-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M9WRCxEZuwSXPhSV6bNZ3U3cAZn1+hwjzqkWJMP4pTcFJuSxhrQBEnIrFt7CL7fQ 6erkPx2oETcRs+CXvRaFMg== 0000950131-02-004293.txt : 20021112 0000950131-02-004293.hdr.sgml : 20021111 20021112112230 ACCESSION NUMBER: 0000950131-02-004293 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020228 FILED AS OF DATE: 20021112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APW LTD CENTRAL INDEX KEY: 0001111938 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 042576375 FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-15851 FILM NUMBER: 02815950 BUSINESS ADDRESS: STREET 1: N22 W23685 RIDGEVIEW PKWY WEST CITY: WAUKESHA STATE: WI ZIP: 53188-1013 BUSINESS PHONE: 2625237600 MAIL ADDRESS: STREET 1: N22 W23685 RIDGEVIEW PKWY WEST CITY: WAUKESHA STATE: WI ZIP: 53188-1013 10-Q/A 1 d10qa.txt FORM 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q/A (Amendment No. 1) Mark One [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended February 28, 2002 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-15851 APW Ltd. (Exact name of registrant as specified in its charter) Bermuda 04-2576375 ------- ---------- (State or other jurisdiction of (I.R.S. Employer Id. No.) incorporation or organization) Clarendon House 2 Church Street Hamilton HM DX, Bermuda N22 W23685 Ridgeview Parkway West Waukesha, Wisconsin 53188-1013 (Address of principal executive offices) (Zip code) (262) 523-7600 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ ----- The number of shares outstanding of the registrant's Common Stock (including related Preferred Stock purchase rights) as of April 11, 2002 was 40,810,170. APW Ltd. INDEX This amendment on Form 10-Q/A #1 amends Items 1 and 2 of the Quarterly Report of APW Ltd. (the "Company") on Form 10-Q previously filed for the three months and six months ended February 28, 2002 and 2001. This Quarterly Report on Form 10-Q/A #1 is filed in connection with the Company's restatement of its financial statements as of August 31, 2001 and 2000 and for the years ended August 31, 2001, 2000 and 1999 and for the quarters ended February 28, 2002, November 30, 2001, February 28, 2001 and November 30, 2000. Financial statement information and related disclosures included in this amended filing reflect, where appropriate, changes as a result of the restatements as described in Notes 1 and 13. All other information contained in this Quarterly Report on Form 10-Q/A #1 is as of the date referenced for such information in the original filing or, if no date is referenced for information in the original filing, as of the date of such filing.
Page No. -------- PART I - FINANCIAL INFORMATION - ------------------------------ Item 1 - Financial Statements Condensed Consolidated Statements of Operations - Three and Six Months Ended February 28, 2002 and 2001 ............. 3 Condensed Consolidated Balance Sheets - February 28, 2002 and August 31, 2001 ............................. 4 Condensed Consolidated Statements of Cash Flows - Six Months Ended February 28, 2002 and 2001 ....................... 5 Notes to Condensed Consolidated Financial Statements ................. 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................ 20 Item 3 - Quantitative and Qualitative Disclosures About Market Risk ................... 32 PART II - OTHER INFORMATION - --------------------------- Item 1 - Legal Proceedings ............................................................ 33 Item 2 - Changes in Securities and Use of Proceeds .................................... 33 Item 4 - Submissions of Matters to a Vote of Security Holders ......................... 33 Item 5 - Other Information ............................................................ 33 Item 6 - Exhibits and Reports on Form 8-K ............................................. 34 SIGNATURE ............................................................................. 34 - ---------
2 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements - ----------------------------- APW Ltd. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended February 28, February 28, -------------------------------- -------------------------------- As Restated As Restated 2002 2001 2002 2001 --------------- ---------------- --------------- ---------------- Net sales $ 200,855 $ 317,563 $ 420,684 $ 677,286 Cost of products sold 186,221 255,879 385,164 526,510 --------------- ---------------- --------------- ---------------- Gross profit 14,634 61,684 35,520 150,776 Engineering, selling and administrative expenses 50,918 57,248 91,054 113,253 Amortization and impairment of intangible assets 397,372 6,416 403,674 12,441 Restructuring charges 7,465 - 17,476 - (Gain) loss on sale of subsidiary (8,210) - (8,210) 2,667 --------------- ---------------- --------------- ---------------- Operating earnings (loss) (432,911) (1,980) (468,474) 22,415 Financing costs 16,439 7,309 30,939 13,773 Other expense (income), net (132) 741 (494) 1,058 --------------- ---------------- --------------- ---------------- Earnings (loss) before income tax expense (benefit) (449,218) (10,030) (498,919) 7,584 Income tax expense (benefit) 44,256 (3,067) 31,792 2,868 --------------- ---------------- --------------- ---------------- Net earnings (loss) $ (493,474) $ (6,963) $ (530,711) $ 4,716 =============== ================ =============== ================ Basic earnings (loss) per share: Earnings (loss) per share $ (12.32) $ (0.18) $ (13.25) $ 0.12 =============== ================ =============== ================ Weighted average common shares outstanding 40,055 39,444 40,050 39,343 =============== ================ =============== ================ Diluted earnings (loss) per share: Diluted earnings (loss) per share $ (12.32) $ (0.18) $ (13.25) $ 0.11 =============== ================ =============== ================ Weighted average common and potential dilutive common shares outstanding 40,055 39,444 40,050 41,219 =============== ================ =============== ================
See accompanying Notes to Condensed Consolidated Financial Statements 3 APW Ltd. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data)
As Restated ------------------------------------ February 28, August 31, 2002 2001 ---------------- --------------- (Unaudited) ASSETS ------ Current assets Cash and cash equivalents $ 6,866 $ 6,190 Accounts receivable, net 94,395 112,948 Inventories 97,902 130,937 Prepaid expenses 16,538 14,213 Deferred income taxes - 16,650 ---------------- --------------- Total current assets 215,701 280,938 Property, plant and equipment 431,652 477,915 Less: Accumulated depreciation (212,172) (222,886) ---------------- --------------- Net property, plant and equipment 219,480 255,029 Goodwill, net 301,611 679,225 Other intangible assets, net 4,192 27,616 Other assets 47,606 58,524 ---------------- --------------- Total assets $ 788,590 $ 1,301,332 ================ =============== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) ---------------------------------------------- Current liabilities Short-term borrowings $ 644,015 $ 603,353 Trade accounts payable 81,545 119,904 Accrued compensation and benefits 28,838 30,126 Income taxes payable 43,946 33,859 Other current liabilities 65,686 40,701 ---------------- --------------- Total current liabilities 864,030 827,943 Long-term debt - 18,096 Other long-term liabilities 38,274 45,375 Shareholders' equity (deficit) Common Stock--$0.01 par value per share; authorized 250,000,000 shares; issued and outstanding, less contingent shares, 40,055,453 and 40,042,207 shares, respectively 400 400 Share premium 679,429 669,772 Accumulated deficit (764,518) (233,765) Accumulated other comprehensive loss (29,025) (26,489) ---------------- --------------- Total shareholders' equity (deficit) (113,714) 409,918 ---------------- --------------- Total liabilities and shareholders' equity (deficit) $ 788,590 $ 1,301,332 ================ ===============
See accompanying Notes to Condensed Consolidated Financial Statements 4 APW Ltd. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six Months Ended February 28, ------------------------------------ As Restated ------------------------------------ 2002 2001 -------------- --------------- Operating activities - -------------------- Net earnings (loss) $ (530,711) $ 4,716 Adjustments to reconcile net earnings (loss) to net cash used in operating activities: Depreciation and amortization 440,917 31,515 Amortization of financing fees 4,683 - Gain from sale of assets (252) - (Gain) loss on sale of subsidiary (8,210) 2,667 Deferred income taxes 27,565 326 Restructuring charges 17,476 - Changes in operating assets and liabilities: Accounts receivable 31,762 4,709 Inventories 28,487 (27,819) Prepaid expenses and other assets (4,506) (4,755) Trade accounts payable (35,782) 1,521 Income taxes 10,843 (33,412) Other liabilities 5,370 (12,076) -------------- --------------- Net cash used in operating activities (12,358) (32,608) Investing activities - -------------------- Proceeds on the sale of property, plant and equipment 4,112 295 Additions to property, plant and equipment (11,874) (57,848) Net proceeds on sale of subsidiary, net of cash sold 19,241 1,782 Business acquisitions, net of cash acquired - (241,546) Other investing activities (398) (727) -------------- --------------- Net cash provided by (used in) investing activities 11,081 (298,044) Financing activities - -------------------- Net short term borrowings (repayments) (5,548) (86) Principal repayments on long-term debt (132,687) (79,448) Principal borrowings on long-term debt 161,378 364,587 Net commercial paper borrowings - 50,124 Net receivables financed (18,859) (50) Debt financing costs (2,100) - Stock option exercises - 1,405 Other financing activities (42) (823) -------------- --------------- Net cash provided by financing activities 2,142 335,709 Effect of exchange rate changes on cash (189) (2,580) -------------- --------------- Net increase in cash and cash equivalents 676 2,477 Cash and cash equivalents - beginning of period 6,190 712 -------------- --------------- Cash and cash equivalents - end of period $ 6,866 $ 3,189 ============== ===============
See accompanying Notes to Condensed Consolidated Financial Statements 5 APW Ltd. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Restatements - --------------------- APW Ltd. (hereinafter referred to as "APW Ltd.", "APW" or "the Company") has determined that accounting improprieties occurred in fiscal 2002, 2001, 2000 and 1999 at one U.S. subsidiary and in fiscal 2001 at one U.K. subsidiary. These accounting improprieties resulted in the overstatement of assets (primarily cash and inventory) and income and the understatement of liabilities (primarily trade accounts payable and accrued compensation and benefits) and expense. As a result, the consolidated financial statements as of August 31, 2001 and 2000 and for the years ended August 31, 2001, 2000 and 1999 as well as the interim results for these periods and the results for the interim periods ended November 30, 2001 and February 28, 2002 have been restated. The restated consolidated financial statements as of August 31, 2001 and 2000 and for the years ended August 31, 2001, 2000 and 1999 have been included in a Form 10-K/A. Restated condensed financial statement information for the interim periods in the years ended August 31, 2001 and 2000 have been included in Item 8 of the Form 10-K/A. Restated condensed financial statement information for the interim periods ended February 28, 2002 and 2001 are included herein. A summary of the effects of the restatements are set forth in Note 13. As a result of the restatement for the year ended August 31, 2001, the Company believes that it would have been in default of certain debt covenants as of August 31, 2001, unless the Company had obtained waivers or the Company's lenders had amended the debt covenants. Accordingly, the Company has classified borrowings under the Revolving Multi-Currency Credit Agreement and the U.K. Facility Agreement as a current liability as of August 31, 2001 in the restated consolidated financial statements. Note 2 - Holding Company Structure - ---------------------------------- APW Ltd. operates as a holding company that has no significant assets other than investments in the stock of its wholly owned subsidiaries. APW Ltd. has significant indebtedness, incurred through its Multi-Currency Credit facilities, which is collateralized by substantially all of the assets, including the stock of its subsidiaries. APW Ltd. relies on dividends and distributions from its subsidiaries as its primary source of cash, primarily to service its indebtedness. Note 3 - Summary of Significant Accounting Policies - --------------------------------------------------- Description of Business: APW Ltd. is a leading global provider of ----------------------- Technically Enabled Manufacturing Services ("TEMS"), focused on designing and integrating large electronic products. APW has the capabilities to design and manufacture various subsystems for electronic products, including enclosures, thermal management systems, backplanes, power supplies, printed circuit board assemblies, and cabling, either as integrated custom systems or as individual subsystems. In addition, APW provides a wide range of integration services to its customers, including product design, supply chain management, manufacturing, assembly, testing and drop-ship services. APW's focus is on large infrastructure solutions, such as wireless base stations and switches, enterprise hardware and Internet server enclosures. APW is not targeting high volume markets, such as personal computers or cell phone handsets. These offerings provide APW's customers with accelerated time-to-market and decreased time-to-volume production, while reducing their production costs and allowing them to focus on the design and marketing of their products. APW believes the Company's emphasis on technical innovation and vertically integrated engineering and manufacturing expertise, coupled with its total solution approach, which can be delivered on a worldwide basis, differentiates the Company in the marketplace. Basis of Presentation: The accompanying unaudited condensed consolidated --------------------- financial statements of APW Ltd. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the financial statements include all adjustments which are normal and recurring in nature necessary to present fairly the financial position of the Company at February 28, 2002, the results of operations for the three and six months ended February 28, 2002 and 2001 and cash flows for the six months ended February 28, 2002 and 2001. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company's fiscal 2001 Annual Report on Form 10-K. Earnings (Loss) Per Share: Basic earnings per share is calculated by ------------------------- dividing net earnings (loss) by the weighted average common shares outstanding during the period. Diluted earnings per share is calculated by using the weighted average common shares outstanding adjusted to include the potentially dilutive effect of outstanding stock options and warrants. 6 Earnings (loss) per share for the three and six months ended February 28, 2002 and 2001 is based on the following (in thousands, except earnings per share amounts):
