pounds)24.1 (Pounds)33.9 (Pounds)4.8
============ ============ ===========
11. Earnings/(loss) per share
1999 2000 2001
---- ---- ----
(in millions)
Profit/(loss) for the period.................................................... (Pounds)60.8 (Pounds)69.3 (Pounds) (115.9)
CULS finance costs.............................................................. 8.4 0.1 --
------------ ------------ ---------------
(Pounds)69.2 (Pounds)69.4 (Pounds) (115.9)
============ ============ ===============
1999 2000 2001
---- ---- ----
(in millions)
Basic weighted average number of shares......................................... 157.1 234.0 248.9
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....................................... 249.4 250.7 249.2
===== ===== =====
1999 2000 2001
---- ---- ----
(in pence)
Basic earnings/(loss) per share..................................................................... 38.7 29.6 (46.5)
Effect per share of exceptional items............................................................... 1.2 (1.3) 19.2
Effect per share of goodwill amortization and impairment............................................ 1.7 9.1 49.4
---- ---- ----
Adjusted basic earnings per share................................................................... 41.6 37.4 22.1
---- ---- ----
Diluted earnings/(loss) per share................................................................... 27.7 27.7 (46.5)
Effect per share of exceptional items............................................................... 0.8 (1.2) 19.2
Effect per share of goodwill amortization and impairment............................................ 1.1 8.5 49.3
---- ---- ----
Adjusted diluted earnings per share................................................................. 29.6 35.0 22.0
==== ==== ====
Adjusted earnings per share before exceptional items (note 5) and
goodwill amortization (note 2d) are disclosed to reflect the underlying
performance of the Group.
12. Intangible fixed assets--goodwill
2000 2001
---- ----
(in millions)
Cost:
At the beginning of the period............................................................... (Pounds)373.7 (Pounds)439.1
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..................................................................... (Pounds)439.1 (Pounds)460.6
Depreciation:
At the beginning of the period............................................................... (Pounds) 2.7 (Pounds) 26.4
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.......................................................... (Pounds)412.7 (Pounds)310.2
============= =============
13. Tangible fixed assets
2000 Land and Plant and Assets under 2001
Total buildings equipment construction Total
----- --------- --------- ------------ -----
(in millions)
(a) Cost:
At the beginning of the period............ (Pounds) 306.0 (Pounds) 113.4 (Pounds) 221.1 (Pounds)11.0 (Pounds)345.5
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....... (Pounds)158.7 (Pounds)87.2 (Pounds)73.6 (Pounds)11.0 (Pounds)171.8
------------- ------------- ------------ ------------- -------------
The net book value of land and buildings comprises:
Freehold............................................ (Pounds)74.1 (Pounds)48.5
Short leasehold..................................... 13.1 5.9
------------- -------------
(Pounds)87.2 (Pounds)54.4
============= =============
Plant and equipment net book value includes(Pounds)0.7 million (2000:
(Pounds)1.4 million) of leased assets.
2000 2001
---- ----
(in millions)
(b) Capital commitments:
Contracted commitments for future capital expenditure.................................. (Pounds) 2.2 (Pounds) 2.9
14. Fixed assets investments
Joint ventures
and associates
--------------
Other
2000 Share of unlisted Own 2001
--------
Total net assets Goodwill Total investments shares Total
----- ---------- -------- ----- ----------- ------ -----
(in millions)
At the beginning of the period .......... (Pounds) 7.7 (Pounds) 1.8 (Pounds)1.2 (Pounds)3.0 (Pounds)2.1(Pounds) 2.4 (Pounds)7.5)
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 . (Pounds) 7.2 (Pounds) 2.0 (Pounds)1.2 (Pounds)3.2 (Pounds)1.7(Pounds) 1.3 (Pounds)6.2)
============ ============ ============ ========== =========== =========== ============
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 (Pounds)1.0 million.
Details of principal subsidiaries and a significant investment are shown in
note 28.
15. Stocks
2000 2001
---- ----
(in millions)
Raw materials and consumable........................................................................ (Pounds)45.9 (Pounds)42.2
Work in progress.................................................................................... 17.0 15.7
Finished goods...................................................................................... 81.5 36.4
------------- -------------
144.4 94.3
Property............................................................................................ 8.7 11.3
------------- -------------
(Pounds)153.1 (Pounds)105.6
============= =============
At the period end the Directors are not aware of any significant difference
between book value and replacement value of stocks.
16. Debtors
2000 2001
---- ----
(in millions)
Trade debtors (less allowance for doubtful accounts of(Pounds)8.3 million at 2000, and(Pounds)5.7
million at 2001)................................................................................. (Pounds)181.5 (Pounds)149.6
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
------------- -------------
(Pounds)221.1 (Pounds)200.7
============= =============
Enodis plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For fiscal years ended
October 2, 1999, September 30, 2000, and September 29, 2001
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.......................................................................... (Pounds)84.6 (Pounds)--
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).................................................................... (Pounds)90.4 (Pounds)2.4
============ ===========
2000 2001
---- ----
(in millions)
(b) Other creditors:
Trade creditors.................................................................... (Pounds)102.2 (Pounds)81.8
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 --
------------- -------------
(Pounds)276.9 (Pounds)225.1
============= =============
18. Creditors falling due after more than one year
2000 2001
---- ----
(in millions)
Term loan.......................................................................... (Pounds)287.3 (Pounds)--
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
------------- -------------
(Pounds)366.6 (Pounds)398.9
============= =============
19. Total borrowings
2000 2001
---- ----
(in millions)
Term loan.......................................................................... (Pounds)371.9 (Pounds)--
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
------------- -------------
(Pounds)457.0 (Pounds)401.3
============= =============
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 (pound)600 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 ((pound)387.5 million) and bears
interest at 1.375% above LIBOR (increasing to 2.25% from October 2001). As a
result, deferred financing costs of (pound)5.8 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
(pound)600 million was reduced by (pound)100 million on July 10, 2001 following
the disposal of the BCP business. Interest rates as at September 29, 2001 ranged
from 4.1% to 6.0%.
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 at 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 (pound)100 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 (pound)11.3 million of Industrial
Revenue Bonds (2000: (pound)15.7 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 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 at September
29, 2001, the Group had total net debt of (Pounds)365.9 million. Using interest
rate swaps and forward rate agreements, (Pounds)136.1 million (37%) was fixed a
period greater than six months with a further (Pounds)68.9 million (19%) fixed
for a period greater than one year. The remaining (Pounds)160.9 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 ................................ (Pounds)89.7 (Pounds)0.7 (Pounds)90.4 (Pounds)1.6 (Pounds)0.8 (Pounds)2.4
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 ............ (Pounds)437.0 (Pounds)20.0 (Pounds)457.0 (Pounds)386.7 (Pounds)14.6 (Pounds)401.3
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 (Pounds)10.4 million (2000: (Pounds)12.3 million)
principally comprises Industrial Revenue Bonds with maturities ranging between
2007 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......................... (Pounds)138.4 (Pounds)106.9
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.................... (Pounds)16.5 (Pounds)15.3 (Pounds)1.0 (Pounds)-- (Pounds)0.2 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....... (Pounds)457.0 (Pounds)292.7 (Pounds)93.5 (Pounds)67.6 (Pounds)3.2 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....... (Pounds)401.3 (Pounds)332.0 (Pounds)69.3 (Pounds)-- (Pounds)-- 6.3%
============= ============= ============ ============ =========== ==========
Non-
interest
bearing
Weighted weighted
average average
period 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
Non- bearing weighted
Floating interest average period
Total rate bearings until maturity
----- ---- -------- --------------
(in millions) Years
Financial assets
Sterling........................................................... (Pounds)6.1 (Pounds)5.7 (Pounds)0.4 --
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.............................................. (Pounds)30.6 (Pounds)14.2 (Pounds)16.4 --
------------ ------------ ------------ --------------
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.............................................. (Pounds)61.4 (Pounds)51.8 (Pounds)9.6 --
============ ============ ============ ==============
The floating rate financial assets comprise a (Pounds)20 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..... (Pounds)(89.7)(Pounds)(89.7)(Pounds)(1.6)(Pounds)(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................................. (Pounds)-- (Pounds)0.2 (Pounds)-- (Pounds)(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.
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....................... (Pounds)0.9 (Pounds)4.3(Pounds)(0.7)(Pounds)(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 ((Pounds)68.0 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 ((Pounds)224.5 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 (Pounds)0.2 million and (Pounds)4.9 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 (Pounds)29.1 million and buy (Pounds)96.6
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 (Pounds)0.3 million and gain of (Pounds)4.3 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 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 Other
U.S. European 2000 U.S. European 2001
Sterling dollar currencies Other Total Sterling dollar currencies Other Total
-------- ------ ---------- ----- ----- -------- ------ ---------- ----- -----
(in millions)
Sterling..... (Pounds)-- (Pounds)0.2 (Pounds)1.6 (Pounds) -- (Pounds)1.8 (Pounds)-- (Pounds)0.1 (Pounds)1.2 (Pounds)-- (Pounds)1.3
U.S. dollar.. 0.2 -- -- -- 0.2 -- -- -- -- --
Currencies... 0.1 2.0 -- -- 2.1 -- 0.2 0.7 -- 0.9
Other........ -- 1.0 0.1 0.2 1.3 -- 1.6 -- -- 1.6
----------- ---------- ----------- ----------- ----------- ---------- ---------- ----------- ---------- -----------
(Pounds)0.3 (Pounds)3.2 (Pounds)1.7 (Pounds)0.2 (Pounds)5.4 (Pounds)-- (Pounds)1.9 (Pounds)1.9 (Pounds)-- (Pounds)3.8
=========== ========== =========== =========== =========== ========== ========== =========== ========== ===========
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......................... (Pounds)1.0 (Pounds)3.3 (Pounds)23.1 (Pounds)16.7 (Pounds)1.5 (Pounds)45.6
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...................... (Pounds)4.6 (Pounds)2.9 (Pounds)21.2 (Pounds)22.5 (Pounds)7.9 (Pounds)59.1
=========== ============ ============ ============ =========== ============
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 (Pounds)14.5 million were made in 2001. A further
(Pounds)6.5 million in cash payments are expected to be made, as well as
non-cash charges of (Pounds)1.4 million.
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 (Pounds) 284 million of losses
available for offset against future profits, comprising (Pounds)85
million in the U.K. and(Pounds)190 million in the U.S. with a
further(Pounds)9 million in other countries in 2001. The losses in the
U.K. and other countries do not expire. The(Pounds)190.0 million of
losses in the U.S. expire as follows:(Pounds)87.0 million
(2006),(Pounds)69.0 million (2007),(Pounds)3.1 million
(2008),(Pounds)9.7 million (2009), and(Pounds)22.1 million (2010 and
thereafter). In addition, the Group has surplus ACT carried forward
of(Pounds)11.5 million.
Enodis plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For fiscal years
ended October 2, 1999, September 30, 2000, and September 29, 2001
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(Pounds)172.1(Pounds)172.1
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 (pound)2.4 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 (pound)264,816.
(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
=========
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................................................................. (Pounds)238.9 (Pounds)-- (Pounds)(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.............................................................. (Pounds)239.0 (Pounds)-- (Pounds)(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(Pounds)335.9 million (2000:(Pounds)331.5 million).
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 Total
----- ----------- -------- ----- ----- ---------- -----
(in millions)
Goodwill................... (Pounds)189.4 (Pounds)(189.4) (Pounds)-- (Pounds)-- (Pounds)-- (Pounds)-- (Pounds)--
Tangible fixed assets...... 61.6 (0.1) -- -- 61.5 1.8 63.3
Stocks..................... 53.8 (5.2) 2.5 -- 51.1 3.0 54.1
Trade debtors.............. 83.7 (2.1) -- -- 81.6 2.6 84.2
Net cash................... 9.3 (0.3) -- -- 9.0 0.5 9.5
Trade creditors............ (32.1) -- -- -- (32.1) (0.6) (32.7)
Other liabilities.......... (37.5) (29.7) (3.1) 0.5 (69.8) (1.4) (71.2)
Net debt................... (219.9) (4.6) -- -- (224.5) (3.7) (228.2)
Minority interest.......... (0.8) -- -- -- (0.8) -- (0.8)
------------- -------------- ------------- ----------- ---------- ----------- ----------
Net assets/(liabilities)
acquired................ (Pounds)107.5 (Pounds)(231.4) (Pounds)(0.6) (Pounds)0.5 (Pounds)(124.0) (Pounds)2.2 (Pounds)(121.8)
Consideration:
Paid in cash............... (Pounds)225.0 (Pounds)8.4 (Pounds)233.4
Deferred................... 17.1 0.8 17.9
Fees....................... 11.5 0.4 11.9
------------- ----------- --------------
Total...................... 253.6 9.6 263.2
------------- ----------- --------------
Goodwill arising in 1999... 377.6 7.4 385.0
------------- ----------- --------------
Subsequent adjustment...... 3.4 -- 3.4
------------- ----------- --------------
Final goodwill 2000........ (Pounds)381.0 (Pounds)-- (Pounds)388.4
============= =========== ==============
The adjustments to the pre-acquisition books of Scotsman are summarized as
follows:
-- Write-off of goodwill of (Pounds)189.4 million carried on the balance sheet
of Scotsman as at the date of acquisition.
-- Recognition of some additional liabilities as well as valuation adjustments
to amounts already recorded, totaling (Pounds)22.4 million.
-- Premium of (Pounds)4.9 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 (Pounds)2.5
million.
-- Recalculation of the pension liability under U.K. GAAP amounting
to (Pounds)2.1 million.
-- Recalculation of the deferred tax assets and liabilities under U.K. GAAP
amounting to (Pounds)15.7 million.
-- The tax impact of all of the fair value adjustments is shown as "Other".
-- Adjustments of (Pounds)3.4 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 (Pounds)0.9 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 (Pounds)0.2 million.
Deferred consideration for Convotherm is expected to be paid in 2004 and is
not subject to any performance criteria.
Deferred consideration of (Pounds)0.3 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 (Pounds)7.8 million to
the Group's net operating cash flows, paid (Pounds)0.4 million in respect of
interest, paid (Pounds)1.7 million in respect of taxation and utilized
(Pounds)0.2 million net for capital expenditure.
3. Pre-acquisition trading
Convotherm generated operating profit in its last financial year ended December
31, 1998, amounting to (Pounds)1.7 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:
Profit and loss account
Pro forma
---------
Scotsman Adjustment Total
-------- ---------- -----
(in millions)
Turnover....................................................................... (Pounds)357.0 (Pounds)-- (Pounds)357.0
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............................................ (Pounds)8.6 (Pounds)(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 (Pounds)2.6 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........................................................... (Pounds)0.4 (Pounds)0.7 (Pounds)1.1
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................................................... (Pounds)0.2 (Pounds)0.1 (Pounds)0.3
Consideration: ------------- ------------ -------------
Paid in cash.................................................................... (Pounds)16.7 (Pounds)2.1 (Pounds)18.8
Fees............................................................................ 0.2 -- 0.2
Loan notes issues............................................................... -- 0.7 0.7
------------- ------------ -------------
Total........................................................................... 16.9 2.8 19.7
------------- ------------ -------------
Goodwill arising................................................................ (Pounds)16.7 (Pounds)2.7 (Pounds)19.4
============= ============ =============
There were no significant adjustments to the book value of assets acquired.
Deferred consideration and costs of (Pounds)28.8 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........................................................................ (Pounds)0.6 (Pounds)(0.6) (Pounds)--
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............................................... (Pounds)6.7 (Pounds)(1.8) (Pounds)4.9
============ ============= =============
Consideration:
Paid in cash.................................................................... (Pounds)24.4
Costs........................................................................... 0.9
-------------
Total........................................................................... 25.3
-------------
Goodwill arising................................................................ (Pounds)20.4
=============
The subsidiary acquired during the year contributed (Pounds)2.9 million
to the Group's net operating cash flows, paid no interest or taxation and
utilized (Pounds)0.4 million net for capital expenditure.
The Group made other acquisitions totaling (Pounds)0.5 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
(Pounds)4.15 million (2000: (Pounds)4.7 million). There is a provision for
pension costs of (Pounds)2.9 million (2000: (Pounds)3.5 million) in the balance
sheet as at 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(Pounds)3.1 million (2000: (Pounds)2.7
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 at
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 (Pounds)86.4 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.
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 at September 29,
2001 was(Pounds)40.4 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 at 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 at 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% (Pounds)43.6 10.175% (Pounds)17.2
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
Enodis plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For fiscal years ended
October 2, 1999, September 30, 2000, and September 29, 2001
25. Group pension schemes
The balance sheet position for the Group's schemes as calculated under
FRS17 at September 29, 2001 was as follows:
Post retirement benefit plans in the U.S.
-----------------------------------------
Pension plans Pension plans
with assets in with liabilities
Berisford excess of in excess of Post retirement
Scheme liabilities assets medical plans
------ ----------- ------ -------------
(in millions)
Fair value of assets................................. (Pounds)75.4 (Pounds)35.1 (Pounds) -- (Pounds) --
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.......................... (Pounds)5.9 (Pounds)0.7 (Pounds)(3.9) (Pounds (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 probable and 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.
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 whilst 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
(Pounds)12.2 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 (Pounds)4.0 million in 1999, (Pounds)7.5 million in 2000 and
(Pounds)7.3 million in 2001.
2000 2001
---- ----
(in millions)
a) The future minimum payments to which the Group is committed under finance
leases are as follows:
Within one year................................................................. (Pounds)0.7 (Pounds)0.1
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)
------------ -----------
(Pounds)1.2 (Pounds)1.3
Disclosed in the financial statements as: ----------- -----------
Creditors due within one year (note 17)......................................... (Pounds)0.7 (Pounds)0.1
Creditors due after more than one year (note 18)................................ 0.5 1.2
----------- -----------
(Pounds)1.2 (Pounds)1.3
============ ==========
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.................................................................................... (Pounds)2.9 (Pounds)3.1
Between one and two years.......................................................................... 2.7 3.9
Between three and five years....................................................................... 7.3 3.8
Thereafter......................................................................................... 17.1 9.5
----------- -----------
(Pounds)30.0 (Pounds)20.3
============ ============
2001(in millions)
c) Operating lease payments which the Group is committed to make are analyzed as follows:
Within one year.................................................................................... (Pounds)20.3
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
------------
(Pounds)70.7
============
1
28. Principal subsidiaries and significant investment
Percentage
held and
Country of voting rights at
incorporation September 29
Food Equipment and 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 (Pounds)1 ordinary shares
Convotherm
Singapore Pte
Ltd Singapore 100 100,000 $1 shares
Cowley
Refrigeration Ltd New Zealand 60 210,000 NZ$1 shares
Enodis Corporation U.S. 100 100 U.S.$.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 (Pounds)1 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 U.S.$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(Pounds)1 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(Pounds)1 preference shares
Scotsman Group
Inc. U.S. 100 1,000 U.S.$1 common stock
Scotsman Ice Systems
(Shanghai) Company
Ltd China 100 1 share of 2,150,000 U.S.$Shares
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
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 U.S.$0.01 par value common stock
Vent Master
(Europe) Limited England 100 49,000(Pounds)1 ordinary shares
Viscount Catering
Limited England 100 1,500,000(Pounds)1 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(Pounds)1 deferred shares
Property
Enodis Property
Developments England 100 38,343,713 (Pounds) 1 ordinary shares
Limited
Enodis Investments
Limited* England 100 65,775,400 50(p) ordinary shares
100 145,805,094 50(p) preferred ordinary
shares
Investment
C. Czarnikow
Limited England 15++ 150,000 (Pounds)1 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. Enodis plc NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS 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.............. (Pounds)60.8 (Pounds)69.3 (Pounds)(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...................... (Pounds)27.3 (Pounds)25.3 (Pounds)(113.7) $(167.0)
============ ============ ============== =======
Net profit/(loss) in accordance with U.S. GAAP represented by:
Continuing operations............................................ (Pounds)10.6 (Pounds) 9.1 (Pounds)(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....................... (Pounds)27.3 (Pounds)25.3 (Pounds)(113.7) $(167.0)
============ ============ ============== =======
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) 6.7(p) 3.9(p) (60.5)(p) $(0.89)
Gain on sale of discontinued operations................................ (m) -- -- 12.0(p) 0.18
Income from discontinued operations.................................... (k,m) 10.7(p) 6.9(p) 2.8(p) 0.04
---- ---- ----- ------
17.4(p) 10.8(p) (45.7)(p) $(0.67)
==== ==== ===== ======
Diluted profit/(loss) per ordinary share in accordance with U.S. GAAP:
Income from continuing operations...................................... (k) 6.7(p) 3.6(p) (60.5)(p) $(0.89)
Gain on sale of discontinued operations................................ (m) -- -- 12.0(p) 0.18
Income from discontinued operations.................................... (k,m) 7.6(p) 6.5(p) 2.8(p) 0.04
---- ---- ----- ------
14.3(p) 10.1(p) (45.7)(p) $(0.67)
==== ==== ===== ======
2001
Equity shareholder's funds Note 2000 2001 (Note 1)
-------------------------- ---- ---- ---- --------
(in millions)
Equity shareholders' funds as reported in accordance with U.K. GAAP............ (Pounds)213.8 (Pounds)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 income taxes.......................................................... (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) (Pounds)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.............................. (Pounds)586.8 (Pounds)443.0 $ 650.8
============= ============= =======
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 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 recognised 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 recognised goodwill impairment under
U.K. GAAP of (Pounds)100 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 recognised under U.S. GAAP.
Differences in the impairment loss recognised of (Pounds)9.8 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
recognised 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
realised.
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 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.
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 2001, 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 (Pounds)0.2 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 (Pounds)0.8 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.......................................................................... (Pounds)27.3 (Pounds)25.3 (Pounds)(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)................. 157.1 234.0 248.9 248.9
Basic earnings/(loss) per ordinary share...................................... 17.4p 10.8p (45.7)p $ (0.67)
Diluted weighted average number of ordinary shares (note 11).................. 249.4 250.7 248.9 248.9
Diluted earnings/(loss) per ordinary share.................................... 14.3p 10.1p (45.7)p $ (0.67)
Share options have not been included in the computation of dilutive loss
per ordinary share calculation in 2001 because such inclusion would be
antidilutive.
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.
Enodis plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For fiscal years ended
October 2, 1999, September 30, 2000, and September 29, 2001
29. Supplementary Information for U.S. Investors
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 at 2000, is as follows:
2000(in millions)
Current assets.................................. (Pounds)80.1
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........... (Pounds)79.9
============
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.
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. 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.
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...................................... (Pounds)35.9 (Pounds)87.9 (Pounds)37.9
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.............. (Pounds)26.7 (Pounds)28.5 (Pounds)39.4
============ ============ ============
Enodis plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For fiscal years ended
October 2, 1999, September 30, 2000, and September 29, 2001
29. Supplementary Information for U.S. Investors
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................................... (Pounds)88.3 (Pounds)160.5 (Pounds)93.0
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........ (Pounds)35.9 (Pounds)87.9 (Pounds)37.9
============== ============= =============
Investing activities:
Capital expenditure and financial investment................................ (Pounds)(16.9) (Pounds)(23.3) (Pounds)(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........... (Pounds)(237.6) (Pounds)(60.6) (Pounds)59.9
============== ============= ============
Financing activities:
Financing...................................................................... (Pounds)183.4 (Pounds) (13.8) (Pounds)(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........... (Pounds)167.1 (Pounds) (42.6) (Pounds)(88.8)
============== =============== ==============
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
(Pounds)8.0 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 at 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.
