6-K 1 form6-k_chalian81701.txt FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2001. Texon International plc (Translation of Registrant's Name Into English) SEC File Number: 333-49619 100 Ross Walk Leicester LE4 5BX England (Address of Principal Executive Offices) (Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.) Form 20-F [ X ] Form 40-F [ ] Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. Not applicable (Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.) Yes [ ] No [ X ] TEXON INTERNATIONAL PLC ------------------------ Six Months Ended June 30, 2001

~~Unaudited~~INDEX ~~Three~~PAGE ~~Months~~NO. ~~ended March 31, March 31,~~ ----- --------~~---------~~ PART I FINANCIAL INFORMATION Item 1 Financial Statements Condensed Consolidated Profit and Loss Accounts Six months ended June 30, 2001 and 2000 ~~----~~3 ~~----~~Condensed ~~Sales~~Consolidated ~~Turnover~~Balance ~~37,249~~Sheets 36June 30,~~688~~ ~~Cost~~2001 ofand ~~Sales~~December ~~(25~~31,~~758)~~ ~~(25,355)~~2000 ~~---------~~4 ~~--------~~Condensed ~~Gross~~Consolidated ~~Profit~~Cash ~~11,491~~Flow ~~11,333~~Statement ~~Selling~~Six months ended June 30, ~~general~~2001 and ~~administrative~~2000 ~~expenses~~5 ~~(8,159)~~Reconciliation ~~(8,191)~~of ~~Goodwill~~Net ~~Amortisation~~Cash ~~(326)~~Flow ~~(163)~~to ~~--------~~Movement ~~--------~~in ~~Operating~~Debt ~~Profit~~Six ~~3,006~~months 2ended June 30,~~979~~ ~~Net~~2001 ~~Interest~~and ~~Payable~~2000 ~~(3,031)~~6 ~~(2,860)~~Reconciliation ~~--------~~of ~~--------~~Movements ~~(Loss)/profit~~in onShareholders' ~~ordinary~~Funds ~~activities~~Six ~~before~~months ~~taxation~~ended ~~(25)~~June ~~119~~30, ~~Taxation~~2001 onand ~~(loss)/profit~~2000 on7 ~~ordinary~~Notes ~~activities~~to ~~(405)~~Condensed ~~(60)~~Consolidated ~~--------~~Financial Statements 8-~~-------~~9 ~~(Loss)/profit~~Item on2 ~~ordinary~~Management's ~~activities~~Discussion ~~after~~and ~~taxation~~Analysis ~~(430)~~of 59Financial ~~Minority~~Condition ~~equity~~and ~~interests~~Results ~~(66)~~of 4Operations 10-~~-------~~14 ~~--------~~PART ~~Net~~II ~~(loss)/profit~~OTHER ~~for~~INFORMATION ~~the~~Item ~~financial~~1 ~~period~~Legal ~~(496)~~Proceedings 6317 ~~Finance~~Item ~~charges~~2 Changes in ~~respect~~Securities and Use of ~~non~~Proceeds ~~equity~~17 ~~shares~~Item ~~(1,114)~~3 ~~(1,000)~~Defaults ~~--------~~Upon ~~--------~~Senior ~~Retained~~Securities ~~(loss)~~17 ~~for~~Item ~~the~~4 ~~financial~~Submission ~~period~~of ~~for~~Matters ~~equity~~to ~~shareholders~~a ~~(1,610)~~Vote ~~(937)~~of ~~========~~Security ~~=======~~Holders 17 Item 5 Other Information 17 Item 6 Exhibits - Reports on Form 8-K 17

2 TEXON INTERNATIONAL PLC ------------------------ CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNTS ----------------------------------------------- (Pounds Sterling, In Thousands)

Unaudited ~~Audited~~Six asMonths atended ~~March~~Three ~~31,~~Months ~~December~~ended ~~31, Notes 2001 2000~~ ----- ----------------- ------------------------ ~~FIXED~~June ~~ASSETS~~30, ~~Intangible~~June ~~assets~~30, ~~Intellectual~~June ~~Property~~30, ~~450~~June ~~492~~30, ~~Goodwill~~2001 212000 2001 2000 Sales Turnover 76,~~090~~917 2176,~~542~~578 ~~Tangible~~39,668 ~~assets~~39,890 21Cost of Sales (52,~~445~~959) 22(53,~~071~~088) ~~Investment~~(27,201) 1(27,733) 1 -------- -------- -------- -------- 42Gross Profit 23,~~986~~958 4423,~~106~~490 ~~CURRENT~~12,467 ~~ASSETS Stocks 2 24~~12,~~286~~157 22Selling,~~292~~ ~~Debtors~~general ~~due~~and ~~within~~administrative ~~one~~expenses ~~year~~(15,876) 29(16,~~955~~119) 33(7,~~167~~823) ~~Debtors~~(8,099) ~~due~~Goodwill ~~after~~Amortisation ~~one~~(610) ~~year~~(350) ~~1,602~~(284) ~~1,606~~(187) ~~Cash~~Reorganisation atCosts ~~bank~~(733) ~~and~~(345) in(627) ~~Hand~~(174) ~~1,215~~-------- ~~837~~ -------- -------- -------- Operating Profit 6,739 6,676 3,733 3,697 Profit on disposal of property - 57500 - 500 Profit on ordinary activities before interest 6,~~058~~739 577,~~902~~176 ~~CREDITORS~~3,733 ~~Amounts~~4,197 ~~falling~~Net ~~due~~Interest ~~within~~Payable ~~one~~(6,116) ~~year~~(5,988) (473,~~967~~085) (483,~~815~~128) --------- --------- ~~NET CURRENT ASSETS 9,091 9,087~~ --------- ---------- ~~TOTAL~~Profit ~~ASSETS~~on ~~LESS~~ordinary ~~CURRENT~~activities ~~LIABILITIES~~before ~~52,077~~taxation 53623 1,~~193~~188 ~~CREDITORS~~648 ~~Amounts~~1,069 ~~falling~~Taxation ~~due~~on ~~after~~profit ~~more~~on ~~than~~ordinary ~~one~~activities ~~year~~ (~~101,902~~718) (~~104,504~~832) ~~Provisions for liabilities and charges~~ (~~7,519~~313) (~~6,778~~772) -------- -------- -------- -------- (~~57,344~~Loss)/profit ~~(58,089)~~on ~~==========~~ordinary ~~=========~~activities ~~CAPITAL~~after ~~AND~~taxation ~~RESERVES~~(95) ~~Called~~356 up335 ~~share~~297 ~~capital~~Minority ~~9,973~~equity ~~9,973~~interests ~~Share~~(210) ~~premium~~(45) ~~49,276 49,276 Profit and loss account~~ (~~130,181~~144) (~~129,746~~49) ~~Premium redemption reserve 12,387 11,273~~ -------- -------- -------- -------- ~~Shareholders'~~Net ~~deficit~~(loss)/profit ~~Equity~~for ~~interests~~the financial period (~~125,683~~305) ~~(125,~~311 191 248) ~~Non-Equity~~Finance ~~interests~~charges ~~67,138~~in ~~66,024~~respect of non equity shares (582,~~545~~228) (592,~~224~~000) ~~Minority equity interests~~ (1,~~201~~114) (1,~~135~~000) -------- -------- -------- -------- Retained (57loss) for the financial period for equity shareholders (2,~~344~~533) (581,~~089~~689) (923) (752) ======== ======== ======== ========

3 TEXON INTERNATIONAL PLC ------------------------ CONDENSED CONSOLIDATED BALANCE SHEET ------------------------------------ (Pounds Sterling, In Thousands)

4 TEXON INTERNATIONAL PLC ------------------------ CONDENSED CONSOLIDATED CASH FLOW STATEMENT ------------------------------------------ (Pounds Sterling, In Thousands) Unaudited Six Months ended ------------------ June 30, June 30, 2001 2000 Cash inflow from operating activities 10,001 7,503 Returns on investments and servicing of finance (5,550) (5,971) Taxation 416 (1,004) Capital expenditure and financial investment (502) (411) Acquisitions and disposals (876) (3,085) ------- ------- Cash inflow/(outflow) before financing 3,489 (2,968) Financing (3,030) 3,130 ------- ------- Increase/(decrease) in cash and overdrafts in the period 459 162 ======= ======= 5 TEXON INTERNATIONAL PLC ------------------------ RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT ------------------------------------------------------- (Pounds Sterling, In Thousands) Unaudited Six Months ended ---------------- June 30, June 30, 2001 2000 Increase in cash and overdrafts in the period 459 162 Cash inflow/(outflow) from debt and lease financing 3,030 (3,130) --------- --------- Change in net debt resulting from cash flows 3,489 (2,968) Loans and finance leases acquired with subsidiary -- (462) Issue of shares -- 706 Non cash movements in debt (376) (428) Translation difference 3,399 (1,004) --------- --------- Movement in net debt in the period 6,512 (4,156) Net debt at the opening date (117,648) (108,063) --------- --------- Net debt at the closing date (111,136) (112,219) ========= ========= 6 TEXON INTERNATIONAL PLC ------------------------ RECONCILIATION OF MOVEMENTS IN TOTAL SHAREHOLDERS' FUNDS -------------------------------------------------------- (Pounds Sterling, In Thousands)

7 TEXON INTERNATIONAL PLC ------------------------ NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1 BASIS OF PREPARATION The accompanying unaudited condensed consolidated financial statements have been prepared by Texon International plc and its subsidiaries ("the Company") in accordance with UK generally accepted accounting principles. The unaudited condensed consolidated financial statements and condensed notes are presented in accordance with Form 10-Q and do not contain all the information required in the Company's annual consolidated financial statements and notes. The operating results for the three month periods are not necessarily indicative of the results which may be expected for the full year. In the opinion of management, all material adjustments, consisting of items of a normal recurring nature, considered necessary for a fair presentation of the results of operations, the financial position and the cash flows for each period shown, have been included. Where necessary comparatives are adjusted to ensure consistency with current periods. 