UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

 

(Mark One)

¨REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended 30 June 20032004

 

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                    to                    

 

Commission file number0-15850

 

Ansell Limited

(Australian Company Number 004 085 330)

(Exact name of Registrant as specified in its charter)

 

Ansell Limited

(Translation of Registrant’s name into English)

 

Victoria, Australia

(Jurisdiction of incorporation or organisation)

 

Level 3, 678 Victoria Street, Richmond, Victoria, 3121, Australia

(Address of principal executive offices)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class


 

Name of each exchange on which registered


None None


 

Securities registered or to be registered pursuant to Section 12(g) of the Act.

 

Ordinary Shares


American Depositary Shares*

 


*Evidenced by American Depositary Receipts, each American Depositary Share representing four (4) Ordinary Shares

 

Securities registered or to be registered pursuant to Section 15(d) of the Act.

 

None


 

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.

 

Ordinary Shares – 185,706,901176,310,916 (at 30 June 2003)2004)**

 


 

**This figure includes 1,332,1841,140,936 shares represented by the 333,046285,234 American Depositary Shares outstanding on 30 June 2003.2004.

 


 

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.

 

    

x Yes

¨ No

Indicate by check mark which financial statement item the registrant has elected to follow

 

    

¨ Item 17

x Item 18

 



Contents - Business Description and Financial Statements


SEC ITEM


    PAGE NO.NO

PART I

     

Item 1:

Item 1 : Identity of Directors, Senior Management and Advisors

  1

Item 2:

Item 2 : Offer Statistics and Expected Timetable

  2

Item 3:

Item 3 : Key Information

  3
  3A 

Selected Financial Data

  3
  3B 

Capitalisation and Indebtedness

  5
  3C 

Reasons for the Offer and use of Proceeds

  5
  3D 

Risk Factors

  5

Item 4:

Item 4 : Information on the Company

  8
  4A 

History and Development of the Company

  8
  4B 

Business Overview

  1011
  4C 

Organisational Structure

  1516
  4D 

Property, Plants and Equipment

16

Item 5:

 15

Item 5 : Operating and Financial Review and Prospects

  1718
  5A 

Operating Results

  1718
  5B 

Liquidity and Capital Resources

  23
  5C 

Research And Development

  2425
  5D 

Trend Information

  25
  5E 

Off-Balance Sheet Arrangements

  25
  5F 

Critical Accounting PoliciesContractual Obligations

  2526
  5G Safe Harbour26
5HCritical Accounting Policies26

Contractual ObligationsItem 6:

 27

Item 6 : Directors, Senior Management and Employees

  28
  6A 

Directors and Senior Management

  28
  6B 

Compensation

  31
  6C 

Board Practices

  35
  6D 

Employees

  41
  6E 

Share Ownership

42

Item 7:

 41

Item 7 : Major Shareholders and Related Party Transactions

43
7A

Major Shareholders

43
7B

Related Party Transactions

43
7C

Interests of Experts and Counsel

43

Item 8 : Financial Information

  44
  8A7A 

Consolidated Statements and other Financial InformationMajor Shareholders

  44
  8B7B 

Significant ChangesRelated Party Transactions

  44
7CInterests of Experts and Counsel44

Item 8:

Item 9 : The Offer and ListingFinancial Information

  45
  9A8A 

OfferConsolidated Statements and Listing Detailsother Financial Information

  45
  8BSignificant Changes45

Item 9:

The Offer and Listing46
9AOffer and Listing Details46
9B 

Plan of Distribution

  4546
  9C 

Markets

  4647
  9D 

Selling Shareholders

  4647
  9E 

Dilution

  4647
  9F 

Expenses of the Issue

  46
47

Item 10 : Additional Information10:

 47Additional Information48
  10A 

Share Capital

  4748
  10B 

Constitution

  4748
  10C 

Material contractsContracts

  4950
  10D 

Exchange controlsControls

  4951
  10E 

Australian Taxation

  5860
  10F 

Dividends and Paying Agents

  61
10G

Statement by Experts

6163

 


Contents - Business Description and Financial Statements


SEC ITEM


     PAGE NO.