Three Months Ended Six Months Ended February 28, February 28, ----------------------- ----------------------- As Restated As Restated ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- --------- ---------- Numerator: Net earnings (loss) for basic and diluted earnings per share $ (493,474) $ (6,963) $ (530,711) $ 4,716 ========== ========== ========== ========== Denominator: Weighted average common shares outstanding for basic earnings (loss) per share 40,055 39,444 40,050 39,343 Net effect of dilutive stock options based on the treasury stock method - - - 1,876 ---------- ---------- ---------- ---------- Weighted average common and potential common shares outstanding for diluted earnings (loss) per share 40,055 39,444 40,050 41,219 ========== ========== ========== ========== Basic earnings (loss) per share $ (12.32) $ (0.18) $ (13.25) $ 0.12 ========== ========== ========== ========== Diluted earnings (loss) per share $ (12.32) $ (0.18) $ (13.25) $ 0.11 ========== ========== ========== ==========
When the Company reports positive net earnings, the diluted earnings per share calculation will include the impact of dilutive securities issued under the existing stock option plans and issued warrants. Fiscal 2002 diluted earnings per share exclude the effect of options to purchase approximately 6.9 million shares of common stock because they would be anti-dilutive due to the net loss during the three and six months ended February 28, 2002. Warrants to purchase approximately 6.2 million shares of common stock were outstanding as of February 28, 2002, but were not included in the computation of diluted earnings (loss) per share because they would be anti-dilutive due to the net loss for the three and six months ended February 28, 2002. New Accounting Pronouncements: In June 2001, Statement of Financial ----------------------------- Accounting Standards ("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets" were issued. The statements eliminate the pooling-of-interests method of accounting for business combinations and require that goodwill and certain intangible assets not be amortized. Instead, these assets will be reviewed for impairment annually with any related losses recognized in earnings when incurred. SFAS No. 141 was effective for APW Ltd. as of July 31, 2001. SFAS No. 142 will be effective for the Company on September 1, 2002 for existing goodwill and intangible assets. The Company is currently evaluating the impact of SFAS No. 142. In June 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations" was issued. SFAS No. 143 sets forth the financial accounting and reporting to be followed for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are to be capitalized as part of the carrying amount of the long-lived asset. Subsequently, the recorded liability will be accreted to its present value and the capitalized costs will be depreciated. The Company is required to adopt SFAS No. 143 on September 1, 2002. The Company is currently evaluating the impact of SFAS No. 143. In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued. SFAS No. 144 modifies and expands the financial accounting and reporting for the impairment or disposal of long-lived assets other than goodwill, which is specifically addressed by SFAS No. 142. SFAS No. 144 maintains the requirement that an impairment loss be recognized for a long-lived asset to be held and used if its carrying value is not recoverable from its undiscounted cash flows, with the recognized impairment being the difference between the carrying amount and fair value of the asset. With respect to long-lived assets to be disposed of other than by sale, SFAS No. 144 requires that the asset be considered held and used until it is actually disposed of but requires that its depreciable life be revised in accordance with APB Opinion No. 20, "Accounting Changes." SFAS No. 144 also requires that an impairment loss be recognized at the date a long-lived asset is exchanged for a similar productive 7 asset. The Company will be required to adopt SFAS No. 144 on September 1, 2002. The Company is currently evaluating the impact of SFAS No. 144. Reclassifications: Certain prior period amounts have been reclassified to ------------------ conform with the fiscal 2002 presentation. Such reclassifications had no impact on previously reported net earnings (loss). Note 4 - Intangible Asset Impairment, Restructuring and Other Charges - --------------------------------------------------------------------- Goodwill and other intangible asset impairment charge During the second quarter of fiscal 2002, the Company performed an impairment assessment of long-lived assets, which include property, plant and equipment, goodwill and other intangible assets. The assessment was performed primarily due to the reduced financial performance of the Company's operating results during the second quarter of fiscal 2002 as compared with previously developed estimates (see Note 10). As a result of the most recent assessment, the Company recorded a $391.6 million impairment charge to further reduce the carrying value of goodwill and other intangible assets. The impairment charge is recorded as a component of amortization and impairment of intangible assets in the Condensed Consolidated Statement of Operations. In determining whether an impairment of long-lived assets has occurred, the Company compares estimated undiscounted cash flows to the related asset book value. The charge was measured in accordance with the provisions of SFAS No. 121, based upon the Company's estimated future discounted cash flows using a discount rate determined by management to be commensurate with the risk inherent in the Company's current business model. The remaining long-lived assets are supported by management's current best estimates of future undiscounted cash flows and will continue to be depreciated and amortized over their remaining useful lives, which management considers appropriate. However, there can be no assurances that the Company's revised forecast will be achieved and accordingly future impairment charges may be necessary. Additionally, the carrying value of remaining long-lived assets is supported by estimates of future undiscounted cash flows as of February 28, 2002, and such amounts could be stated at amounts in excess of their fair values. Restructuring Beginning in fiscal 2001 and continuing in fiscal 2002, management developed formal plans to exit certain facilities and involuntarily terminate employees. Management's plans to exit certain facilities included the identification of manufacturing and sales facilities for closure and the transfer of the related operations to other facilities. Management currently anticipates that the facility closures and all related activities will be substantially complete within one year of the commitment dates of the respective exit plans. During the three and six months ended February 28, 2002, the Company recognized pre-tax restructuring and other charges of $16.9 million and $36.5 million, respectively. The components of the charges recorded are as follows (in millions): Three Months Six Months Ended Ended February 28, February 28, 2002 2002 -------------------------- Facility closure costs: Severance $ 1.1 $ 7.5 Lease exit costs 6.4 10.0 Equipment impairment 7.6 15.5 Other costs 1.8 3.5 -------------------------- Total facility closure costs $ 16.9 $ 36.5 ========================== Facility closure costs relate to the rationalization of seven facilities in the first quarter of fiscal 2002 and three facilities in the second quarter of fiscal 2002. The severance charges impact both salaried and hourly employees. The costs are recorded in the Condensed Consolidated Statement of Operations for the three and six months ended February 28, 2002, respectively, as follows: (i) severance and lease exit costs totaling $7.5 million and $17.5 million are recorded as restructuring charges; and (ii) equipment impairment charges, resulting from facility closures, of $7.6 million ($5.5 million recorded as cost of products sold and $2.1 million recorded as engineering, selling and administrative expenses) and $15.5 million ($13.4 million recorded as cost of products sold and $2.1 million recorded as engineering, selling and administrative expenses) and other facility closure costs totaling $1.8 million 8 and $3.5 million are recorded as cost of products sold. The following table summarizes the activity with respect to fiscal 2002 restructuring charges (in millions, except employee data):
Number of Severance Facilities Employees Reserve Reserve Total Reserve ------------- ------------ ------------- --------------- Total reserve balance at August 31, 2001 287 $ 2.1 $ 5.2 $ 7.3 Add: Fiscal 2002 six month charges 612 7.5 10.0 17.5 Less: Fiscal 2002 six month utilization (677) (5.6) (3.9) (9.5) ------------- ------------ ------------- --------------- Total reserve balance at February 28, 2002 222 $ 4.0 $ 11.3 $ 15.3 ============= ============ ============= ===============
Additionally, the Company has recorded a charge of $2.0 million (recorded as a component of engineering, selling and administrative expenses in the Condensed Consolidated Statement of Operations) during the second quarter related to its decision to discontinue use of its two leased aircraft. This charge reflects management's current estimates relating to future required lease payments and the ultimate disposition timing and proceeds of the two aircraft. See further discussion in Note 10. Note 5 - Comprehensive Income (Loss) - ------------------------------------ The components of comprehensive income (loss) are as follows (in thousands):
Three Months Ended Six Months Ended February 28, February 28, --------------------------- ------------------------- As Restated As Restated --------------------------- ------------------------- 2002 2001 2002 2001 ------------- ------------ ----------- ------------ Net earnings (loss) $ (493,474) $ (6,963) $(530,711) $ 4,716 Cumulative effect of change in accounting principle for derivatives and hedging activities, net of tax - - - 168 Derivative instrument fair market value adjustment (724) (1,030) (1,379) (1,072) Reclassification of derivative losses to earnings 343 39 539 81 Foreign currency translation adjustments (593) 1,934 (1,696) (161) ------------- ------------ ----------- ------------ Comprehensive (loss) income $ (494,448) $ (6,020) $(533,247) $ 3,732 ============= ============ =========== ============
Note 6 - Inventories - -------------------- Inventories consisted of (in thousands):
As Restated ------------------------------------- February 28, August 31, 2002 2001 ---------------- ---------------- Raw material $ 57,138 $ 73,427 Work-in-progress 25,536 31,945 Finished goods 28,203 39,591 ---------------- ---------------- Total inventories, gross 110,877 144,963 Less: inventory reserves (12,975) (14,026) ---------------- ---------------- Total inventories $ 97,902 $ 130,937 ================ ================
Note 7 - Divestitures - --------------------- On February 13, 2002, APW Ltd. completed the sale of its Zero Cases division. Total consideration from the transaction was a net $19.2 million, which resulted in a net book gain of $8.2 million. 9 Note 8 - Accounts Receivable Facility - ------------------------------------- At February 28, 2002 and August 31, 2001, accounts receivable were reduced by $39.1 million and $58.0 million, respectively, representing receivable interests sold under the Accounts Receivable Facility. The maximum that can be sold under this facility is $80.0 million, but at any date is limited to the amount of the Company's eligible receivables. The balance at February 28, 2002 reflects that limit. Eligible receivables are based on geographic origination, aging status and customer concentration limits. Note 9 - Contingencies and Litigation - ------------------------------------- APW Ltd. is a party to various legal proceedings which have arisen in the normal course of its business. These legal proceedings typically include product liability, environmental, labor, patent and contract claims, and commission disputes. APW Ltd. has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable that a loss has been incurred as of the balance sheet date and such loss can be reasonably estimated. In the opinion of management, the resolution of these contingencies will not have a material adverse effect on APW Ltd.'s financial condition, results of operations or cash flows. APW Ltd. has facilities at numerous geographic locations, which are subject to a range of environmental laws and regulations. Compliance with these laws has and will require expenditures on a continuing basis. Predecessors to APW Ltd. have been identified by the United States Environmental Protection Agency ("EPA") as "Potentially Responsible Parties" regarding various multi-party Superfund sites. Potentially Responsible Parties are jointly and severally liable with respect to Superfund remediation liabilities. Any liability in connection with these sites has been assumed by APW Ltd. Based on the Company's investigations, management believes that the Company is a de minimis participant in certain of these sites. As to one other site, the Company is a minor participant, and the Company's share of estimated cleanup costs is not likely to exceed $1.1 million. As to another EPA site where the Company is not a de minimis participant, the state has required additional ground water testing at a former APW Ltd. manufacturing facility, and the Company cannot reasonably estimate the amount of the Company's liability, if any. In addition, the Company is also involved in other state cleanup actions for which management believes the aggregate costs of remediation are adequately reserved for. APW Ltd. anticipates that environmental costs will be expensed or capitalized depending on their future economic benefits. Expenditures that have no future economic value are expensed. Liabilities will be recorded when environmental remediation is probable and the costs can be reasonably estimated. Although the level of future expenditures for environmental remediation is impossible to determine with any degree of