Information for the Group's major defined benefit plans is as follows (in
millions):
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........ (Pounds)7.8 (Pounds)63.2 (Pounds)34.5 (Pounds)65.7 (Pounds)35.2 (Pounds)68.6
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.............. (Pounds)34.5 (Pounds)65.7 (Pounds)35.2 (Pounds)68.6 (Pounds)37.5 (Pounds)77.0
------------ ------------- -------------- ------------ ------------- -------------
Change in plan assets:
Fair value of plan assets, beginning of year. (Pounds)10.0 (Pounds)78.9 (Pounds)33.4 (Pounds)88.4 (Pounds)40.4 (Pounds)96.4
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............. (Pounds)33.4 (Pounds)88.4 (Pounds)40.4 (Pounds)96.4 (Pounds)35.0 (Pounds)77.8
------------ ------------ ------------ ------------ ------------ ------------
Funded status...................................... (Pounds)(1.1) (Pounds)22.7 (Pounds)5.2 (Pounds)27.8 (Pounds)(2.5) (Pounds)0.8
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..................... (Pounds)0.2 (Pounds)17.3 (Pounds)5.2 (Pounds)21.6 (Pounds)6.1 (Pounds)26.2
------------ ------------ ------------ ------------ ------------ ------------
Amounts recognized in the balance sheet consist of:
Prepaid/(accrued) benefit cost.................. (Pounds)4.7 (Pounds)21.3 (Pounds)10.0 (Pounds)25.7 (Pounds)10.9 (Pounds)30.7
Accrued benefit liability....................... (4.5) (4.0) (4.8) (4.1) (4.8) (4.5)
------------ ------------ ------------ ------------ ------------ ------------
Net amount recognized.............................. (Pounds)0.2 (Pounds)17.3 (Pounds)5.2 (Pounds)21.6 (Pounds)6.1 (Pounds)26.2
============ ============= ============ ============= ============ ============
1999 Pension Benefits 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..................................... (Pounds)0.2 (Pounds)0.4 (Pounds)0.6 (Pounds)0.6 (Pounds)0.3 (Pounds)0.7
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)
Amortisation of unrecognised prior service costs. -- -- -- -- 0.1 --
Net amortization of transition obligation........ -- (1.5) -- (1.5) -- (1.5)
Settlement credit................................ (0.6) -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net periodic pension cost........................ (Pounds)(0.5 (Pounds)(3.7) (Pounds)(0.3) (Pounds)(4.3) (Pounds)(0.6) (Pounds)(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%
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, (Pounds)3.8
million, (Pounds)3.1 million and (Pounds)3.1 million for Fiscal 1999, 2000 and
2001, respectively. Enodis plc NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For fiscal years ended October 2, 1999, September 30, 2000, and September 29,
2001
29. Supplementary Information for U.S. Investors
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 ......................... (Pounds)-- (Pounds)4.0 (Pounds)3.7
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 ............................... (Pounds)4.0 (Pounds)3.7 (Pounds)2.9
----------- ------------ ------------
Change in plan assets:
Employer contributions ..................................... (Pounds)0.1 (Pounds)0.2 (Pounds)0.2
Plan participants' contributions ........................... -- -- 0.1
Benefits paid .............................................. 0.1 (0.2) (0.3)
----------- ----------- -----------
Fair value of plan assets, end of year ........................ (Pounds)-- (Pounds)-- (Pounds)--
----------- ----------- -----------
Funded status ................................................. (Pounds)(4.0) (Pounds)(3.7) (Pounds)(2.9)
Unrecognized prior year service ............................... -- (0.3) (0.2)
Unrecognized net actuarial gain ............................... (0.3) (0.4) (0.4)
------------- ------------- -------------
Accrued pension cost........................................................... (Pounds)(4.3) (Pounds)(4.4)(Pounds)(3.5)
------------- ------------ -------------
Amounts recognized in the balance sheet consist of:
Accrued benefit liability................................................... (Pounds)(4.3) (Pounds)(4.4)(Pounds)(3.5)
============= ============ =============
Components of net periodic benefit cost:
Service cost................................................................ (Pounds) 0.1 (Pounds)0.1 (Pounds) 0.1
Interest cost............................................................... -- 0.2 0.2
Amendment credit............................................................ -- -- (1.1)
------------- ------------ -------------
Net periodic pension cost...................................................... (Pounds) 0.1 (Pounds)0.3 (Pounds)(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
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 (Pounds)nil million in 2001, (Pounds)2.8
million in 2000 and (Pounds)nil 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 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....................................... (Pounds)27.3 (Pounds)25.3 (Pounds)(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 (1992) Executive scheme (1984) Executive scheme (1995) Executive scheme (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 (Pounds)1.48 2,438,753 (Pounds)0.82 2,064,450 (Pounds)1.87 -- (Pounds)--
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 (Pounds)1.56 116,870 (Pounds)1.55 830,537 (Pounds)1.68 -- (Pounds)--
The weighted average fair value of shares granted was (Pounds)1.02,
(Pounds)1.11, (Pounds)0.81 in 1999, 2000, and 2001 respectively.
30. Post balance sheet events
On December 13, 2001, we entered into an agreement to sell Sammic S.A., our
Spanish food service equipment business in for consideration of (Pounds)20
million. In addition, we provided an indemnity for any financial losses on the
part of the purchaser resulting from any misstatements in certain information
provided by Enodis in connection with the sale (capped at (Pounds)20 million)
which expires December 13, 2003.
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 (Pounds)150 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 (Pounds)4.1
million were written off in the first quarter of the 2002 financial year.
In addition, in February 2002, the Group announced a rights offering for up
to 150,861,463 shares at a price of 50p per share. The Group also announced that
it intends to offer up to (Pounds)100 million in long term fixed rate notes. It
is intended that the net proceeds of the rights offering and the note offering
will be used to repay in full the bridge loan.
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............................................................... (Pounds)4.0 (Pounds)8.1 (Pounds)13.5
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.................................................................. (Pounds)8.1 (Pounds)16.0 (Pounds)24.9
1999/2000:
Foreign currency translation..................................................... (Pounds)(0.2) (Pounds)1.1 (Pounds)2.4
Additions--acquisitions.......................................................... -- -- 3.5
Additions--charged............................................................... 1.3 0.7 19.7
Utilized......................................................................... (0.9) (1.8) (20.7)
----------- ------------ ------------
September 30, 2000............................................................... (Pounds)8.3 (Pounds)16.0 (Pounds)29.8
2000/2001:
Foreign currency translation..................................................... (Pounds)-- (Pounds)-- (Pounds)0.1
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............................................................... (Pounds)5.7 (Pounds)15.0 (Pounds)36.2
=========== ============ ============
Five year summary--U.K. GAAP
1997 1998
(restated) (restated) 1999 2000 2001
---------- ---------- ---- ---- ----
(in millions, except percentages, ratios and per share amounts)
Group turnover......................................... (Pounds)549.7 Pounds)591.2 (Pounds)756.3 (Pounds)1,180.1 (Pounds)1,081.1
Earnings and dividends:
Profit before interest, tax, depreciation, amortization
and exceptionals.................................... (Pounds)59.2 (Pounds)73.1 (Pounds)103.4 (Pounds)163.5 (Pounds)122.6
Profit/(loss) before interest and tax.................. 45.1 59.8 80.0 121.3 (67.1)
Profit before tax, amortization and exceptionals....... 37.0 50.2 75.4 102.2 63.8
Profit/(loss) on ordinary activities before taxation... 60.4 50.2 66.7 83.8 (109.0)
Profit/(loss) after tax and before equity minority
interest............................................ 56.8 46.7 60.8 69.6 (115.6)
Adjusted diluted earnings per share (note i)........... 18.0p 23.5p 29.6p 35.0p 22.0p
Dividends per share (net).............................. 6.5p 9.5p 12.5p 13.75p 2.0p
Ratios:
Operating margin (excluding amortization and 8.5% 10.1% 11.2% 11.8% 9.2%
exceptionals)......................................
Return on sales (excluding amortization and
exceptionals)...................................... 6.7% 8.5% 9.4% 8.7% 5.9%
Dividend cover (adjusted diluted)..................... 2.8x 2.5x 2.4x 2.5x 11.0x
Interest cover (excluding amortization and exceptionals) 4.7x 6.2x 6.4x 3.7x 2.8x
Assets employed:
Intangible fixed assets
--goodwill.......................................... (Pounds)-- (Pounds)-- (Pounds)371.0 (Pounds)412.7 (Pounds)310.2
Tangible fixed assets................................. 90.9 89.3 158.7 171.8 111.4
Investments........................................... 10.9 4.9 7.6 7.2 6.2
Net current assets.................................... 83.8 61.5 25.6 35.4 118.2
------------- ------------- ------------- ------------- -------------
(Pounds)185.6 (Pounds)155.7 (Pounds)562.9 Pounds)627.1 (Pounds)546.0
------------- ------------- ------------- ------------- -------------
Financed by:
Share capital......................................... (Pounds)76.3 (Pounds)76.6 (Pounds)105.8 (Pounds)125.0 (Pounds)125.1
Reserves (note i)..................................... (142.4) (165.4) (20.9) 88.8 (37.9)
------------- ------------- ------------- ------------- -------------
Shareholders' funds................................... (66.1) (88.8) 84.9 213.8 87.2
5% convertible unsecured loan stock 2015.............. 230.7 230.4 94.4 -- --
Other................................................. 21.0 14.1 383.6 413.3 458.0
------------- ------------- ------------- ------------- -------------
(Pounds)185.6 (Pounds)155.7 (Pounds)562.9 (Pounds)627.1 (Pounds)545.2
------------- ------------- ------------- ------------- -------------
U.S. Dollar rate
--Average........................................... $1.63 $1.66 $1.62 $1.55 $1.44
--Year end.......................................... 1.61 1.70 1.66 1.48 1.47
-----------
i Adjusted diluted earnings per share have been restated for the
implementation of FRS14. Reserves have been restated for the implementation
of FRS10.
Holders of Group Securities
Shareholders' analysis
The issued ordinary share capital of Enodis plc at September 29, 2001, was
(Pounds)125,144,475 in 250,288,950 ordinary shares of 50p each, held by 7,895
members.
Holders Holders Number Percentage
Number % of shares of capital
------ - --------- ----------
Banks/Nominees........................................................... 928 11.75 217,379,740 86.85
Insurance companies...................................................... 17 0.22 2,020,093 0.81
Investment trusts........................................................ 17 0.22 263,111 0.11
Pension trusts........................................................... 4 0.05 858,816 0.34
Other corporate bodies................................................... 9 0.11 231,290 0.09
Other companies.......................................................... 346 4.38 18,014,213 7.20
Individuals.............................................................. 6,574 83.27 11,521,687 4.60
Total.................................................................... 7,895 100 250,288,950 100
Group Information
Capital gains tax
For the purpose of U.K. capital gains tax, the market value of the Group's
ordinary shares on March 31, 1982 was 258p (after
adjustment for the consolidation and sub-division of shares in 1989 and the
consolidation of shares in 1993).
The value does not take account of any adjustment required by the Group's
rights issues, as such adjustment is wholly dependent upon action taken by the
shareholders in respect of such rights issues.
Financial calendar 2001/2002
Year's results--2001 Announced November 21, 2001
Annual General Meeting Held on January 16, 2002
Half year's results--2002 To be announced May 2002
Corporate information
Company Secretary D R Hooper
Registered Office
Washington House 40-41 Conduit Street London W1S 2YQ
Registration details
Registered in England and Wales No. 109849
Registrar
Computershare Investor Services PLC PO Box 82 The Pavilions Bridgwater
Road Bristol BS99 7NH 0870 7020000
Website: www.computershare.com
ADR Depositary
The Bank of New York 620 Avenue of the Americas New York, NY 10011
1-888--BNY--ADRS (toll free)
Email via website at www.adrbny.com
American Depositary Receipt facility
Enodis plc ordinary shares are traded on The New York Stock Exchange in
the form of American Depositary Shares (ADSs) using the symbol ENO. Each ADS
represents four Enodis plc ordinary shares. The ADS program is administered by
the Bank of New York and inquiries should be directed to them at the address
shown. An Annual Report on Form 20-F is filed with the U.S. Securities and
Exchange Commission.
PART III: INFORMATION RELATING TO THE RIGHTS ISSUE
1. TERMS AND CONDITIONS OF THE RIGHTS ISSUE
Subject to the fulfillment of the conditions referred to below, Enodis
will raise approximately (Pounds)71.5 million, after expenses, through a Rights
Issue of up to 150,861,463 New Ordinary Shares at 50 pence per share. The New
Ordinary Shares are being offered by way of rights to Qualifying Shareholders on
the following basis and otherwise as set out herein:
3 New Ordinary Shares for every 5 Existing Ordinary Shares
held at the close of business on 11 March 2002 and so in proportion for
any other number of Ordinary Shares then held.
Holdings of Ordinary Shares in certificated and uncertificated form
will be treated as separate holdings for the purpose of calculating entitlements
under the Rights Issue.
Fractions of New Ordinary Shares will not be allotted to Qualifying
Shareholders and, where necessary, entitlements to New Ordinary Shares will be
rounded down to the nearest whole number. Entitlements to fractions will be
aggregated and sold in the market for the benefit of the Company. Accordingly,
Qualifying Shareholders with fewer than 5 Existing Ordinary Shares will not be
entitled to any New Ordinary Shares.
The attention of Overseas Shareholders is drawn to paragraph 5 below.
The New Ordinary Shares will, when issued and fully paid, rank pari
passu in all respects with the Existing Ordinary Shares including the right to
receive all dividends or other distributions made, paid or declared thereafter.
Application has been made to the U.K. Listing Authority and to the
London Stock Exchange for the New Ordinary Shares to be admitted to the Official
List and to trading on the London Stock Exchange's market for listed securities.
Subject to admission becoming effective, dealings in the Nil Paid Rights are
expected to commence on 19 March 2002.
The Rights Issue is conditional upon, amongst other things, fulfillment
of the following conditions by 19 March 2002 or such later date as may be agreed
between Credit Suisse First Boston and the Company:
(i) the passing of the Resolutions;
(ii) the Underwriting Agreement having become unconditional in all respects
(save for the condition relating to Admission) and not having been
terminated in accordance with its terms; and
(iii) Admission having occurred by not later than 10.00 a.m. on 19 March
2002 (or such later time and/or date as Credit Suisse First Boston and
the Company may agree).
Applications will be made for the Nil Paid Rights and the Fully Paid
Rights to be admitted to CREST. CRESTCo requires the Company to confirm to it
that certain conditions (imposed by the CREST Regulations) are satisfied before
CRESTCo will admit any security to CREST. It is expected that these conditions
will be satisfied, in respect of the Nil Paid Rights and the Fully Paid Rights,
as soon as admission of the Nil Paid Rights to the Official List has become
effective. As soon as practicable after satisfaction of the conditions, the
Company will confirm to CRESTCo that the relevant conditions are satisfied.
The Company's Existing Ordinary Shares are already admitted to CREST.
No further application for admission to CREST is required for the New Ordinary
Shares; all of such New Ordinary Shares, when issued and fully paid, may be held
and transferred by means of CREST.
Subject, amongst other things, to the conditions referred to in
paragraphs (i), (ii) and (iii) above being satisfied and save as provided in
paragraph 5 below, it is intended that:
(a) Provisional Allotment Letters in respect of Nil Paid Rights will be
despatched to Qualifying non-CREST Shareholders at their own risk on
18 March 2002;
(b) the Registrar will instruct CRESTCo to credit the appropriate stock
accounts of Qualifying CREST Shareholders with such Shareholders'
entitlements to Nil Paid Rights, with effect from 19 March 2002; and
(c) the Nil Paid Rights and Fully Paid Rights will be enabled for
settlement by CRESTCo on 19 March 2002, as soon as practicable after
the Company has confirmed to CRESTCo that all the conditions for
admission of such Nil Paid Rights and Fully Paid Rights to CREST have
been satisfied.
The offer of New Ordinary Shares to Qualifying CREST Shareholders will
be made, on the terms and conditions set out in this document, at the time when
(such Shareholders' stock accounts having been credited as described in
paragraph (b) above) the Nil Paid Rights are enabled for settlement as described
in paragraph (c) above.
The Rights Issue has been fully underwritten by Credit Suisse First
Boston. Under the terms of the Underwriting Agreement, further details of which
are set out in paragraph 7(a) of Part VI of this document, Credit Suisse First
Boston has certain rights to terminate the Underwriting Agreement prior to
Admission, if, amongst other things, the Company has materially breached its
warranties or undertakings.
2. ACTION TO BE TAKEN
The action to be taken in respect of New Ordinary Shares depends on
whether, at the relevant time, the Nil Paid Rights or Fully Paid Rights in
respect of which action is to be taken are in certificated form (that is, are
represented by Provisional Allotment Letters) or are in uncertificated form
(that is, are in CREST).
CREST sponsored members should refer to their CREST sponsor, as only
their CREST sponsor will be able to take the necessary action specified below to
take up their entitlements or otherwise to deal with their Nil Paid Rights or
Fully Paid Rights.
(a) General
(i) Nil Paid Rights represented by Provisional Allotment Letters
The Provisional Allotment Letters will set out the holding of Existing
Ordinary Shares on which a Qualifying non-CREST Shareholder's
entitlement to New Ordinary Shares has been based, the aggregate number
of New Ordinary Shares which have been provisionally allotted and the
procedures to be followed if a Qualifying non-CREST Shareholder wishes
to dispose of all or part of his entitlement or to convert all or part
of his entitlement into uncertificated form.
The Provisional Allotment Letters will also include instructions
regarding acceptance and payment, consolidation, splitting and
registration of renunciation. If the Rights Issue is delayed so that
Provisional Allotment Letters cannot be despatched on 18 March 2002,
the expected timetable as set out on page 4 of this document will be
adjusted accordingly and the revised dates will be set out in the
Provisional Allotment Letters.
(ii) Nil Paid Rights in CREST
Subject to paragraph 1 above, each Qualifying CREST Shareholder will
receive a credit to his stock account in CREST of his entitlement to
Nil Paid Rights in accordance with paragraph 1 above. The stock account
to be credited will be an account under the participant ID and member
account ID that apply to the Existing Ordinary Shares held on the
Record Date by the Qualifying CREST Shareholder in respect of which the
Nil Paid Rights are provisionally allotted.
The Nil Paid Rights will constitute a separate security for the
purposes of CREST and can accordingly be transferred, in whole or in
part, by means of CREST in the same manner as any other security that
is admitted to CREST.
If the Rights Issue is delayed so that stock accounts of Qualifying
CREST Shareholders cannot be credited, or the Nil Paid Rights enabled,
on 19 March 2002, Provisional Allotment Letters will be sent out in
substitution for the Nil Paid Rights which would have been so credited
or enabled and the expected timetable as set out in this document will
be adjusted accordingly. References to dates and times in this document
should be read as subject to any such adjustment. The Company will make
an appropriate announcement to the Company Announcements Office giving
details of the revised dates but Qualifying CREST Shareholders may not
receive any further written communication.
(b) Procedures for acceptance and payment
(i) Holders of Provisional Allotment Letters
Holders of Provisional Allotment Letters who wish to take up their
entitlement, in whole or in part, must return the Provisional Allotment
Letter, together with a remittance for the full amount payable on
acceptance, in accordance with the instructions printed thereon, either
by post or by hand to Computershare Investor Services PLC, PO Box 859,
The Pavilions, Bridgwater Road, Bristol BS99 1XZ or by hand (during
normal business hours only) to Computershare Investor Services PLC, 7th
Floor, Jupiter House, Triton Court, 14 Finsbury Square, London EC2A
1BR, so as to arrive as soon as possible and in any event so as to be
received by not later than 10.30 a.m. on 8 April 2002. If you post your
Provisional Allotment Letter within the U.K. by first class post it is
recommended that you allow at least two days for delivery.
If payment is not received in full by 10.30 a.m. on 8 April 2002, the
provisional allotment will (unless the Company has exercised its right
to treat as valid an acceptance from an authorised person, qualified
institutional buyer or other late acceptance procedure) be deemed to
have been declined and will lapse. The Company reserves the right, but
shall not be obliged, to treat as valid (i) Provisional Allotment
Letters and accompanying remittances which are received through the
post not later than 10.30 a.m. on 9 April 2002 (the cover bearing a
legible postmark not later than 10.30 a.m. on 8 April 2002 and (ii)
applications in respect of which remittances are received prior to
10.30 a.m. on 8 April 2002 from an authorised person (as defined in the
FSMA) or a qualified institutional buyer within the meaning of the U.S.
Securities Act of 1933, as amended, specifying the Nil Paid Rights to
be acquired and undertaking to lodge the relevant Provisional Allotment
Letter duly completed in due course.
All subscription monies must be in pounds sterling and cheques or
banker's drafts should be made for the full amount payable to "The
Royal Bank of Scotland plc A/C Enodis plc" and crossed "A/C payee
only". Cheques or banker's drafts must be drawn on a bank or building
society or branch of a bank or building society in the U.K. or Channel
Islands which is either a settlement member of the Cheque and Credit
Clearing Company Limited or the CHAPS Clearing Company Limited or which
has arranged for its cheques and banker's drafts to be cleared through
the facilities provided by any of those companies and must bear the
appropriate sort code in the top right hand corner. All documents and
cheques sent through the post will be sent at the risk of the drawer.
Cheques or banker's drafts will be presented for payment upon receipt.
The Company reserves the right to instruct the Receiving Agent to seek
special clearance of cheques and banker's drafts to allow the Company
to obtain value for remittances at the earliest opportunity. No
interest will be allowed on payments made before they are due. It is a
term of the Rights Issue that cheques shall be honoured at first
presentation and the Company may elect to treat as invalid acceptances
in respect of which cheques are not so honoured. The Company may (in
its sole discretion) treat a Provisional Allotment Letter as valid and
binding on the person(s) by whom or on whose behalf it is lodged even
if it is not completed in accordance with the relevant instructions or
is not accompanied by a valid power of attorney where required.
(ii) Nil Paid Rights in uncertificated form (that is, in CREST)
CREST members who wish to take up all or part of their entitlement in
respect of Nil Paid Rights in CREST must send (or, if they are CREST
sponsored members, procure that their CREST sponsor sends) a
Many-To-Many ("MTM") instruction to CRESTCo which, on its settlement,
will have the following effect:
(a) the crediting of a stock account of the Receiving Agent under
the participant ID and member account ID specified, with the
number of Nil Paid Rights to be taken up;
(b) the making of a CREST payment to the Receiving Agent in
respect of the full amount payable on acceptance in respect of
the Nil Paid Rights referred to in paragraph 2(b)(ii)(a)
above; and
(c) the crediting of a stock account of the accepting CREST member
(being an account under the same participant ID and member
account ID as the account from which the Nil Paid Rights are
to be debited on settlement of the MTM instruction) of the
corresponding number of Fully Paid Rights to which the CREST
member is entitled on taking up his Nil Paid Rights referred
to in paragraph 2(b)(ii)(a) above.
The MTM instruction must be properly authenticated in accordance with
CRESTCo's specifications and must contain, in addition to the other
information that is required for settlement in CREST, the following
details:
(i) the number of Nil Paid Rights to which the acceptance relates;
(ii) the participant ID of the accepting CREST member;
(iii) the member account ID of the accepting CREST member from which
the Nil Paid Rights are to be debited;
(iv) the participant ID of the Receiving Agent "3RA40";
(v) the member account ID of the Receiving Agent "ENODIS";
(vi) the number of Fully Paid Rights that the CREST member is
expecting to receive on settlement of the MTM instruction
(note: this must be the same as the number of Nil Paid Rights
referred to in (i) above);
(vii) the amount payable by means of the CREST payment arrangements
on settlement of the MTM instruction. This must be the full
amount payable on acceptance in respect of the number of Nil
Paid Rights to which acceptance relates referred to in (i)
above;
(viii) the intended settlement date. This must be on or before 8
April 2002;
(ix) the nil paid ISIN Number which is GB0031335275;
(x) the fully paid ISIN Number which is GB0031335168; and
(xi) the corporate action number for the Rights Issue. This will
be available by viewing the relevant corporate action details
in CREST.
An MTM instruction complying with the requirements as to authentication
and contents set out above will constitute a valid acceptance where
either:
(aa) the MTM instruction settles by not later than 10.30 a.m. on 8
April 2002; or
(bb) the MTM instruction is received by CRESTCo by not later than
10.30 a.m. on 8 April 2002 and a number of Nil Paid Rights
at least equal to the number of Nil Paid Rights inserted in
the MTM instruction is credited to the member account of the
accepting CREST member specified in the MTM instruction at
10.30 a.m. on 8 April 2002.
An MTM instruction will be treated as having been received by CRESTCo
for these purposes at the time at which the instruction is processed by
the Communications Host at CRESTCo of the network provider used by the
CREST member (or by the CREST member's CREST sponsor). This will be
conclusively determined by the input time stamp applied to the MTM
instruction by the Communications Host.
A CREST member or CREST sponsored member who makes a valid acceptance
as described above represents, warrants and undertakes to the Company
that he has taken (or procured to be taken), and will take (or will
procure to be taken), such action as shall be required to be taken by
him or by his CREST sponsor (as appropriate) to ensure that the MTM
instruction concerned is capable of settlement at 10.30 a.m. on 8 April
2002 and remains capable of settlement at all times thereafter until
2.00 p.m. on 8 April 2002 (or until such later time and date as the
Company may determine). In particular, the CREST member or CREST
sponsored member represents, warrants and undertakes that, at 10.30
a.m. on 8 April 2002 and at all times thereafter until 2.00 p.m. on 8
April 2002 (or until such later time and date as the Company may
determine), there will be sufficient Headroom within the Cap (as those
terms are defined in the Glossary to the CREST Manual) in respect of
the cash memorandum account to be debited with the amount payable on
acceptance to permit the MTM instruction to settle.
CREST members and (where applicable) their CREST sponsors should note
that CRESTCo does not make available special procedures in CREST for
any particular corporate action. Normal system timings and limitations
will therefore apply in relation to the input of an MTM instruction and
its settlement in connection with the Rights Issue. It is the
responsibility of the CREST member concerned to take (or, if the CREST
member is a CREST sponsored member, to procure that his CREST sponsor
takes) such action as shall be necessary to ensure that a valid
acceptance is received as stated above by 10.30 a.m. on 8 April 2002.
In this connection CREST members and (where applicable) their CREST
sponsors are referred in particular to those sections of the CREST
Manual concerning practical limitations of the CREST system and
timings.
A CREST member who makes a valid acceptance in accordance with the
above procedures will thereby (a) undertake to pay to the Company the
amount payable on acceptance in accordance with the above procedures or
in such other manner as the Company may require (it being acknowledged
that, where payment is made by means of a CREST payment (as defined in
the CREST Manual), the making of a CREST payment in favour of the
Receiving Agent's payment bank in accordance with the CREST payment
arrangements shall, to the extent of the obligation so created,
discharge in full the obligation of the CREST member to pay to the
Company the amount payable on acceptance) and (b) request that the
Fully Paid Rights and/or the New Ordinary Shares to which he will
become entitled be issued to him on the terms set out in this document
and subject to the Memorandum and Articles of Association of the
Company.