   10H  

Documents on Display

  61
   10I  

Subsidiary Information

  61

Item 11 : Quantitative and Qualitative Disclosures about Market Risk

  62
   

Derivative Financial Instruments

  62

Item 12 : Description of Securities Other than Equity Securities

  68

PART II

   

Item 13 : Defaults, Dividend Arrearages and Delinquencies

  69

Item 14 : Material Modifications to the Rights of Security Holders

  70

Item 15 : Controls and Procedures

  71

Item 16 : [Reserved]

  72
   16A  

Audit Committee Financial Expert

  72
   16B  

Code of Ethics

  72
   16C  

Principal Accountant Fees and Services

  72
   16D  

Exemptions from the Listing Standards for Audit Committees

  73

PART III

   

Items 17 & 18 : Financial Statements

  74
   

Statements of Financial Performance

  74
   

Statements of Financial Position

  75
   

Statements of Cash Flows

  76
   

Industry Segments

  77
   

Notes to Financial Statements

  78
   1.  

Summary of Significant Accounting Policies

  78
   2.  

Change in Accounting Policy

  84
   3.  

Total Revenue

  84
   4.  

Profit/(Loss) From Ordinary Activities Before Income Tax

  85
   5.  

Contributed Equity

  86
   6.  

(Accumulated Losses)/Retained Profits and Reserves

  87
   7.  

Total Equity Reconciliation

  88
   8.  

Income Tax

  88
   9.  

Dividends Paid or Declared

  89
   10.  

Outside Equity Interests

  89
   11.  

Cash Assets

  89
   12.  

Receivables

  90
   13.  

Inventories

  90
   14.  

Other Financial Assets (Investments)

  91
   15.  

Property, Plant and Equipment

  91
   16.  

Intangible Assets

  93
   17.  

Deferred Tax Assets

  93
   18.  

Payables

  94
   19.  

Interest Bearing Liabilities

  94
   20.  

Provisions

  96
   21.  

Other Liabilities

  97
   22.  

Dissection of Liabilities

  97
   23.  

Expenditure Commitments

  97
   24.  

Superannuation

  98
   25.  

Ownership-Based Remuneration Schemes

  99
   26.  

Contingent Liabilities and Contingent Assets

  100
   27.  

Financial Instruments

  101
   28.  

Directors’ and Executives’ Remuneration

  103
   29.  

Service Agreements

  105
   30.  

Notes to the Industry Segments Report

  105
   31.  

Notes to the Statements of Cash Flows

  106
   32.  

Acquisition of Controlled Entities and Material Businesses

  107
  10G Statement by Experts  63
  10H Documents on Display  63
  10I Subsidiary Information  63

Item 11:

 Quantitative and Qualitative Disclosures about Market Risk  64
  Derivative Financial Instruments  64

Item 12:

 Description of Securities Other than Equity Securities  70

Item 13:

 Defaults, Dividend Arrearages and Delinquencies  71

Item 14:

 Material Modifications to the Rights of Security Holders  72

Item 15:

 Controls and Procedures  73

Item 16:

    74
  16A Audit Committee Financial Expert  74
  16B Code Of Ethics  74
  16C Principal Accountant Fees and Services  74
  16D Exemptions from the Listing Standards for Audit Committees  75
  16E Purchases Of Equity Securities By The Issuer  75

Item 17:

 Financial Statements  76

Item 18:

 Consolidated Financial Statements  77
  Statements of Financial Performance  77
  Statements of Financial Position  78
  Statements of Cash Flows  79
  Industry Segments  80
  1. Summary of Significant Accounting Policies  81
  2. Impact of Adopting Australian Equivalents to International Financial Reporting Standards  88
  3. Total Revenue  88
  4. Profit/(Loss) from Ordinary Activities Before Income Tax  89
  5. Contributed Equity  90
  6. Accumulated Losses and Reserves  91
  7. Total Equity Reconciliation  92
  8. Income tax  92
  9. Dividends Paid or Declared  93
  10. Outside Equity Interests  93
  11. Cash Assets  93
  12. Receivables  94
  13. Inventories  94
  14. Other Financial Assets (Investments)  95
  15. Property, Plant and Equipment  95
  16. Intangible Assets  97
  17. Deferred Tax Assets  97
  18. Payables  98
  19. Interest Bearing Liabilities  98
  20. Provisions  100
  21. Other Liabilities  101
  22. Dissection of Liabilities  101
  23. Expenditure Commitments  101
  24. Superannuation  102
  25. Ownership-Based Remuneration Schemes  103
  26. Contingent Liabilities and Contingent Assets  105
  27. Financial Instruments  107
  28. Director and Executive Disclosures  110
  29. Service Agreements  115
  30. Notes to the Industry Segments Report  116
  31. Notes to the Statements of Cash Flows  118
  32. Acquisition of Controlled Entities and Material Businesses  119

 


Contents - Business Description and Financial Statements


SEC ITEM


     PAGE NO.