certainty, management does not believe these costs are likely to have a material adverse effect on APW Ltd.'s financial position, results of operations or cash flows. The Company, as well as one current, and one former executive have been sued in three actions which are pending in the United States District Court for the Eastern District of Wisconsin in connection with alleged violations of Federal securities laws which preceded a drop in the price of its common stock ending on March 20, 2001. The first of these suits which is captioned Stewart Norman Hicks v. APW Ltd., et al., was filed on December 10, 2001. The subsequently filed suits are captioned Robert Betz v. APW Ltd, et al., and Market Street Securities v. APW Ltd., et al. The complaints for all three suits allege violations of the Federal securities laws and seek certification of a plaintiff class consisting of all purchasers of the Company's common stock between September 26, 2000 and March 20, 2001, inclusive. The complaint does not quantify the damages. The Company has not yet been served with the complaints but understands that the respective plaintiffs intend to seek consolidation of the suits. At this time, the Company cannot evaluate the merits of these claims. Note 10 - Liquidity, Debt Covenant Compliance and Management's Plans - -------------------------------------------------------------------- On September 27, 2001, the Company's lenders amended certain debt covenants associated with APW Ltd.'s Multi-Currency Credit Agreement, UK Revolving Credit Agreement and the Accounts Receivable Facility (collectively, "credit facilities"). These revised covenants were established based upon APW Ltd. management's financial forecasts prior to the events of September 11, 2001. Following the events of September 11 and throughout the fiscal 2002 first quarter, APW Ltd. experienced a significant decline in net sales compared to prior periods and a further decline compared to management's financial forecasts that were the basis for the financial covenants set forth in the September 27, 2001 10 amendment. Such declines are related to a number of factors, certain of which were impacted by the terrorist attacks that took place in the United States on September 11, 2001. On December 13, 2001, the Company's lenders amended certain debt covenants associated with the Company's credit facilities to reflect the Company's revised financial forecasts as of that point in time. The revisions in the covenants were considered necessary due to the magnitude of the decline in the fiscal 2002 first quarter actual results compared to prior periods and management's forecasts. In addition, the amendment repriced the outstanding warrants issued in conjunction with the May 15, 2001 amendment to the closing price of APW Ltd.'s common stock on December 10, 2001 of $1.98 and eliminates the previous reduction provision if the Company met repayment targets by August 31, 2002. The Company also issued warrants for 9.9% of the common stock outstanding on December 13, 2001 (approximately 4.1 million shares) at a price of $0.01. These $0.01 warrants are cancelled if the credit facilities are repaid by July 31, 2002 (entirely cancelled) or September 30, 2002 (49.5% cancelled). During the second quarter of fiscal 2002, $8.5 million was recorded as the estimated fair value of the warrants issued in conjunction with the December amendment and was recorded as an increase in deferred financing costs and an increase in share premium. As a result of the restatement for the year ended August 31, 2001, the Company believes that it would have been in default of certain debt covenants as of August 31, 2001, unless the Company had obtained waivers or the Company's lenders had amended the debt covenants. Accordingly, the Company has classified borrowings under the Revolving Multi-Currency Credit Agreement and the U.K. Facility Agreement as a current liability as of August 31, 2001 in the restated consolidated financial statements. During the quarter ended February 28, 2002, the Company amended its credit facilities on three different occasions. The net result of these amendments was: (i) to provide a temporary deferment of cash interest payment obligations until April 15, 2002; (ii) to increase the size of the UK Revolving Credit Facility by approximately $5.0 million under the UK Revolving Credit Agreement; (iii) to allow for the sale of the assets of the Company's Zero Cases division; and (iv) to provide a waiver of all financial covenant requirements for the period from January 31, 2002 until April 15, 2002. Prior to considering the effects of the restatement as of February 28, 2002, the Company was in compliance under its credit facilities as a result of having all of the financial covenants waived. Based on its current projections, the Company believes that it is probable that it will not meet certain of these covenants for the period ending May, 31, 2002 unless further waived or otherwise amended through ongoing negotiations with its lenders. As such, in accordance with Emerging Issues Task Force Issue ("EITF") 86-30, the Company has classified all of its debt obligations as current as of February 28, 2002. The Company has been pursuing discussions with its lenders concerning a recapitalization plan. The discussions have centered around a recapitalization of the balance sheet that is intended to result in no disruption to the operating subsidiaries and their suppliers, who will be paid in full in the normal course of business. In connection with the recapitalization plan, the Company intends that such plan would entail the following: (i) the conversion of $550.0 million of the current and outstanding debt plus accrued interest to common stock; (ii) the allowance of a new financing line of credit of $110.0 million; (iii) the issuance of common stock (and possible preferred stock or warrants) to the existing lenders so that they would end up owning substantially all of the outstanding capital stock of the Company; (iv) the issuance of warrants to the Company's existing shareholders for some number of additional shares which become exercisable if the lenders receive a return of their initial investment; and (v) the retention of existing management. The Company has been negotiating this plan with the lenders and primarily through its steering committee. To date, the Company and the lenders have agreed in principal on the main terms of the recapitalization plan, but no definitive agreement has yet been agreed to and executed. It is anticipated that the plan will be implemented through a pre-packaged or pre-negotiated Chapter 11 of APW Ltd., the holding company. Consequently, the lenders will have agreed to the terms of the recapitalization plan prior to the filing. This plan would be structured in such a way so that all of the obligations of APW Ltd. (see Note 2 - Holding Company Structure) could be assumed, adjusted or eliminated in a bankruptcy proceeding. The Company and its lenders are structuring the recapitalization of the Company so that only APW Ltd., the holding company, should be affected. Under this plan, the Chapter 11 filing of APW Ltd., the holding company, will not effect, in any direct way the operating subsidiaries and their ability to conduct business normally with their customers and suppliers. In particular, there is no intent to impair the suppliers of the operating subsidiaries. If the Company cannot execute the recapitalization plan as currently conceived, APW Ltd. would likely be forced to file and seek protection under the bankruptcy laws. Given, that at this point there is not a definitive recapitalization plan document agreed to with the Company's lending group and as such, prospectively the Company could be required to meet the future financial covenants of our current amended credit facilities (unless otherwise waived or amended), which the Company feels that at this point is not probable, coupled with the Company's current level of liquidity, there is substantial doubt about the Company's ability to continue as a going concern. In order to facilitate the finalization of negotiations regarding the terms of the recapitalization and the related documentation, on April 15, 2002, the Company unanimously received an extension with regard to the deferment of interest payments and a waiver of all financial covenants for the period through May 14, 2002. The Accounts Receivable Facility will terminate on May 15, 2002 unless terminated earlier according to its terms (including, without limitation the occurrence of a "termination event" that is not waived or amended) or extended by mutual agreement of parties thereto. The Company does not currently expect that the facility will be extended beyond the May 15, 2002 termination date. APW Ltd.'s management plans to continue to aggressively pursue additional revenue opportunities within its 11 core customer markets. APW Ltd. adopted several restructuring plans during fiscal 2001 and throughout the first six months of fiscal 2002 in an effort to reduce costs in the wake of declining net sales experienced during those periods. These programs resulted in restructuring charges during fiscal 2001 and the first six months of fiscal 2002 and have provided cost savings that are expected to continue into the future. Management plans to consider additional cost-reduction programs, as necessary, to further align the Company's cost base with net sales. In December 2001, a subsidiary of the Company received notification from the lessor of two of its aircraft that the lease contracts ("contracts") for the two aircraft would be terminated effective March 4, 2002. In conjunction with the termination, the terms of the contracts would require the Company to pay the lessor approximately $12.3 million for the two aircraft and, in exchange, the lessor would convey all of its rights, title and interest in the two aircraft to the Company. The Company is actively working with the lessor to identify a third party which would purchase and/or lease the two aircraft, thereby eliminating the Company's $12.3 million payment obligation. The lessor has informed the Company that it is willing to continue to work with the Company to find third party alternatives to eliminate the cost of terminating this contract, provided the Company continues to make scheduled lease payments. As such, the Company has recorded a charge of $2.0 million during the second quarter related to its decision to discontinue use of the related aircraft. This charge reflects management's current estimates relating to future required lease payments and the ultimate disposition timing and proceeds of the two aircraft. Note 11 - Income Taxes - ---------------------- Due to the size of APW Ltd.'s net operating loss carry-forwards in relation to the Company's recent history of unprofitable operations and to the continuing uncertainties surrounding recoverability of these losses and other net deferred tax assets, a valuation allowance of $138.5 million has been established to reduce the Company's net deferred tax assets to $0.4 million as of February 28, 2002. APW Ltd. currently provides for income taxes only to the extent that the Company expects to pay taxes for current income, as well as for deferred taxes for those tax jurisdictions in which the Company continues to be profitable. Note 12 - Subsequent Events - --------------------------- On April 2, 2002, the Company received notification from the New York Stock Exchange ("NYSE") that the Company's shares of common stock have been suspended and that the issue has been removed from the NYSE's trading list due to its non-compliance with the exchange's continuing listing criteria. As of April 8, 2002 the Company commenced trading on the OTC Bulletin Board under the ticker "APWLF". On April 15, 2002 the Company unanimously received an extension with regard to the deferment of interest payments and a waiver of all financial covenants for the period through May 14, 2002. 12 Note 13--Restated Financials - ---------------------------- As described in Note 1, the consolidated financial statements as of February 28, 2002 and 2001 and for the three months and six months ended February 28, 2002 and 2001 have been restated. These quarterly statements are unaudited. A review of the consolidated financial statements for the three and six month periods ended February 28, 2001 has not been performed by the Company's independent accountants. A summary of the effects of the restatements follows: APW Ltd. Consolidated Statement of Operations (Dollars in millions, except per share data)
For the 3 Months Ended February 28, 2002 (Unaudited) --------------------------------------------------------- Previously Reported Adjustments As Restated ---------- ----------- ----------- Net sales $ 200.9 $ -- $ 200.9 Costs of products sold 185.2 1.0 186.2 ------- ------ ------- Gross profit 15.7 (1.0) 14.7 Engineering, selling and administrative expenses 51.2 (.3) 50.9 Amortization of intangible assets 397.4 -- 397.4 Restructuring charges 7.5 -- 7.5 Gain on sale of subsidiary (8.2) -- (8.2) ------- ------ ------- Operating loss (432.2) (.7) (432.9) Net financing costs 16.4 -- 16.4 Other income, net (.1) -- (.1) ------- ------ ------- Loss before income tax expense (448.5) (.7) (449.2) Income tax expense 40.3 4.0 44.3 ------- ------ ------- Net loss $(488.8) $ (4.7) $(493.5) ======= ====== ======= Basic and diluted loss per share: Loss per share $(12.20) $ (.12) $(12.32) Weighted average common shares outstanding 40,055 -- 40,055
13 APW Ltd. Consolidated Statement of Operations (Dollars in millions, except per share data)
For the 6 Months Ended February 28, 2002 (Unaudited) ---------------------------------------------------- Previously Reported Adjustments As Restated ---------- ----------- ----------- Net sales $ 420.7 $ -- $ 420.7 Costs of products sold 383.2 2.0 385.2 ------- ------- ------- Gross profit 37.5 (2.0) 35.5 Engineering, selling and administrative expenses 91.5 (.5) 91.0 Amortization of intangible assets 403.7 -- 403.7 Restructuring charges 17.5 -- 17.5 Gain on sale of subsidiary (8.2) -- (8.2) ------- ------- ------- Operating loss (467.0) (1.5) (468.5) Net financing costs 30.9 -- 30.9 Other income, net (.5) -- (.5) ------- ------- ------- Loss before income tax expense (497.4) (1.5) (498.9) Income tax expense 28.1 3.7 31.8 ------- ------- ------- Net loss $(525.5) $ (5.2) $(530.7) ======= ======= ======= Basic and diluted loss per share: Loss per share $(13.12) $ (.13) $(13.25) Weighted average common shares outstanding 40,050 -- 40,050
14 APW Ltd. Consolidated Balance Sheet (Dollars in millions)