The Company may in its sole discretion:
(A) reject any acceptance constituted by an MTM instruction which
is otherwise valid in the event of breach of any of the
representations, warranties and undertakings set out or
referred to in this Part III. Where an acceptance is made as
described in paragraph 2(b)(ii)(bb) above which is otherwise
valid, and the MTM instruction concerned fails to settle by
2.00 p.m. on 8 April 2002 (or by such later time and date as
the Company has determined), the Company shall be entitled to
assume, for the purposes of its right to reject an acceptance
contained in this paragraph (A), that there has been a breach
of the representations, warranties and undertakings set out or
referred to in this Part III unless the Company is aware of
any reason outside the control of the CREST member or CREST
sponsor (as appropriate) concerned for the failure to settle;
(B) treat as valid (and binding on the CREST member concerned) an
acceptance which does not comply in all respects with the
requirements as to validity set out or referred to in this
Part III;
(C) accept an alternative properly authenticated dematerialised
instruction from a CREST member or (where applicable) a CREST
sponsor as constituting a valid acceptance in substitution for
or in addition to an MTM instruction and subject to
such further terms and conditions as the Company may
determine;
(D) treat a properly authenticated dematerialised instruction (in
this sub-paragraph the "first instruction") as not
constituting a valid acceptance if, at the time at which the
Receiving Agent receives a properly authenticated
dematerialised instruction giving details of the first
instruction, either the Company or the Receiving Agent have
received actual notice from CRESTCo of any of the matters
specified in CREST Regulation 35(5)(a) in relation to the
first instruction. These matters include notice that any
information contained in the first instruction was incorrect
or notice of lack of authority to send the first instruction;
and
(E) accept an alternative instruction or notification from a CREST
member or CREST sponsored member or (where applicable) a CREST
sponsor, or extend the time for acceptance and/or settlement
of an MTM instruction or any alternative instruction or
notification, in the event that, for reasons or due to
circumstances outside the control of any CREST member or CREST
sponsored member or (where applicable) CREST sponsor, the
CREST member or CREST sponsored member is unable validly to
take up all or part of their Nil Paid Rights by means of the
above procedures. In normal circumstances, this discretion is
only likely to be exercised in the event of any interruption,
failure or breakdown of CREST (or of any part of CREST) or on
the part of the facilities and/or systems operated by the
Receiving Agent in connection with CREST.
(c) Money Laundering Regulations
(i) Holders of Provisional Allotment Letters
If the value of your application exceeds the equivalent of 15,000 Euros
(or is one of a series of linked applications, the aggregate value of
which exceeds that amount) the verification of identity requirements of
the Money Laundering Regulations 1993 (the "Money Laundering
Regulations") will apply. The Receiving Agent is entitled to require,
at its absolute discretion, verification of identity from any person
lodging a Provisional Allotment Letter (the "applicant"), including,
without limitation, any person who either (i) tenders payment by way of
a cheque or banker's draft drawn on an account in the name of a person
or persons other than the applicant or (ii) appears to the Receiving
Agent to be acting on behalf of some other person. Returning a
Provisional Allotment Letter with the appropriate remittance will
constitute a warranty that the Money Laundering Regulations will not be
breached by the acceptance of the remittance and an undertaking by the
applicant to provide promptly to the Receiving Agent such information
as may be specified by the Receiving Agent as being required for the
purpose of the Money Laundering Regulations if so requested. Pending
the provision of evidence satisfactory to the Receiving Agent as to
identity, the Receiving Agent may in its absolute discretion retain a
Provisional Allotment Letter lodged by an applicant for New Ordinary
Shares and/or the cheque or other remittance relating thereto and/or
not enter the New Ordinary Shares to which it relates on the register
of members or issue any share certificate in respect of them. If
satisfactory evidence of identity has not been provided within a
reasonable time, then the acceptance will not be valid but without
prejudice to the right of the Company to take proceedings to recover
any loss suffered by it as a result of failure of the applicant to
provide satisfactory evidence. In such event the application monies
(without interest) will be returned to the bank or building society
account from which payment was made, following which, the procedure in
respect of rights not taken up (as described in paragraph 3 below) will
apply, save that any premium obtained will be held by the Company on
trust until it is satisfied as to the identity of the applicant in
accordance with the Money Laundering Regulations. Neither the Company
nor Credit Suisse First Boston nor Computershare Investor Services plc
will be liable to any person for any loss or damage suffered or
incurred as a result of the exercise of the Company's discretion to
require evidence as to identity of any applicant pursuant to the Money
Laundering Regulations, or to treat an acceptance as invalid as a
result of an applicant's failure to provide such evidence to the
Company's satisfaction.
The following guidance is provided in order to reduce the likelihood of
difficulties, delays and potential rejection of an application (but
does not limit the right of the Receiving Agent to require verification
of identity as stated above).
Applicants are urged if possible to make their payment by their own
cheque. If this is not practicable and an applicant uses a cheque drawn
by a building society or other third party or a banker's draft, the
applicant should:
(a) write the applicant's name and address on the back of the
building society cheque, banker's draft or other third party
cheque and, in the case of an individual, record his date of
birth against his name; and
(b) if a building society cheque or banker's draft is used, ask
the building society or bank to endorse on the cheque the full
name and account number of the person whose building society
or bank account is being debited.
If an application is delivered by hand and the accompanying payment is
not the applicant's own cheque, the applicant should ensure that he has
with him evidence of identity bearing his photograph, for example, a
valid full passport.
If you are making an application as agent for one or more persons and
you are not a U.K. or EC regulated person or institution (e.g. a bank
or broker), then, irrespective of the value of the application, the
Receiving Agent is obliged to take reasonable measures to establish the
identity of the person or persons on whose behalf the application is
being made. Applicants making such an application as agent should
specify on the Provisional Allotment Letter if they are a U.K. or EC
regulated person or institution. All enquiries in relation to the
Provisional Allotment Letter should be addressed to the Receiving
Agent.
(ii) Nil Paid Rights in CREST
If you hold your Nil Paid Rights in CREST and apply to take up all or
part of your entitlement as agent for one or more persons and you are
not a U.K. or EC regulated person or institution (e.g. a bank or a
broker), then, irrespective of the value of the application, the
Receiving Agent is obliged to take reasonable measures to establish the
identity of the person or persons on whose behalf you are making the
application. You must therefore contact the Receiving Agent before
sending any MTM or other instruction so that appropriate measures may
be taken.
Submission of an MTM instruction which constitutes, or which may, on
its settlement, constitute, a valid acceptance as described above
constitutes a warranty and undertaking by the applicant to provide
promptly to the Receiving Agent such information as may be specified by
the Receiving Agent as being required for the purposes of the Money
Laundering Regulations. Pending the provision of evidence satisfactory
to the Receiving Agent as to identity, the Receiving Agent may in its
absolute discretion take, or omit to take, such action as they may
determine to prevent or delay settlement of the MTM instruction. If
satisfactory evidence of identity has not been provided within a
reasonable time, then the Receiving Agent will not permit the MTM
instruction concerned to proceed to settlement but without prejudice to
the right of the Company to take proceedings to recover any loss
suffered by them as a result of failure of the applicant to provide
satisfactory evidence.
(d) Dealings in Nil Paid Rights
Dealings on the London Stock Exchange in the Nil Paid Rights are
expected to commence on 19 March 2002. A transfer of Nil Paid Rights can be
made:
(i) in the case of Nil Paid Rights in certificated form, by renunciation of
the Provisional Allotment Letter in accordance with the instructions
printed thereon and delivery of such letter to the transferee; and
(ii) in the case of Nil Paid Rights in uncertificated form, by means of
CREST in the same manner as any other security that is admitted to
CREST. The Nil Paid Rights are expected to be disabled in CREST at
10.30 a.m. on 8 April 2002 (or such later time and date as the Company
may determine).
(e) Dealings in Fully Paid Rights
After acceptance of the provisional allotment and payment in full in
accordance with the provisions set out in this document and (where appropriate)
the Provisional Allotment Letter, the Fully Paid Rights may be transferred:
(i) in the case of Fully Paid Rights in certificated form, by renunciation
of the relevant Provisional Allotment Letter and lodging of the same
either by post or by hand with Computershare Investor Services PLC, PO
Box 859, The Pavilions, Bridgwater Road, Bristol BS99 1XZ or by hand
(during normal business hours only) with Computershare Investor
Services PLC, 7th Floor, Jupiter House, Triton Court, 14 Finsbury
Square, London EC2A 1BR by not later than 10.30 a.m. on 8 April 2002;
and
(ii) in the case of Fully Paid Rights in uncertificated form, by means of
CREST in the same manner as any other security that is admitted to
CREST. The latest date for settlement of any transfer of Fully Paid
Rights in CREST is expected to be 8 April 2002. The Fully Paid Rights
are expected to be disabled in CREST after the close of CREST business
on 8 April 2002.
After 8 April 2002, the New Ordinary Shares will be in registered form
and transferable in the usual way (see paragraph (i) below). Dealings
in New Ordinary Shares are expected to commence on 9 April 2002.
(f) Renunciation and splitting of Provisional Allotment Letters
A Qualifying non-CREST Shareholder entitled to a provisional allotment
of New Ordinary Shares who wishes to transfer all (and not only some) of the Nil
Paid Rights or Fully Paid Rights comprised in a Provisional Allotment Letter may
(save as required by the laws of certain foreign jurisdictions) renounce such
allotment by completing and signing Form X on such letter and handing the entire
letter to the renouncee or to the broker or bank who acts for such person in the
transaction. Once a Provisional Allotment Letter has been renounced, the letter
will become a negotiable instrument in bearer form.
The latest time and date for registration of renunciation of
Provisional Allotment Letters, fully paid is 10.30 a.m. on 8 April 2002. If the
Qualifying non-CREST Shareholder wishes to have only some of such New Ordinary
Shares registered in his name and to transfer the remainder, or wishes to
transfer all the Nil Paid Rights or Fully Paid Rights but to different persons,
he may have the Provisional Allotment Letter split, for which purpose he or his
agent must complete and sign Form X on such letter. The Provisional Allotment
Letter must then be lodged by post or by hand with Computershare Investor
Services PLC (during normal business hours only) at 7th Floor, Jupiter House,
Triton Court, 14 Finsbury Square, London EC2A 1BR by not later than 3.00 p.m. on
4 April 2002, if nil paid or fully paid, to be cancelled and exchanged for the
split Provisional Allotment Letters required. The number of split letters
required and the number of Nil Paid Rights or Fully Paid Rights to be comprised
in each should be stated in an accompanying letter. Form X on split letters will
be marked "Original duly renounced" before issue.
Nil Paid Rights or Fully Paid Rights in CREST may be transferred (in
whole or in part) in the same manner as any other security that is admitted to
CREST, as explained in paragraphs (d) and (e) above.
(g) Registration in names of persons other than Qualifying Shareholders
originally entitled
In relation to Nil Paid Rights or Fully Paid Rights in certificated
form, the renouncee or his agent(s) must complete Form Y on the Provisional
Allotment Letter and lodge the entire letter either by post or by hand to
Computershare Investor Services PLC, PO Box 859, The Pavilions, Bridgwater Road,
Bristol BS99 1XZ or by hand (during normal business hours only) to Computershare
Investor Services PLC, 7th Floor Jupiter House, Triton Court, 14 Finsbury
Square, London EC2A 1BR by not later than 10.30 a.m. on 8 April 2002, whether
nil paid (with a payment) or fully paid. Nil Paid Rights or Fully Paid Rights in
CREST may be transferred in the same manner as any other security that is
admitted in CREST, as explained in paragraphs (d) and (e) above. From 9 April
2002, the New Ordinary Shares will be transferable in the usual way.
(h) Deposit of Nil Paid Rights or Fully Paid Rights into, and withdrawals
of such Rights from, CREST
Nil Paid Rights or Fully Paid Rights which are represented by
Provisional Allotment Letters may be converted into uncertificated form, that
is, deposited into CREST (whether any such conversion arises as a result of a
transfer of such Rights or otherwise). Similarly, Nil Paid Rights or Fully Paid
Rights held in CREST may be converted into certificated form, that is, withdrawn
from CREST. Normal CREST procedures (including timings) apply in relation to any
such conversion, subject (in the case of a deposit into CREST) to procedures set
out in the Provisional Allotment Letter. You are recommended to refer to the
CREST Manual for details of such procedures.
The procedure for depositing the Nil Paid Rights represented by the
Provisional Allotment Letter into CREST, whether such rights are to be converted
into uncertificated form in the name(s) of the person(s) whose name(s) and
address appear(s) on page 1 of the Provisional Allotment Letter or in the name
of a person or persons to whom this letter has been renounced, is as follows.
Form X and the CREST deposit form (both on page 4 of the Provisional Allotment
Letter) will need to be completed and the Provisional Allotment Letter deposited
with the CCSS; in addition, the normal CREST stock deposit procedures will need
to be carried out, except that (a) it will not be necessary to complete and
lodge a separate CREST Transfer Form (prescribed under the Stock Transfer Act
1963) with the CCSS and (b) only the whole of the Nil Paid Rights or Fully Paid
Rights represented by the Provisional Allotment Letter may be deposited into
CREST. If you wish to deposit some only of the Nil Paid Rights or Fully Paid
Rights represented by the Provisional Allotment Letter into CREST, you must
first apply for split Provisional Allotment Letters. If the rights represented
by more than one Provisional Allotment Letter are to be deposited, the CREST
deposit form on each letter must be completed and deposited. The consolidation
listing form must not be used.
Holders of Nil Paid Rights who are proposing so to convert any such
rights are recommended to ensure that the conversion procedures are implemented
in sufficient time to enable the person holding or acquiring the Nil Paid Rights
in CREST following the conversion to take all necessary steps in connection with
taking up the entitlement prior to 10.30 a.m. on 8 April 2002. In particular,
having regard to normal processing times in CREST and on the part of the
Receiving Agent, the latest time for depositing a renounced Provisional
Allotment Letter with the CCSS, where the renouncee wishes to hold the Nil Paid
Rights represented by such Provisional Allotment Letter in uncertificated form,
is 3.00 p.m. on 3 April 2002, and the recommended latest time for receipt by
CRESTCo of a properly authenticated dematerialised instruction requesting
withdrawal of Nil Paid Rights from CREST is 4.30 p.m. on 28 March 2002, in
either case so as to enable the person acquiring or (as appropriate) holding the
Nil Paid Rights following the conversion to take all necessary steps in
connection with taking up the entitlement prior to 10.30 a.m. on 8 April 2002.
(i) Issue of New Ordinary Shares in definitive form
In relation to Fully Paid Rights in certificated form after the close
of CREST business on 8 April 2002 (the latest date for registration of
renunciation), the New Ordinary Shares (in definitive form) to which the holders
of those Fully Paid Rights are entitled will be issued in certificated form.
Definitive share certificates are expected to be despatched by first
class post to the first named or sole holder at his registered address by 11
April 2002 to the persons entitled thereto. After despatch of definitive
certificates, Provisional Allotment Letters will cease to be valid for any
purpose whatsoever. After 8 April 2002 and pending the issue of definitive share
certificates, instruments of transfer will be certified by the Registrar against
lodgment of fully paid Provisional Allotment Letters.
Fully Paid Rights in CREST are expected to be disabled in CREST after
the close of CREST business on 8 April 2002 (the latest date for settlement of
transfers of Fully Paid Rights in CREST). New Ordinary Shares (in definitive
form) will be issued in uncertificated form to those persons registered as
holding such Fully Paid Rights in CREST at the close of business on the date on
which the Fully Paid Rights are disabled. The Receiving Agent will instruct
CRESTCo to credit the appropriate stock accounts of such persons with such
persons' entitlements to New Ordinary Shares with effect from the next business
day (expected to be 9 April 2002). The stock accounts to be credited will be
accounts under the same participant IDs and member account IDs that apply to the
Fully Paid Rights held by the persons concerned in respect of which the New
Ordinary Shares (in definitive form) are issued.
(j) Posting
All documents and cheques posted to or by the allottees or their
renouncees (or their agents, as appropriate) will be posted at their risk.
(k) Right to allot/issue in certificated form
Notwithstanding any other provision of this document, the Company
reserves the right to allot and/or issue any Nil Paid Rights, Fully Paid Rights
or New Ordinary Shares in certificated form. In normal circumstances, this right
is only likely to be exercised in the event of any interruption, failure or
breakdown of CREST (or of any part of CREST) or on the part of the facilities
and/or systems operated by the Receiving Agent in connection with CREST.
3. PROCEDURE IN RESPECT OF RIGHTS NOT TAKEN UP (WHETHER CERTIFICATED OR IN
CREST)
If an entitlement to New Ordinary Shares is not validly taken up by
10.30 a.m. on 8 April 2002, in accordance with the procedure laid down for
acceptance and payment, then that provisional allotment will be deemed to have
been declined and will lapse. Credit Suisse First Boston, acting as agent for
the Company, will endeavour to procure, by not later than 3.00 p.m. on 10 April
2002, subscribers for such New Ordinary Shares if a premium over the aggregate
of the Issue Price and the expenses of procuring such subscribers (including any
value added tax thereon) can be obtained unless Credit Suisse First Boston
considers in its reasonable opinion that it is unlikely that subscribers could
be procured on the above basis. If subscribers can be procured on such basis, it
will be a term of such subscription that such premium shall be paid (subject as
provided in this paragraph 3):
(i) where the provisional allotment was, at the time of its lapsing,
represented by a Provisional Allotment Letter, to the person whose name
and address appeared on page 1 of the Provisional Allotment Letter; and
(ii) where the Nil Paid Rights were, at the time of their lapsing, in
uncertificated form, to the person registered as the holder of such Nil
Paid Rights at the time of their disablement in CREST.
New Ordinary Shares for which subscribers are procured on this basis
will be re-allotted to such subscribers and the premium (being the amount paid
by such subscribers after deducting the Issue Price and the expenses of
procuring such subscribers including any value added tax thereon) will be
distributed by cheque (without interest) to non-accepting Qualifying
Shareholders to whom the New Ordinary Shares were originally allotted in
proportion to their rights not taken up, except that amounts of less than
(pound)3 per holding will not be distributed but will be aggregated and retained
for the benefit of the Company. Cheques for amounts due to non-accepting
Qualifying Shareholders (if any) will be sent by post, at the risk of persons
entitled to them, to the first named or sole holder at his registered address.
Any transactions undertaken pursuant to this paragraph 3 shall be
deemed to have been undertaken at the request of the persons entitled to the
lapsed provisional allotments and neither the Company nor Credit Suisse First
Boston nor any person procuring such subscribers shall be responsible or have
any liability whatsoever for any loss or damage (whether actual or alleged)
arising from the terms or timing of any such subscription or any decision not to
endeavour to procure subscribers and each such person shall be entitled to
retain any brokerages, commissions or other benefits received in connection with
these arrangements. Cheques for the amount due will be sent, at the risk of the
person(s) entitled, to their registered addresses (the registered address of the
first named in the case of joint holders), provided that, where any entitlement
concerned was held in CREST, the amount due will, unless the Company (in its
absolute discretion) otherwise determines, be satisfied by the Company procuring
the making of a CREST payment to the relevant CREST member in respect of the
cash amount concerned. If subscribers cannot be procured on the basis outlined
above, the relevant New Ordinary Shares will be subscribed for by Credit Suisse
First Boston or Credit Suisse First Boston will procure subscribers at a price
of 50 pence per New Ordinary Share.
4. TAXATION
The following statements are intended only as a general guide to the
position under current U.K. law and Inland Revenue practice and may not apply to
certain classes of Shareholders, such as dealers in securities. The comments are
of a general nature and concern only the position of Shareholders who are the
beneficial owners of their shares. Shareholders who are in any doubt as to their
tax position or who may be subject to tax in a jurisdiction other than the U.K.
are strongly recommended to consult their professional tax advisers immediately.
(a) Stamp duty and stamp duty reserve tax
No stamp duty or stamp duty reserve tax ("SDRT") will be payable on the
issue of Provisional Allotment Letters, split allotment letters or definitive
share certificates, on the registration of the original holders of Provisional
Allotment Letters or their renouncees, on the crediting of the Nil Paid Rights
or Fully Paid Rights to stock accounts in CREST or on the issue in
uncertificated form of the New Ordinary Shares, unless the holders concerned are
persons to whom the depository receipt or clearance service charge may apply
(excluding clearance services where an election for an alternative system of
charge is in effect).
Where Nil Paid Rights or Fully Paid Rights represented by a Provisional
Allotment Letter or held in CREST are sold on or before the last date for
registration of renunciation or transfer, the purchaser will not be liable to
stamp duty but will generally be liable to SDRT at the rate of 0.5 per cent. of
the actual consideration paid (except in the case of certain sales to certain
intermediaries and charities). In the case of transfers in CREST, SDRT will be
collected through CREST in accordance with the CREST rules.
The transfer on sale of New Ordinary Shares held outside CREST after
the last date for registration of renunciation will generally be liable to stamp
duty at the rate of 0.5 per cent. of the actual consideration paid. A charge to
SDRT at the rate of 0.5 per cent. of the actual consideration paid will also
arise in relation to an unconditional agreement to transfer such New Ordinary
Shares but that charge will be cancelled, or the SDRT repaid, depending on the
circumstances, if the agreement is completed by a duly stamped transfer executed
within six years of the date of that agreement. The transfer on sale of New
Ordinary Shares held in CREST after the last date for settlement of transfers of
Fully Paid Rights in CREST will generally be liable to SDRT at the rate of 0.5
per cent. of the actual consideration paid (except in the case of certain sales
to certain intermediaries and charities). In the case of transfers in CREST, the
SDRT tax will be collected in CREST in accordance with the CREST rules.
(b) Taxation of chargeable gains
For the purposes of U.K. taxation of chargeable gains:
(i) a Shareholder will not be treated as making a disposal of all or part
of his holding of Existing Ordinary Shares or any rights attached to
them and will therefore not incur a liability to taxation of chargeable
gains on taking up all or part of his rights to New Ordinary Shares;
(ii) any New Ordinary Shares subscribed under the Rights Issue by a holder
of Existing Ordinary Shares will, together with the original holding of
Ordinary Shares, be treated as forming part of a single asset (the "New
Holding") acquired on the date of acquisition of the original holding,
the base cost of which will be the amount paid for the original holding
together with the amount of subscription monies paid for the New
Ordinary Shares;
(iii) for disposals on or after 6 April 1998, indexation allowance is
available for the purposes of corporation tax only and is not therefore
available to individuals, personal representatives or trustees. The
following paragraphs accordingly deal separately with the positions of
corporate and non-corporate Qualifying Shareholders:
(aa) Qualifying Shareholders who are within the charge to
corporation tax will continue to obtain the benefit of
indexation
allowance on their New Holding, although for the purposes of
calculating the indexation allowance on any disposal of
Ordinary Shares comprised in the New Holding, the expenditure
incurred in subscribing for the New Ordinary Shares will be
treated as incurred only when the Shareholder became liable to
make or made payment, not at the time the Existing Ordinary
Shares were acquired;
(bb) for disposals on or after 6 April 1998 by individuals,
personal representatives or trustees the indexation allowance
was frozen by reference to the Retail Price Index at April
1998 (although indexation relief for holding periods up to
then was preserved) and was replaced by a system of taper
relief. Taper relief operates by reducing the amount of any
gain realised on the disposal of assets (after indexation
relief, if available) by a percentage amount that is dependent
on the period of ownership of the relevant asset since 6 April
1998 and on whether that asset qualifies for the business or
non-business rate of taper. The period of ownership (since 6
April 1998) of the existing holding of Ordinary Shares is
taken into account when assessing the availability of taper
relief; and
(iv) depending on each Shareholder's individual circumstances, a liability
to U.K. taxation of capital gains may be incurred if:
(aa) all or some of the Nil Paid Rights or Fully Paid Rights or the
New Ordinary Shares themselves are sold or otherwise disposed of; or
(bb) the Nil Paid Rights are allowed to lapse and a cash payment is
received in respect thereof.
However, if the proceeds resulting from a lapse of the Nil Paid Rights
or a disposal of any of the Nil Paid Rights or the New Ordinary Shares
do not exceed whichever is the greater of (Pounds)3,000 or 5 per cent.
of the market value (as at the date of disposal or lapse) of the
Existing Ordinary Shares in respect of which the rights of shares
arose, the Qualifying Shareholder will not generally be treated as
making a disposal for the purposes of U.K. tax on chargeable gains;
instead, the proceeds will be deducted from the acquisition cost of the
Existing Ordinary Shares.
(c) Taxation of dividends
(i) Under current U.K. tax legislation the Company is not required to
withhold tax at source from dividend payments it makes.
(ii) Individual Shareholders who are resident for tax purposes in the U.K.
should generally be entitled to a tax credit in respect of any dividend
received from the Company equal to one-ninth of the amount of the
dividend. Such a Shareholder's liability to U.K. tax is calculated on
the sum of the dividend and the tax credit (the "gross dividend")
which, with certain other investment income, will be regarded as the
top slice of his income and which will be subject to U.K. income tax
rates of tax described below. The tax credit (which equals 10 per cent.
of the gross dividend) will be available to offset such Shareholder's
liability (if any) to income tax on the gross dividend income.