   33.  

Disposal of Controlled Entities and Material Businesses

  107
   34.  

Related Party Disclosures

  107
   35.  

Earnings per Share

  110
   36.  

Environmental Matters

  110
   37.  

Particulars Relating to Controlled Entities

  111
   38.  

Investments in Associates

  114
   39.  

Events after Balance Date

  115
   40.  

Major differences between Australian GAAP and US GAAP

  116
   41.  

Reconciliation to United States Generally Accepted Accounting Principles (U.S. GAAP)

  123

Directors’ Declaration

  129

Independent Audit Report

  130

Signature

  132

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003

  133
   

Directors Report

  133
   

Statement of Financial Performance

  137
   

Statement of Financial Position

  138
   

Statement of Cash Flow

  139
   

Notes to the Financial Statements

  140

Directors’ Declaration

  173

Independent Audit Report

  174

Item 19 : Exhibits

  175
   

Exhibit Index

  175
  33. Disposal of Controlled Entities and Material Businesses  119
  34. Non-Director Related Party Disclosures  119
  35. Earnings per Share  121
  36. Environmental Matters  121
  37. Particulars Relating to Controlled Entities  122
  38. Investments in Associates  125
  39. Major differences between Australian GAAP and US GAAP—Restated  127
  40. Reconciliation to United States Generally Accepted Accounting Principles (US GAAP)  134
  Report of Independent Registered Public Accounting Firm  142

Item 19:

 Exhibits  143

Signature

    144

South Pacific Tyres

  145
  Statement Of Financial Performance  145
  Statement Of Financial Position  146
  Statement Of Partners’ Equity  147
  Statements Of Cash Flows  148
  Notes To The Financial Statements  149

Exhibit Index

  187
  Exhibit 1.1  187
  Exhibit 7.1  188
  Exhibit 8.1  189
  Exhibit 12.1  191
  Exhibit 12.2  192
  Exhibit 13.1  193
  Exhibit 13.2  194

 


PART I

 

Item 1 : Identity of Directors, Senior Management and Advisors


Not Applicable

1


PART I

 

Item 2 : Offer Statistics and Expected Timetable


Not Applicable

2


PART I

 

Item 3 : Key Information


3ASELECTED FINANCIAL DATA

 

The following selected financial data for the five year period ended 30 June 20032004 has been derived from Ansell Limited’s audited consolidated financial statements (the “Financial Statements”) and should be read in conjunction with and are qualified in their entirety by reference to those statements and accompanying notes thereto. Such Financial Statements have been audited by KPMG, independent accountants.Independent Registered Public Accounting Firm.

 

Except as set forth below, Ansell Limited’s consolidated financial statements are prepared in accordance with Australian GAAP, which varies in certain material respects from U.S. GAAP. For discussion of the major differences and a reconciliation of the material differences between Australian GAAP and US GAAP as they relate to Ansell Limited, see Notes 4039 and 4140 to the Consolidated Financial Statements. Refer Note 39(r) for details regarding the restatement of certain amounts in the US GAAP results for the years ended 30 June 2003, 2002, 2001 and 2000.

 

  For Years Ended 30 June 

In millions of A$, except per share & per ADS amounts


  2003

  2002

  2001

  2000

  1999

   For Years Ended 30 June

 
  2004

  2003

  2002

 2001

 2000

 

STATEMENTOF FINANCIAL PERFORMANCE DATA

                    

Amounts prepared in accordance with Australian GAAP :

                    

Sales revenue (excluding South Pacific Tyres)

  1,294  2,223  4,157  5,726  5,680   1,113  1,294  2,223  4,157  5,726 

Depreciation and amortization (excluding goodwill)

  31  53  95  149  156 

Net profit before minority interest, goodwill amortization, net interest expense including borrowing costs and income tax expense from continuing operations