February 28, 2002 (Unaudited) ----------------------------------------------------- Previously Reported Adjustments As Restated ---------- ----------- ----------- ASSETS - ------ Current assets Cash and cash equivalents $ 9.0 $ (2.1) $ 6.9 Accounts receivable, net 94.4 -- 94.4 Inventories 104.1 (6.2) 97.9 Prepaid expenses 16.8 (.3) 16.5 ----------------- ----------- ----------------- Total current assets 224.3 (8.6) 215.7 Property, plant and equipment 431.7 -- 431.7 Less: Accumulated depreciation (212.2) -- (212.2) ----------------- ----------- ----------------- Net property, plant and equipment 219.5 -- 219.5 Goodwill, net 301.6 -- 301.6 Other intangibles, net 4.2 -- 4.2 Other assets 47.5 .1 47.6 ----------------- ----------- ----------------- Total assets $ 797.1 $ (8.5) $ 788.6 ================= =========== ================= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities Short-term borrowings $ 644.0 $ -- $ 644.0 Trade accounts payable 80.2 1.4 81.6 Accrued compensation and benefits 28.2 .6 28.8 Income taxes payable 43.9 -- 43.9 Other current liabilities 65.1 .6 65.7 ----------------- ----------- ----------------- Total current liabilities 861.4 2.6 864.0 Other long-term liabilities 38.3 -- 38.3 Shareholders' equity Common stock .4 -- .4 Share premium 679.4 -- 679.4 Accumulated deficit (753.4) (11.1) (764.5) Accumulated other comprehensive loss (29.0) -- (29.0) ----------------- ----------- ----------------- Total shareholders' equity (102.6) (11.1) (113.7) ----------------- ----------- ----------------- Total liabilities and shareholders' equity $ 797.1 $ (8.5) $ 788.6 ================= =========== =================
15 APW Ltd. Consolidated Condensed Statement of Cash Flows (Dollars in millions)
For the 6 Months Ended February 28, 2002 (Unaudited) ---------------------------------------------------- Previously Reported Adjustments As Restated ---------- ----------- ----------- Net loss $(525.5) $(5.2) $(530.7) Net cash used in operating activities (12.6) .2 (12.4) Net cash provided by investing activities 11.1 -- 11.1 Net cash provided by financing activities 2.2 -- 2.2 Effect of exchange rate changes on cash (.2) -- (.2) Net increase in cash and cash equivalents .5 .2 .7 Cash and cash equivalents-beginning of year 8.5 (2.3) 6.2 Cash and cash equivalents-end of year $ 9.0 $(2.1) $ 6.9
16 APW Ltd. Consolidated Statement of Operations (Dollars in millions, except per share data)
For the 3 Months Ended February 28, 2001 (Unaudited) ---------------------------------------------------- Previously Reported Adjustments As Restated ---------- ----------- ------------ Net sales $ 317.6 $ -- $ 317.6 Costs of products sold 254.2 1.7 255.9 ------- ------- ------- Gross profit 63.4 (1.7) 61.7 Engineering, selling and administrative expenses 57.3 (.1) 57.2 Amortization of intangible assets 6.4 -- 6.4 ------- ------- ------- Operating loss (.3) (1.6) (1.9) Net financing costs 7.3 -- 7.3 Other expense, net .8 -- .8 ------- ------- ------- Loss before income tax benefit (8.4) (1.6) (10.0) Income tax benefit (2.5) (.6) (3.1) ------- ------- ------- Net loss $ (5.9) $ (1.0) $ (6.9) ======= ======= ======= Basic and diluted loss per share: Loss per share $ (.15) $ (.03) $ (.18) Weighted average common shares outstanding 39,444 -- 39,444
17 APW Ltd. Consolidated Statement of Operations (Dollars in millions, except per share data)
For the 6 Months Ended February 28, 2001 (Unaudited) ---------------------------------------------------- Previously Reported Adjustments As Restated ---------- ----------- ----------- Net sales $ 677.3 $ -- $ 677.3 Costs of products sold 523.2 3.3 526.5 ------- ------- ------- Gross profit 154.1 (3.3) 150.8 Engineering, selling and administrative expenses 113.3 -- 113.3 Amortization of intangible assets 12.4 -- 12.4 Loss on sale of subsidiary 2.7 -- 2.7 ------- ------- ------- Operating earnings 25.7 (3.3) 22.4 Net financing costs 13.8 -- 13.8 Other expense, net 1.0 -- 1.0 ------- ------- ------- Earnings before income tax expense 10.9 (3.3) 7.6 Income tax expense 4.0 (1.1) 2.9 ------- ------- ------- Net earnings $ 6.9 $ (2.2) $ 4.7 Basic earnings per share: Earnings per share $ .17 $ (.05) $ .12 Weighted average common shares outstanding 39,343 -- 39,343 Diluted earnings per share: Earnings per share $ .17 $ (.06) $ .11 Weighted average common shares outstanding 41,219 -- 41,219
18 APW Ltd. Consolidated Condensed Statement of Cash Flows (Dollars in millions)
For the 6 Months Ended February 28, 2001 (Unaudited) ---------------------------------------------------- Previously Adjustments As Restated Reported ---------- ----------- ----------- Net earnings $ 6.9 $(2.2) $ 4.7 Net cash used in operating activities (31.4) (1.2) (32.6) Net cash used in investing activities (298.0) -- (298.0) Net cash provided by financing activities 335.7 -- 335.7 Effect of exchange rate changes on cash (2.6) -- (2.6) Net increase in cash and cash equivalents 3.7 (1.2) 2.5 Cash and cash equivalents-beginning of year .6 .1 .7 Cash and cash equivalents-end of year $ 4.3 $(1.1) $ 3.2
Note 14 - Reorganization Under Chapter 11 On May 16, 2002, APW Ltd. (in provisional liquidation) (hereinafter referred to as "APW Ltd.", "APW" or "the Company"), a Bermuda company, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code ("Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York ("Bankruptcy Court") (Case No. 02-12335). The proceeding involved only APW Ltd., the Bermuda company, and Vero Electronics, Inc., a non-operating entity and subsidiary of APW Ltd. (Case No. 02-12334). All other subsidiaries of the Company were excluded from the proceeding and continue to conduct business with customers and suppliers in the ordinary course. The Company continued to operate its business as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. The bankruptcy proceedings are being jointly administered under Case No. 02-12334 (PCB). On May 30, 2002, a proceeding (the "Bermuda Proceeding") was commenced pursuant to the Companies Act 1981 with respect to APW Ltd. in the Bermuda Supreme Court in connection with a winding-up petition. One of the purposes of the filing was the imposition of a statutory stay preventing third parties from continuing or taking actions against APW in Bermuda. On May 30, 2002, the Bermuda Court appointed Malcolm L. Butterfield of KPMG Bermuda and Philip W. Wallace of KPMG London, England as joint provisional liquidators of APW Ltd. (or, as referred to herein, the JPLs) with limited supervisory powers. The appointment of the JPL's and statutory stay enabled the JPL's to perform supervisory and oversight of the management of APW while reviewing the Plan of reorganization with a view to its treatment of creditors. On July 22, 2002, the JPLs were granted various powers, including the power to authorize the sale of any business, operation, subsidiary, division or other significant asset of APW Ltd. APW Ltd. decided to pursue reorganization under Chapter 11 of the Bankruptcy Code based upon the certainty of the elimination of pre-petition indebtedness and as a consequence the ability of the Company to emerge from bankruptcy significantly deleveraged. As a debtor-in-possession, APW Ltd. is authorized to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the approval of the Bankruptcy Court, after notice and an opportunity for a hearing. Confirmation of Plan of Reorganization On July 24, 2002 the Bankruptcy Court entered an order confirming APW Ltd.'s and Vero's Amended and Restated Plan of Reorganization dated June 19, 2002 (as modified, amended or supplemented, the "Plan"). APW Ltd. emerged on July 31, 2002. Pursuant to the terms of the Plan, certain assets and liabilities were transferred to AWP Ltd. ("AWP"), a newly formed Bermuda company, including the right to use the name "APW Ltd.," which became the successor-in-interest to APW Ltd. After the consummation of the Plan, APW Ltd. changed its name to BQX Ltd. and AWP Ltd. changed its name to APW Ltd. The above name changes became effective on July 31, 2002. In addition, as of July 31, 2002 the effective date of the Plan, AWP (the successor in interest to APW Ltd.) issued under the Plan the following: . New Secured Notes in the aggregate principal amount of $100 million issued to its senior secured lenders, . 1,000,000 common shares of AWP (the successor in interest to APW Ltd.) (the "APW Common Shares") issued to its senior secured lenders which represents 100% of the outstanding common shares of AWP after the consummation of the Plan, . Warrants to purchase up to 60,606 APW Common Shares at an exercise price of $448.95 per share issued to the current equity holders of APW Ltd., and . Warrants to purchase up to 303,030 APW Common Shares at an exercise price of $0.02 per share issued to lenders under the Credit Facility (defined below). As of July 31, 2002, there were approximately 40.8 million common shares of APW Ltd. outstanding. Under the Plan, holders of APW Ltd. common shares will receive (a) warrants representing the right to purchase 60,606 APW Common Shares as stated above and (b) retain existing common shares in APW Ltd. (which as a practical matter will be liquidated and no distribution is expected to shareholders). Subsequent to the effective date of the Plan, APW Ltd. will be dissolved, liquidated or wound-up by joint provisional liquidators in connection with a proceeding in Bermuda or otherwise pursuant to applicable Bermuda law, and no assets are expected to be distributed to current shareholders. After the consummation of the Plan, AWP Ltd. (as successor to APW Ltd.) is expected to have approximately 1.8 million authorized common shares, par value $0.02 per share, of which 1,000,000 common shares will be outstanding. All such 1,000,000 shares will be issued as of the consummation of the Plan. The Credit Facility Concurrent with the Chapter 11 filing, the Company entered into a new $110 million debtor-in-possession credit facility ("Credit Facility") to provide for the payment of permitted pre-petition claims, working capital needs, letters of credit and other general corporate purposes. The Credit Facility requires that we maintain certain financial covenants and restrict liens, indebtedness, capital expenditures, dividend payments and sale of assets. Upon emergence from the Chapter 11 proceeding, the Credit Facility was extended until November 15, 2003 with respect to $90.0 million of the Credit Facility and May 15, 2004 with respect to $20.0 million of the Credit Facility. Fresh Start Accounting As a result of the bankruptcy, the Company will adopt fresh start accounting pursuant to guidance provided by the American Institute of Certified Public Accountant's Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code", as of July 31, 2002. In accordance with the principles of fresh start accounting, the Company will adjust the carrying values of its assets and liabilities to their fair values as of July 31, 2002. The application of fresh start accounting will result in material changes to the carrying values of the Company's assets and liabilities. Going Concern Following its emergence from the Chapter 11 proceeding, the ability of APW Ltd., the successor company, to continue as a going concern is predicated upon, among other things, compliance with the provisions of the Credit Facility and the term loan agreement related to the $100 million in new secured notes issued under the Plan and the ability to generate cash flows from operations and obtain financing sources sufficient to satisfy future obligations. 19 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations This amendment on Form 10-Q/A #1 amends Items 1 and 2 of the Quarterly Report of APW Ltd. (the "Company") on Form 10-Q previously filed for the three months and six months ended February 28, 2002 and 2001. This Quarterly Report on Form 10-Q/A #1 is filed in connection with the Company's restatement of its financial statements as of August 31, 2001 and 2000 and for the years ended August 31, 2001, 2000 and 1999 and for the quarters ended February 28, 2002, November 30, 2001, February 28, 2001 and November 30, 2000. Financial statement information and related disclosures included in this amended filing reflect, where appropriate, changes as a result of the restatements. All other information contained in this Quarterly Report on Form 10-Q/A #1 is as of the date referenced for such information in the original filing or, if no date is referenced for information in the original filing, as of the date of such filing. The following discussion of our financial condition and our results of operations should be read in conjunction with our accompanying unaudited condensed consolidated financial statements and related notes thereto. Overview APW Ltd. is a leading global technically enabled manufacturing services provider, focused on designing and integrating large electronic enclosure products. We have the capabilities to design and manufacture various subsystems for electronic products, including enclosures, power supplies, thermal management systems, printed circuit board assemblies, and cabling, either as individual subsystems or as integrated custom systems. We provide a wide range of integrated design, manufacturing and logistics services to customers, including product design, supply chain management, manufacturing, assembly, testing and drop-ship services. Operating in over 30 locations throughout North America, South America, Europe and Asia, we provide our solutions and services to original equipment manufacturers, primarily in the communications (datacom and telecom), computing (enterprise hardware - large servers, large data storage, networking) and Internet (application service providers, Internet service providers and web hosting) markets. Our customers include industry leaders such as Applied Materials, Cisco, Compaq, Cymer, EMC, Ericsson, Fujitsu, Hewlett-Packard, IBM, Lucent, Marconi, Motorola, NCR, Nortel Networks and Sun Microsystems. Reorganization Under Chapter 11 On May 16, 2002, APW Ltd., (in provisional liquidation) (herinafter referred to as "APW Ltd.", "APW" or "the Company"), a Bermuda company, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code ("Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York ("Bankruptcy Court") (Case No. 02-12335). The proceeding involved only APW Ltd., the Bermuda company, and Vero Electronics, Inc., a non-operating entity and subsidiary of APW Ltd. (Case No. 02-12334). All other subsidiaries of the Company were excluded from the proceeding and continue to conduct business with customers and suppliers in the ordinary course. The Company will continue to operate its business as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. The bankruptcy proceedings are being jointly administered under Case No. 02-12334 (PCB). On May 30, 2002, a proceeding (the "Bermuda Proceeding") was commenced pursuant to the Companies Act 1981 with