(iii) Individual Shareholders who are liable to income tax at the basic rate
or at a rate which is lower than the basic rate will be liable to tax
on dividend income received from the Company at the rate of 10 per
cent. This means that the tax credit will satisfy the income tax
liability of such Shareholders in respect of the dividend income.
(iv) Individual Shareholders who are liable to income tax at the higher rate
will be liable to tax on dividend income received from the Company at
the rate of 32.5 per cent. After taking into account 10 per cent. tax
credit, a higher rate taxpayer will be liable to additional income tax
of 22.5 per cent. of the gross dividend, equal to 25 per cent. of the
net dividend, to the extent that the gross dividend falls above the
threshold for higher rate income tax.
(v) With limited exceptions (relating to shares held in individual savings
accounts or personal equity plans in respect of dividends paid prior to
6 April 2004), individual Shareholders who are resident in the U.K.
cannot claim repayment of the tax credit from the Inland Revenue.
(vi) A corporate Shareholder resident for tax purposes in the U.K. will
not normally be liable to corporation tax on any dividend received from
the Company.
(vii) Tax exempt pension funds, most U.K. corporate Shareholders and
charities cannot reclaim from the Inland Revenue tax credits attaching
to dividend payments received from the Company, although charities are
entitled to limit compensation in lieu of repayable tax credits until 5
April 2004.
The right of a Shareholder not resident in the U.K. for tax purposes to
the benefit of a tax credit in respect of a dividend received
and to claim payment of any part of a tax credit is determined by the double tax
convention or agreement (if any) between the U.K. and the country in which the
Shareholder is resident. Qualifying Shareholders who are not resident in the
U.K. for tax purposes should consult their own tax advisers concerning their tax
liabilities on dividends received, whether they are entitled to claim any part
of the tax credit and, if they are so entitled, the procedure for doing so. Such
Qualifying Shareholders should note that it is likely that they will, in
practice, not be able to reclaim any significant part of the tax credit.
Qualifying Shareholders resident outside the U.K. may also be subject to
taxation on dividend income under their local law.
The above comments are intended only as a general guide to the current
position. Any person who is in any doubt as to his tax position should consult
his own professional adviser.
5. OVERSEAS SHAREHOLDERS
The making of the offer by way of rights to persons resident in, or who
are citizens of, countries other than the U.K. may be affected by the laws of
the relevant jurisdiction. No person in any territory other than the U.K.
receiving a copy of this document and/or a Provisional Allotment Letter in that
territory or receiving a credit of Nil Paid Rights to a stock account in CREST
may treat the same as constituting an offer or invitation to him, nor should he
in any event deal with such a Provisional Allotment Letter or Nil Paid Rights or
Fully Paid Rights in CREST, unless in the relevant territory such an invitation
or offer can lawfully be made to him and the Provisional Allotment Letter, Nil
Paid Rights or Fully Paid Rights in CREST can lawfully be dealt with without
contravention of any registration or other legal requirements.
Save in such circumstances, this document and/or the Provisional
Allotment Letter will be sent for information only and should not be copied or
redistributed.
Subject to paragraphs 5(a) and (b) below any person outside the U.K.
wishing to accept the offer of New Ordinary Shares comprised in a Provisional
Allotment Letter or (as appropriate) made when Nil Paid Rights (having been
credited to his stock account in CREST) are enabled for settlement in CREST must
satisfy himself as to full observance of the laws of any relevant territory in
connection therewith, including obtaining any requisite governmental or other
consents, observing any other requisite formalities and paying any issue,
transfer or other taxes due in such territory. A Shareholder who is in any doubt
as to his position should consult his professional adviser without delay.
The Company reserves the right to treat as invalid any acceptance or
purported acceptance of the offer of New Ordinary Shares which appears to the
Company or its agents to have been executed, effected or despatched in a manner
which may involve a breach of the securities laws of any jurisdiction or if it
believes or they believe that the same may violate applicable legal or
regulatory requirements, including without limitation if (in the case of a
Provisional Allotment Letter) it provides an address for delivery of share
certificates for New Ordinary Shares in the United States, Canada, Japan,
France, Australia, South Africa, Singapore or the Republic of Ireland or in any
jurisdiction outside the U.K. in which it would be unlawful to deliver such
share certificates.
Despite any other provision of this document or the Provisional
Allotment Letter, the Company reserves the right to permit any Overseas
Shareholder on the register of members of the Company on the Record Date to take
up his rights if the Company in its sole and absolute discretion is satisfied,
at any time prior to 10.30 a.m. on 8 April 2002, that the transaction in
question is exempt from, or not subject to, any legislation or regulations
giving rise to any restrictions.
The provisions of paragraph 3 above will apply generally to those New
Ordinary Shares and Nil Paid Rights which Overseas Shareholders who are not
entitled to participate in the Rights Issue would have been entitled if they had
been Qualifying Shareholders, save that Credit Suisse First Boston shall
endeavour to procure the sale of such rights or shares from the date of
Admission.
Overseas Shareholders who wish and are permitted to take up their
entitlement should note that payments must be made in pounds sterling and must
be made as described in 2(b)(i) where Nil Paid Rights are represented by
Provisional Allotment Letters and paragraph 2(b)(ii) where Nil Paid Rights are
in CREST.
Specific restrictions relating to certain jurisdictions are set out
below.
(a) United States
The Nil Paid Rights, Fully Paid Rights, New Ordinary Shares and the
Provisional Allotment Letters have not been and will not be registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), or under the
securities laws of any state of the United States. Accordingly, subject to
certain exceptions, neither the New Ordinary Shares nor the Provisional
Allotment Letters nor any Nil Paid Rights or Fully Paid Rights may be offered,
sold, delivered, taken up, renounced or transferred, directly or indirectly, in
or into the U.S. at any time except pursuant to the terms of an applicable
exemption under the Securities Act and applicable securities laws of the United
States.
Accordingly, the offer by way of rights is not being made in the U.S.
or to U.S. Persons, and neither this document nor the Provisional Allotment
Letter constitutes an offer to any U.S. Person, and neither this document nor
the Provisional Allotment Letter will be sent to, nor will any Nil Paid Rights
be credited to a stock account in CREST of, any Shareholder whose registered
address is in the United States. Provisional Allotment Letters sent from or
post-marked in the U.S. will be deemed to be invalid and no definitive share
certificates for New Ordinary Shares will be sent to addresses inside the United
States. The Company reserves the right to reject any Provisional Allotment
Letter (or renunciation thereof) in the name of any person who provides an
address in the U.S. for acceptance, renunciation or for the delivery of
definitive certificates for New Ordinary Shares, or who is unable to represent
and warrant that such person is not in the U.S., is not a U.S. Person and is not
acting on a non-discretionary basis for persons in the U.S. or for U.S. Persons,
or that appears to the Company or its agents to have been executed in or
despatched from the United States. In addition, the Company reserves the right
to reject any MTM instruction sent by or on behalf of any CREST member with a
registered address in the U.S. in respect of the Nil Paid Rights.
Notwithstanding the foregoing, the Company reserves the right to make
the Nil Paid Rights, Fully Paid, Rights, New Ordinary Shares and the Provisional
Allotment Letters available to a limited number of Shareholders who are able to
take up their rights pursuant to an exemption from the registration requirements
of the Securities Act.
Holders of our ADSs will not be eligible to participate in the Rights
Issue. However, the depositary under the Company's American Depositary Receipt
facility has confirmed that it will sell the rights relating to the Ordinary
Shares underlying the ADSs, and will distribute the net proceeds to the ADS
holders in accordance with the depositary agreement.
(b) Canada, Japan, France, Australia, South Africa, Singapore and the
Republic of Ireland
Due to restrictions under the securities laws of Canada, Japan, France,
Australia, South Africa, Singapore and the Republic of Ireland, neither this
document nor the Provisional Allotment Letter will be sent to, nor will any Nil
Paid Rights be credited to a stock account in CREST of, any Shareholders with
registered addresses in, and the New Ordinary Shares may not be transferred or
sold to or renounced or delivered in, any of those countries. Accordingly, no
offer of New Ordinary Shares is being made under this document to Shareholders
with registered addresses in, or to residents of any of, Canada, Japan, France,
Australia, South Africa, Singapore and the Republic of Ireland and neither this
document nor the Provisional Allotment Letter should be forwarded to or
transmitted in or into any of these countries.
6. GOVERNING LAW
The terms and conditions of the Rights Issue, as set out in this
document and (where appropriate) the Provisional Allotment Letter, shall be
governed by and construed in accordance with the laws of England and Wales.
PART IV: ANNOUNCEMENT OF QUARTERLY RESULTS FOR THE 13 WEEKS ENDED
29 DECEMBER 2001
The following is the full text of the announcement of the Group's
unaudited quarterly results for the 13 weeks ended 29 December 2001 released on
20 February 2002:
"
Highlights
As reported at the time of our Annual General Meeting, Group
performance for the 13 weeks ended 29 December 2001 ("First Quarter 2002") is in
line with the Board's expectations at the time of the preliminary announcement
of our results for the year ended 29 September 2001 (the "2001 financial year")
made in November 2001.
. Food equipment sales decreased by 4.6% to(pound)189.9 million in
First Quarter 2002 from (pound)199.0 million for the 13 weeks
ended 29 December 2000 ("First Quarter 2001"), reflecting the
deterioration of the food service equipment market in North
America and difficult trading conditions for our food retail
equipment group, particularly in display cases. At the time of
our preliminary results announcement in November, we expected a
further significant decline in the food service equipment
markets, especially in North America. Whilst sales held up
relatively well in October and November a further decline in
sales became apparent in December. As previously anticipated,
this decline is therefore expected to have a greater impact on
our results for the second quarter of the financial year ending
28 September 2002 compared to the first quarter.
. Food equipment operating profit before exceptional items and
goodwill amortisation decreased by 9.6% to (pound)14.2 million
in First Quarter 2002 from (pound)15.7 million in First
Quarter 2001, reflecting the reduced sales volumes and pricing
pressures, particularly in our food retail equipment group,
offset to a significant extent by the cost savings generated
by the management actions taken in the second half of the 2001
financial year.
. Group profit before tax, exceptional items and goodwill
amortisation decreased by 17.7% to(pound)5.1 million in First
Quarter 2002 from(pound)6.2 million in First Quarter 2001.
. Profit on disposal of businesses in First Quarter 2002
amounted to (pound)2.7 million, due to the sale of Sammic for
consideration of (pound)20 million. Exceptional charges of
(pound)2.4 million in First Quarter 2002 were for the ongoing
restructuring and reorganisation. We also wrote off (pound)4.1
million of deferred financing costs as a result of entering
into the new financing arrangements described below.
. Adjusted diluted earnings per share were 1.7p in First Quarter
2002 compared with 2.0p in First Quarter 2001.
. Net debt was (pound)376.1 million at the end of First Quarter
2002 compared to (pound)439.2 million at the end of First
Quarter 2001 and (pound)365.9 million at the end of the 2001
financial year.
. Rights issue and new financing arrangements announced to
provide a more appropriate long term capital structure.
As covered in a separate announcement, we have entered into new
financing arrangements, including a proposed three for five underwritten rights
issue and a five year committed senior credit facility of approximately
(pound)320 million (comprising a $370 million term loan and $85 million
revolving credit facility) and a (pound)150 million bridge loan facility. We
intend to repay the bridge loan with the net proceeds of the rights issue and
the net proceeds of a proposed issue of long term fixed rate notes. The long
term fixed rate notes will be offered to certain institutional investors. In
connection with the sale of the long term fixed rate notes, we expect to agree
to announce interim results on a quarterly basis and publicly file unaudited
financial information and an accompanying operating and financial review.
Assuming the notes are issued, we will adopt a policy of reporting our results
quarterly in the future.
Andrew Allner, CEO of Enodis, said:
"The Group's performance in the first quarter, in extremely difficult
market conditions, is encouraging and the Board's expectations for the full year
operating profits are as they were at the time of our November 2001
announcement. Our global food service equipment strategy is firmly on track and
we believe that the long term fundamentals of the industry remain attractive."
For further information please contact
Enodis plc
Andrew Allner Chief Executive Officer 020 7304 6006
Financial Dynamics
Richard Mountain/Andrew Lorenz 020 7269 7291
Operating Review--First Quarter 2002 Compared to First Quarter 2001
Turnover (Net Sales) from Continuing Operations
Turnover comprises gross sales to third parties, including shipping and
handling fees, less allowances for sales returns, rebates, discounts and other
items. Revenue is recognised upon shipment of goods to customers.
Turnover from continuing operations decreased by (pound)9.1 million, or
4.6%, to (pound)189.9 million in First Quarter 2002 from (pound)199.0 million in
First Quarter 2001. Our principal source of turnover consists of sales of food
service equipment, which comprised 75.4% of our turnover from continuing
operations in First Quarter 2002. Sales of food retail equipment comprised 24.6%
of our turnover from continuing operations. There were no sales of property
assets in either quarter.
Turnover in First Quarter 2002 benefited from approximately (pound)1.5
million of foreign exchange translation movements compared to First Quarter
2001.
Global Food Service Equipment. The following table provides a summary
of turnover from our global food service equipment group.
First Quarter 2002 Change
------------------ ------
First Quarter 2001
------------------
(in millions, except percentages)
North America.................................................. (Pounds)110.6 73.1% (Pounds)106.3 74.2% (Pounds)(4.3) (3.9)%
Europe & Rest of World......................................... 40.7 26.9% 36.9 25.8% (3.8) (9.3)%
------------- ------ ------------- ------ ------------- ------
Total Global Food Service Equipment............................ (Pounds)151.3 100.0% (Pounds)143.2 100.0% (Pounds)(8.1) (5.4)%
============= ====== ============= ====== ============= ======
Turnover decreased by (Pounds)8.1 million, or 5.4%, to (Pounds)143.2
million in First Quarter 2002 from (Pounds)151.3 million in First Quarter 2001.
Turnover in First Quarter 2002 benefited by (Pounds)1.2 million from foreign
exchange movements compared to First Quarter 2001.
Turnover from our North America operations decreased by (Pounds)4.3
million, or 3.9%, to (Pounds)106.3 million in First Quarter 2002 from
(Pounds)110.6 million in First Quarter 2001, as a result of the general
deterioration of the food service equipment market in North America. Whilst
sales in October and November held up relatively strongly, a decline in sales
was felt more acutely in December.
Turnover from Europe and the rest of the world decreased by (Pounds)3.8
million, or 9.3%, to (Pounds)36.9 million in the First Quarter 2002 from
(Pounds)40.7 million in First Quarter 2001. Excluding the effects of the
disposal of Sammic and other non-core businesses, the decrease was (Pounds)0.7
million, or 1.7%, which was due to a decrease in sales volume in a depressed
market.
Food Retail Equipment. Turnover decreased by (Pounds)1.0 million, or
2.1%, to (Pounds)46.7 million in First Quarter 2002 from (Pounds)47.7 million in
First Quarter 2001, due to a very difficult market for display cases and
refrigeration systems in North America. Turnover in First Quarter 2002 benefited
by (Pounds)0.3 million from foreign exchange movements compared to First Quarter
2001.
Property. There were no sales of property assets in either First
Quarter 2002 or First Quarter 2001. Future revenues from sales of 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. Property sales are expected to remain consistent with the prior
year for the upcoming year, with lower levels in future years.
Operating Profit from Continuing Operations before Goodwill Amortisation and
Exceptional Items
Operating profit from continuing operations before goodwill
amortisation and exceptional items represents turnover less operating costs.
Operating costs consist of cost of sales, administrative expenses, distribution
costs, and other operating expenses. Cost of sales includes raw material
components, direct labour costs, fixed and variable overhead costs, depreciation
and amortisation 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 buildings and
professional fees.
Operating profit from continuing operations before goodwill
amortisation and exceptional items decreased by (Pounds)1.6 million, to
(Pounds)12.1 million in First Quarter 2002 from (Pounds)13.7 million in First
Quarter 2001.
Operating profit from continuing operations before goodwill
amortisation and exceptional items in First Quarter 2002 has benefited by
approximately (Pounds)0.1 million as a result of foreign exchange translation
movements compared to First Quarter 2001.
Global Food Service Equipment. The following table sets out a summary
of our operating profit from continuing operations before goodwill amortisation
and exceptional items from our global food service equipment group.
First Quarter 2002 Change
------------------ ------
First Quarter 2001
------------------
(in millions, except percentages)
North America.................................................... (Pounds)10.1 75.9% (Pounds)9.8 78.4% (Pounds)(0.3) (3.0)%
Europe & Rest of World........................................... 3.2 24.1% 2.7 21.6% (0.5) (15.6)%
------------ ------ ------------ ------ ------------- -------
Total Global Food Service Equipment.............................. (Pounds)13.3 100.0% (Pounds)12.5 100.0% (Pounds)(0.8) (6.0)%
============ ====== ============ ====== ============= =======
Operating profit from continuing operations before goodwill amortisation and
exceptional items decreased by (Pounds)0.8 million, or
6.0%, to (Pounds)12.5 million in First Quarter 2002 from (Pounds)13.3 million in
First Quarter 2001. Operating profit from continuing operations before goodwill
amortisation and exceptional items benefited by (Pounds)0.1 million from foreign
exchange movements compared to First Quarter 2001.
Operating profit from continuing operations before goodwill
amortisation and exceptional items in North America decreased by (Pounds)0.3
million, or 3.0%, to (Pounds)9.8 million in First Quarter 2002 from (Pounds)10.1
million in First Quarter 2001. Operating profit from continuing operations
before goodwill amortisation and exceptional items as a percentage of turnover
from North America increased by 0.1 percentage points to 9.2% in First Quarter
2002 from 9.1% in First Quarter 2001. The fall in operating profit from
continuing operations before goodwill amortisation and exceptional items
reflected lower sales volumes. The expected decline in gross margin has been
partially offset by the effect of the cost savings programme enacted in the
second half of the 2001 financial year.
Operating profit from continuing operations before goodwill
amortisation and exceptional items in Europe and the rest of the world decreased
by (Pounds)0.5 million, or 15.6%, to (Pounds)2.7 million in First Quarter 2002
from (Pounds)3.2 million in First Quarter 2001. Excluding the effects of the
disposal of Sammic and other non-core businesses, the decrease was (Pounds)0.2
million, or 6.3%. Operating profit from continuing operations before goodwill
amortisation and exceptional items as a percentage of net sales from Europe and
the rest of the world decreased by 0.6 percentage points to 7.3% in First
Quarter 2002 from 7.9% in First Quarter 2001. The expected fall in operating
profit from continuing operations before goodwill amortisation and exceptional
items arising from reduced sales volume and a different product mix compared to
the First Quarter 2001 has been offset in part by the effect of the cost savings
programme enacted in the second half of the 2001 financial year and First
Quarter 2002.
Food Retail Equipment. Operating profit from continuing operations
before goodwill amortisation and exceptional items decreased by (Pounds)0.7
million, or 29.2%, to (Pounds)1.7 million in First Quarter 2002 from (Pounds)2.4
million in First Quarter 2001. Operating profit from continuing operations
before goodwill amortisation and exceptional items in First Quarter 2002
benefited by (Pounds)12,000 gain from positive foreign exchange movements
compared to First Quarter 2001. Operating profit from continuing operations
before goodwill amortisation and exceptional items as a percentage of net sales
decreased by 1.4 percentage points to 3.6% in First Quarter 2002 from 5.0% in
First Quarter 2001. The decrease in operating profit from continuing operations
before goodwill amortisation and exceptional items principally reflected reduced
sales of refrigeration systems and display cases by Kysor Warren, offset in part
by stronger performance in refrigerated panels and walk-in freezers and coolers
sold by Kysor Panel Systems. The decline in gross margin was partially offset by
the effect of the cost savings programme enacted in the second half of the 2001
financial year and in First Quarter 2002.
Goodwill Amortisation
Amortisation and impairment of goodwill from continuing operations
decreased by (Pounds)0.4 million due to the effect of the (Pounds)100 million
impairment in the value of the Group's goodwill booked in September 2001, offset
in part by the full quarter effect of the amortisation of goodwill arising from
the Jackson acquisition in November 2000.
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 the 2001 financial year,
Kysor Warren has operated at a profit (exclusive of exceptional costs and
amortisation). However, Kysor Warren, along with its competitors, has been
adversely impacted by difficult market conditions. The unaudited results of this
operation for First Quarter 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 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 at 29
December 2001 the carrying value of goodwill relating to Kysor Warren was
approximately (Pounds)50 million.
Operating Exceptional Items
Exceptional operating charges from continuing operations totalled
(Pounds)2.4 million for First Quarter 2002, resulting from the continued
rationalisation of administration functions and simplifying management
structures. These items relate principally to costs of redundancy in our food
retail equipment group and the European businesses within the global food
service equipment group.
Profit on Disposal of Businesses and Other Assets
The profit on disposal of businesses in First Quarter 2002 amounted to
(Pounds)2.7 million, due to the sale of Sammic for consideration of (Pounds)20
million.
Net Interest Payable and Similar Charges
Net interest payable and similar charges increased by (Pounds)1.1
million, or 11.0%, to (Pounds)11.1 million in First Quarter 2002 from
(Pounds)10.0 million in First Quarter 2001. Primarily, the increase was due to
the write off of (Pounds)4.1 million in unamortised financing costs related to
our previous multi-currency facility entered into in March 2001, which has been
replaced with the new senior secured credit facility and
bridge facility signed on 20 February 2002. Excluding this charge, net interest
expense decreased by (Pounds)3.0 million, or 30.0% to (Pounds)7.0 million in
First Quarter 2002 from (Pounds)10.0 million in First Quarter 2001, reflecting
lower average principal outstanding and interest rates.
Tax on Profit/(Loss) on Ordinary Activities.
Tax on profit/(loss) on ordinary activities decreased by (Pounds)0.7
million, or 53.8%, to (Pounds)0.6 million in First Quarter 2002 from (Pounds)1.3
million in First Quarter 2001. There was no material change in deferred tax
balances in First Quarter 2002, as compared to movements in First Quarter 2001
when there was a net utilisation of deferred tax assets. The effective rate of
current tax remained constant at approximately 14%, in both periods.
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
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.
On implementation of FRS 19, all prior period results should be adjusted as
though FRS 19 had been applied throughout the relevant period. Accordingly,
results for the 2001 financial year have been restated, recognising a deferred
tax asset of (Pounds)26.9 million at 29 September 2001, principally relating to
timing differences on tax losses and warranty reserves.
Operating Profit from Discontinued Operations
There was no net profit from discontinued operations for First Quarter
2002 compared to the First Quarter 2001, which included (Pounds)2.5 million from
the building and consumer products business which was sold in June 2001.
Debt and Liquidity
Net debt at the end of First Quarter 2002 was (Pounds)376.1 million,
compared to (Pounds)365.9 million at the end of the 2001 financial year and
(Pounds)439.2 million at the end of First Quarter 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 (Pounds)20 million from the disposal of Sammic. The overall decrease
from First Quarter 2001 reflects the efforts made over the last year in reducing
debt. The following table summarises the movements in net debt from 29 September
2001 to 29 December 2001.
(in millions)
Net debt at 29 September 2001................................................................................ (Pounds)(365.9)
Global FSE operating cash flow............................................................................... 15.4
FRE operating cash flow...................................................................................... (8.1)
Corporate/Property operating cash flow....................................................................... (7.7)
Interest expense............................................................................................. (5.7)
Tax.......................................................................................................... (1.6)
Exceptional items............................................................................................ (11.2)
Disposal of businesses....................................................................................... 16.6
Foreign Exchange............................................................................................. (7.9)
---------------
Net debt at 29 December 2001................................................................................. (Pounds)(376.1)
===============
As also announced today, we have entered into new financing
arrangements, including a three for five underwritten rights issue, a committed
senior credit facility of $455 million (comprised of a $370 million term loan
and a $85 million revolving credit facility) and a (Pounds)150 million bridge
loan facility. We intend to repay the bridge loan with the net proceeds of the
rights issue and the net proceeds of a proposed issue of long term, fixed rate
notes. As at 29 December 2001, all borrowings have been reclassified as short
term, giving the Group net current liabilities at that date. The new financing
arrangements (including the proposed long term fixed rate note issue), will
provide the Group with long term financing, with the result that we expect the
balance sheet will reflect a net current asset position when the new financing
arrangements are completed.
Outlook
The results for the first quarter of the financial year ending 28
September 2002 reflect the more difficult trading conditions in our key markets,
partly offset by the benefits of the cost reduction actions that we have
previously announced. Food equipment operating profit before exceptional items
and goodwill amortisation was (Pounds)14.2 million compared to (Pounds)15.7
million for the first quarter of the previous financial year. This was in line
with our expectations at the time of the preliminary announcement of the results
made in November 2001.
As we indicated in our preliminary results announcement, we expected a
further significant decline in the food service equipment markets, especially in
North America. Whilst sales held up relatively well in October and November, a
further decline in sales became apparent in December. As previously anticipated,
this decline is therefore expected to have a greater impact on our results for
the second quarter of the financial year ending 28 September 2002 as compared to
the first quarter.
The duration of this difficult climate cannot be predicted, but the
Board has based its plans on the assumption that it will continue at least
through to the end of the current financial year. As previously announced, the
Board is addressing the situation by taking action to reduce costs further,
targeting further cost savings of some (Pounds)10 million for the current
financial year through strategic headcount reductions, discretionary cost
savings, leveraging purchasing power and ongoing manufacturing restructuring.