2 STOCKS Stock is stated at the lower of cost, including factory overheads where applicable, and net realizable value on a first in first out basis. Provision is made for slow-moving and obsolete items. Inventories are summarised as follows: June 30, December 31, 2001 2000 Finished goods and goods for resale 4,122 4,687 Work in progress 1,980 1,550 Raw materials 16,457 16,055 ------ ------ 22,559 22,292 ====== ====== 3 CHANGES IN UK ACCOUNTING STANDARDS The Accounting Standards Board (ASB) has issued FRS 17 Retirement Benefits, which is mandatory for all accounting periods ending on or after 22 June 2003. FRS 17 replaces SSAP 24 and UITF 6 relating to accounting for pension costs and other post-retirement benefits. The FRS makes radical changes in respect of accounting for defined benefit schemes, leading to increased volatility in the balance sheet as actuarial gains and losses are recognized immediately and scheme assets are valued at fair values. While companies with defined benefit schemes will be able to continue applying SSAP 24 for periods ending before June 22, 2003, they will need to make additional disclosure in accordance with FRS17 for periods ending on or after June 22, 2001. The Group will apply the additional disclosure of FRS 17 prospectively in 2001. 8 TEXON INTERNATIONAL PLC ------------------------ 3 CHANGES IN UK ACCOUNTING STANDARDS CONTINUED The Accounting Standards Board (ASB) has issued FRS 18 Accounting Policies, which is effective for all accounting periods ending on or after June 22, 2001. FRS 18 replaces SSAP 2. This replacement of SSAP 2 brings the assumptions and the criteria on which entities select accounting policies, into line with the ASB's statement of principles. FRS 18 re-iterates the going concern and accruals bases, however the previous concepts of prudence and consistency have been downplayed. In determining the most appropriate accounting policy the emphasis is now on the four objectives of relevance, reliability, comparability and understandability. The Group will apply the provisions of FRS 18 prospectively in 2001. The Accounting Standards Board (ASB) has issued FRS 19 Deferred Tax, which is effective for all accounting periods ending on or after January 23, 2002. Its main objectives for the treatment of deferred tax to come more in line with international practice. Although FRS 19 introduces a form of "full provision" it has not harmonized with IAS 12. The general principle of FRS 19 is that deferred tax should be recognized in full in respect of transactions or events that have taken place by the balance sheet date and which give the entity an obligation to pay more or less tax in the future. 9 TEXON INTERNATIONAL PLC ------------------------ ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included in this report, in the Annual Report on Form 20-F filed by the Company with the Securities and Exchange Commission (the "Commission") on May 2, 2001 and in the Company's periodic reports filed with the Commission. Except for the historical data set forth herein, the following discussion contains certain forward-looking information. The Company's actual results may differ significantly from the projected results. Factors that could cause or contribute to such differences include, but are not limited to, levels of sales to customers, actions by competitors, fluctuations in the price of primary raw materials, foreign currency exchange rates and political and economic instability in the Company's markets. The cautionary statements appearing in the Company's annual report, a copy of which is available on request, qualify the forward-looking statements contained herein. GENERAL ------- The Company believes it is the world's largest, in terms of sales, manufacturer and marketer of structural materials that are essential in the manufacture of footwear. The Company operates a global business, which generates sales that are widely diversified by geographic region and product line. The Company's primary products include materials for insoles, which form the structural foundation of shoes; stiffeners, which support and shape the toe and heel of shoes; other component products used in the manufacture of footwear, such as linings, lasts, tacks, nails, steel shanks, steel toe caps, midsoles and adhesives; and a CAD business, Crispin Dynamics a leading supplier of CAD solutions to the footwear industry. The world's largest manufacturer of insole materials, the Company also commands leading positions in the markets for its other footwear products. While the products sold by the Company represent a small percentage of the total cost of materials