respect to APW Ltd. in the Bermuda Supreme Court in connection with a winding-up petition. One of the purposes of the filing was the imposition of a statutory stay preventing third parties from continuing or taking actions against APW in Bermuda. On May 30, 2002, the Bermuda court appointed Malcolm L. Butterfield of KPMG Bermuda and Philip W. Wallace of KPMG, London, England as joint provisional liquidators of APW Ltd. (or, as referred to herein, the JPLs) with limited supervisory powers. The appointment of the JPL's and statutory stay enabled the JPL's to perform supervisory and oversight of the management of APW while reviewing the Plan of reorganization with a view to its treatment of creditors. On July 22, 2002, the JPLs were granted various powers, including the power to authorize the sale of any business, operation, subsidiary, division or other significant asset of APW Ltd. APW Ltd. decided to pursue reorganization under Chapter 11 of the Bankruptcy Code based upon the certainty of the elimination of pre-petition indebtedness and as a consequence the ability of the Company to emerge from bankruptcy significantly deleveraged. As a debtor-in-possession, APW Ltd. is authorized to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the approval of the Bankruptcy Court, after notice and an opportunity for a hearing. Confirmation of Plan of Reorganization On July 24, 2002 the Bankruptcy Court entered an order confirming APW Ltd.'s and Vero's Amended and Restated Plan of Reorganization dated June 19, 2002 (as modified, amended or supplemented, the "Plan"). APW Ltd. emerged on July 31, 2002. A copy of the Plan is attached hereto as Exhibit 2.1(b). Pursuant to the terms of the Plan, subject to the approval of the joint provisional liquidators (the "JPLs") appointed in the Bermuda Proceeding and, if required, the approval of the Bermuda Supreme Court, all of the assets and liabilities which were to be retained by APW Ltd. under the original Plan will be transferred to AWP Ltd. ("AWP"), a newly formed Bermuda company, including the right to use the name "APW Ltd.," which became the successor-in-interest to APW Ltd. After the consummation of the Plan, APW Ltd. changed its name to BQX Ltd. and AWP Ltd. changed its name to APW Ltd. The above name changes became effective on July 31, 2002. In addition, as of July 31, 2002 the effective date of the Plan, AWP (the successor in interest to APW Ltd.) issued under the Plan the following: . New Secured Notes in the aggregate principal amount of $100 million issued to its senior secured lenders, . 1,000,000 common shares of AWP (the successor in interest to APW Ltd.) (the "APW Common Shares") issued to its senior secured lenders which represents 100% of the outstanding common shares of AWP after the consummation of the Plan, . Warrants to purchase up to 60,606 APW Common Shares at an exercise price of $448.95 per share issued to the current equity holders of APW Ltd., and . Warrants to purchase up to 303,030 APW Common Shares at an exercise price of $0.02 per share issued to lenders under the Credit Facility (defined below). As of July 31, 2002, there were approximately 40.8 million common shares of APW Ltd. outstanding. Under the Plan, holders of APW Ltd. common shares received (a) warrants representing the right to purchase 60,606 APW Common Shares as stated above and (b) retain existing common shares in APW Ltd. (which as a practical matter will be liquidated and no distribution is expected to shareholders). Subsequent to the effective date of the Plan, APW Ltd. will be dissolved, liquidated or wound-up by joint provisional liquidators in connection with a proceeding in Bermuda or otherwise pursuant to applicable Bermuda law, and no assets are expected to be distributed to current shareholders. After the consummation of the Plan, AWP Ltd. (as successor to APW Ltd.) is expected to have approximately 1.8 million authorized common shares, par value $0.02 per share, of which 1,000,000 common shares will be outstanding. All such 1,000,000 shares will be issued as of the consummation of the Plan. The board of directors of AWP Ltd. (as successor to APW Ltd.) after consummation of the Plan are to consist of: Richard G. Sim, W. Peter Douglas, Christopher S. Brothers, Stephen A. Kaplan, Michael P. Harmon, J. Richard Budd and Toni J. Smith. In addition, the Plan provides for a new management incentive plan for issuance of options to purchase to key employees or the opportunity for such key employees to purchase 10% of the APW Common Shares on a fully diluted basis (or 151,515 shares). The Credit Facility Concurrent with the Chapter 11 filing, the Company entered into a new $110 million debtor-in-possession credit facility ("Credit Facility") to provide for the payment of permitted pre-petition claims, working capital needs, letters of credit and other general corporate purposes. The Credit Facility requires that we maintain certain financial covenants and restrict liens, indebtedness, capital expenditures, dividend payments and sale of assets. Upon emergence from the Chapter 11 proceeding, the Credit Facility was extended until November 15, 2003 with respect to $90.0 million of the Credit Facility and May 15, 2004 with respect to $20.0 million of the Credit Facility. 20 Fresh Start Accounting As a result of the bankruptcy, the Company will adopt fresh start accounting pursuant to guidance provided by the American Institute of Certified Public Accountant's Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code", as of July 31, 2002. In accordance with the principles of fresh start accounting, the Company will adjust the carrying values of its assets and liabilities to their fair values as of July 31, 2002. The application of fresh start accounting will result in material changes to the carrying values of the Company's assets and liabilities. Going Concern Following its emergence from the Chapter 11 proceeding, the ability of APW Ltd., the successor company, to continue as a going concern is predicated upon, among other things, compliance with the provisions of the Credit Facility and the term loan agreement related to the $100 million in new secured notes issued under the Plan and the ability to generate cash flows from operations and obtain financing sources sufficient to satisfy our future obligations. Significant Accounting Policies Financial Reporting Release No. 60, which was recently released by the Securities and Exchange Commission, requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. These policies and methods are the most important to the portrayal of the Company's financial condition and results, and require management's most difficult, subjective and complex judgments. The following is a brief discussion of the more significant accounting policies and methods used by APW Ltd. General The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant estimates and assumptions relate to the recoverability of long-lived assets including goodwill and other intangibles, the realization of deferred income taxes and the adequacy of restructuring reserves. Actual amounts could differ significantly from these estimates. Recoverability of long-lived assets, goodwill and other intangible assets We periodically assess the impairment of long-lived assets, goodwill and other identifiable intangible assets under SFAS No. 121 and Accounting Principles Board Opinion No. 17 whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following: .. significant underperformance relative to expected historical or forecasted future operating results; .. significant changes in the manner of our use of the acquired assets or the strategy for our overall business; .. commitments by management to close certain facilities that are made as part of a company-wide restructuring initiative; .. significant negative industry or economic trends; .. significant decline in our stock price for a sustained period; and .. our market capitalization relative to net book value. Upon the existence of one or more of the above indicators of impairment, we estimate the future undiscounted cash flows and compare such estimates to the related asset book value. If it is determined that these estimated future undiscounted cash flows will not be sufficient to enable the recovery of the related asset book value, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Prospectively, we must continue to assess the recoverability of the Company's long-lived assets, goodwill and other intangibles. In so doing, we will be required to make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. While we believe our estimates are reasonable, if our estimates or their related assumptions change in the future, we may be required to record additional impairment charges. Assumptions we make regarding estimated future cash flow include: (i) future revenue growth (and mix); (ii) future composition of cost of products sold and operating expenses; and (iii) future capital expenditure requirements. Accounting for income taxes As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the tax jurisdictions in which we operate. This process involves us estimating our current tax liability together with assessing temporary differences resulting from differing treatment of items for tax and book purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and any related valuation allowance recorded against our net deferred tax assets. Generally accepted accounting principles require that we record a valuation allowance against our deferred tax assets if it is "more likely than not" that we will not be able to utilize them to offset future taxes. Restructuring Reserves Restructuring charges as presented in our Condensed Consolidated Statement of Operations are comprised of severance and lease exit costs. These charges are recognized in accordance with Emerging Issues Task Force ("EITF") 94-3 and Staff Accounting Bulleting ("SAB") 100. Our accruals for lease exit obligations stemming from closed facilities are based on management's best estimate of the total future cash flows required to exit such facilities. Actual costs could differ materially due to factors such as our ability to secure subleases, the creditworthiness of sub-lessees and our success at negotiating early termination agreements with our lessors. These factors are significantly dependent on the general health of the economy and the resultant demand for commercial property. 21 Fiscal 2002 Second Quarter Compared to the Fiscal 2001 Second Quarter Net Sales Net sales for the fiscal 2002 second quarter were $200.9 million compared to $317.6 million in the fiscal 2001 second quarter, a decrease of 36.7%. Net sales in the fiscal 2002 second quarter were negatively impacted by the broad based slow down in the technology sector which has resulted in reduced demand for some of our customers products and in turn has negatively impacted the demand those customers have for our products and services. Our fiscal 2002 second quarter sales were influenced by the inclusion of acquisitions completed in the second quarter of fiscal 2001. Excluding these acquisitions, net sales decreased 41.1% in the fiscal 2002 second quarter when compared to sales in the fiscal 2001 second quarter. Geographic Sales Three Months Ended February 28, ------------------------- 2002 2001 Change -------------------------------- (In millions) Americas $ 114.4 $ 195.5 (41.5%) Europe and Asia 86.5 122.1 (29.2%) -------------------------------- Total $ 200.9 $ 317.6 (36.7%) ================================ Net sales in the Americas for the fiscal 2002 second quarter were $114.4 million compared to $195.5 million in the fiscal 2001 second quarter, a decrease of 41.5%. Our fiscal 2002 second quarter sales were influenced by the inclusion of acquisitions completed in the second quarter of fiscal 2001. Excluding these acquisitions, net sales decreased 48.5% in the fiscal 2002 second quarter when compared to net sales in the fiscal 2001 second quarter. Net sales in Europe and Asia for the fiscal 2002 second quarter were $86.5 million compared to $122.1 million in the fiscal 2001 second quarter, a decrease of 29.2%. Gross Profit Gross profit for the fiscal 2002 second quarter was $14.6 million compared to $61.7 million in the fiscal 2001 second quarter, a decrease of 76.3%. As a percentage of net sales, the fiscal 2002 second quarter gross profit was 7.2% compared to 19.4% in the fiscal 2001 second quarter. The decrease in gross profit as a percentage of net sales is primarily a result of a combination of factors: (i) $7.0 million of costs related to facility closures (primarily equipment write-offs); (ii) under-absorption of costs resulting from the broad based slow down in the technology sector which significantly reduced sales volumes; and (iii) a shift in sales mix to programs with increased levels of systems integration, which typically have lower margins. 