These cost savings are in addition to the full year benefits of fixed and
headcount cost savings implemented in the second half of the financial year
ended 29 September 2001. The Group estimates exceptional costs of some (Pounds)6
million in the financial year ending 28 September 2002 relating to these
actions.
The Group is also pursuing market share gain opportunities to improve
top line performance. The directors believe that the Group's scale, broad
product range, technology, and industry relationships position the Group well to
achieve this.
The Board believes that, despite the severe decline in the Group's end
markets brought about by the current adverse economic circumstances, the long
term characteristics of the food service equipment industry remain attractive.
Management results for January 2002 are slightly ahead of our
expectations at the time of the Annual General Meeting, and our expectations for
the full year operating profits remain unchanged from the time of our
preliminary results announcement in November. Compared to the first half of the
current financial year, results for the second half are expected to benefit from
seasonality and management actions including cost savings, market share gain
initiatives and new product development.
Dividend Policy
In light of the downturn in the Group's end markets, and uncertain
economic conditions, the 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 29 September 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 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 Group results. However, as a result of the losses
recognised on this transfer, the Company does not currently have sufficient
distributable reserves to lawfully make dividend payments.
As and when the Board determines to resume dividend payments, the
Company will seek to take the steps necessary to enable it to increase its
distributable reserves so that it is able to lawfully pay dividends. Any such
action is likely to require the approval of Shareholders and the High Court. In
addition, the Company's ability to make future dividend payments will depend on
its profit and cash flow performance and the need to comply with the terms of
the new credit facilities and the proposed notes.
Group profit and loss account
13 weeks to 29 December 2001 52 weeks to 29 September 2001
---------------------------- -----------------------------
Before Exceptional 13 weeks to Before Exceptional
exceptional items 30 December exceptional items
Notes items (note 4) Total 2000 items (note 4) Total
----- ----- -------- ----- ---- ----- -------- -----
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Restated) (Restated) (Restated)
(amounts in millions)
Turnover
Food Equipment........... (Pounds)189.9 -- (Pounds)189.9 (Pounds)199.0 (Pounds)887.2 -- (Pounds)887.2
Property................. -- -- -- -- 16.6 -- 16.6
------------- ----------- ------------- ------------- ------------- ------------ -------------
Continuing operations....... 2 189.9 -- 189.9 199.0 903.8 -- 903.8
Discontinued operations..... -- -- -- 61.3 177.3 -- 177.3
------------ ------------ ------------ ------------ ------------ -------------- --------------
189.9 -- 189.9 260.3 1,081.1 -- 1,081.1
------------ ------------ ------------ ------------ ------------ -------------- --------------
Profit from operations
Food Equipment.............. 14.2 (2.4) 11.8 15.7 90.7 (43.4) 47.3
Property.................... -- -- -- -- 9.0 -- 9.0
Corporate costs............. (2.1) -- (2.1) (2.0) (8.9) (24.1) (33.0)
------------ ------------ ------------ ------------ ------------ -------------- --------------
Continuing operations....... 12.1 (2.4) 9.7 13.7 90.8 (67.5) 23.3
Discontinued operations..... -- -- -- 2.5 9.1 -- 9.1
------------ ------------ ------------ ------------ ------------ -------------- --------------
12.1 (2.4) 9.7 16.2 99.9 (67.5) 32.4
Goodwill
amortisation/impairment.. (5.0) -- (5.0) (5.4) (23.0) (100.0) (123.0)
------------ ------------ ------------ ------------ ------------ -------------- --------------
Operating profit/(loss)..... 3 7.1 (2.4) 4.7 10.8 76.9 (167.5) (90.6)
Profit on disposal of
businesses............... -- 2.7 2.7 -- -- 23.5 23.5
Net interest payable and
similar charges.......... (7.0) (4.1) (11.1) (10.0) (36.1) (5.8) (41.9)
------------ ------------ ------------ ------------ ------------ -------------- --------------
Profit/(loss) on ordinary
activities before
taxation................. 0.1 (3.8) (3.7) 0.8 40.8 (149.8) (109.0)
Tax on profit/(loss) on
ordinary activities...... 5 (0.6) -- (0.6) (1.3) (13.4) 2.0 (11.4)
------------ ------------ ------------ ------------ ------------ -------------- --------------
Profit/(loss) on ordinary
activities after
taxation................. (0.5) (3.8) (4.3) (0.5) 27.4 (147.8) (120.4)
Equity minority interest.... (0.1) -- (0.1) -- (0.3) -- (0.3)
------------ ------------ ------------ ------------ ------------ -------------- --------------
Profit/(loss) for the
period................... (0.6) (3.8) (4.4) (0.5) 27.1 (147.8) (120.7)
Equity dividends............ 6 -- -- -- -- (4.8) -- (4.8)
------------ ------------ ------------ ------------ ------------ -------------- --------------
Retained profit/(loss)...... (Pounds)(0.6) (Pounds)(3.8) (Pounds)(4.4) (Pounds)(0.5) (Pounds)22.3 (Pounds)(147.8) (Pounds)(125.5)
============ ============ ============ ============ ============ ============== ==============
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
Notes 2001 2000 2001
----- ---- ---- ----
(Unaudited) (Unaudited) (Restated)
Earnings/(loss) per share
Basic loss per share.............................................. 7 (1.8)p (0.2)p (48.5)p
Adjusted basic earnings per share................................. 7 1.7 p 2.0 p 20.1 p
Diluted loss per share............................................ 7 (1.8)p (0.2)p (48.4)p
Adjusted diluted earnings per share............................... 7 1.7 p 2.0 p 20.1 p
Statement of total recognised gains and losses
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
Notes 2001 2000 2001
----- ---- ---- ----
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
Loss for the period................................................... (Pounds)(4.4) (Pounds)(0.5) (Pounds)(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 (1.1) 1.8 (1.7)
------------ ------------ --------------
Total recognised gains and losses in the period....................... (Pounds)4.9 (Pounds)1.3 (Pounds)(126.8)
============ ============ ==============
Group balance sheet
29 December 30 December 29 September
Notes 2001 2000 2001
----- ---- ---- ----
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
Fixed assets
Intangible assets: goodwill....................................... (Pounds)310.9 (Pounds)421.4 (Pounds)310.2
Tangible assets................................................... 108.7 170.3 111.4
Investments....................................................... 6.9 8.6 6.2
------------- ------------- -------------
426.5 600.3 427.8
------------- ------------- -------------
Current assets
Stocks............................................................ 8 105.4 166.1 105.6
Debtors........................................................... 184.6 192.2 200.7
Deferred tax...................................................... 27.0 31.3 26.9
Cash at bank and in hand.......................................... 9 26.9 41.9 39.4
------------- ------------- -------------
343.9 431.5 372.6
------------- ------------- -------------
Creditors falling due within one year
Borrowings........................................................ 9 (388.5) (93.7) (2.4)
Other creditors................................................... (189.3) (263.3) (225.1)
------------- ------------- -------------
Net current assets/(liabilities).................................. (233.9) 74.5 145.1
------------- ------------- -------------
Total assets less current liabilities............................. (Pounds)192.6 (Pounds)674.8 (Pounds)572.9
------------- ------------- -------------
Financed by:
Creditors falling due after more than one year
Borrowings........................................................ 9 (Pounds)14.5 (Pounds)382.2 (Pounds)398.9
Provisions for liabilities and charges............................ 58.2 44.4 59.1
------------- ------------- -------------
72.7 426.6 458.0
------------- ------------- -------------
Capital and reserves
Called up share capital........................................... 125.1 125.0 125.1
Share premium account............................................. 239.0 238.9 239.0
Profit and loss account........................................... (245.1) (116.8) (250.0)
------------- ------------- -------------
Equity shareholders' funds........................................ 10 119.0 247.1 114.1
------------- ------------- -------------
Equity minority interests......................................... 0.9 1.1 0.8
------------- ------------- -------------
(Pounds)192.6 (Pounds)674.8 (Pounds)572.9
============= ============= =============
Group cash flow statement
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
Notes 2001 2000 2001
----- ---- ---- ----
(Unaudited) (Unaudited)
(amounts in millions)
Net cash flow from operations before exceptional items............ (Pounds)2.3 (Pounds)31.4 (Pounds)120.8
Net cash flow effect of exceptional items......................... (11.2) -- (27.8)
------------- ------------ -------------
Net cash inflow/(outflow) from operating activities............... (8.9) 31.4 93.0
------------- ------------ -------------
Return on investments and servicing of finance
Interest paid..................................................... (5.7) (10.2) (40.9)
------------- ------------ -------------
Taxation
Overseas and U.K. tax paid........................................ (1.6) (1.6) (6.0)
------------- ------------ -------------
Capital expenditure and financial investment
Payments to acquire tangible fixed assets......................... (2.8) (2.9) (23.7)
Receipts from sale of tangible fixed assets....................... 0.1 0.1 7.4
------------- ------------ -------------
(2.7) (2.8) (16.3)
------------- ------------ -------------
Acquisitions and disposals
Purchase of subsidiary undertakings and minority interests........ -- (24.7) (25.8)
Disposal of subsidiary undertakings............................... 4 16.6 -- 98.6
------------- ------------ -------------
16.6 (24.7) 72.8
------------- ------------ -------------
Equity dividends paid............................................. -- -- (28.2)
------------- ------------ -------------
Cash inflow/(outflow) before financing............................ (2.3) (7.9) 74.4
------------- ------------ -------------
Financing
Issue of shares................................................... -- -- 0.2
Additional net borrowings......................................... -- -- 398.3
Term loan repayment............................................... -- -- (385.7)
Repayment of other loans.......................................... (10.1) 16.3 (72.8)
Capital element of finance lease payments......................... (0.1) (0.1) (0.6)
------------- ------------ -------------
(10.2) 16.2 (60.6)
------------- ------------ -------------
Increase/(decrease) in cash in the period......................... (Pounds)(12.5) (Pounds)8.3 (Pounds)13.8
============= ============ =============
Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from
operating activities
13 weeks to 29 December 2001 52 weeks to 29 September 2001
---------------------------- -----------------------------
Before Effect of 13 weeks to Before Effect of
exceptional Exceptional 30 December exceptional exceptional
items items Total 2000 items items Total
----- ----- ----- ---- ----- ----- -----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(amounts in millions)
Operating profit/(loss)....... (Pounds)7.1 (Pounds)(2.4) (Pounds)4.7 (Pounds)10.8 (Pounds)76.9(Pounds)(167.5)(Pounds)(90.6)
Depreciation.................. 4.5 -- 4.5 6.3 22.7 -- 22.7
Amortisation of goodwill...... 5.0 -- 5.0 5.4 23.0 100.0 123.0
Gain on sale of tangible
fixed assets............... -- -- -- -- (1.7) -- (1.7)
Provisions (net).............. (0.3) (1.2) (1.5) (1.0) (6.0) 16.5 10.5
(Increase)/decrease in stock.. (1.2) -- (1.2) (8.4) 12.1 0.5 12.6
Decrease in debtors......... 16.9 -- 16.9 33.3 10.7 -- 10.7
(Decrease)/increase in
creditors................ (29.7) (7.6) (37.3) (15.0) (16.9) 22.7 5.8
----------- ------------- ------------ ------------ ------------- ------------- ------------
Net cash inflow/(outflow)
from operating activities (Pounds)2.3 (Pounds)(11.2) (Pounds)(8.9) (Pounds)31.4 (Pounds)120.8 (Pounds)(27.8)(Pounds)93.0
=========== ============= ============ ============ ============= ============= ============
Notes to the quarterly financial statements
1 Basis of Preparation
The accompanying condensed financial statements ("quarterly 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
13 weeks ended 29 December 2001 may not necessarily be indicative of the
operating results that may be incurred for the entire fiscal year.
The quarterly financial information has been prepared on the basis of
the accounting policies set out in the Group's financial statements for the year
ended 29 September 2001, with the exception that the results reflect the
adoption of FRS 19 "Deferred Tax" and the 29 September 2001 comparative figures
have been restated accordingly.
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 summarised in Note 14 to
the quarterly financial statements.
These quarterly financial statements should be read in conjunction with
the consolidated balance sheets of Enodis plc and its subsidiaries as of 29
September 2001 and 30 September 2000, and the related consolidated statements of
profit and loss account, cash flows, recognised gains and losses and movement in
equity shareholders' funds for each of the three years in the period ended 29
September 2001, all expressed in British pounds, as filed with the U.S.
Securities and Exchange Commission on Form 20-F.
2 Turnover
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
---- ---- ----
(Unaudited) (Unaudited)
(amounts in millions)
Food Service Equipment--North America........................................ (Pounds)106.3 (Pounds)110.6 (Pounds)498.7
Food Service Equipment--Europe and Rest of the World......................... 36.9 40.7 185.4
Food Retail Equipment....................................................... 46.7 47.7 203.1
------------- ------------- ---------------
Food Equipment.............................................................. 189.9 199.0 887.2
Property.................................................................... -- -- 16.6
------------- ------------- ---------------
Continuing operations....................................................... 189.9 199.0 903.8
Discontinued operations..................................................... -- 61.3 177.3
------------- ------------- ---------------
(Pounds)189.9 (Pounds)260.3 (Pounds)1,081.1
============= ============= ===============
In the 13 weeks to 29 December 2001, group turnover has benefited from
favourable exchange rates by approximately (pound)1.5 million compared to the 13
weeks to 30 December 2000.
Turnover from discontinued operations represents the building and
consumer products business sold in June 2001.
3 Operating profit/(loss)
13 weeks to 29 December 2001 52 weeks to 29 September 2001
---------------------------- -----------------------------
Before 13 weeks to Before
exceptional Exceptional 30 December exceptional Exceptional
items items Total 2000 items items Total
----- ----- ----- ---- ----- ----- -----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(amounts in millions)
Food Service Equipment--North
America.................. (Pounds)9.8 (Pounds)-- (Pounds)9.8 (Pounds)10.1 (Pounds)62.6 (Pounds)(25.6) (Pounds)37.0
Food Service Equipment--Europe
and Rest of the World.... 2.7 (1.3) 1.4 3.2 17.7 (5.2) 12.5
Food Retail Equipment....... 1.7 (1.1) 0.6 2.4 10.4 (12.6) (2.2)
----------- ------------ ------------ ------------ ------------- -------------- -------------
14.2 (2.4) 11.8 15.7 90.7 (43.4) 47.3
Food Equipment goodwill
amortisation/impairment.. (5.0) -- (5.0) (5.4) (23.0) (100.0) (123.0)
----------- ------------ ------------ ------------ ------------- -------------- -------------
Food Equipment.............. 9.2 (2.4) 6.8 10.3 67.7 (143.4) (75.7)
Property.................... -- -- -- -- 9.0 -- 9.0
Corporate costs............. (2.1) -- (2.1) (2.0) (8.9) (24.1) (33.0)
----------- ------------ ------------ ------------ ------------- -------------- -------------
Continuing operations....... 7.1 (2.4) 4.7 8.3 67.8 (167.5) (99.7)
Discontinued operations..... -- -- -- 2.5 9.1 -- 9.1
----------- ------------ ------------ ------------ ------------- -------------- -------------
(Pounds)7.1 (Pounds)(2.4) (Pounds)4.7 (Pounds)10.8 (Pounds)76.9 (Pounds)(167.5) (Pounds)(90.6)
=========== ============ ============ ============ ============= ============== =============
In the 13 weeks to 29 December 2001, Group operating profit has
benefited from favourable exchange rates by (pound)0.1 million compared to the
13 weeks to 30 December 2000.
Operating profit from discontinued operations represents the building
and consumer products business sold in June 2001.
4 Exceptional items
(a) Operating exceptional items
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
---- ---- ----
(Unaudited) (Unaudited)
(amounts in millions)
Restructuring costs......................................................... (Pounds)2.4 (Pounds)-- (Pounds)33.1
Revisions to working capital provisions and other exceptional warranty costs -- -- 13.7
Litigation costs............................................................ -- -- 12.2
Costs associated with the Board's review of strategic options............... -- -- 8.5
----------- ---------- ------------
2.4 -- 67.5
Goodwill impairment......................................................... -- -- 100.0
----------- ---------- -------------
Operating exceptional items................................................. (Pounds)2.4 (Pounds)-- (Pounds)167.5
=========== ========== =============
Restructuring costs in the 13 weeks to 29 December 2001 principally
represent costs associated with rationalising 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 13 December 2001, the Group disposed of Sammic SA and its subsidiary
undertakings for consideration of (Pounds)20 million realising a provisional
profit on disposal of (Pounds)2.7 million after costs. The net cash proceeds of
(Pounds)18.7 million have been used to repay debt.
During the period, (Pounds)2.1 million was paid to Nobia AB, the
acquirers of the building and consumer products business in respect of the value
of net assets transferred.
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
---- ---- ----
(Unaudited) (Unaudited)
(amounts in millions)
Net cash flow from the disposal of Sammic SA................................ (Pounds)18.7 (Pounds)-- (Pounds) --
(Payment to Nobia AB)/net cash flow from the disposal of Magnet............. (2.1) -- 98.6
------------ ---------- ------------
Net cash flow from disposals................................................ (Pounds)16.6 (Pounds)-- (Pounds)98.6
============ ========== ============
(c) Net interest payable and similar charges
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
---- ---- ----
(Unaudited) (Unaudited)
(amounts in millions)
Deferred financing fees written off......................................... (Pounds)4.1 (Pounds)-- (Pounds)5.8
============ ========== ============
5 Taxation
(a) Analysis of charge in period
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
---- ---- ----
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
The tax charge comprised:
U.K. taxation at 30%........................................................ Pounds)-- (Pounds)-- (Pounds)--
Foreign taxation............................................................ 0.7 0.8 8.6
----------- ----------- ------------
0.7 0.8 8.6
Tax relief on exceptional items............................................. -- -- (2.0)
----------- ----------- ------------
0.7 0.8 6.6
Deferred taxation--origination and reversal of timing differences............ (0.1) 0.5 4.8
----------- ----------- ------------
(Pounds)0.6 (Pounds)1.3 (Pounds)11.4
=========== =========== =============
(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.
29 September
2001(Restated)(amounts
----
in millions)
Deferred tax provision as previously reported.............................................................. (Pounds)--
Adjustment to recognise deferred tax in respect of timing differences...................................... 26.9
-------------
Deferred tax asset as restated............................................................................. (Pounds)26.9
=============
(d) Analysis of deferred tax asset
29 December 30 December 29 September
2001 2000 2001
---- ---- ----
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
U.S. Revenue Losses......................................................... (Pounds)13.0 (Pounds)14.4 (Pounds)12.7
Warranties.................................................................. 8.2 8.2 8.2
Pension and SERP related reserves........................................... 4.1 3.2 4.0
Accrued compensation related items.......................................... 3.2 0.3 3.2
6.6 14.8 6.8
------------ ------------ -------------
Other short term timing differences......................................... 35.1 40.9 34.9
Accelerated capital allowances.............................................. (8.1) (9.6) (8.0)
------------ ------------ -------------
(Pounds)27.0 (Pounds)31.3 (Pounds)26.9
============ ============ =============
A deferred tax asset has only been recognised in respect of those
losses where there is sufficient certainty that they will be utilised within the
immediate future.
6 Equity dividends
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
---- ---- ----
(Unaudited) (Unaudited)
(amounts in millions)
Interim and final dividend ........................................ (Pounds)-- (Pounds)-- (Pounds)4.8
========== ========== ===========
Interim and final dividend (net per ordinary share) ............... --p --p 2.0p
========== ========== ===========
7 Earnings/(loss) per share
13 weeks to 13 weeks to 52 weeks to
29 December 30 December 29 September
2001 2000 2001
---- ---- ----
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
Basic and diluted loss attributable to shareholders ............... (Pounds)(4.4) (Pounds)(0.5) (Pounds)(120.7)
=========== =========== =============
Basic weighted average number of shares ........................... 249.0 248.8 248.9
Employee share options ............................................ -- 0.5 0.1
Share save ........................................................ -- 0.4 0.2
---------- ---------- ===========
Diluted weighted average number of shares ......................... 249.0 249.7 249.2
========== ========== ===========
Basic loss per share .............................................. (1.8)p (0.2)p (48.5)p
Effect per share of exceptional items ............................. 1.5p --p 19.2p
Effect per share of goodwill amortisation and impairment .......... 2.0p 2.2p 49.4p
---------- ---------- -----------
Adjusted basic earnings per share ................................. 1.7p 2.0p 20.1p
---------- ---------- -----------
Diluted loss per share ............................................ (1.8)p (0.2)p (48.4)p
Effect per share of exceptional items ............................. 1.5p --p 19.2p
Effect per share of goodwill amortisation and impairment .......... 2.0p 2.2p 49.3p
---------- ---------- -----------
Adjusted diluted earnings per share ............................... 1.7p 2.0p 20.1p
========== ========== ===========
8 Stocks
29 December 30 December 29 September
2001 2000 2001
---- ---- ----
(Unaudited) (Unaudited)
(amounts in millions)
Raw materials and consumables ..................................... (Pounds)40.6 (Pounds)54.5 (Pounds)42.2
Work in progress .................................................. 14.6 16.9 15.7
Finished goods .................................................... 37.7 83.8 36.4
---------- ---------- -----------
92.9 155.2 94.3
Property..................................................... 12.5 10.9 11.3
------------- ------------- -------------
(Pounds)105.4 (Pounds)166.1 (Pounds)105.6
============= ============= =============
9 Borrowings
(a) On 20 February 2002, the Group announced new financing arrangements
including a proposed three for five underwritten rights issue, to
refinance the existing revolving multi-currency loan facility that
commenced on 12 March 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 (Pounds)150 million to
be repaid from the proceeds of the proposed rights issue 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.
(b) Reconciliation of net debt to Balance Sheet
29 December 30 December 29 September
2001 2000 2001
---- ---- ----
(Unaudited) (Unaudited)
(amounts in millions)
Cash at bank................................................. (Pounds)26.9 (Pounds)41.9 (Pounds)39.4
Current borrowing............................................ (388.5) (93.7) (2.4)
Exclude current portion of deferred financing costs.......... -- (1.3) (1.1)
------------- ------------- -------------
Current net cash/(borrowings)................................ (361.6) (53.1) 35.9
------------- ------------- -------------
Long term lease obligations.................................. (0.3) (0.3) (1.2)
Long term debt............................................... (14.2) (381.9) (397.7)
Exclude long term portion of deferred finance................ -- (3.9) (2.9)
------------- ------------- -------------
Net debt at end of period.................................... (Pounds)(376.1) (Pounds)(439.2) (Pounds)(365.9)
============= ============= =============
10 Equity shareholders' funds
(a) Following the implementation of FRS 19 (note 5), equity shareholders'
funds at 29 September 2001 have been restated as follows:
29 September
2001
----
(Restated)
(amounts in millions)
Equity shareholders' funds as previously reported......................................... (Pounds)87.2
Cumulative effect on profit and loss account reserve of implementing FRS 19............... 26.9
-------------
Equity shareholders' funds as restated.................................................... (Pounds)114.1
=============
(b) Movements on reserves during the period were as follows:
Share Share
capital premium Profit and loss Total
------- ------- --------------- -----
(amounts in millions)
At 29 September 2001 (Restated)............................. (Pounds)125.1 (Pounds)239.0 (Pounds)(250.0) (Pounds)114.1
Loss for the period......................................... -- -- (4.4) (4.4)
Goodwill written back on disposals previously written off... -- -- 10.4 10.4
Currency realignment........................................ -- -- (1.1) (1.1)
------------- ------------- --------------- --------------
At 29 December 2001......................................... (Pounds)125.1 (Pounds)239.0 (Pounds)(245.1) (Pounds)119.0
============= ============= =============== ==============
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 13 weeks to 29 December 2001, the weighted average exchange rate
for sales and profit being (Pounds)1 = $1.45. Results to 30 December 2000 were
translated at the rate of (Pounds)1 = $1.46 and full year results to 29
September 2001 at (Pounds)1 = $1.44. The closing rate for the U.S. dollar at 29
December 2001 was (Pounds)1 = $1.45, at 30 December 2000 was (Pounds)1 = $1.49
and at 29 September 2001 was (Pounds)1 = $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 29 September 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 29 September 2001 have been restated to reflect the adoption of
FRS 19 "Deferred tax". The figures for the 13 week periods to 29 December 2001
and 30 December 2000 have been extracted from underlying accounting records and
have not been audited.
13 Events occurring after the end of the financial period
We have entered into new financing arrangements, and have announced a
three for five underwritten rights issue and a proposed offering of (Pounds)100
million of long term fixed rate notes. The new financing arrangements include a
bridge facility of (Pounds)150 million, and a committed facility of $455 million
(comprised of a $370 million term loan and a $85 million revolving credit
facility). As a result of the new financing arrangements, we have written off
the deferred financing costs of (Pounds)4.1 million (note 4) relating to the
previous multi-currency loan facility. The net proceeds of the rights issue and
the issue of long term notes will be used to repay the bridge facility. The long
term fixed rate notes will be offered to institutional investors and it is a
requirement of this market that we present quarterly financial statements along
with a review of operating results consistent with those traditionally seen in
the United States. We intend to continue this practice for future quarters.