contained in footwear, they are critical to the performance and manufacture of footwear and are not fashion sensitive. By leveraging its expertise in the manufacture of these structural materials, the Company has developed several related niche industrial products such as carpet gripper pins and cellulose air freshener material. These industrial products are sold to a wide range of industries. The Company supplies most of the major footwear manufacturers in the world and believes that its global presence gives it a unique competitive advantage to exploit industry trends favoring suppliers who provide footwear companies with a "global partner". The Company supplies over 7,500 customers worldwide, servicing global athletic footwear companies such as Nike and Adidas, designers and producers of casual shoes including Timberland and R. Griggs & Co (Dr Martens) and manufacturers of men's and women's formal shoes such as Church's and Bally. The Company has eighteen manufacturing sites strategically located in Europe, the United States, Brazil, China and Australia and sells its products in more than 90 countries through an extensive marketing and distribution network. During the first six months of 2001, sales of insoles, stiffeners, other footwear materials, industrial products and component products accounted for 34%, 25%, 10%, 10%, and 21% of total sales, respectively. In this period, 47% of the Company's sales were made to Europe, 29% to Asia and the Pacific, 16% to the Americas and 8% to the rest of the world. 10 TEXON INTERNATIONAL PLC ------------------------ COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2001 TO THE THREE MONTHS ENDED JUNE 30, 2000 Sales Turnover. Sales for the three months ended June 30, 2001 were (pound) 39.7 million, a decrease of (pound) 0.2 million from (pound) 39.9 million in the comparable period of 2000. Insole sales for three months ended June 30, 2001 decreased to (pound) 13.7 million from (pound) 14.9 million for the comparable period in 2000, reflecting the difficult market conditions in North America and in Asia where a major customer has switched to a lower priced alternative supplier. Stiffener sales for the three months ended June 30, 2001 increased to (pound) 10.0 million from (pound) 7.7 million for the comparable period in 2000. The increase in stiffener sales is mainly due to the inclusion of sales of Foss products following its acquisition in July 2000. Sales of other footwear product sales, decreased to (pound) 4.3 million from (pound) 4.5 million for the three months ended June 30, 2001 and 2000, respectively. Sales of metal products increased to (pound) 5.0 million from (pound) 4.6 million for the comparable three months ended June 30, 2001 and 2000, respectively. This increase is a result of the continued good performance of the Esjot businesses acquired in July 1999. Sales of industrial products for three months ended June 30, 2001 increased to (pound) 3.9 million from (pound) 3.6 million for the comparable period in 2000. During the three months ended June 30, 2001, sales of plastic products were (pound) 2.2 million, compared to (pound) 4.0 million for the three months ended June 30, 2000, primarily due to the disposal of the Cornwell Industrial Business in January 2001. During the three months ended June 30, 2001 and June 30, 2000 sales of Crispin products were static at (pound) 0.6 million. On a geographical basis, sales for the three months ended June 30, 2001, were as follows; Europe 45%, Asia 30%, Americas 17%, and the rest of the world 8%. For the comparable period in 2000, the percentages were 48%, 26%, 16%, and 10%, respectively. Gross Profit. Gross profit for the three months ended June 30, 2001 increased by (pound) 0.3 million to (pound) 12.5 million compared to (pound) 12.2 million in the comparable period in 2000. When expressed as a percentage of sales, gross profit was 31.4% for the three months ended June 30, 2001 an increase of 0.9% from the comparable period in 2000. This improvement is the result of favorable raw material prices and a more favorable sales mix towards higher margin businesses. Selling, General and Administrative Costs. Selling, general and administrative costs for the three months ended June 30, 2001 were (pound) 7.8 million compared with (pound) 8.1 million in the comparable period in 2000. Overheads have decreased despite the inclusion of a full quarter of overheads associated with the Foss acquisition in July 2000, as a result of a continuing cost reduction program being implemented throughout the group. 