22 Operating Expenses Operating expenses in the fiscal 2002 second quarter were $50.9 million compared to $57.2 million in the fiscal 2001 second quarter. As a percentage of net sales, operating expenses were 25.4% for the fiscal 2002 second quarter, compared to 18.0% for the fiscal 2001 second quarter. Our operating expenses consist primarily of engineering, selling, marketing, finance, information technology and general administrative expenses. Operating expenses have been reduced by $6.3 million from the fiscal 2001 second quarter. The reduction in operating expenses is primarily due to the restructuring and cost reduction efforts we have made. Although operating expenses have been reduced from the fiscal 2001 second quarter, operating expenses as a percentage of net sales increased due to the under-absorption of costs resulting from the broad based slow down in the technology sector which significantly reduced sales volumes. Amortization of Intangible Assets In the fiscal 2002 second quarter, we performed an impairment assessment of our long-lived assets as a result of revised Company forecasts resulting from continuing deterioration of our operating results. As a result of the assessment, we recorded a $391.6 million impairment charge to reduce the carrying value of goodwill and other intangible assets. Total amortization expense, including the impairment charge, in the fiscal 2002 second quarter was $397.4 million compared to $6.4 million in the fiscal 2001 second quarter. Excluding the impairment charge, amortization for the fiscal 2002 second quarter was $5.8 million compared to $6.4 million in the fiscal 2001 second quarter. Restructuring and Other Charges Beginning in fiscal 2001 and continuing through the fiscal 2002 second quarter, management has developed formal plans to exit certain facilities and involuntarily terminate employees. Management's plans to exit certain facilities included the identification of manufacturing and sales facilities for closure and the transfer of the related operations to other facilities. Management currently anticipates that the facility closures and all related activities will be substantially complete within one year of the commitment dates of the respective exit plans. A restructuring charge totaling $7.5 million was recorded during the fiscal 2002 second quarter. The restructuring charge relates to the rationalization of three facilities and the involuntary termination of both salaried and hourly employees. Severance costs associated with the involuntary termination of employees totaled $1.1 million. Lease exit costs resulting from facility closures totaled $6.4 million. In addition to the restructuring charge totaling $7.5 million, we incurred $9.4 million of other costs related to facility closures (primarily equipment impairment charges). Of the $16.9 million in rationalization charges, $9.3 million are cash costs and $7.6 million are non-cash costs. Of the $9.3 million in cash costs, only $1.8 million are incremental cash costs that would not have been incurred in the next 12 months without undertaking these restructuring actions. Since commencing our restructuring plans in the third quarter of fiscal 2001, we have recorded restructuring and restructuring related charges totaling $67.8 million. Our restructuring program was implemented to reduce our 23 aggregate fixed cost structure to mitigate the revenue decline we began to experience as a result of a weak economic environment in the computing, telecommunication, and semi-conductor markets we serve. We have rationalized 18 facilities through consolidating the operations of closed locations into existing larger locations, thus eliminating fixed facility costs and redundant headcount and better leveraging our existing infrastructure. Through February 28, 2002 we have spent approximately $23.1 million on cash restructuring, with only approximately $3.0 million of the total being incremental cash costs that would not have been incurred in the next 12 months without undertaking these restructuring actions. Divestiture On February 13, 2002, APW Ltd. completed the sale of its Zero Cases division. Total consideration from the transaction was a net $19.2 million, which resulted in a net book gain of $8.2 million. Operating Loss We incurred an operating loss of $432.9 million in the fiscal 2002 second quarter compared to $1.9 million in the fiscal 2001 second quarter. The operating loss was primarily due to: (i) a $391.6 million goodwill and other intangible asset impairment charge; (ii) a $7.5 million restructuring charge; (iii) $9.4 million of costs related to facility closures (primarily equipment impairment charges); and (iv) reduced sales volumes, driven by the broad based slow down in the technology sector, which resulted in the under-absorption of costs during the fiscal 2002 second quarter. Financing Costs Financing costs in the fiscal 2002 second quarter were $16.4 million compared to $7.3 million in the fiscal 2001 second quarter. Included in the fiscal 2002 second quarter financing costs is $3.1 million of non-cash amortization of capitalized costs and the value of warrants issued as a result of amending our credit facilities during fiscal 2001 and through the first six months of fiscal 2002. The increase in our net financing costs, excluding the $3.1 million of non-cash amortization, is a result of the increase in our outstanding indebtedness to fund acquisitions made in the second quarter of fiscal 2001, capital expenditures, restructuring activities and operations. Income Tax Expense We recorded income tax expense in the fiscal 2002 second quarter of $44.3 million compared to a $3.1 million income tax benefit in the fiscal 2001 second quarter. Included in our fiscal 2002 second quarter tax expense is a charge of $128.7 million to increase our valuation allowance to $138.5 million at February 28, 2002. As a result of this charge, our net deferred tax asset balance was reduced to $0.4 million at February 28, 2002. We will continue to record a valuation allowance to offset any future income tax benefits until it is more likely than not that we will be able to realize such benefits. 24 Fiscal 2002 Six Months Compared to the Fiscal 2001 Six Months Net Sales Net sales for the fiscal 2002 six months were $420.7 million compared to $677.3 million in the fiscal 2001 six months, a decrease of 37.9%. Net sales in the fiscal 2002 six months were negatively impacted by the broad based slow down in the technology sector which has resulted in reduced demand for some of our customers products and in turn has negatively impacted the demand those customers have for our products and services. In addition to the broad based slow down in the technology sector, the terrorist attacks that took place on September 11, 2001 have had an adverse impact on our business. Our fiscal 2002 six month sales were influenced by the inclusion of acquisitions completed in the second quarter of fiscal 2001. Excluding these acquisitions, net sales decreased 42.8% in the fiscal 2002 six months when compared to sales in the fiscal 2001 six months. Geographic Sales Six Months Ended February 28, --------------------- 2002 2001 Change --------------------------------- (In millions) Americas $ 247.1 $ 419.1 (41.0%) Europe and Asia 173.6 258.2 (32.8%) -------------------------------- Total $ 420.7 $ 677.3 (37.9%) ================================ Net sales in the Americas for the fiscal 2002 six months were $247.1 million compared to $419.1 million in the fiscal 2001 six months, a decrease of 41.0%. Our fiscal 2002 six month sales were influenced by the inclusion of acquisitions completed in the second quarter of fiscal 2001. Excluding these acquisitions, net sales decreased 49% in the fiscal 2002 six months when compared to net sales in the fiscal 2001 six months. Net sales in Europe and Asia for the fiscal 2002 six months were $173.6 million compared to $258.2 million in the fiscal 2001 six months, a decrease of 32.8%. Gross Profit Gross profit for the fiscal 2002 six months was $35.5 million compared to $150.8 million in the fiscal 2001 six months, a decrease of 76.5%. As a percentage of net sales, the fiscal 2002 six months gross profit was 8.4% compared to 22.3% in the fiscal 2001 six months. The decrease in gross profit as a percentage of net sales is primarily a result of a combination of factors: (i) $16.6 million of costs related to facility closures (primarily equipment write-offs); (ii) under-absorption of costs resulting from the broad based slow down in the technology sector which significantly reduced sales volumes; and (iii) a shift in sales mix to programs with increased levels of systems integration, which typically have lower margins. Operating Expenses Operating expenses in the fiscal 2002 six months were $91.1 million compared to $113.3 million in the fiscal 2001 six months. As a percentage of net sales, operating expenses were 21.7% for the fiscal 2002 six months, compared to 16.7% for the fiscal 2001 six months. Our operating expenses consist primarily of engineering, selling, marketing, finance, information technology and general administrative expenses. Operating expenses have been reduced by $21.8 million from the fiscal 2001 six months. The reduction in operating expenses is primarily due to the restructuring and cost reduction efforts we have made. Although operating expenses have been reduced from the 25 fiscal 2001 six months, operating expenses as a percentage of net sales increased due to the under-absorption of costs resulting from the broad based slow down in the technology sector which significantly reduced sales volumes. Amortization of Intangible Assets In the fiscal 2002 second quarter, we performed an impairment assessment of our long-lived assets as a result of revised Company forecasts resulting from continuing deterioration of our operating results. As a result of the assessment, we recorded a $391.6 million impairment charge to reduce the carrying value of goodwill and other intangible assets. Total amortization expense, including the impairment charge, in the fiscal 2002 six months was $403.7 million compared to $12.4 million in the fiscal 2001 six months. Excluding the impairment charge, amortization for the fiscal 2002 six months was $12.1 million compared to $12.4 million in the fiscal 2001 six months. Restructuring and Other Charges Beginning in fiscal 2001 and continuing through the fiscal 2002 second quarter, management has developed formal plans to exit certain facilities and involuntarily terminate employees. Management's plans to exit certain facilities included the identification of duplicate manufacturing and sales facilities for closure and the transfer of the related operations to other facilities. Management currently anticipates that the facility closures and all related activities will be substantially complete within one year of the commitment dates of the respective exit plans. A restructuring charge totaling $17.5 million was recorded during the fiscal 2002 six months. The restructuring charge relates to the rationalization of ten facilities and the involuntary termination of both salaried and hourly employees. Severance costs associated with the involuntary termination of employees totaled $7.5 million. Lease exit costs resulting from facility closures totaled $10.0 million. In addition to the restructuring charge totaling $17.5 million, we incurred $19.1 million of other costs related to facility closures (primarily equipment impairment charges). Of the $36.5 million in rationalization charges, $21.0 million are cash costs and $15.5 million are non-cash costs. Of the $21.0 million in cash costs, only $3.5 million are incremental cash costs that would not have been incurred in the next 12 months without undertaking these restructuring actions. Since commencing our restructuring plans in the third quarter of fiscal 2001, we have recorded restructuring and restructuring related charges totaling $67.8 million. Our restructuring program was implemented to reduce our aggregate fixed cost structure to mitigate the revenue decline we began to experience as a result of a weak economic environment in the computing, telecommunication, and semi-conductor markets we serve. We have rationalized 18 facilities through consolidating the operations of closed locations into existing larger locations, thus eliminating fixed facility costs and redundant headcount and better leveraging our existing infrastructure. Through February 28, 2002 we have spent approximately $23.1 million on cash restructuring, with only approximately $3.0 million of the total being incremental cash costs that would not have been incurred in the next 12 months without undertaking these restructuring actions. 26 Divestiture On February 13, 2002, APW Ltd. completed the sale of its Zero Cases division. Total consideration from the transaction was a net $19.2 million, which resulted in a net book gain of $8.2 million. Operating Loss We incurred an operating loss of $468.5 million in the fiscal 2002 six months compared to operating earnings of $22.4 million in the fiscal 2001 six months. The operating loss was primarily due to: (i) a $391.6 million impairment of goodwill and other intangible assets; (ii) a $17.5 million restructuring charge; (iii) $19.1 million of costs related to facility closures (primarily equipment impairment charges); and (iv) reduced sales volumes, driven by the broad based slow down in the technology sector, which resulted in the under-absorption of costs during the fiscal 2002 six months. Financing Costs Financing costs in the fiscal 2002 six months were $30.9 million compared to $13.8 million in the fiscal 2001 six months. Included in the fiscal 2002 six months financing costs is $4.7 million of non-cash amortization of capitalized fees and warrants issued as a result of amending our credit facilities during fiscal 2001 and through the first six months of fiscal 2002. The increase in our net financing costs, excluding the $4.7 million of non-cash amortization, is a result of the increase in our outstanding indebtedness to fund acquisitions made in the second quarter of fiscal 2001, capital expenditures, restructuring activities and operations. Income Tax Expense We recorded income tax expense in the fiscal 2002 six months of $31.8 million compared to $2.9 million in the fiscal 2001 six months. Included in our fiscal 2002 six months tax expense is a charge of $128.7 million to increase our valuation allowance to $138.5 million at February 28, 2002. As a result of this charge, our net deferred tax asset balance was reduced to $0.4 million at February 28, 2002. We will continue to record a valuation allowance to offset any future income tax benefits until it is more likely than not that we will be able to realize such benefits. Liquidity and Capital Resources Cash Flows Cash and cash equivalents totaled $6.9 million at February 28, 2002 and $6.2 million at August 31, 2001. Net cash used in operating activities in the fiscal 2002 six months was $12.4 million compared to $32.6 million used in the fiscal 2001 six months. The net use of cash in the fiscal 2002 six months was primarily due to restructuring and related payments totaling $12.0 million. Other net uses of cash included the funding of operating losses, and payments to professional advisors, offset by a source of cash from primary working capital (receivables, inventory, and payables). Net cash provided by investing activities for the fiscal 2002 six months was $11.1 million compared to net cash used in investing activities of $298.0 million for the fiscal 2001 six months. The net source of cash for the fiscal 2002 six months was primarily due to $19.2 million of proceeds on the sale of a subsidiary offset by capital expenditures of $11.9 million. 27 Net cash provided by financing activities for the fiscal 2002 six months was $2.1 million compared to $335.7 million provided in the fiscal 2001 six months. The net cash provided by financing activities for the fiscal 2002 six months primarily came from net borrowings on our long-term debt facility of $28.7 million, which was offset by $5.5 million in payments on short-term borrowings, $2.1 million in debt financing costs and a reduction in sold receivables of $18.9 million. Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments On January 22, 2002, the SEC issued FR-61, "Commission Statement about Management's Discussion and Analysis of Financial Condition and Results of Operations." FR-61 indicates that registrants should consider the need to provide disclosures concerning transactions, arrangements and other relationships with unconsolidated entities or other persons that are reasonably likely to affect materially liquidity or the availability of, or requirements for capital resources as well as disclosures concerning a registrant's obligations and commitments to make future payments under contracts, such as debt, leases, and contingent commitments. In response to this release, we have outlined our off-balance sheet arrangement as well as our contractual obligations and commercial commitments as they relate to the Company. Accounts Receivable Facility APW North America Inc., a wholly owned subsidiary of APW Ltd., and certain domestic subsidiaries (collectively, "Originators") sell trade accounts receivable to Applied Power Credit Corporation ("APCC"), a wholly-owned, limited purpose, consolidated subsidiary of the Company. APCC is a separate corporate entity that sells participating interests in its pool of accounts receivable to financial institutions ("Purchasers"). The Purchasers, in turn, receive an ownership and security interest in the pool of receivables. Participation interests in new receivables generated by the Originators are purchased by APCC and resold to the Purchasers on a revolving basis as collections reduce previously sold participation interests. The accounts receivable sold to Purchasers are reflected as a reduction of receivables in the Condensed Consolidated Balance Sheets. APCC has no risk of credit loss on such receivables as they are sold without recourse. APW North America Inc. retains collection and administrative responsibilities on the participation interests sold as servicer for APCC and the Purchasers. Further, APCC is a bankruptcy remote corporation, and as such, the assets held by APCC would not be available to satisfy the claims of APW Ltd.'s creditors until all of the amounts owed to the Purchasers have been paid in full. The Accounts Receivable Facility described above represents "off-balance sheet financing." This results in assets being removed from our balance sheet, rather than incurring a liability similar to that of traditional financing. The receivables are sold on a revolving basis where new eligible receivables replace collected receivables on a daily basis. The maximum amount of receivables that can be sold under the current facility is $80.0 million. At February 28, 2002 and August 31, 2001, only $39.1 and $58.0 million, respectively, of this facility was utilized due to this limitation. To the extent eligible receivables under this facility decrease from this amount, cash collections on the sold receivables must be repaid to the Purchaser, thereby reducing our availability under the facility. Conversely, if more eligible receivables are generated due to increased sales, we can increase the cash available to us under the facility via the sale of these new eligible receivables up to the maximum allowed of $80.0 million. Upon the facility's termination, the Purchaser would be entitled to all cash collections on receivables sold to it by APCC until its net investment ($39.1 million at February 28, 2002) had been repaid. The Accounts Receivable Facility will terminate on May 15, 2002 unless terminated earlier according to its terms (including, without limitations the occurrence of a "termination event" that is not waived or amended) or extended by mutual agreement of parties thereto. We do not currently expect that the facility will be extended beyond the May 15, 2002 termination date. Contractual Obligations and Commercial Commitments Currently, we have classified all of our debt under the Multi-Currency Credit facilities as current in accordance with EITF 86-30 which is discussed further in the Liquidity section below. We lease, through various subsidiaries, certain facilities and equipment under various lease agreements generally over periods of one to twenty years. Under most arrangements, we also pay the property taxes, insurance, maintenance and expenses related to the leased properties. Future obligations on non-cancelable operating leases in effect at February 28, 2002 are: $21.3 million for the remainder of fiscal 2002; $25.5 million in fiscal 2003 and $164.2 million thereafter. These amounts 28 represent amounts that have previously been disclosed in our Form 10-K/A for the twelve months ended August 31, 2002 as adjusted for the current year's activity. Included in the February 28, 2002 Condensed Consolidated Balance Sheet are $11.3 million of lease exit reserves that would reduce our future obligations listed above. Total rental expense under operating leases for the fiscal 2002 six months was approximately $14.5 million. Capitalization Debt at February 28, 2002 totaled $644.0 million, an increase of approximately $22.6 million from August 31, 2001. The increase in debt was primarily due to restructuring costs, capital expenditures and the $18.9 million decrease in receivables sold under the accounts receivable facility, offset by $19.2 million of proceeds from the sale of a division. To reduce the risk of interest rate increases, we may periodically enter into interest rate swap agreements. Our current interest rate swap activity is limited to two agreements and is not significant. Liquidity On September 27, 2001, the Company's lenders amended certain debt covenants associated with APW Ltd.'s Multi-Currency Credit Agreement, UK Revolving Credit Agreement and the Accounts Receivable Facility (collectively, "credit facilities"). These revised covenants were established based upon APW Ltd. management's financial forecasts prior to the events of September 11, 2001. Following the events of September 11 and throughout the fiscal 2002 first quarter, APW Ltd. experienced a significant decline in net sales compared to prior periods and a further decline compared to management's financial forecasts that were the basis for the financial covenants set forth in the September 27, 2001 amendment. Such declines are related to a number of factors, certain of which were impacted by the terrorist attacks that took place in the United States on September 11, 2001. On December 13, 2001, the Company's lenders amended certain debt covenants associated with the Company's credit facilities to reflect the Company's revised financial forecasts as of that point in time. The revisions in the covenants were considered necessary due to the magnitude of the decline in the fiscal 2002 first quarter actual results compared to prior periods and management's forecasts. In addition, the amendment repriced the outstanding warrants issued in conjunction with the May 15, 2001 amendment to the closing price of APW Ltd.'s common stock on December 10, 2001 of $1.98 and eliminates the previous reduction provision if the Company met repayment targets by August 31, 2002. The Company also issued warrants for 9.9% of the common stock outstanding on December 13, 2001 (approximately 4.1 million shares) at a price of $0.01. These $0.01 warrants are cancelled if the credit facilities are repaid by July 31, 2002 (entirely cancelled) or September 30, 2002 (49.5% cancelled). During the second quarter of fiscal 2002, $8.5 million was recorded as the estimated fair value of the warrants issued in conjunction with the December amendment and was recorded as an increase in deferred financing costs and an increase in share premium. As a result of the restatement for the year ended August 31, 2001, the Company believes that it would have been in default of certain debt covenants as of August 31, 2001, unless the Company had obtained waivers or the Company's lenders had amended the debt covenants. Accordingly, the Company has classified borrowings under the Revolving Multi-Currency Credit Agreement and the U.K. Facility Agreement as a current liability as of August 31, 2001 in the restated consolidated financial statements. During the quarter ended February 28, 2002, the Company amended its credit facilities on three different occasions. The net result of these amendments was: (i) to provide a temporary deferment of cash interest payment obligations until April 15, 2002; (ii) to increase the size of the UK Revolving Credit Facility by approximately $5.0 million under the UK Revolving Credit Agreement; (iii) to allow for the sale of the assets of the Company's Zero Cases division; and (iv) to provide a waiver of all financial covenant requirements for the period from January 31, 2002 until April 15, 2002. Prior to considering the effects of the restatement, as of February 28, 2002 the Company was in compliance under its credit facilities as a result of having all of the financial covenants waived. Based on its current projections, the Company believes that it is probable that it will not meet certain of these covenants for the period ending May, 31, 2002 unless further waived or otherwise amended through ongoing negotiations with its lenders. As such, in accordance with Emerging Issues Task Force Issue ("EITF") 86-30, the Company has classified all of its debt obligations as current as of February 28, 2002. The Company has been pursuing discussions with its lenders concerning a recapitalization plan. The discussions have centered around a recapitalization of the balance sheet that is intended to result in no disruption to the operating subsidiaries and their suppliers, who will be paid in the normal course of business. In connection with the recapitalization plan, the Company intends that such plan would entail the following: (i) the conversion of $550.0 million of the current and outstanding debt plus accrued interest to common stock; (ii) the allowance of a new financing line of credit of $110.0 million; (iii) the issuance of common stock (and possible preferred stock or warrants) to the existing lenders so that they would end up owning substantially all of the outstanding capital stock of the Company; (iv) the issuance of warrants to the Company's 29 existing shareholders for some number of additional shares which become exercisable if the lenders receive a return of their initial investment; and (v) the retention of existing management. The Company has been negotiating this plan with the lenders and primarily through its steering committee. To date, the Company and the lenders have agreed in principal on the main terms of the recapitalization plan, but no definitive agreement has yet been agreed to and executed. It is anticipated that the plan will be implemented through a pre-packaged or pre-negotiated Chapter 11 of APW Ltd., the holding company. Consequently, the lenders will have agreed to the terms of the recapitalization plan prior to the filing. This plan would be structured in such a way so that all of the obligations of APW Ltd. (see Note 2 to the Condensed Consolidated Financial Statements - Holding Company Structure) could be assumed, adjusted or eliminated in a bankruptcy proceeding. The Company and its lenders are structuring the recapitalization of the Company so that only APW Ltd., the holding company, should be affected. Under this plan, the Chapter 11 filing of APW Ltd., the holding company, will not effect, in any direct way the operating subsidiaries and their ability to conduct business normally with their customers and suppliers. In particular, there is no intent to impair the suppliers of the operating subsidiaries. If we cannot execute the recapitalization plan as currently conceived, APW Ltd. would likely be forced to file and seek protection under the bankruptcy laws. Given, that at this point there is not a definitive recapitalization plan document agreed to with our lending group and as such, prospectively the Company could be required to meet the future financial covenants of our current amended credit facilities (unless otherwise waived or amended), which the Company feels that at this point is not probable, coupled with the Company's current level of liquidity, there is substantial doubt about the Company's ability to continue as a going concern. In order to facilitate the finalization of negotiations regarding the terms of the recapitalization and the related documentation, on April 15, 2002, the Company unanimously received an extension with regard to the deferment of interest payments and a waiver of all financial covenants for the period through May 14, 2002. The Accounts Receivable Facility will terminate on May 15, 2002 unless terminated earlier according to its terms (including, without limitation the occurrence of a "termination event" that is not waived or amended) or extended by mutual agreement of parties thereto. We do not currently expect that the facility will be extended beyond the May 15, 2002 termination date. APW Ltd.'s management plans to continue to aggressively pursue additional revenue opportunities within its core customer markets. APW Ltd. adopted several restructuring plans during fiscal 2001 and throughout the first six months of fiscal 2002 in an effort to reduce costs in the wake of declining net sales experienced during those periods. These programs resulted in restructuring charges during fiscal 2001 and the first six months of fiscal 2002 and have provided cost savings that are expected to continue into the future. Management plans to consider additional cost-reduction programs, as necessary, to further align the Company's cost base with net sales. In December 2001, a subsidiary of the Company received notification from the lessor of two of its aircraft that the lease contracts ("contracts") for the two aircraft would be terminated effective March 4, 2002. In conjunction with the termination, the terms of the contracts would require the Company to pay the lessor approximately $12.3 million for the two aircraft and, in exchange, the lessor would convey all of its rights, title and interest in the two aircraft to the Company. The Company is actively working with the lessor to identify a third party which would purchase and/or lease the two aircraft, thereby eliminating the Company's $12.3 million payment obligation. The lessor has informed the Company that it is willing to continue to work with the Company to find third party alternatives to eliminate the cost of terminating this contract, provided the Company continues to make scheduled lease payments. As such, the Company has recorded a charge of $2.0 million during the second quarter related to its decision to discontinue use of the related aircraft. This charge reflects management's current estimates relating to future required lease payments and the ultimate disposition timing and proceeds of the two aircraft. At February 28, 2002 and March 31, 2002, we had $23.3 million and $12.3 million, respectively, of borrowings available under our two credit facilities and $6.9 million in cash as of February 28, 2002. To provide additional liquidity, we have been extending payables beyond their normal payment terms. At February 28, 2002 and March 31, 2002, although we sold all eligible accounts receivable under our accounts receivable facility, we had the availability to sell an incremental $40.9 million and $40.8 million, respectively. Our future, liquidity could further decline if we experience a negative variance from our expected operating results or if we do not receive additional deferments of interest on our credit facilities from our lenders. New Accounting Pronouncements In June 2001, SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets" were issued. The statements eliminate the pooling-of-interests method of accounting for business combinations and require that goodwill and certain intangible assets not be amortized. Instead, these assets will be reviewed for impairment annually with any related losses recognized in earnings when incurred. SFAS No. 141 was effective for us as of July 31, 2001. SFAS No. 142 will be effective for us on September 1, 2002 for existing goodwill and intangible assets. We are currently evaluating the impact of SFAS No. 142. 