  137  135  115  100  125 

Net profit/(loss) before minority interest, goodwill amortization, net interest expense including borrowing costs and income tax expense from non recurring activities

  (6) (108) 79  (9) 276 

Goodwill amortization

  25  29  41  41  41 

Net Interest expense including borrowing costs

  26  55  99  103  106 

Net profit/(loss) before income tax

  80  (57) 54  (53) 163 

Profit/(loss) before income tax

  94  80  (57) 54  (53)

Income tax expense

  27  56  190  30  51   21  27  56  190  30 

Outside equity interest after tax

  3  (3) (3) (4) (6)  2  3  (3) (3) (4)

Net profit/(loss) after income tax

  50  (116) (139) (87) 106   71  50  (116) (139) (87)

Amounts prepared in accordance with US GAAP :

           

Amounts prepared in accordance with US GAAP (Restated) :

         

Sales revenue from continuing operations

  1,294  1,414  1,412  1,173  1,185   1,113  1,294  1,414  1,412  1,173 

Income/(loss) from continuing operations

  86  (75) (223) (31) 37   83  69  (126) (281) (33)

Net income/(loss)

  56  (184) (195) (42) 119   90  51  (172) (207) (42)

SHARE INFORMATION(1)

                    

Amounts prepared in accordance with Australian GAAP :

                    

Number of shares on issue (millions)

  187  188  188  209  206   177  187  188  188  209 

Basic Earnings per share ($’s)

  0.27  (0.62) (0.72) (0.42) 0.51   0.39  0.27  (0.62) (0.72) (0.42)

Basic Earnings per ADS ($’s)

  1.08  (2.48) (2.88) (1.68) 2.04   1.56  1.08  (2.48) (2.88) (1.68)

Dividends provided for or paid

  —    —    47  103  144   31  —    —    47  103 

Dividends per ordinary share ($’s)

  —    —    0.05  0.10  0.14   0.17  —    —    0.05  0.10 

Dividends per ADS ($’s)

  —    —    0.20  0.40  0.56   0.68  —    —    0.20  0.40 

Dividends per ADS – US$(2)

  —    —    0.10  0.23  0.35   0.48  —    —    0.10  0.23 

Amounts prepared in accordance with US GAAP :(3)

           

Amounts prepared in accordance with US GAAP (Restated) :(3)

         

Basic Earnings per share – continuing operations(4) ($’s)

  0.46  (0.40) (1.15) (0.15) 0.18   0.46  0.37  (0.67) (1.45) (0.16)

Basic Earnings per ADS – continuing operations ($’s)

  1.84  (1.60) (4.60) (0.60) 0.72   1.84  1.48  (2.68) (5.80) (0.64)

Basic Earnings per share – net income/(loss) ($’s)

  0.30  (0.98) (1.01) (0.20) 0.58   0.50  0.27  (0.92) (1.07) (0.20)

Basic Earnings per ADS – net income/(loss) ($’s)

  1.20  (3.92) (4.04) (0.80) 2.32   2.00  1.12  (3.68) (4.28) (0.80)

STATEMENTOF FINANCIAL POSITION DATA (ATYEAREND)

                    

Amounts prepared in accordance with Australian GAAP :

                    

Current assets

  761  822  1,803  3,344  3,071   749  761  822  1,803  3,344 

Total assets

  1,579  1,833  3,476  5,086  5,219   1,499  1,579  1,833  3,476  5,086 

Current liabilities

  368  389  1,450  2,863  2,581   404  368  389  1,450  2,863 

Non-current liabilities

  366  568  960  723  1,004   283  366  568  960  723 

Shareholders’ equity

  845  876  1,066  1,500  1,634   812  845  876  1,066  1,500 

Amounts prepared in accordance with US GAAP(3) :

           

Amounts prepared in accordance with US GAAP (Restated)(3) :

         

Current assets

  761  821  1,802  3,342  3,070   749  761  821  1,802  3,342 

Total assets

  1,618  1,847  3,561  5,193  5,321   1,591  1,615  1,844  3,546  5,190 

Current liabilities

  367  389  1,427  2,797  2,512   405  367  389  1,427  2,797 

Long term debt (including leases)

  320  517  862  628  783   236  320  517  862  628 

Shareholders’ equity

  874  877  1,154  1,656  1,786   880  864  874  1,139  1,653 

3


PART I

Item 3 : Key Information

 

(3A1)SELECTED FINANCIAL DATA(continued)

(1)Effective 12 April 2002, Ansell Limited reduced the number of ordinary shares and exercisable options on issue by means of a 1 for 5 share consolidation, which received shareholder approval at an Extraordinary General Meeting held on 12 April 2002. Where appropriate prior year comparatives have been adjusted to take into account this share consolidation.