11 TEXON INTERNATIONAL PLC ------------------------ Operating Profit. Operating profit for the three months ended June 30, 2001 was (pound) 3.7 million, the same as the comparable period in 2000. Excluding one-time reorganization expenses, operating profit for the three months ended June 30, 2001 was (pound) 4.4 million, (pound) 0.5 million higher than in the comparable period in 2000. Earnings before Interest Depreciation and Amortisation ("EBITDA"). EBITDA for the three months ended June 30, 2001 was (pound) 5.6 million compared to (pound) 5.5 million for the same period in 2000. However, 2000 results included property profits of (pound) 0.5 million, hence on a comparable basis EBITDA increased by (pound) 0.6 million compared with the three months ended June 30, 2000. Interest Expense. Net interest expense was static at (pound) 3.1 million for the three months ended June 30, 2001 and June 30, 2000. Included in the interest charge is the amortization of debt insurance costs of (pound) 0.2 million for both of the three months ended June 31, 2001 and 2000. Taxation. The tax charge for the three months ended June 30, 2001 is based on the estimated percentage tax rate the Company will incur for the full year. COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2001 TO THE SIX MONTHS ENDED JUNE 30, 2000 Sales Turnover. Sales for the six months ended June 30, 2001 were (pound) 76.9 million, an increase of (pound) 0.3 million from (pound) 76.6 million in the comparable period of 2000. Insole sales for six months ended June 30, 2001 decreased to (pound) 26.4 million from (pound) 28.8 million for the comparable period in 2000, reflecting the difficult market conditions in North America and in Asia where a major customer has switched to a lower priced alternative supplier. Stiffener sales for the six months ended June 30, 2001 increased to (pound) 18.9 million from (pound) 15.1 million for the comparable period in 2000. The increase in stiffener sales is mainly due to the inclusion of sales of Foss products following its acquisition in July 2000. Sales of other footwear product sales, decreased to (pound) 7.5 million from (pound) 7.7 million for the six months ended June 30, 2001 and 2000, respectively. Sales of metal products increased to (pound) 10.2 million from (pound) 9.4 million for the comparable six months ended June 30, 2001 and 2000, respectively. This increase is a result of the continued good performance of the Esjot businesses acquired in July 1999. Sales of industrial products for six months ended June 30, 2001 increased to (pound) 7.7 million from (pound) 6.9 million for the comparable period in 2000. During the six months ended June 30, 2001, sales of plastic products were (pound) 4.6 million, compared to (pound) 7.9 million for the six months ended June 30, 2000, primarily due to the disposal of the Cornwell Industrial Business in January 2001. During the six months ended June 30, 2001, sales of Crispin products were (pound) 1.6 million, compared to (pound) 0.8 million for six months ended June 30, 2000. This increase is a result of the reflection of a full six months of sales following its acquisition in March 2000. 12 TEXON INTERNATIONAL PLC ------------------------ On a geographical basis, sales for the six months ended June 30, 2001, were as follows; Europe 47%, Asia 29%, Americas 16%, and the rest of the world 8%. For the comparable period in 2000, the percentages were 50%, 25%, 14%, and 11%, respectively. Gross Profit. Gross profit for the six months ended June 30, 2001 increased by (pound) 0.5 million to (pound) 24.0 million compared to (pound) 23.5 million in the comparable period in 2000. When expressed as a percentage of sales, gross profit was 31.1% for the six months ended June 30, 2001 an increase of 0.5% from the comparable period in 2000. This improvement is the result of favorable raw material prices and a more favorable sales mix towards higher margin businesses. Selling, General and Administrative Costs. Selling, general and administrative costs for the six months ended June 30, 2001 were (pound) 15.9 million compared with (pound) 16.1 million in the comparable period in 2000. Overheads have fallen despite