14 U.S. GAAP reconciliation
29 December 30 December 29 September
2001 2000 2001
---- ---- ----
(Unaudited) (Unaudited) (Restated)
(amounts in millions)
Net Loss
Net loss in accordance with U.K. GAAP....................................... (Pounds)(4.4) (Pounds)(0.5) (Pounds)(120.7)
Items (increasing)/decreasing operating loss under U.K. GAAP
--Goodwill amortisation...................................................... (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....................................... (Pounds)(9.5) (Pounds)(4.4) (Pounds)(113.7)
============= ============= ===============
Under U.K. GAAP, approximately (Pounds)385 million of borrowings have
been classified as falling due within one year at 29 December 2001 as such
borrowings were repayable within 12 months from 29 December 2001. Under U.S.
GAAP, (pound)385 million would be classified as long term as such borrowings
have been refinanced on a long term basis subsequent to 29 December 2001, but
prior to issuing these financial statements. "
PART V: UNAUDITED PRO FORMA STATEMENT OF NET ASSETS
Unaudited Pro Forma Statement of Net Assets of the Group
The unaudited pro forma statement of net assets of the Group set out
below has been prepared to illustrate the effect of the Rights Issue and the New
Credit Facilities on the net assets of Enodis as if it had occurred on 29
December 2001. For a description of the use of the proceeds of the Rights Issue,
see Part I.
The pro forma statement is for illustrative purposes only and, because
of its nature, may not give a true picture of the financial position or results
of the Group following completion of the Rights Issue and the agreement of the
New Credit Facilities. The pro forma statement has been prepared on the basis
set out in the notes below:
Enodis Adjustment Pro Forma
29 December 2001 (notes 2 Adjustment Enodis
----------
(note 1) and 5) (note 3) 29 December 2001
-------- ------ -------- ----------------
(amounts in millions)
Fixed Assets
Intangible assets: Goodwill................................. 310.9 -- -- 310.9
Tangible assets............................................. 108.7 -- -- 108.7
Investments................................................. 6.9 -- -- 6.9
-------- -------- -------- --------
426.5 -- -- 426.5
-------- -------- -------- --------
Current Assets
Stocks...................................................... 105.4 -- -- 105.4
Debtors..................................................... 184.6 -- -- 184.6
Deferred tax asset.......................................... 27.0 -- -- 27.0
Cash at Bank and in hand.................................... 26.9 -- -- 26.9
-------- -------- -------- --------
343.9 -- -- 343.9
-------- -------- -------- --------
Creditors Falling Due Within One Year
Borrowings.................................................. (388.5) 316.0 71.5 (1.0)
Other creditors............................................. (189.3) -- -- (189.3)
-------- -------- -------- --------
(577.8) 316.0 71.5 (190.3)
-------- -------- -------- --------
Net Current Assets/(Liabilities)............................ (233.9) 316.0 71.5 153.6
-------- -------- -------- --------
Total assets less current liabilities....................... 192.6 316.0 71.5 580.1
-------- -------- -------- --------
Creditors Falling Due After More than One Year
Borrowings.................................................. (14.5) (318.5) -- (333.0)
Provisions for Liabilities and Charges...................... (58.2) -- -- (58.2)
-------- -------- -------- --------
(72.7) (318.5) -- (391.2)
-------- -------- -------- --------
Net assets.................................................. 119.9 (2.5) 71.5 188.9
======== ========= ========= ========
Note 1 The net assets of Enodis have been extracted without material adjustment
from the balance sheet as set out in the unaudited financial
statements for Enodis for the 13 week period ended 29 December 2001.
Note 2 For the purposes of the pro forma, proceeds from the New Credit
Facilities will be used to replace the outstanding amounts due under
the previous facilities as at 29 December 2001 of (Pounds)385.1
million. The costs relating to the New Credit Facilities, including
the termination of the previous facilities (Pounds)2.5 million), are
estimated to be approximately (Pounds)10 .5 million. The cost of
terminating the previous facilities is written off upon termination of
these facilities and the balance of the costs relating to the New
Credit Facilities will be capitalised and amortised over the life of
the related debt.
Note 3 The proceeds of the proposed rights issue of(PoundS)75.1 million, less
estimated expenses of(Pounds)3.6 million ,will be used to repay part
of Enodis New Credit Facilities.
Note 4 Save as described above, no adjustments have been made to reflect the
trading or other transactions of the Group subsequent to 29 December
2001.
Note 5 The New Credit Facilities consist of the senior secured facility of
$455 million (approximately (Pounds)320 million) and the bridge loan
facility of (Pounds)150 million. The senior secured facility consists
of a $370 million term loan and a $85 million revolving credit
facility, translated at an estimated exchange rate of
(Pounds)1:$1.4218, as of 19 February 2002.
The following text is the report on Pro Forma Net Asset Statement by Deloitte &
Touche
Deloitte & Touche
Hill House
1 Little New Street
London EC4A 3TR
The Directors
Enodis plc
40-41 Conduit Street
London W1S 2YQ
Credit Suisse First Boston (Europe) Limited
One Cabot Square
London E14 4QJ
21 February 2002
Dear Sirs
Enodis plc
We report on the unaudited pro forma statement of net assets ("the pro
forma financial information") set out in Part V of the prospectus dated 21
February 2002 ("the Prospectus") issued by Enodis plc. The pro forma financial
information has been prepared for illustrative purposes only to provide
information about how the proposed rights issue might have affected the
financial information presented.
Responsibilities
It is the responsibility solely of the Directors of Enodis plc to
prepare the pro forma financial information in accordance with paragraph 12.29
of the Listing Rules of the U.K. Listing Authority ("the Listing Rules").
It is our responsibility to form an opinion, as required by the Listing
Rules, on the pro forma financial information and to report our opinion to you.
We do not accept any responsibility for any reports previously given by us on
any financial information used in the compilation of the pro forma financial
information beyond that owed to those to whom our reports were addressed by us
at the dates of their issue.
Basis of opinion
We conducted our work in accordance with the Statements of Investment
Circular Reporting Standards and the Bulletin 1998/8 "Reporting on pro forma
financial information pursuant to the Listing Rules" issued by the Auditing
Practices Board in the United Kingdom. Our work, which involved no independent
examination of any of the underlying financial information, consisted primarily
of comparing the unadjusted financial information with the source documents,
considering the evidence supporting the adjustments and discussing the pro forma
financial information with the Directors of Enodis plc.
Our work has not been carried out in accordance with auditing or other
standards and practices generally accepted in the United States or other
jurisdictions and accordingly should not be relied upon as if it has been
carried out in accordance with those standards and practices.
Opinion
In our opinion:
(a) the pro forma financial information has been properly compiled on the
basis stated;
(b) such basis is consistent with the accounting policies of Enodis plc;
and
(c) the adjustments are appropriate for the purposes of the pro forma financial
information as disclosed pursuant to paragraph 12.29 of the Listing Rules.
Yours faithfully
Deloitte & Touche
PART VI: ADDITIONAL INFORMATION
1. RESPONSIBILITY STATEMENT
The directors of Enodis, whose names are set out in paragraph 3 below,
accept responsibility for the information contained in this document. To the
best of the knowledge and belief of the directors (who have taken all reasonable
care to ensure that such is the case) the information contained in this document
is in accordance with the facts and does not omit anything likely to affect the
import of such information.
2. THE COMPANY
(a) The Company is incorporated in England and Wales with its registered office
at Washington House, 40-41 Conduit Street, London W1S 2YQ.
(b) The Company has the following principal subsidiaries all of which are
indirectly owned save for Enodis Holdings Limited, which is wholly and
directly owned, and Welbilt Manufacturing (Thailand) Limited, which is
directly owned:
Percentage held
Country of and voting
incorporation and rights at
operation 21 February 2002
--------- ----------------
Food Equipment
Aladdin Temp-Rite Canada, Inc................................................... Canada 100
Aladdin Temp-Rite LLC........................................................... U.S. 100
Aladdin Temp-Rite Pty. Limited.................................................. Australia 100
Aladdin Temp-Rite Puerto Rico Inc............................................... Puerto Rico 100
Austral Refrigeration Pty. Limited.............................................. Australia 100
Belshaw Bros, Inc............................................................... U.S. 100
Castel MAC S.p.A................................................................ Italy 100
Cleveland Range, Inc............................................................ U.S. 100
Cleveland Range Limited......................................................... Canada 100
Convotherm Elektrogerate GmbH................................................... Germany 91
Convotherm Limited.............................................................. England 91
Convotherm Singapore Pte Limited................................................ Singapore 100
Cowley Refrigeration Limited.................................................... New Zealand 60
Enodis Corporation.............................................................. U.S. 100
Enodis Deutschland GmbH......................................................... Germany 100
Enodis France SA................................................................ France 100
Enodis Group Limited............................................................ England 100
Enodis Holdings Limited......................................................... England 100
Enodis Iberia SA................................................................ Spain 100
Enodis U.K. Limited............................................................. England 100
Frimont S.p.A................................................................... Italy 100
Frymaster L.L.C................................................................. U.S. 100
Garland Commercial Industries, Inc.............................................. U.S. 100
Garland Commercial Ranges, Limited.............................................. Canada 100
Guyon Productions SA............................................................ France 100
Hartek Awagem Vertriebsges m.b.H................................................ Austria 100
Hartek Beverage Handling GmbH................................................... Germany 100
Jackson MSC Inc................................................................. U.S. 100
Kysor Industrial Corporation.................................................... U.S. 100
Kysor//Warren Australia Pty. Limited............................................ Australia 100
Lincoln Foodservice Products, Inc............................................... U.S. 100
Merco/Savory, Inc............................................................... U.S. 100
Merrychef Holdings Limited...................................................... England 100
Mile High Equipment Company..................................................... U.S. 100
New Ton Food Equipment Co. Limited.............................................. Thailand 97.2
Scotsman Beverage Systems Limited............................................... England 100
Scotsman Group Inc.............................................................. U.S. 100
Scotsman Ice Systems (Shanghai) Company Limited................................. China 100
Technyform Production SA........................................................ France 100
Temp-Rite International GmbH.................................................... Germany 100
Temp-Rite International Holding B.V............................................. Netherlands 100
Temp-Rite International SA...................................................... France 100
Temp-Rite Kft................................................................... Hungary 100
The Delfield Company............................................................ U.S. 100
Vent Master (Europe) Limited.................................................... England 100
Viscount Catering Limited....................................................... England 100
Welbilt Manufacturing (Thailand) Limited........................................ Thailand 50
Welbilt Walk-Ins, L.P........................................................... U.S. 100
Whitlenge Drink Equipment Limited............................................... England 100
Property
Enodis Property Developments Limited............................................ England 100
Enodis Investments Limited...................................................... England 100
(c) The Company also has an indirect 15 per cent. holding in C. Czarnikow
Limited, a company incorporated in England.
3. DIRECTORS AND DIRECTORS' OTHER INTERESTS
(a) Directors
The directors and their respective functions are:
Peter Malcolm Brooks (Chairman (Non-executive))
Andrew James Allner (Chief Executive Officer)
David Swinton McCulloch (President Global Food Service Equipment Group)
David Wesley Odum (President Food Retail Equipment Group)
Robert Eugene Briggs (Non-executive)
George Eryl Morris (Non-executive)
Waldemar Schmidt (Non-executive)
The business address of all of the directors is Washington House, 40-41
Conduit Street, London W1S 2YQ.
(b) Directors' other interests
(i) The details of those companies and partnerships outside the Group of
which the directors are currently or have previously been directors or
partners at any time during the five years prior to the date of this
document are as follows:
Director Current directorships Previous directorships and partnerships
-------- --------------------- ---------------------------------------
Deutsche Bank Group
Chesterton Intl PLC Morgan Grenfell and Co Ltd
Peter Brooks.............. Chesterton Investment Services NCL Holding ASA
Dalgety PLC
Nycomed Amersham PLC
Andrew Allner............. Moss Bros Group PLC PIC Intl Group PLC
Hussman Store Equipment Ltd
David Odum................ Krack Corp
Anglian Water PLC
Blagden plc
Courtaulds PLC
Airinmar Group Ltd Courtaulds Textiles plc
AWG PLC Inchcape Shipping Services
HPI Group Ltd Holdings Ltd
IMVA Holdings Limited Safetynet Group Ltd
Eryl Morris............... Mill Digital Media Ltd The Albert Fisher Group PLC
Arby's Intl
Robert Briggs............. Kentucky Fried Chicken
Alfa Laval AB
Energi E2 A/S
F Group A/S
Group 4 Falck A/S
Navision A/S
Ore Arkil Holding A/S
Superfos A/S
Tholstrup Cheese Holding A/S
Thrane & Thrane A/S
Viterra Energy Services AG
Waldemar Schmidt.......... ISS Intl Service System A/S
(ii) As at the date of this document no director:
(a) except as disclosed above, has been at any time in
the five years prior to the date of this document a
director or partner of any non-Group companies or
partnerships; or
(b) has any unspent convictions in relation to
indictable offences; or
(c) has been adjudged bankrupt or been a party to a deed
of arrangement or any form of voluntary arrangement;
or
(d) has been a director with an executive function of
any company which, while he was such a director or
within 12 months after his ceasing to be such a
director, was put into receivership or compulsory
liquidation or creditors' voluntary liquidation or
company voluntary arrangement or has had an
administration or an administrative or other
receiver appointed or entered into any composition
or arrangement with its creditors generally or any
class of its creditors; or
(e) has been a partner in any partnership which, while
he was a partner, or within 12 months after his
ceasing to be a partner, was put into compulsory
liquidation or had an administrator or an
administrative or other receiver appointed or
entered into any voluntary arrangement; or
(f) has had an administrative or other receiver
appointed in respect of any asset belonging to him
or to a partnership of which he was a partner at the
time of such event or within 12 months after his
ceasing to be such a partner; or
(g) has received any public criticism by any statutory
or regulatory authorities, including designated
professional
bodies, or been disqualified by a court from acting as a
director of a company or from acting in the management or
conduct of the affairs of any company.
(c) Interests in shares
The interests as at 19 February 2002 (being the latest practicable date
prior to the publication of this document) of each director in the
ordinary share capital of the Company (all of which are held beneficially
unless otherwise stated), which:
(i) have been notified to the Company pursuant to sections 324 or 328 of
the Act; or
(ii) are required to be entered in the register of directors' interests
maintained under section 325 of the Act; or
(iii) are interests of a connected person of a director which would, if
the connected person were a director, be required to be disclosed
under (i) or (ii) above and the existence of which is known to or
could with reasonable diligence be ascertained by that director,
are shown below and all of which represent individually and in total less
than three per cent. of the entire issued share capital of Enodis:
Ordinary Shares and Enodis ADSs
Ordinary Shares
represented by
Director Ordinary Shares Enodis ADSs
-------- --------------- -----------
Peter Brooks.................................................................... 20,000 Nil
Andrew Allner................................................................... 4,500 Nil
David McCulloch................................................................. Nil 5,000
David Odum...................................................................... Nil Nil
Robert Briggs................................................................... Nil 2,000
Eryl Morris..................................................................... 20,000 Nil
Waldemar Schmidt................................................................ 2,300 Nil
(d) Employee Share Schemes
David McCulloch and David Odum hold options to acquire Ordinary Shares
under the Employee Share Schemes, each of which has been granted for nil
consideration and details of which (before any adjustment as a consequence
of the Rights Issue) are set out below:
Ordinary Shares Exercise price Date from which Latest exercise
Name under option Date of grant (pence) exercisable date
---- ------------ ------------- ------- ----------- ----
David McCulloch.............. 40,000 01/07/97 144.00 01/07/00 01/07/07
35,000 28/07/99 262.90 28/07/02 28/07/09
359,560 10/09/01 101.00 10/09/04 10/09/11
David Odum................... 121,065 21/12/00 210.00 21/12/03 21/12/10
326,370 10/09/01 101.00 10/09/04 10/09/11
On 5 April 2001, the Company agreed to grant to Mr. Allner an option under
the 2001 Executive Share Option Scheme, with a value of (Pounds)490,000,
based on an exercise price of (Pounds)1.81 per Ordinary Share. If the
price of Ordinary Shares increases above (Pounds)1.81
before the date of grant, options will be granted at that higher price.
In these circumstances Mr. Allner is entitled upon exercise to a cash
payment equal to the difference between the actual exercise price and
(Pounds)1.81 per Ordinary Share. If there is a change of control of
Enodis prior to the date of grant, Mr. Allner will receive a cash
payment of the amount that would have been paid to him if he had been
granted and had exercised the option at an exercise price of
(Pounds)1.81 per Ordinary Share and sold the shares at the purchase
price paid by the acquiror.
On 21 December 2001, the Company agreed to grant to Mr. Allner an
option under the 2001 Executive Share Option Scheme over 380,435
Ordinary Shares based on an exercise price of (Pounds)0.92 per ordinary
share. If the price of Ordinary Shares increases above (Pounds)0.92
before the date of the grant, options will be granted at that higher
price. In these circumstances Mr. Allner is entitled upon exercise to a
payment equal to the difference between the actual exercise price and
(Pounds)0.92 per Ordinary Share. If there is a change of control of
Enodis prior to the date of grant, Mr. Allner will receive a cash
payment of the amount that would have been paid to him if he had been
granted and had exercised the option at an exercise price of
(Pounds)0.92 per Ordinary Share and sold the shares at the purchase
price paid by the acquiror.
On 14 February 2002, the Company agreed to grant Mr. Allner options
over 819,565 Ordinary Shares at an exercise price to be based on the
market price of the Ordinary Shares on or about the date of grant.
On 1 February 2001, the Company agreed to grant to Mr. McCulloch an
option under the 2001 Executive Share Option Scheme, over 219,613
Ordinary Shares based on an exercise price of (Pounds)1.81 per Ordinary
Share. If there is a change of control of Enodis prior to the date of
grant, Mr. McCulloch will receive a cash payment of the amount that
would have been paid to him if he had been granted and had exercised
the option at an exercise price of (Pounds)1.81 per Ordinary Share and
sold the Ordinary Shares at the purchase price paid by the acquirer.
On 1 February 2001, the Company agreed to grant to Mr. Odum an option
under the 2001 Executive Share Option Scheme, over 141,905 Ordinary
Shares, based on an exercise price of (Pounds)1.81 per Ordinary Share.
If there is a change of control of Enodis prior to the date of grant,
Mr. Odum will receive a cash payment of the amount that would have been
paid to him if he had been granted and had exercised the option at an
exercise price of (Pounds)1.81 per Ordinary Share and sold the Ordinary
Shares at the purchase price paid by the acquirer.
The Company has also agreed in principle to grant to David McCulloch
and David Odum options at an exercise price to be based on the market
price on or about the date of grant over a number of shares whose value
is equal to their respective annual salary (being $357,500 and $324,500
respectively).
The Company intends to grant the options described in this paragraph
(all of which will be adjusted as a result of the Rights Issue) in the
period following Shareholder approval of the Rights Issue.
(e) Employee Share Trust
The U.K. resident executive directors are potential beneficiaries of
the Employee Share Trust and are therefore each deemed to have an
interest in 1,269,341 Ordinary Shares held by the trustees of the
Employee Share Trust.
(f) Directors' interests in transactions
Save as disclosed in paragraph 3(d) above, no director has or has had
any interest in any transaction which is or was of an unusual nature,
contains or contained unusual terms or which is or was significant to
the business of the Group and which was effected by any member of the
Group during the current or immediately preceding financial year, or
during any earlier financial year and which remains in any respect
outstanding or unperformed.
(g) Directors' service agreements and remuneration--executive directors
(i) Andrew Allner
The Company has an employment agreement with Andrew Allner
dated 14 February 2002. Mr. Allner is entitled to a base
salary at the rate of (Pounds)350,000 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 per cent. of base salary
("Additional Salary") in lieu of membership in the Defined
Benefit Pension Plan and in lieu of a contribution to the
Defined Contribution Pension Plan.
The Company may terminate Mr. Allner's employment on 12
months' notice. If the termination is without cause or within
12 months after a change of control, Mr. Allner is entitled to
a payment equal to (a) 95 per cent. of his annual base salary,
(b) 95 per cent. of his Additional Salary, (c) 95 per cent. of
annual on target bonus (only if termination occurs before 31
May 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.
(ii) David McCulloch
Enodis Corporation has an employment agreement with David
McCulloch dated as of 1 October 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 Enodis Corporation
terminates Mr. McCulloch's employment for cause, Mr. McCulloch
is entitled only to earned but unpaid salary, benefits and
unreimbursed expenses. If the termination is without cause and
takes place on or before 31 March 2003, Mr. McCulloch is
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 31 March 2003, Mr. McCulloch will be entitled to
12 months' base salary. In the event of a termination without
cause or for good reason within one year following a change of
control, Mr. McCulloch will 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 is 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.
(iii) David Odum
Enodis Corporation has an employment agreement with David Odum
dated as of 1 October 2001. Mr. Odum is entitled to a base
salary at the rate of $324,500 per annum. In addition, Mr.
Odum participates in the discretionary bonus scheme, the share
option plans and bonus plans generally provided to other
senior executives. If Enodis Corporation terminates Mr. Odum's
employment for cause, Mr. Odum is entitled only to earned but
unpaid salary, benefits and any unreimbursed expenses. If the
termination is without cause and takes place on or before 31
March 2003, Mr. Odum is entitled to instalment payments equal
to 12 months' base salary at the rate in effect on the date of
his termination, and to an additional lump sum payment equal
to 12 months' base salary as well as unreimbursed expenses and
other benefits to the date of termination. In the event of a
termination without cause after 31 March 2003, Mr. Odum will
be entitled to 12 months' base salary. In the event of a
termination without cause or for good reason within one year
following a change of control, Mr. Odum will 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. Odum terminates
the agreement for good reason other than a change of control,
he is 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.
(iv) The remuneration paid and benefits in kind granted to those
who were directors in the 2001 financial year by any member of
the Group during the 2001 financial year were as follows:
Name Salary Fees Bonuses/(1)/ Benefits/(2)/ Total
---- ------ ---- ----------- ------------ -----
(Pounds)
Andrew J. Allner......................................... 293,686/(3)/ -- 250,000 21,496 565,182
Robert Briggs............................................ -- 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/(6)/ 217,662/(6)/
------- ------- ------- ----------- --------------
Total.................................................... 820,568 263,544 250,000 84,991 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.
(3) Mr. Allner's salary amount includes(Pounds)62,437 in lieu of
Company contribution to Company pension arrangements.
(4) Ms. Hughes resigned from the Board on 17 January 2001.
(5) Mr. Roake resigned from the Board and left the Company's
employ as of 31 December 2001. He will receive $535,000
(plus benefits) in 26 instalments in 2002. Payments would
accelerate if there is a change of control.
(6) Mr. Williams resigned from the Board on 23 March 2001 and
left the Company's employ on 31 March 2001. Benefits include
a relocation bonus. He also received (Pounds)327,302 (plus
one year's benefits) in severance payments.
(h) Directors' letters of appointment--non-executive directors
The Company has entered into letters of appointment with each of the
non-executive directors. Peter Brooks was appointed pursuant to a
letter of appointment dated 21 May 1998, and he ordinarily receives a
fee of (Pounds)100,000 per annum. However, by a letter effective as of
21 March 2001, Mr Brooks agreed to increase the time he devoted to the
Company's affairs until such time as a new Chief Executive Officer was
appointed and, as such, his salary was increased to (Pounds)210,000
per annum. His fee has reverted with effect from 1 December 2001 to
(Pounds)100,000 per annum. Eryl Morris and Waldemar Schmidt each
receive a fee of (Pounds)32,500 per annum pursuant to letters of
appointment dated 13 July 1998 and 27 January 2000 respectively (as
amended). Robert Briggs receives a fee of (Pounds)27,500 pursuant to a
letter of appointment dated 21 July 2000. Each of the non-executive
directors has been appointed for a proposed initial period of five
years. However, this is not a fixed term and none of them is entitled
to any compensation for early termination. Each of the non-executive
directors is entitled to claim expenses but receives no other
benefits.
(i) Loans to directors
There are no outstanding loans by any member of the Group to any
directors nor have any guarantees been provided by any member of the
Group for the benefit of any of the directors.
4. SHARE CAPITAL
(a) As at 19 February 2002 (being the latest practicable date prior
to the publication of this document) the authorised and issued
share capital of the Company is:
(Pounds) Number (Pounds) Number
-------- ------ -------- ------
Authorised Issued and fully paid
Ordinary shares of 50p each................................. 172,100,000 344,200,000 125,145,496 250,290,992
As at 19 February 2002, outstanding options had been granted under
the Employee Share Schemes over 7,058,472 Ordinary Shares.