PART I

Item 3 : Key Information


3ASELECTED FINANCIAL DATA(continued)

 

(2)US$ amount of A$ dividends translated at the Noon Buying Rate on the respective A$ dividend payment dates, which represents approximately the actual US$ dividend paid to holders of American Depositary Shares (ADSs) by the Depositary.

 

(3)The principle differences between Australian GAAP and US GAAP are explained in Notes 4039 and 4140 to the Consolidated Financial Statements.

 

(4)Diluted earnings per share have not been disclosed,are the same as they are not materially different from basic earnings per share.

 

EXCHANGE RATES

 

Ansell Limited publishes its consolidated financial statements in Australian dollars (A$ or $). Unless specified or the context otherwise requires, references to US$ or US dollars are to United States dollars and references to $ or A$ are to Australian dollars. For the convenience of the reader, this Annual Report contains translations of certain Australian dollar amounts into US dollars at specified exchange rates. These translations should not be construed as representations that the Australian dollar amounts actually represent such US dollar amounts or could be converted into US dollars at the rate indicated. Unless otherwise stated, the translations of Australian dollars into US dollars have been made at the noon buying rate in New York City for cable transfers in Australian dollars as certified for customs purposes by the Federal Reserve Bank of New York (the “noon buying rate”) on specified dates.

 

The rate of exchange of A$1.00 to US$ based on the noon buying rate 28 November 2003February 2005 was 0.7227.0.7880.

 

The following table sets forth, for the periods and dates indicated, information concerning the rates of exchange of A$1.00 to US$ based on the noon buying rate.

 

For the last six months

 

US$ per A$1.00


  High

  Low

November 2003

  0.7240  0.6986

October 2003

  0.7080  0.6790

September 2003

  0.6802  0.6361

August 2003

  0.6604  0.6391

July 2003

  0.6811  0.6469

June 2003

  0.6735  0.6558

US$ per A$1.00


  High

  Low

February 2005

  0.7922  0.7650

January 2005

  0.7765  0.7553

December 2004

  0.7819  0.7515

November 2004

  0.7905  0.7464

October 2004

  0.7484  0.7203

September 2004

  0.7256  0.6880

 

For the last five fiscal years

 

US$ per A$1.00


  2003

  2002

  2001

  2000

  1999

  2004

  2003

  2002

  2001

  2000

Average Rate(1)

  0.5865  0.5221  0.5377  0.6280  0.6248  0.7016  0.5865  0.5221  0.5377  0.6280

 

(1)(1)The daily average of the noon buying rate on the last business day of each calendar month during the period.

 

Fluctuations in the A$/US$ exchange rate will affect the US$ equivalent of the A$ price of the ordinary shares on the Australian Stock Exchange Limited, and as a result, are likely to affect the market price of Ansell Limited’s ADSs in the United States. Such fluctuations would also affect the US$ amounts received by holders of ADSs on conversion by the Depositary of cash dividends paid in A$ on the ordinary shares underlying the ADSs.

4


PART I

 

Item 3 : Key Information


 

3ASELECTED FINANCIAL DATA(continued)

 

Ansell Limited purchases forward exchange contracts to cover exchange rate risks on import/export transactions. The Company believes it has reduced substantially its exposure to movements in exchange rates with respect to these transactions. The Company remains exposed, however, to fluctuations in exchange rates to the extent that the results of operations of its foreign subsidiaries are denominated in currencies other than Australian dollars and are translated for each relevant financial period into Australian dollars at the average exchange rate for the period.

 

3BCAPITALISATIONAND INDEBTEDNESS

 

Not ApplicableRequired

 

3CREASONSFORTHE OFFERANDUSEOF PROCEEDS

 

Not ApplicableRequired

 

3DRISK FACTORS

 

The following list of risks and uncertainties may not be exhaustive. Additional risks and uncertainties that we do not currently know about or that we currently believe are immaterial may also harm Ansell’s business, results of operations and financial condition.