the inclusion of overheads associated with the 2000 acquisitions as a result of a continuing cost reduction program being implemented throughout the group. Operating Profit. Operating profit for the six months ended June 30, 2001 was (pound) 6.7 million, the same as the comparable period in 2000. Excluding one-time reorganization expenses, operating profit for the six months ended June 30, 2001 was (pound) 7.5 million, (pound) 0.5 million higher than in the comparable period in 2000. Earnings before Interest Depreciation and Amortisation ("EBITDA"). EBITDA for the six months ended June 30, 2001 was (pound) 10.0 million compared to (pound) 9.7 million for the same period in 2000. However, 2000 results included property profits of (pound) 0.5 million, hence on a comparable basis EBITDA increased by (pound) 0.8 million compared to the six months ended June 30, 2000. Interest Expense. Net interest expense increased by (pound) 0.1 million to (pound) 6.1 million for the six months ended June 30, 2001 from (pound) 6.0 million from the comparable period in 2000. Included in the interest charge is the amortization of debt insurance costs of (pound) 0.4 million for both of the six months ended June 30, 2001 and 2000. Taxation. The tax charge for the six months ended June 30, 2001 is based on the estimated percentage tax rate the Company will incur for the full year. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity needs arise primarily from debt service obligations on the indebtedness incurred in connection with the Notes and the Revolving Credit Facility, working capital needs and the funding of capital expenditures. Total liabilities at June 30, 2001 were (pound) 154.6 million, including consolidated indebtedness of (pound) 111.1 million as compared to total assets of (pound) 99.1 million. The excess of liabilities over assets of (pound) 55.5 million at June 30, 2001 is due to the writing off of goodwill in earlier periods. The shareholders' deficit as at June 30, 2001 (pound) was 56.8 million compared to (pound) 59.2 million as at December 31, 2000. The Company's primary sources of liquidity are cash flows from operations and borrowings under the Company's financing agreements, which provide the Company with a (euro) 35.0 million 5 year Term Loan and a (euro) 15.0 million Revolving Credit Facility as well as several local facilities in Germany, Italy, Spain, France, China, Australia, New Zealand, Brazil and the UK. 13 TEXON INTERNATIONAL PLC ------------------------ The net cash inflow from operating activities for the six months ended June 30, 2001 was (pound) 10.0 million compared to (pound) 7.5 million for the comparable period in 2000. This increase of (pound) 2.5 million is primarily attributable to improvements in the management of working capital during the period. For the six months ended June 30, 2001 the Company had a cash inflow of (pound) 0.5 million, compared to an inflow of (pound) 0.2 million in the comparable period in 2000. Returns on investments and servicing of finance for the six months ended June 30, 2001 were (pound) 5.6 million compared to (pound) 6.0 million for the six months ended June 30, 2000. There was a taxation refund of (pound) 0.4 million for the six months ended June 30, 2001, compared to taxation payable of (pound) 1.0 million for the comparable period in 2000. Capital expenditures, for the six months ended June 30, 2001 were (pound) 0.5 million, as compared to (pound) 0.4 million for the comparable period in 2000. Acquisitions and disposals cash outflow for the six months ended June 30, 2001 was (pound) 0.9 million, compared with an outflow of (pound) 3.1 million in the comparable period of 2000. 14 TEXON INTERNATIONAL PLC ------------------------ FINANCIAL INSTRUMENTS AND MARKET RISKS The Company's operations are conducted by entities in many countries and the primary market risk exposures of the Company are interest rate risk and foreign currency exchange risk. The exposure to market risk for changes in interest rates relates to its debt obligations, upon which interest is paid at both short-term fixed and variable rates, and local bank borrowings, upon which interest is paid at variable rates. The Company does not use any instruments by which to hedge against fluctuations in interest rates, as it is believed that interest rates are low in the currencies in which debt is