(b) Following the Rights Issue, the authorised and issued share
capital of the Company (assuming no options granted under the
Employee Share Schemes are exercised) will be:
(Pounds) Number (Pounds) Number
-------- ------ -------- ------
Authorised Issued and fully paid
Ordinary shares of 50p each................................. 300,000,000 600,000,000 200,232,793 400,465,587
(c) Subject to the passing of the Resolutions set out in the notice of
EGM on page 166 of this document:
(i) the authorised share capital of the Company will be
increased from (Pounds)172,100,000 divided into 344,200,000
ordinary shares of 50 pence each to (Pounds)300,000,000
divided into 600,000,000 Ordinary Shares of 50 pence each by
the creation of 255,800,000 Ordinary Shares of 50 pence each
(an increase of 74 per cent.) in order to give the Company
the additional share capital required to allot the New
Ordinary Shares;
(ii) the directors will be authorised to allot relevant
securities in the capital of the Company (within the meaning
of section 80(2) of the Act) up to an aggregate nominal
value of(Pounds)141,164,119 (which represents 113 per cent.
of the Existing Ordinary Shares). This figure includes the
authority necessary for the allotments in connection with
the Rights Issue and the directors intend to exercise the
authority to allot the New Ordinary Shares. Following the
Rights Issue, (assuming no options are exercised) the Board
will have authority to allot the
remaining(Pounds)66,076,821.50 (representing 33 per cent. of
the Enlarged Issued Ordinary Share Capital). Furthermore,
additional securities may be allotted pursuant to the
Employee Share Schemes without them counting towards the
limit of the nominal value of(Pounds)141,164,119. Such an
authority enables the Board to take advantage without delay
of any opportunity that occurs to issue shares either for
cash or as consideration for an acquisition. The authority
will be exercised only if the directors believe that to do
so would be in the best interests of the Shareholders
generally. The authorisation will expire five years from the
date the resolution is passed; and
(iii) the statutory pre-emption rights afforded under section
89(1) of the Act will be disapplied in relation to the
authority detailed in 4(c)(ii) above provided that
allotments of equity securities are offered to Shareholders
(whether by way of rights issue, open offer or otherwise)
pro rata to their existing holdings of Ordinary Shares
except where the directors deem it necessary or expedient to
exclude certain Shareholders to deal with fractional
entitlements and legal or practical problems in overseas
jurisdictions. Pre-emption rights will also be disapplied in
respect of issues of equity securities for cash up to an
aggregate nominal amount of(Pounds)10,011,639.50. Together
therefore, pre-emption rights will be disapplied up to an
aggregate nominal amount of(Pounds)85,098,937, representing
68 per cent. of the Existing Ordinary Shares. Following the
Rights Issue, the remaining disapplication will represent 5
per cent. of the Enlarged Issued Ordinary Share Capital. The
disapplication is deemed necessary by the directors in
relation to the Rights Issue in order to allow for the
exclusion of the offer from jurisdictions where otherwise it
would or may contravene legal or regulatory requirements of
such jurisdictions and to deal with entitlements to
fractions. The disapplication will replace the Company's
existing disapplication which only applies to the Existing
Ordinary Shares and will provide the Company with the
maximum permitted authority to allot shares for cash without
regard to pre-emption rights in respect of the Enlarged
Issued Ordinary Share Capital. Such a disapplication will
also enable the Board to take advantage without delay of an
opportunity that occurs to issue shares for cash up to 5 per
cent. of the Enlarged Issued Ordinary Share Capital without
being required to make a pre-emptive offer to Shareholders.
The authorisation will expire on the earlier of the
conclusion of the Company's Annual General Meeting to be
held in 2003 and the date 15 months after the passing of the
resolution.
(d) The provisions of section 89(1) of the Act (to the extent not
disapplied pursuant to section 95 of the Act) confer on
Shareholders certain rights of pre-emption in respect of the
allotment of equity securities (as defined in section 94(2) of
the Act) which are, or are to be, paid up in cash and will apply
to the increased authorised but unissued share capital of the
Company.
(e) Other than pursuant to the Rights Issue, none of the New Ordinary
Shares have been marketed or are available in whole or in part to
the public. The Existing Ordinary Shares are listed only on the
Official List and admitted to trading only on the London Stock
Exchange and no application has been or is being made for the
admission of the New Ordinary Shares to listing or trading on any
other stock exchange or securities market. The Company also has
an ADR programme, under which Enodis ADRs are listed on the New
York Stock Exchange.
(f) All of the Existing Ordinary Shares are and all of the New
Ordinary Shares will be in registered form following the latest
date for registration and renunciation. The New Ordinary Shares
will be capable of being held in certificated and uncertificated
form.
(g) The New Ordinary Shares are to be issued at their nominal value
of 50p per Ordinary Share and without any premium on issue.
5. ENODIS' MEMORANDUM AND ARTICLES OF ASSOCIATION
The memorandum of association of the Company grants wide powers under
its objects clause allowing it to carry on, inter alia, any trade or
business whatsoever which may seem, in the opinion of the Board, to be
capable of being conveniently or advantageously carried out by the
Company. The objects of the Company are set out in full in clause 4 of
the Company's memorandum of association which is available for
inspection at the addresses specified in paragraph 14, below.
The following is a summary of the provisions of the Articles of
Association of the Company as amended by Shareholders on 16 January
2002 including the rights attaching to the Ordinary Shares:
(a) Share Capital
(i) Power to attach rights
Subject to the Act and all statutes and subordinate
legislation for the time being in force concerning companies
so far as they apply to the Company (the "Acts") and to the
rights attached to existing shares, new shares may be
allotted or issued with or have attached to them such
special rights or restrictions as the Company may by
ordinary resolution decide.
(ii) Redeemable shares
Subject to the Acts and to the rights attached to existing
shares, shares may be issued on terms that they are to be
redeemed or, at the option of the Company or the holder, are
liable to be redeemed.
(iii) Variation of rights
Subject to the Acts, the rights attached to a class of
shares may be varied, altered or abrogated (whether or not
the Company is being wound up) with the consent in writing
of the holders of at least three-fourths of the nominal
amount of the issued shares of the class or with the
sanction of an extraordinary resolution passed at a separate
general meeting of the holders of the issued shares of that
class validly held in accordance with Article 12 of the
Articles of Association.
(iv) Alteration of capital
The Company may, by ordinary resolution, consolidate and
divide its share capital and at such time may cancel any
shares which have not be taken or agreed to be taken by any
person. It may sub-divide all or any of its share capital
into shares of a smaller amount than is fixed by its
Memorandum of Association, but so that the proportion of the
amount not paid up (if any) to the amount paid up remains
the same as it was prior to the consolidation or division.
The Company may attach any restrictions or rights of
preference to sub-divided or consolidated shares as it would
have power to attach to new shares.
Where, as a result of any consolidation, members become
entitled to fractions of a share the directors may aggregate
and sell such fractions for the best reasonably obtainable
price and distribute the proceeds in due proportion to the
members who would have been entitled to such fractions.
Subject to the Acts, the Company may purchase shares of any
class (including redeemable shares) in its own capital and
by special resolution reduce its capital.
(v) Uncertificated shares
Uncertificated shares of a class are not to be regarded as
forming a separate class from certificated shares of that
class and a member may, in accordance with the CREST
Regulations, change a share of a class which is a
participating security from a certificated share to an
uncertificated share and vice versa. The Company may give
notice requiring a member to change uncertificated shares to
certificated shares or alternatively give notice prohibiting
a member from changing certificated shares to uncertificated
shares.
(b) Transfer of shares
Certificated shares may be transferred in writing in any usual
form or in another form approved by the directors, and the
instrument shall be executed by or on behalf of the transferor and
(except in the case of a fully paid share) by or on behalf of the
transferee. The transfer must be left at the registered office of
the Company or at such other place as the directors may determine
for registration and must be accompanied by the share certificate
of those shares to be transferred (save where the shares are
registered in the name of a Stock Exchange nominee and no
certificate was issued) and such other evidence (if any) as the
directors may require to prove title to the shares or the right to
transfer the shares. The transferor is deemed to remain the holder
of the share until the name of the transferee is entered in the
register in respect of it.
The directors may, in their absolute discretion and without giving
a reason, refuse to register a transfer of a certificated share
if:
(i) it is in respect of a share which is not fully paid up; or
(ii) it is in respect of a share on which the Company has a
lien,
provided such refusal does not prevent dealings in the share from
taking place on an open and proper basis.
If the directors refuse to register the transfer of a share
certificate they shall, within two months after the date on which
the transfer was lodged with the Company, send notice of the
refusal to the transferee. Refused instruments of transfer shall
be returned to the person depositing it.
Subject to the requirements of the London Stock Exchange, the
Company shall register a transfer of title to any uncertificated
share or any renounceable right of allotment of a share which is a
participating security held in uncertificated form in accordance
with the CREST Regulations but so that the Board may refuse to
register such a transfer in favour of more than four persons
jointly or in any other circumstances permitted by the CREST
Regulations.
If the Board refuses to register the transfer of an
uncertificated share or any such uncertificated renounceable
right of allotment of a share it shall, within two months after
the date on which the transfer instruction relating to such
transfer was received by the Company, send notice of the refusal
to the transferee.
Subject to the Acts the registration of transfers may be
suspended at such times and for such periods (not exceeding 30
days in any one year) as the directors may decide and either
generally or in respect of a particular class of shares.
(c) Failure to disclose interest in shares
If a member, or any other person appearing to be interested in
shares held by that member, has been issued with a notice
pursuant to section 212 of the Act and has failed in relation to
any shares (the "default shares") to give the Company the
information thereby required within the prescribed period from
the date of the notice, the following sanctions shall apply
unless the directors otherwise determine:
(i) the member is not entitled in respect of the default shares
to be present or to vote (either in person or by proxy) at
any general meeting or at any separate meeting of the
holders of any class of shares or on a poll to exercise
other rights conferred by membership in relation to the
meeting or poll; and
(ii) where the default shares represent at least 0.25 per cent.
of the nominal value of the issued shares of their class:
. a dividend or any other amount payable in respect of
the default shares shall be withheld by the Company,
which shall have no obligation to pay interest on it,
and the members shall not be entitled to elect to
receive shares instead of that dividend; and
. no transfer, other than an excepted transfer, as
specified in the Articles of Association, of any of the
default shares held by the member shall be registered
unless the member is not himself in default as regards
the information required and he proves to the
satisfaction of the Board that no person in default of
supplying such information is interested in any of the
shares the subject of the transfer.
(d) Voting rights
Subject to special terms as to voting on which the shares have
been issued, or a suspension or abrogation of voting rights
pursuant to the Articles of Association at a general meeting
every member present in person has, on a show of hands, one vote
and every member present in person or by proxy has, on a poll,
one vote for every share of which he is the registered holder.
Unless otherwise decided by the directors, no member is entitled
in respect of a share held by him to be present or vote at a
general meeting or a separate meeting of the holders of a class
of shares if a call or other amount due and payable in respect of
the share is unpaid.
(e) Dividends
Subject to the Acts and the Articles of Association, the Company
may by ordinary resolution declare a dividend to be paid to the
members according to their respective rights and interests, but
no dividend may exceed the amount recommended by the directors.
The trustee of the Employee Share Trust, Mourant & Co., has
agreed to waive its right to all future dividends.
No dividend shall be payable except out of the profits of the
Company available for distribution in accordance with the
provisions of the Acts.
Subject to the Acts, the directors may, if they think fit,
declare and pay such interim dividends as appear justified by the
profits of the Company available for distribution.
Except as otherwise provided by the rights attached to shares, a
dividend shall be declared and paid according to the amounts paid
up on the shares in respect of which the dividend is declared and
paid, but no amount paid up on a share in advance of a call may
be treated for these purposes as paid up on the share.
Dividends unclaimed for a period of 12 years after having been
declared or become due for payment are forfeited and cease to
remain owing by the Company.
Subject to the Acts, the directors may, as authorised by an
ordinary resolution passed at the annual general meeting of
the Company on 16 January 2001, offer those Shareholders of a
particular class of shares in respect of any dividend the
right to elect to receive shares by way of scrip dividend
instead of cash, such authority to expire on the date of the
annual general meeting to be held in 2006.
(f) Distribution of assets on winding up
On a winding up (whether voluntary or official) the liquidator
may, by extraordinary resolution, divide among the members in
kind any part of the assets of the Company or vest any part of
the assets of the Company in trustees upon such trusts for the
benefit of the members or any of them. Such resolution may
provide for a distribution of any specific assets amongst
different classes of members otherwise than in accordance with
their existing rights.
Any surplus assets remaining after the payment of all
creditors shall be divided among the members in proportion to
the capital which at the commencement of the winding up is
paid up on the shares held by them. If the assets are
insufficient to repay the whole of the capital the assets
shall be distributed so that the losses shall be borne by the
members in proportion to the capital paid up.
6. SUBSTANTIAL INTERESTS IN SHARES
Save as disclosed below, the Company is not aware of any person who,
directly or indirectly, had an interest in 3 per cent. or more of the
issued share capital of the Company as at 19 February 2002 (being the
latest practicable date prior to the publication of this document):
Percentage of issued
Shareholder Ordinary Shares share capital
----------- --------------- -------------
Harris Associates L.P........................................................ 29,314,000 11.71
Putnam Investment Management LLC............................................. 7,894,200 3.15
Du Pont Capital Management Corporation....................................... 7,663,274 3.06
The directors are not aware of any person who, directly or indirectly,
jointly or severally exercises or could exercise control over the
Company.
7. MATERIAL CONTRACTS
The only contracts, other than contracts entered into in the ordinary
course of business, which have been entered into by any member of the
Group (i) within the two years immediately preceding the date of this
document which are or may be material or (ii) which contain any
provision under which any member of the Group has any obligation or
entitlement which is or may be material to the Group as at the date of
document are as follows:
(a) an underwriting agreement (the "Underwriting Agreement" )
dated 20 February 2002 between (1) the Company; (2) Credit
Suisse First Boston (Europe) Limited; and (3); Credit Suisse
First Boston Equities Limited, wherein it has been agreed
between the parties thereto, subject to the conditions set out
therein, that:
(i) Credit Suisse First Boston (Europe) Limited be
appointed by the Company 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;
(ii) Credit Suisse First Boston (Europe) Limited be
appointed by the Company 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;
(iii) in consideration of its agreement to, among other
things, underwrite the Rights Issue, the Company has
agreed to pay to Credit Suisse First Boston Equities
Limited a commission of 2.25 per cent. of the
aggregate issue price of the shares allotted in the
Rights Issue, and the Company has also agreed to pay
Credit Suisse First
Boston (Europe) Limited a fee of (Pounds)80,000 per month for the
period from 1 October 2001 to 30 April 2002 in connection with
its appointment as sponsor to and financial adviser in connection
with the Rights Issue. This latter fee will be payable
irrespective of whether or not the Rights Issue proceeds;
(iv) the Company has 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;
(v) the Company has 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 behalf
of the Company in relation to the applications for listing and
trading; and
(vi) the Underwriting Agreement is conditional, among other things, on
Admission becoming effective by no later than 10.00 a.m. on 19
March 2002 (or such later time and/or date as the Company, 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, cancellation or demand for repayment of the New
Credit Facilities or if there shall occur any fundamental change
in national or international financial, economic or political
conditions or 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 Issue or
materially and adversely affect the financial position and/or
prospects of the Group;
(b) a senior secured credit facility agreement dated 20 February 2002
between Enodis Holdings Limited ("Holdings") and certain of its
subsidiaries as guarantors (the "Guarantors"), Credit Suisse First
Boston, London Branch and The Royal Bank of Scotland plc as arrangers
and The Royal Bank of Scotland plc as agent. The senior secured credit
facilities are comprised of a $300 million 5 year "A" term loan
facility (the "A" Term Loan Facility") and a $70 million 6 year "B"
term loan facility (the "B Term Loan Facility" and together the "Term
Loan Facility") and a $85 million 5 year revolving credit facility
(the "Revolving 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 A Term
Loan Facility and the Revolving Facility both mature five years from
the date of the facility. The indebtedness under the senior secured
credit facilities is secured by fixed and floating charges over
substantially all the assets of the borrowers and 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, cashflow to total funding costs, total net debt to EBITDA,
total net senior debt to EBITDA and minimum tangible net worth, each
term as defined in the senior secured credit agreement. The senior
secured credit facilities also include covenants relating to
limitations on sales of assets, 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 plus a margin.
The margins are adjusted after September 30, 2002, based on the
Group's 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 the Company or a
disposal of substantially all of the assets of the Company and its
subsidiaries. Certain mandatory partial repayments are required to be
made out of proceeds from asset sales, other than in the ordinary
course of business, not immediately reinvested in replacement assets
or 75% of surplus cash of the Company 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(Pounds)5
million, insolvency, bankruptcy or similar events, change of control
and material adverse change;
(c) a bridge loan facility dated 20 February 2002, between Enodis, The
Royal Bank of Scotland plc, Credit Suisse First Boston, London Branch
as arranger and as agent. The facility consists of a(Pounds)150
million bridge loan with an initial maturity of 364 days. The Company
used the bridge proceeds to repay outstanding indebtedness under the
Company's prior credit facility. We expect to repay the bridge loan
facility (and any exchange notes that are issued, as described below)
with the net proceeds from the proposed issue of Notes and the net
proceeds of the Rights Issue. Each lender of the bridge loans has the
right, three months after 20 February 2002 to receive, in exchange for
its bridge loan or a portion thereof, exchange notes of the Company
which will rank pari passu with the bridge loans. The exchange notes
will mature on 20 February 2012. If any lender under the bridge loan
facility does not exchange its bridge loan for exchange notes on or
prior to 20 February 2003, such lender will be required to extend the
maturity of such loan to
20 February 2012. The bridge loan facility and the exchange notes contain
operating and financial covenants that are applicable during the first 364
days in substantially the same form as those governing the Term Loan
Facility and the Revolving Facility including, without limitation, minimum
ratios of EBITDA to total interest costs, cashflow to total funding costs,
total net debt to EBITDA, total net senior debt to EBITDA and minimum
tangible net worth, each term as described in the bridge loan facility. The
bridge loan facility and the exchange notes also include covenants relating
to limitations on sales of assets, dividends and other restricted payments,
mergers, indebtedness, acquisitions and liens. Prior to 20 February 2003,
advances under the bridge loan facility and the exchange notes bear
interest at LIBOR plus a margin plus mandatory costs. The margin will
increase by 0.5 per cent. each three month period thereafter, up to 20
February 2003. After 20 February 2003, if advances under the bridge loan
facility remain outstanding, the interest rate on the bridge loans or the
exchange notes will become fixed based on a formula which references a
number of market indices plus a margin. Interest on the bridge loan
facility (and any exchange notes) is capped at 16 per cent. per annum. The
bridge loan facility and the exchange notes contain customary events of
default including failure to make payments under the bridge loan facility,
breach of covenants, including financial covenants, breach of
representations, cross-default in respect of indebtedness in excess
of (Pounds)5 million, insolvency, bankruptcy or similar events, change of
control and material adverse change;
(d) a sale and purchase agreement dated 13 December 2001 between (1) Enodis
Nederland BV (2) Berisford Industrial Holdings Ltd (3) Enodis (together the
"Sellers") and (4) Asociacion Kaiseri 99, S.L. pursuant to which Enodis
sold its interests in Sammic S.A. and Sammic Limited ("Sammic") to
Asociacion Kaiseri 99, S.L., a company comprising the then existing
management team of Sammic, for the gross consideration of (Pounds)22.2
million, of which (Pounds)2.2 million was used by Enodis to repay an
inter-company balance due to Sammic. The agreement contains limited
warranties and indemnities given by the Sellers which continue for two
years from the date of the agreement and which are subject to a cap of
(Pounds)20 million;
(e) a vendor loan agreement dated 14 June 2001 between (1) Enodis and (2) Nobia
AB ("Nobia") pursuant to which Enodis made a loan of (Pounds)20 million to
Nobia in connection with payment of the consideration for the former
building and consumer products division of Enodis. The vendor loan is
repayable in 2009 or on the occurrence of certain change of control events
or on an initial public offering of the shares of Nobia if earlier. The
loan is subordinated to Nobia's bank and mezzanine debt and interest is
payable to Enodis at 3.5 per cent. over LIBOR;
(f) a sale and purchase agreement dated 20 April 2001 between (1) Enodis (2)
Inhoco 2297 Limited and (3) Nobia pursuant to which on 14 June 2001 Enodis
sold its building and consumer products division to Nobia for consideration
of (Pounds)134 million (subject to post completion adjustment) satisfied by
the payment of(Pounds)114 million in cash and a vendor loan of(Pounds)20
million (referred to at paragraph (e) above), together with warrants to
acquire shares in Nobia. The consideration was adjusted downwards after
preparation of the completion accounts by approximately(Pounds)2.1 million
pursuant to an agreement dated 17 December 2001. The agreement contains
certain warranties and indemnities from Enodis. In particular, Enodis gave
an indemnity to the purchaser for certain specified environmental matters
up to an aggregate cap of(Pounds)3 million for 3 years from 14 June 2001,
together with an indemnity for previously unidentified environmental
matters up to an aggregate cap of (Pounds)2 million for 6 years from 14
June 2001. There is also a customary tax deed of indemnity given by Enodis
in favour of the purchaser. Claims for breach of any warranty related to
taxation and claims under the tax deed of indemnity must be made within
seven years of 14 June 2001. All other claims for breach of warranty must
be made within two years of 14 June 2001;
(g) an inter-creditor deed dated 20 April 2001 between (1) Nobia and certain of
its subsidiaries (2) certain financial institutions acting as senior
lenders (3) Enodis (4) Svenska Handlesbanken AB (publ) (as facility agent)
(5) Intermediate Capital Group PLC as agent for the mezzanine lenders (6)
Svenska Handlesbanken AB (publ) as security agent which, inter alia,
provides for the subordination of the vendor loan note of (Pounds)20
million granted to Enodis pursuant to the agreement described in paragraph
(e) above to Nobia's existing senior and mezzanine debt;
(h) a settlement agreement dated 14 May 2001 between (1) International Minerals
and Resources, S.A. ("IMR") (2) International Shipping Company, S.A.
("ISL") (3) Shimon Katz (4) Bomar Resources Inc. (5) Bomar Resources
Holdings, Inc. (6) Bomar Resources, Inc. and (7) Enodis pursuant to which
Enodis agreed to pay a total of $17.5 million to IMR and ISR in final
settlement of certain claims related to Bomar Resources Inc., a former
indirect subsidiary of Enodis. Of the $17.5 million, $10 million was paid
on 14 May 2001 and $7.5 million was paid on 1 October 2001;
(i) an agreement dated 9 November 2000 between (1) Ecolab Inc. and (2) Enodis
Corporation pursuant to which Enodis Corporation purchased all the issued
and outstanding shares of common stock of Jackson MSC Inc. for a total
consideration of (Pounds)23.7 million. The agreement contains warranties in
favour of Enodis Corporation which survive for a period of eighteen months
from 9 November 2000 (the "closing date") (other than warranties in respect
of certain tax matters which survive for a period of four years from the
closing date and warranties in respect of the shares being
acquired which survive for the applicable statute of limitations). For
certain types of losses, Ecolab Inc. has agreed to indemnify the Company
only to the extent the Company's losses exceed $500,000 in total (in which
case it may only claim for the excess above $500,000), subject to a maximum
cap on liability of $7,500,000;
(j) a deposit agreement dated 11 July 2000 between (1) the Company, (2)
The Bank of New York and (3) all owners and holders from time to time
of Enodis ADRs pursuant to which Bank of New York acts as depository
and registrar for the Enodis 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 Enodis
ADRs for cancellation and upon payment of fees, expenses and taxes;
(k) an agreement dated 14 June 2000 between (1) 3i Nominees Limited and 3i
96 Partners Nominees Limited (2) Berisford Industrial Holdings Limited
(3) and others pursuant to which the Company acquired Merrychef
Holdings Limited for a total consideration of (Pounds)16.7 million
cash (including repayment of debt); and
(l) those material contracts entered into within the two years immediately
preceding the date of this document which were referred to in the
circular relating to the disposal of the building and consumer
products division dated 24 May 2001 (copies of which are available for
inspection in accordance with paragraph 14 below).
8. LITIGATION
Save as provided in this paragraph 8, no member of the Group is or has been
engaged in any legal or arbitration proceedings (including any such
proceedings which are pending or threatened of which the Company is aware)
which may have or have had, during the 12 months preceding the date of this
document, a significant effect on the financial position of the Group.
(a) Consolidated-related lawsuits
One of the Company's subsidiaries, Enodis Corporation, has been named
in a number of lawsuits throughout the United States in which the
plaintiffs seek to hold it liable for the alleged obligations of its
former subsidiary, Consolidated Industries Corp. ("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.
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. The Company records as a liability on its
financial statements the amount of any future losses that it considers
to be probable and reasonably estimable. Based upon its current
assessments of these lawsuits and claims and the capital resources
available to it, the Company believes 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 the Company's financial condition, liquidity or results of
operations. 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 whilst 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. 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.
(b) 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 or financial condition.
(c) Other litigation
The Company's subsidiaries are routinely defendants in litigation
regarding product liability claims. This litigation is generally
covered by insurance.
9. EMPLOYEE SHARE SCHEMES
Save as disclosed in this paragraph 9, no share or loan capital of the
Company or any of its subsidiaries is under option or is agreed,
conditionally or unconditionally, to be put under option. Further
information regarding the Company's Employee Share Schemes can be found in
Part II on page 51 of this document. The details of options over Ordinary
Shares which were outstanding as at 19 February 2002, (being the latest
practicable date prior to the printing of this document) are shown below in
this paragraph 9.
(a) Former Schemes
(i) Sharesave Scheme (1992).