 

Since a substantial portion of Ansell’s costs and net sales are incurred and realised in currencies other than Australian dollars, fluctuations in currency exchange rates could have a material effect on the results of operations.

 

Due to the worldwide locations of Ansell’s manufacturing facilities, a substantial portion of costs are incurred in currencies other than Australian dollars, primarily the U.S. dollar and currencies of various Southeast Asian countries. In fiscal years 2001, 2002, 2003 and 2003,2004 all Ansell’s manufacturing costs in respect of its continuing operations were denominated in currencies other than Australian dollars.

 

Similarly, due to the worldwide presence of Ansell’s customer base, a substantial portion of net sales is realised in various currencies other than Australian dollars, primarily U.S. dollars, Euros and to a lesser extent British pounds, Canadian dollars and several other currencies. For each of fiscal years 2001, 2002 and 2003, approximately 95% and in 2004 approximately 94% of net sales were denominated in currencies other than Australian dollars. Net sales and costs are not aligned in certain regions, which limits natural currency hedges.

 

We expect that a large part of Ansell’s costs and sales will continue to be in non-Australian currencies. As a result, fluctuations in currency exchange rates, particularly of the U.S. dollar, various Southeast Asian currencies and the Euro relative to the Australian dollar could have a material positive or negative effect on the results of operations.

 

Ansell’s board of directors reviews and approves the currency and hedging strategies. These strategies should reduce but not eliminate the risks of currency exchange rate fluctuations and will result in transaction costs associated with hedging transactions.

5


PART I

 

Item 3 : Key Information


 

3DRISK FACTORS(continued)

 

The public market for Ansell Limited’s shares may fluctuate.

 

The market price of Ansell Limited’s shares could fluctuate significantly in response to various factors, including:

 

actual or anticipated variations in semi-annual operating results, including currency translation,

 

announcements of technological innovations or new services or products by Ansell or Ansell’s competitors,

 

the operating and stock price performance of other comparable companies,

 

changes in financial estimates by securities analysts,

 

changes in Ansell’s expected capital needs, and

 

announcements relating to strategic relationships, mergers or consolidations by Ansell’s competitors or us.

 

The stock markets have experienced extreme price and volume fluctuations that have affected the market prices of equity securities. These fluctuations have often been unrelated or disproportionate to operating performance. These broad market factors may materially affect the trading price of Ansell Limited’s common stock. General economic, political and market conditions, like recessions and interest rate fluctuations, may also have an adverse effect on the market price of Ansell Limited’s shares.

 

Ansell’s manufacturing operations are based, and revenues originate, in many different countries and are, therefore, subject to instability and fluctuation in political, diplomatic and economic conditions, including changes in policies regarding taxation.

 

In fiscal year 2003,2004, approximately 82%89% of the Ansell’s manufacturing operations, measured in terms of cost of production, and approximately 58%61% of Ansell’s net sales were outside the United States. As a company with worldwide presence, we are subject to economic, political and diplomatic factors in countries where we have operations that could adversely affect the financial results, restrict Ansell’s ability to expand or limit the current operations.

 

Ansell’s plants outside the United States are located in Malaysia, Thailand, Sri Lanka, India, Mexico, and the U.K. as are those of many of Ansell’s competitors. As a result, we are directly affected by the political and economic conditions, to the extent that they affect on the export of product from manufacturing plants that exist in those parts of the world. Any political or economic instability, a significant increase in the rate of corporate taxation, a discontinuance or reduction in export tax rebates or any other change in a country’s policies regarding foreign ownership of manufacturing facilities could adversely affect the results of operations. We expect that non-U.S. production costs will continue to represent the major portion of such costs.

 

We also expect that we will be subject to the risks of conducting business internationally, including foreign currency exchange rate fluctuations, unexpected changes in regulatory requirements, tariffs and other barriers. The results of operations may be adversely affected by these factors.

 

Several of Ansell Limited’s subsidiaries, and the Company in some instances, are defendants in product liability lawsuits related to products manufactured and sold by subsidiaries. Although we cannot quantify Ansell’s exposure in these cases, we are incurring and expect to incur additional expenses in defending these. Some of those expenses, as well as judgements that could be entered against us, are not covered by insurance.