denominated and that the risk of major fluctuations in such interest rates is low. The results of the Company's operations are subject to currency translation risk and currency transaction risk. Regarding currency translation risk, the operating results and financial position of each entity is reported in the relevant local currency and then translated into Sterling at the applicable exchange rate for inclusion in the financial statements of the Company. The fluctuation of Sterling against foreign currencies will therefore have an impact upon the reported profitability of the Company and may also affect the value of the Company's assets and the amount of the Company's shareholders equity. Regarding currency transaction risk, fluctuations in exchange rates may affect the operating results of the Company because many of each entities costs are incurred in currencies different from the revenue currencies and there is also a time lag between incurrence of costs and the collection of related revenues. To protect against currency transaction risk the Company engages in hedging its net transaction exposure by the use of foreign exchange forward contracts to cover exposures arising from outstanding sales and purchase invoices. It has not covered outstanding sales or purchase orders unless they are firm commitments. At present hedging covers all traded currencies to which the Company is exposed and in which forward contracts may be undertaken. This includes the Euro and the U.S., Hong Kong, Australian and New Zealand Dollar. In addition the Company hedges against certain non-trading exposures by using foreign exchange forward contracts, these exposures being short-term loans between entities and interest payable (within one year) on the Senior Notes. Short-term loans may fluctuate in value depending upon the daily cash position of the various entities and may be denominated in any of the currencies stated above. INTERNATIONAL OPERATIONS The Company conducts operations in countries around the world including through manufacturing facilities in the UK, the United States, France, Germany, Italy, Australia, Brazil and China. The Company's global operations may be subject to some volatility because of currency fluctuations, inflation and changes in political and economic conditions in these countries. The financial position and results of operations of the Company's businesses outside the UK are measured using the local currency as the functional currency. Most of the revenues and expenses of the Company's operations are denominated in local currencies whereas the majority of raw material purchases are denominated in US dollars. Assets and liabilities of the Company's subsidiaries outside the UK are translated at the balance sheet exchange rate and statement of operations accounts are translated at the average rate prevailing during the relevant period. The Company's financial performance in future periods may be impacted as a result of changes in the above factors which are largely beyond the control of the Company. 15 TEXON INTERNATIONAL PLC ------------------------ EXCHANGE RATE INFORMATION The table below shows the major exchange rates, expressed per Pound Sterling, used in the preparation of the condensed consolidated financial statements included herewith. 2001 Average Rate Period End Rate ----------------- --------------- US Dollar 1.44 1.41 Euro 1.61 1.66 16 TEXON INTERNATIONAL PLC ------------------------ PART II OTHER INFORMATION Item 1 Legal Proceedings From time to time, the Company is involved in routine litigation incidental to its business. The Company is not a party to any threatened legal proceedings which the Company believe would have a material adverse effect on the Company's results or operations or financial condition. Item 2 Changes in Securities and Use of Proceeds None. Item 3 Defaults Upon Senior Securities None. Item 4 Submission of Matters to a Vote of Security Holders None. Item 5 Other Information None. Item 6 Exhibits and Report on Form 8 - K None. 17 TEXON INTERNATIONAL PLC ------------------------ SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Texon International plc ----------------------- (Registrant) Date August 17, 2001 By /s/ J. Neil Fleming ----------------------------- J. Neil Fleming Finance Director and Chief Accounting Officer

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