The options shown below remain outstanding under the Sharesave
Scheme (1992):
Outstanding
Date from Normal number of
which last date Ordinary Shares
Year Exercise Price exercisable for exercise under option
---- -------------- ----------- ------------ ------------
1994............................................. 150.9p 01/09/01 28/02/02 43,102
1995............................................. 181.8p 01/09/02 28/02/03 36,910
1996............................................. 158.8p 01/09/01 28/02/02 15,856
1996............................................. 158.8p 01/09/03 29/02/04 14,978
1997............................................. 112.0p 01/09/02 28/02/03 12,936
1998............................................. 202.7p 01/09/01 28/02/02 481
1998............................................. 202.7p 01/09/03 29/02/04 2,042
1998............................................. 202.7p 01/09/05 28/02/06 13,852
1999............................................. 192.7p 01/09/02 28/02/03 34,553
1999............................................. 192.7p 01/09/04 28/02/05 33,263
1999............................................. 192.7p 01/09/06 28/02/07 8,390
2000............................................. 258.9p 01/09/03 29/02/04 26,310
2000............................................. 258.9p 01/09/05 28/02/06 27,364
2000............................................. 258.9p 01/09/07 29/02/08 16,317
----- -------
Total............................................ 286,354
=======
(ii) Executive Share Option Scheme (1984).
The options shown below remain outstanding under the Executive Share
Option Scheme (1984):
Outstanding
Date from Normal number of
which last date Ordinary Shares
Date of Grant Exercise Price exercisable for exercise under option
------------- -------------- ----------- ------------ ------------
03/02/93......................................... 95.0951p 03/02/96 02/02/03 61,989
14/02/94......................................... 222.9894p 14/02/97 13/02/04 54,881
-------
Total............................................ 116,870
=======
(iii) Executive Share Option Scheme (1995).
The options shown below remain outstanding under the Executive Share
Option Scheme (1995):
Outstanding
Date from Normal number of
which last date Ordinary Shares
Date of Grant Exercise Price exercisable for exercise under option
------------- -------------- ----------- ------------ ------------
31/03/95......................................... 230.5p 31/03/98 30/03/05 18,080
22/07/96......................................... 186p 22/07/99 21/07/06 16,129
22/07/96......................................... 186p 22/07/99 21/07/06 151,526
01/07/97......................................... 144p 01/07/00 30/06/07 390,000
28/11/97......................................... 187.5p 28/11/00 27/11/07 254,802
17/11/98......................................... 180p 17/11/01 16/11/08 137,935
28/07/99......................................... 262.9p 28/07/02 27/07/09 900,000
24/11/99......................................... 314p 24/11/02 23/11/09 90,197
03/07/00......................................... 322p 03/07/03 02/07/10 55,896
03/07/00......................................... 322p 03/07/03 02/07/10 649,820
03/07/00......................................... 322.2p 03/07/03 02/07/10 36,798
21/12/00......................................... 210p 21/12/03 20/12/10 181,065
21/12/00......................................... 216.28p 21/12/03 20/12/10 20,000
---------
Total............................................ 2,902,248
=========
(iv) Executive Share Option Scheme (1993).
The options shown below are options over Existing Ordinary Shares and
remain outstanding under the Executive Share Option Scheme (1993):
Outstanding
Date from Normal number of
which last date Ordinary Shares
Date of Grant Exercise Price exercisable for exercise under option
------------- -------------- ----------- ------------ ------------
25/07/94......................................... 2.071302 25/07/97 24/07/04 67,590
01/07/97......................................... 1.4400 01/07/00 30/06/07 15,580
01/07/97......................................... 1.4400 01/07/00 30/06/07 408,083
26/06/98......................................... 2.3000 26/06/01 25/06/08 213,475
28/07/99......................................... 2.6290 28/07/02 27/07/09 77,055
28/07/99......................................... 2.6290 28/07/02 27/07/09 154,345
03/09/99......................................... 3.0150 03/09/02 02/09/09 93,333
---------------
Total............................................ 1,029,461
===============
(b) Current Schemes
(i) Executive Share Option Scheme (2001) (the "2001 ESOS")
The 2001 ESOS is a discretionary scheme under which options can
be granted to selected employees (including full time directors)
of the Group. Options are granted at market value shortly before
the time of grant. Options are normally exercisable between 3 and
10 years after they are granted. The options normally lapse if an
optionholder leaves employment with the Group except in certain
defined compassionate circumstances.
Options already granted under the 2001 ESOS will be exercisable
in full only if Enodis' total shareholder return over at least
three years is ranked in the upper quartile when compared, as to
50 per cent. of the options to the FTSE Mid 250 Index and, as to
the other 50 per cent. of the options, to a selected group of
companies with similar businesses. If Enodis' total shareholder
return is between the median and the upper quartile positions
relative to these groups, the number of options exercisable will
vary on a pro rata basis between a maximum of 50 per cent. and a
minimum of 17.5 per cent. for each half of the option. If Enodis'
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, an option is not normally exercisable
unless Enodis' earnings per share have grown by at least the
increase in the retail prices index over a three year period.
In the case of future options, the performance condition will be
based on the Company's total shareholder return relative to the
constituents of the FTSE Mid 250 Index. As set out above, options
will be exercisable on a pro rata basis for performance between
the median and upper quartile. However, where an executive
receives no more than one times' salary worth of Ordinary Shares
under option in any year, options will be fully exercisable if
the Company outperforms the median. In addition, the exercise of
options requires a sustained improvement in the Company's
underlying financial performance.
In certain limited circumstances relating to a termination of
employment or a change of control (or similar events), options
may be exercised early, but in the case of a change of control
(or similar event) the performance conditions continue to apply
until the date of the event in question, unless the Remuneration
Committee decides otherwise.
The options shown below remain outstanding under the 2001 ESOS:
Outstanding
Date from Normal number of
which last date Ordinary Shares
Date of Grant Exercise Price exercisable for exercise under option
------------- -------------- ----------- ------------ ------------
22/01/01......................................... 1.81 22/01/04 21/01/11 2,753,919
22/01/01......................................... 2.1045 22/01/04 21/01/11 109,913
12/06/01......................................... 1.81 12/06/04 11/06/11 203,238
10/09/01......................................... 1.01 10/09/04 09/09/11 685,930
---------------
Total............................................ 3,753,000
===============
The Board has agreed to grant further options to certain of the
directors, details of which are set out in paragraph 3(d).
In addition, the Board has agreed in principle to grant options
over an aggregate of approximately 2.4 million Ordinary Shares
(which will be adjusted as a result of the Rights Issue) to a
group of senior executives at an exercise price based on the
market price on or about the date of grant. These include the
agreements in principle to grant options to each of Dave
McCulloch and Dave Odum over a number of Ordinary Shares with a
value equal to his annual salary (as described in paragraph 3(d)
above). It is intended that all of the options described in this
paragraph will be granted in the period following Shareholder
approval of the Rights Issue.
(ii) Other Schemes
Shareholders have also authorised three other employee share
schemes under which executives and others may purchase Ordinary
Shares: the 2002 Sharesave Scheme, the Share Matching Scheme and
the Employee Stock Purchase Plan. Although Shareholders have
authorised them, they have not been implemented and the Company
does not currently intend to implement them.
(c) Dilution Limits
Each Employee Share Scheme which permits the issue of new
Ordinary Shares is limited so that the number of Ordinary Shares
(including ADSs) which may be issued pursuant to options, or
other rights, granted under all such schemes (in aggregate) in a
ten-year period may not exceed 10 per cent. of Enodis' issued
Ordinary Share capital from time to time. This is the principal
dilution limit in the Employee Share Schemes but other limits
also apply.
(d) Rights Issue Adjustments
Each of the current and former schemes provides that, in the
event of a rights issue, the number of shares subject to an
option (or award, in the case of the Enodis Share Matching
Scheme), and the exercise price, may be adjusted. The directors
propose to use this power and adjust the options shown above to
reflect the terms of the Rights Issue. In the case of an option
granted under a Scheme which is approved by the Inland Revenue,
any such adjustment must be agreed with the Inland Revenue.
10. WORKING CAPITAL
The Company is of the opinion that, having regard to the credit facilities
available to the Group and the net proceeds of the Rights Issue, the
working capital available to the Group is sufficient for the Group's
present requirements, that is, for at least the next twelve months from the
date of publication of this document.
11. EXPENSES
The total costs and expenses of, and incidental to, the Rights Issue
payable by the Company including professional fees, pricing and commissions
are estimated to amount to approximately (Pounds)3.6 million (excluding
value added tax). Save as disclosed in paragraph 7(a)(iii), no fees are
payable to financial intermediaries.
Fees and expenses associated with the Rights Issue are expected to total
approximately (Pounds)3.6 million, which will be written off against the
share premium account. Fees and expenses relating to the bridge facility,
term loan and revolving credit facility as well as the proposed offering of
Notes are expected to total approximately (Pounds)13.9 million; these fees
and expenses will be capitalized and amortized over the life of the related
debt. In addition, fees associated with the unwinding of our previous
financing arrangements of (Pounds)2.5 million will be charged as an
exceptional item in the second quarter of the 2002 financial year.
12. MARKET QUOTATIONS
The closing middle market quotations for an Ordinary Share, derived from
the Daily Official List of the London Stock Exchange, for the first dealing
day in each of the last six months prior the date of this document and on
19 February 2002, the latest practicable date prior to the publication of
this document, were as follows:
Ordinary
Date Share price
---- -----------
1 August 2001................................................ 124p
3 September 2001............................................. 115.5p
1 October 2001............................................... 77p
1 November 2001.............................................. 64.5p
3 December 2001.............................................. 92.5p
2 January 2002............................................... 94.5p
1 February 2002.............................................. 84.5p
19 February 2002............................................. 93.0p
13. MISCELLANEOUS
(a) Credit Suisse First Boston (Europe) Limited is registered in England
and Wales with registered number 891554 and its registered office is
at One Cabot Square, London E14 4QJ. Credit Suisse First Boston
(Europe) Limited has given and has not withdrawn its written consent
to the issue of this document with the inclusion herein of the
references to its name in the form and context in which they appear.
(b) The financial information set out in this document relating to the
Group does not constitute statutory accounts of the Group within the
meaning of section 240 of the Act. The auditors of the Company,
Deloitte & Touche (Chartered Accountants and registered auditors) of
Hill House, 1 Little New Street, London EC4A 3TR have audited and
reported on the annual accounts of the Company for the three financial
years made up to 2 October 1999, 30 September 2000 and 29 September
2001 respectively within the meaning of section 235 of the Act. Each
such report was unqualified and did not contain a statement under
section 237(2) or (3) of the Act. Statutory accounts for the Group for
each of such financial years have been delivered to the Registrar of
Companies in England and Wales pursuant to section 242 of the Act.
(c) Deloitte & Touche has given and has not withdrawn its written consent
to the inclusion within this document of its reports and the
references to its name in the form and context in which they appear
for the purposes of Regulation 6(1)(e) of the Financial Services and
Markets Act 2000 (Official Listing of Securities) Regulations 2001.
(d) Save as disclosed in the statement on current trading and Group
prospects in the paragraph headed Current Trading and Prospects in
Part I of this document and the replacement of the Group's banking
facilities with the New Credit Facilities, there has been no
significant change in the trading or financial position of the Group
since 29 December 2001, the end of the last financial period for which
financial statements of the Group have been published.
(e) The Rights Issue has been fully underwritten by Credit Suisse First
Boston Equities Limited on the basis set out in paragraph 7(a) above.
Credit Suisse First Boston Equities Limited has reserved the right to
procure sub-underwriting of the Rights Issue at no additional cost to
the Company. The sub-underwriting of such shares has not been put out
to tender. Your Board believes that the Rights Issue together with the
New Credit Facilities and the proposed offering of Notes provide the
Company with an overall financial package that is appropriately
priced.
(f) The Registrar of the Company is Computershare Investor Services PLC,
P.O. Box 82, The Pavilions, Bridgwater Road, Bristol BS99 7NH.
(g) The Receiving Agents to the Rights Issue are Computershare Investor
Services PLC, P.O. Box 859, The Pavilions, Bridgwater Road, Bristol
BS99 1XZ.
14. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents may be inspected at the registered office of
the Company and at the offices of Clifford Chance LLP, 200 Aldersgate Street,
London EC1A 4JJ during usual business hours on any weekday (Saturdays and public
holidays excepted) from the date of this document until the conclusion of the
Extraordinary General Meeting and any adjournment thereof:
(a) the memorandum and articles of association of the Company;
(b) the audited consolidated accounts of Enodis for the 52 week periods ended
30 September 2000 and 29 September 2001;
(c) the directors' service agreements referred to in paragraph 3(g) above;
(d) the letters of appointment of the non-executive directors referred to in
paragraph 3(h) above;
(e) the material contracts referred to in paragraph 7 above;
(f) the consent letters referred to in paragraph 13 above;
(g) the rules of the Employee Share Schemes, the Employee Stock Purchase Plan
and the Employee Share Ownership Plan trust deed;
(h) the reports of Deloitte & Touche set out in Parts II and V of this
document;
(i) this document; and
(j) Form 20-F, extracts of which are set out in Part II of this document.
21 February 2002
PART VII: DEFINITIONS
"the Act" the Companies Act 1985, as amended; the admission
of the New Ordinary Shares, nil paid, to (i) the
Official List and (ii) trading on the London Stock
Exchange's market for listed securities becoming
effective in accordance
"Admission" with, respectively, the Listing Rules and the
Admission and Disclosure Standards; the
requirements contained in the publication
"Admission and Disclosure Standards" issued by the
London Stock Exchange dated May 2000 containing,
inter alia, the admission requirements to
"Admission and Disclosure be observed by companies seeking admission to
trading on the London Stock Exchange's market
Standards" for listed securities;
"ADRs" American Depository Receipts;
"certificated" or "in
certificated form" a share or other security which is not in
uncertificated form;
"Communications Host" the network provider's communication host as
defined in the glossary to the CREST Manual;
"Company" or "Enodis" Credit Suisse First Boston (Europe) Limited and/or
Enodis plc; " Credit any of its affiliates; the Relevant System (as
Suisse First Boston" defined in the CREST Regulations) in respect of
which CRESTCo is the
Operator (as defined in the CREST Regulations);
CRESTCo Limited, the operator of CREST;
"CREST"
"CRESTCo"
"CREST Courier and Sorting the CREST Courier and Sorting Service
Service" or "CCSS" established by CRESTCo to facilitate, inter alia,
the deposit and withdrawal of securities; the
rules governing the operation of CREST, consisting
of the CREST Reference Manual, CREST Central
Counterparty Service Manual, CREST International
Manual, CREST Rules, CCSS Operations Manual and
CREST Glossary of Terms (all as defined in the
CREST Glossary of Terms issued on 26
"CREST Manual" November 2001); a person who has been admitted by
CRESTCo as a system- member (as defined in the
CREST
"CREST member" Regulations); a person who is, in relation to
CREST, a system- participant (as defined in the
CREST
"CREST participant" Regulations);
"CREST Regulations" the Uncertificated Securities Regulations 2001 (SI
2001 No. 3755), as amended;
"CREST sponsor" a CREST participant admitted to CREST as a CREST
sponsor;
a CREST member admitted to CREST as a sponsored
member (which includes all CREST personal
"CREST sponsored member" members);
"directors" or "Board" the directors of the Company whose names are set
out on page 5 of this document; "Enodis ADRs" the
ADRs evidencing the Enodis ADSs;
"Enodis ADSs" American Depository Shares each representing four
Ordinary Shares;
Sharesave Scheme (1992);
1984 Executive Share Option Scheme;
1993 Executive Share Option Scheme;
1995 Executive Share Option Scheme;
"Employee Share Schemes" 2001 Executive Share Option Scheme;
"Employee Share Ownership the trust created by deed dated 22 July 1994
Plan" between the Company and Mourant & Co. establishing
a trust to hold Ordinary Shares to meet future
obligations under certain share option schemes;
"Enlarged Issued Ordinary the issued share capital of the Company following
Share Capital" the Rights Issue (assuming no options granted
under the Employee Share Schemes are exercised);
"Existing Ordinary Shares" the fully paid Ordinary Shares in issue at the
date of this document;
"Extraordinary General the extraordinary general meeting of the Company
Meeting" or "EGM" to be held at 10.00 a.m. on 18 March 2002, notice
of which is set out at the end of this document;
"Form of Appointment of the document entitled "Enodis plc Form of
Proxy" Appointment of Proxy" enclosed with this document;
"FSA" The Financial Services Authority;
"FSMA" Financial Services and Markets Act 2000;
"Fully Paid Rights" rights to acquire New Ordinary Shares, fully paid;
"Group" Enodis and its subsidiaries;
"Issue Price" 50 pence per New Ordinary Share;
the rules and regulations made by the U.K. Listing
Authority under Part VI of FSMA as amended
"Listing Rules" from time to time;
"London Stock Exchange" London Stock Exchange PLC;
"Member account ID" the identification code or number attached to any
member account in CREST;
"New Ordinary Shares" up to 150,861,463 new Ordinary Shares to be issued
by the Company pursuant to the Rights Issue;
"New Credit Facilities" the senior secured credit facilities and the
bridge loan facility described on page 155;
(i) the Rights Issue; (ii) the issue of(pound)100
million of Notes; and (iii) the replacement credit
facilities agreed by the Company under the New
"New Financing Arrangements" Credit Facilities;
New Ordinary Shares in nil paid form provisionally
allotted to Qualifying Shareholders pursuant to
"Nil Paid Rights" the Rights Issue;
"Notes" long term fixed rate notes;
"Official List" the Official List of the U.K. Listing Authority;
"Ordinary Shares" the ordinary shares of 50 pence each in the
capital of the Company; Shareholders with
registered addresses outside the U.K. or who are
citizens or residents of
"Overseas Shareholders" countries outside the U.K.; the identification
code or membership number used in CREST to
identify a particular CREST
"participant ID" member or other CREST participant;
"Proposals" the passing of the Resolutions and the New
Financing Arrangements; renounceable provisional
allotment letters to be issued to Qualifying
non-CREST Shareholders " Provisional Allotment
Letters" by the Company in respect of the Nil Paid
Rights, pursuant to the Rights Issue; Qualifying
Shareholders whose Ordinary Shares on the register
of members of the Company at the
"Qualifying CREST close of business on the Record Date are in
Shareholders" uncertificated form;
"Qualifying non-CREST Qualifying Shareholders whose Ordinary Shares on
Shareholders" the register of members of the Company at the
close of business on the Record Date are in
certificated form; holders of Ordinary Shares on
the register of members of the Company at the
Record Date with
"Qualifying Shareholders" the exclusion of certain Overseas Shareholders as
described in Part III at paragraph 5;
"Record Date" the close of business on 11 March 2002;
"Registrar" and "Receiving
Agent" Computershare Investor Services PLC;
the resolutions numbered 1, 2 and 5 to be proposed
at the Extraordinary General Meeting, as set out
"Resolutions" in the notice of Extraordinary General Meeting on
"Rights Issue" or "Rights page 166 of this document; the proposed issue by
Offering" way of rights of New Ordinary Shares to Qualifying
Shareholders as described in this document;
"SEC" United States Securities and Exchange Commission,
Washington, DC 20549;
"Shareholder(s)" holder(s) of Ordinary Shares;
an account within a member account in CREST to
"stock account" which a holding of a particular share or other
security in CREST is credited;
the FSA in its capacity as the competent authority
for the purposes of Part VI of the FSMA and in the
exercise of its functions in respect of the
admission to the Official List otherwise than in
"U.K. Listing Authority" accordance with Part VI of the FSMA;
recorded on the relevant register of the share of
security concerned as being held in
"uncertificated" or in uncertificated form in CREST, and title to which,
by virtue of the CREST Regulations, may be
"uncertificated form" transferred by means of CREST;
the agreement between the Company, Credit Suisse
First Boston Equities Limited and Credit Suisse
First Boston (Europe) Limited, a summary of which
"Underwriting Agreement" appears in Part VI of this document at paragraph 7;
"United Kingdom" or "U.K." United Kingdom of Great Britain and Northern
Ireland; the United States of America, its
territories and possessions, any state of the
"United States" or "U.S." United States, and the District of Columbia;
"U.S. person" as defined in Regulation S under the
United States Securities Act of 1933, as
"U.S. Person" amended.
ENODIS PLC
Registered No: 109849
NOTICE OF EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN that an EXTRAORDINARY GENERAL MEETING of the
Company will be held at 10.00 a.m. on 18 March 2002 at the Westbury Hotel, Bond
Street, London W1S 2YF (entrance in Conduit Street) for the purpose of
considering and, if thought fit, passing the following resolutions of which
Resolutions 1 to 4 will be proposed as Ordinary Resolutions and Resolution 5 as
a
Special Resolution:
ORDINARY RESOLUTIONS
1. THAT the authorised share capital of the Company be increased from
(Pounds)172,100,000 divided into 344,200,000 ordinary shares of 50
pence each to (Pounds)300,000,000 divided into 600,000,000 ordinary
shares of 50 pence each by the creation of 255,800,000 ordinary shares
of 50 pence each;
2. THAT subject to the passing of Resolution 1 above, in substitution for
the authority given to them pursuant to the Ordinary Resolution
(numbered 6) passed at the Annual General Meeting on 16 January 2002
(but without prejudice to any previous allotments under such
substituted authority), the directors be generally and unconditionally
authorised in accordance with Section 80 of the Companies Act 1985 (the
"Act") to exercise all powers of the Company to allot relevant
securities (within the meaning of Section 80(2) of the Act) provided
that:
(a) the aggregate of the nominal amount of such securities where
they are shares, and where such securities are not shares, the
nominal amount of the shares in respect of which such
securities confer the right to subscribe or convert, shall not
exceed (Pounds)141,164,119 million, but for this purpose no
account shall be taken of any relevant securities allotted
pursuant to any share option scheme adopted or to be adopted
by the Company; and
(b) this authority shall expire on the date five years after the
passing of this Resolution save that the Company may before
such expiry make an offer or agreement which would or might
require relevant securities to be allotted after such expiry
and the directors may allot relevant securities in pursuance
of such offer or agreement as if the authority conferred
hereby had not expired;
3. THAT conditional on the Rights Issue (as defined in the prospectus sent
to shareholders of the Company dated 21 February 2002) becoming
unconditional in all respects, the 2001 Executive Share Option Scheme,
a copy of the rules of which is produced to the meeting and signed by
the Chairman for the purpose of identification, be amended by the
deletion of "19,000,000" and the substitution for it of "40,050,000" in
paragraph 4.3;
4. THAT conditional on the Rights Issue becoming unconditional in all
respects, the Employee Stock Purchase Plan, a copy of the rules of
which is produced to the meeting and signed by the Chairman for the
purpose of identification, be amended by the deletion of "12,000,000"
and the substitution for it of "19,200,000" and by the deletion of
"3,000,000" and the substitution for it of "4,800,000" in Section 7.1;
and
SPECIAL RESOLUTION
5. THAT subject to the passing of Resolutions 1 and 2 above, the directors
be generally empowered pursuant to Section 95 of the Act to allot
equity securities (within the meaning of Section 94(2) of the Act) of
the Company for cash pursuant to the general authority conferred by
Resolution 2 as if Section 89(1) of the Act did not apply to such
allotment, provided that the power conferred by this Resolution shall
be limited:
(a) to allotments of equity securities where such securities have
been offered (whether by way of a rights issue, open offer or
otherwise) to holders of ordinary shares of 50 pence each in
the capital of the Company and in proportion (as nearly as may
be) to their existing holdings of ordinary shares of 50 pence
each, but subject to the directors having a right to make such
exclusions or other arrangements in connection with such
offering as they deem necessary or expedient:
(i) to deal with equity securities representing
fractional entitlements; and
(ii) to deal with legal or practical problems arising in
any overseas territory or by virtue of shares being
represented by depository receipts, the requirements
of any regulatory body or stock exchange, or any
other matter whatsoever;
(b) to allotments of equity securities for cash otherwise than
pursuant to sub-paragraph (a) above up to a nominal amount not
exceeding in aggregate (pound)10,011,639.50 million.
and this power shall expire on the earlier of the conclusion
of the next Annual General Meeting of the Company to be
held in 2003 and the date 15 months after the passing of this
Resolution, save that the Company may before such expiry make an
offer or agreement which would or might require equity securities
to be allotted after such expiry and the directors may allot
equity securities pursuant to any such offer or agreement as if
the power conferred hereby had not expired.
Date: 21 February 2002
BY ORDER OF THE BOARD
David Hooper
Secretary
Registered office:
Washington House
40-41 Conduit Street
London W1S 2YQ
Notes:
1. Only holders of Ordinary Shares are entitled to attend and vote at the
meeting. Shareholders so entitled may appoint one or more proxies to
attend and, on a poll, vote instead of him/her. A proxy need not be a
member of the Company. A form of appointment of proxy is enclosed.
2. The forms of appointment of proxy, and (in the case of a form of
appointment signed by an agent of a member or on behalf of a
corporation) power of attorney or other written authority under which
such form of appointment is signed or an office copy or duly certified
copy thereof, must be deposited at the office of the Company's
Registrar, Computershare Investor Services PLC, PO Box 1075, The
Pavilions, Bridgwater Road, Bristol BS99 3FA by no later than 10.00
a.m. on 16 March 2002 (being 48 hours before the time appointed for the
above meeting or any adjournment thereof).
3. In accordance with Regulation 41 of the Uncertificated Securities
Regulations 2001, only those members entered on the register of members
of the Company as at 6.00 p.m. on 16 March 2002 shall be entitled to
attend or vote at the meeting in respect of the number of shares
registered in their name at that time. Changes to entries on the
register of members after 6.00 p.m. on 16 March 2002 shall be
disregarded in determining the rights of any persons to attend or vote
at the meeting.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENODIS PLC
February 21, 2002 By: /s/ Andrew Allner
------------------------------
Name: Andrew Allner
Title: Chief Executive Officer