30 In June 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations" was issued. SFAS No. 143 sets forth the financial accounting and reporting to be followed for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are to be capitalized as part of the carrying amount of the long-lived asset. Subsequently, the recorded liability will be accreted to its present value and the capitalized costs will be depreciated. We are required to adopt SFAS No. 143 on September 1, 2002. We are currently evaluating the impact of SFAS No. 143. In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued. SFAS No. 144 modifies and expands the financial accounting and reporting for the impairment or disposal of long-lived assets other than goodwill, which is specifically addressed by SFAS No. 142. SFAS No. 144 maintains the requirement that an impairment loss be recognized for a long-lived asset to be held and used if its carrying value is not recoverable from its undiscounted cash flows, with the recognized impairment being the difference between the carrying amount and fair value of the asset. With respect to long-lived assets to be disposed of other than by sale, SFAS No. 144 requires that the asset be considered held and used until it is actually disposed of but requires that its depreciable life be revised in accordance with APB Opinion No. 20, "Accounting Changes." SFAS No. 144 also requires that an impairment loss be recognized at the date a long-lived asset is exchanged for a similar productive asset. We will be required to adopt SFAS No. 144 on September 1, 2002. We are currently evaluating the impact of SFAS No. 144. Seasonality Due to the shortened number of business days in the second quarter of our fiscal year (from December 1 to February 28), we typically experience lower sales volumes in the second quarter of each fiscal year as compared to the other quarters in the fiscal year. 31 Forward-looking Statements and Cautionary Factors - ------------------------------------------------- Certain statements contained in this document, as well as statements in other Company communications, which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. The terms "anticipate", "believe", "estimate", "expect", "objective", "plan", "project" and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to inherent risks and uncertainties that may cause actual results or events to differ materially from those contemplated by such forward-looking statements. In addition to the assumptions and other factors referred to specifically in connection with such statements, factors that may cause actual results or events to differ materially from those contemplated by such forward-looking statements include, without limitation, general economic conditions, market conditions in the computer, semiconductor, telecommunication, and electronic industries in North America, South America, Europe and Asia, market acceptance of existing and new products, successful integration of acquisitions, competitive product and pricing pressures, foreign currency risk, interest rate risk, the Company's ability to access capital markets, extension of forbearance of interest obligations and other factors that may be referred to in APW Ltd.'s reports filed with the Securities and Exchange Commission from time to time. Item 3 - Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------- We are exposed to market risk from changes in foreign exchange and interest rates and, to a lesser extent, commodities. To reduce such risks, we selectively use financial instruments. Currency Risk - We have significant international operations. In most ------------- instances, our products are produced at manufacturing facilities located near the customer. As a result, significant volumes of finished goods are manufactured in countries for sale into those markets. For goods purchased from our affiliates, we denominate the transaction in the functional currency of the producing operation. We have adopted the following guidelines to manage our foreign exchange exposures: (i) increase the predictability of costs associated with goods whose purchase price is not denominated in the functional currency of the buyer; (ii) minimize the cost of hedging through the use of naturally offsetting positions (borrowing in local currency), netting, pooling; and (iii) where possible, sell product in the functional currency of the producing operation. Our identifiable foreign exchange exposures result primarily from the anticipated purchase of product from affiliates and third-party suppliers along with the repayment of intercompany loans with foreign subsidiaries denominated in foreign currencies. We periodically identify naturally occurring offsetting positions and then may purchase hedging instruments to protect against anticipated exposures. The Company had no such foreign currency hedging instruments at February 28, 2002. Based on our overall currency rate exposure, including derivative financial instruments and nonfunctional currency denominated receivables and payables, a near-term 10% appreciation or depreciation of the U.S. dollar would not have a significant effect on our financial position, results of operations and cash flows over the next fiscal year. Interest Rate Risk - We periodically enter into interest rate swaps to ------------------ stabilize financing costs by minimizing the effect of potential interest rate increases on floating-rate debt in a rising interest rate environment. Under these agreements, we contract with a counter party to exchange the difference between a fixed rate and a floating rate applied to the notional amount of the swap. The effective portion of any gain or loss due to a change in the fair value is initially recorded as a component of other comprehensive income (loss) and subsequently reclassified into earnings when the hedged exposure affects earnings. The fair value of our interest rate swap agreements was a liability of $2.6 million and $2.4 million at February 28, 2002 and August 31, 2001, respectively. A sixty-eight (10% of our weighted average interest rate) basis-point change in interest rates on average long-term borrowings would have impacted net interest expense by approximately $2.4 million for the six months ended February 28, 2002. Commodity Prices - We are exposed to fluctuation in market prices for ---------------- steel. Therefore, we have established a program for centralized negotiation of steel prices. This program allows APW Ltd. to take advantage of economies of scale as well as to cap pricing. All business units are able to purchase steel under this arrangement. In general, the contracts lock steel pricing for 18 months and enable APW Ltd. to pay less if market prices fall. 32 PART II - OTHER INFORMATION Item 1 - Legal Proceedings - -------------------------- The Company, as well as one current, and one former executive have been sued in three actions which are pending in the United States District Court for the Eastern District of Wisconsin in connection with alleged violations of Federal securities laws which preceded a drop in the price of its common stock ending on March 20, 2001. The first of these suits which is captioned Stewart Norman Hicks v. APW Ltd., et al., was filed on December 10, 2001. The subsequently filed suits are captioned Robert Betz v. APW Ltd, et al., and Market Street Securities v. APW Ltd., et al. The complaints for all three suits allege violations of the Federal securities laws and seek certification of a plaintiff class consisting of all purchasers of the Company's common stock between September 26, 2000 and March 20, 2001, inclusive. The complaint does not quantify the damages. The Company has not yet been served with the complaints but understands that the respective plaintiffs intend to seek consolidation of the suits. At this time, the Company cannot evaluate the merits of these claims. Item 2 - Changes in Securities and Use of Proceeds - -------------------------------------------------- On December 13, 2001, the Company issued warrants to purchase a total of 4,030,027 shares of the Company's common stock (3,455,610 to the Company's U.S. lenders and 584,597 to the Company's U.K. lenders). The warrants are exercisable at any time during a period from October 1, 2002 through May 15, 2006, at an exercise price of $0.01 per share, although under certain limited circumstances the exercise date may be accelerated. The warrants were issued to certain lenders as an inducement in connection with the Company's renegotiations of its Amended and Restated Multi-Currency Credit Agreement and Amended U.K. Facility Agreement. The issuance of warrants did not generate any proceeds and no underwriter was involved in the issuance. The warrants are subject to a complete reduction if certain prepayment targets are met. The Company issued the warrants in reliance upon Section 4(2) and Regulation D of the Securities Act of 1933, as amended, in a transaction not involving a public offering. The lenders were the only offerees in this transaction, and no public solicitation was made. The warrant holders are investors with access to all relevant information necessary to evaluate the investment and have represented to the Company that the shares were being acquired for investment purposes. The shares of common stock underlying the warrants are subject to certain transfer restrictions and have registration rights. Item 4 - Submissions of Matters to a Vote of Security Holders - ------------------------------------------------------------- The Annual Meeting of Shareholders was held on January 14, 2002 and the following proposals were voted on. The number of votes cast for, against, abstained and withheld for each proposal is set forth below: (a) Election of Directors - Class of 2002 Share Votes For Share Votes Withheld --------------- -------------------- Jack L. Heckel 34,108,886 537,547 Gerald McGoey 34,102,942 543,491 Bruno D'Avanzo 34,102,379 544,054 Mr. Heckel's and Mr. McGoey's terms expire in 2005 and Mr. D'Avanzo's term expires in 2004. (b) Appointment of Independent Auditors The appointment of PricewaterhouseCoopers LLP as the independent auditors was approved with 34,403,591 for, 191,673 against and 51,169 withheld. Item 5 - Other Information - -------------------------- In April 2002, Mr. Jack Heckel resigned as a director due to recent health reasons that prevent him from participating in Board meetings. 33 Item 6 - Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibit 4.3 Sixth Amendment to Amended and Restated Multicurrency Credit Agreement (b) Reports on Form 8-K On December 21, 2001, the Company filed a Current Report on Form 8-K dated December 13, 2001, reporting under Item 5 the Company's renegotiations of its Multi-Currency Credit Agreement, Facility Agreement with the Royal Bank of Scotland and Receivables Purchasing Agreement, collectively, the "credit facilities". On February 19, 2002 the Company filed a Current Report on Form 8-K dated February 13, 2002, reporting under Item 5 the Company's divestiture of its Zero Cases division. On February 25, 2002 the Company filed a Current Report on Form 8-K dated January 15, 2002, reporting under Item 5 the Company's further negotiations of its credit facilities. On February 28, 2002 the Company filed a Current Report on Form 8-K dated February 15, 2002, reporting under Item 5 the Company's additional renegotiations of its credit facilities. (c) Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (d) Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused Amendment No. 1 to this report to be signed on its behalf by the undersigned thereunto duly authorized. APW Ltd. (n/k/a BQX Ltd.) (in provisional liquidation) ------------------------- (Registrant) Date: November 12, 2002 By: /s/ Richard D. Carroll ---------------------- Richard D. Carroll Vice President and Chief Financial Officer (Principal Financial Officer and duly authorized to sign on behalf of the registrant) 34 CERTIFICATIONS Chief Executive Officer - ----------------------- I, Richard G. Sim Certify that: 1. I have reviewed this quarterly report on Form 10-Q/A (Amendment No. 1) of APW Ltd. (n/k/a BQX Ltd.); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. Date: November 12, 2002 /s/ Richard G. Sim - --------------------------- Richard G. Sim President and Chief Executive Officer 35 Chief Financial Officer - ----------------------- I, Richard D. Carroll Certify that: 1. I have reviewed this quarterly report on Form 10-Q/A (Amendment No. 1) of APW Ltd. (n/k/a BQX Ltd.); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. Date: November 12, 2002 /s/ Richard D. Carroll - ---------------------- Richard D. Carroll Vice President and Chief Financial Officer 36 EX-99.1 3 dex991.txt CERTIFICATION OF CEO Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of APW Ltd. (n/k/a BQX Ltd.) (the "Company") on Form 10-Q/A (Amendment No. 1) for the period ended February 28, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard G. Sim, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Richard G. Sim - --------------------------- Richard G. Sim President and Chief Executive Officer November 12, 2002 EX-99.2 4 dex992.txt CERTIFICATION OF CFO Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of APW Ltd. (n/k/a BQX Ltd.) (the "Company") on Form 10-Q/A (Amendment No. 1) for the period ended February 28, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard D. Carroll, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Richard D. Carroll - --------------------------- Richard D. Carroll Vice President and Chief Financial Officer November 12, 2002 -----END PRIVACY-ENHANCED MESSAGE-----