 

Ansell, and other companies in its industry, are currently defendants in numerous product liability lawsuits alleging fault for allergic reactions to natural rubber latex gloves experienced by some users. As of 30 June 2003,2004, Ansell was a defendant along with other manufacturers and distributors of latex gloves in 31346 lawsuits filed in the United States and 1 in Australia on behalf of individuals alleging wrongful death, personal injuries and lost wages as a result of their exposure to natural rubber latex gloves.

6


PART I

 

Item 3 : Key Information


 

3DRISK FACTORS(continued)

 

The lawsuits allege, among other things, that the defendants were negligent in the design and manufacture of the gloves and failed to adequately warn users of the possibility of allergic reactions to latex products. Certain lawsuits allege cross claims by glove distributors for indemnity and defense costs. As of 30 June 2003,2004, the 31346 lawsuits pending against us in the United States represented approximately 50% of outstanding latex related cases filed against all defendants in the United States.

 

In the United States, we had 379367 and 367313 latex allergy lawsuits pending against us at 30 June 20012002 and 30 June 2002,2003, respectively. We are unable to anticipate how many additional plaintiffs may file similar lawsuits or how many lawsuits may be filed in other countries.

 

Ansell is subject to regulation by governments around the world, and if these regulations are not complied with, existing and future operations may be curtailed, and could be subject to liability.

 

The design, development, manufacturing, marketing and labelling of Ansell’s products are subject to regulation by governmental authorities in the United States, Europe and other countries, including the Food and Drug Administration and the European Committee for Standardisation, known as the FDA and CEN, respectively. The regulatory process can result in required modification or withdrawal of existing products and a substantial delay in the introduction of new products. Also, it is possible that regulatory approval may not be obtained for a new product.

 

Failure to comply with applicable regulatory requirements can result in actions that could adversely affect Ansell’s business and financial performance.

 

Ansell is heavily dependent upon the rubber crop and the availability of latex concentrate, and a material disruption in the regular supply of rubber for latex concentrate or increases in the price of latex concentrate could negatively affect the results of operations.

 

Ansell accounted for approximately 5%4% of worldwide liquid natural latex consumption in fiscal 2003.2004.

 

Ansell’s ability to produce natural latex products is heavily dependent upon the regular availability of raw rubber harvested by independent growers in Southeast Asia and processed into latex concentrate. A material disruption in the regular supply of rubber for latex concentrate due to weather or other natural phenomena, labour or transportation stoppages or shortages, political unrest or otherwise, would cause adverse effects to Ansell’s business, financial condition and results of operations. In addition, rubber is a commodity traded on world commodities exchanges and is subject to price fluctuations driven by changing market conditions.

7


PART I

 

Item 4 : Information on the Company


 

OVERVIEW

 

The fiscal year of Ansell Limited (“Ansell Limited” or the “Company,” which, unless the context otherwise requires, includes Ansell Limited and its consolidated subsidiaries) ends on 30 June. The fiscal year ended 30 June 20032004 is referred to herein as “2002-2003”“2003-2004” or “fiscal year 2003”2004” and other fiscal years are referred to in a similar manner.

 

This Annual Report contains forward looking statements (within the meaning of the Securities Exchange Act of 1934, as amended) and information that is based on management’s beliefs as well as assumptions made by and information currently available to management. When used in this Annual Report the words “anticipate,” “estimate,” “believe,” “expect,” “potential,” “should” and similar expressions are intended to identify forward looking statements. These forward looking statements necessarily make numerous assumptions with respect to the Company’s operations, potential exposure, industry performance, general business, economic and regulatory conditions, access to markets and materials and other matters, all of which are inherently subject to significant uncertainties and contingencies and many of which are beyond the Company’s control. Should one or more of these risks or uncertainties materialise or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, planned for, estimated, expected or projected. The Company believes that a number of important factors could cause the Company’s actual results to differ from those that may have been or may be projected in forward looking statements made by or on behalf of the Company from time to time. These factors include the economic situation in those areas of the world where the Company has substantial operations, customers or consumers, foreign currency exchange rates, the success of the Company’s business strategies including cost cutting and consolidations, the ability of the Company to take advantage of growth opportunities through acquisitions, the positioning of business segments, future production output capacity, litigation, environmental risks, and risks of derivative instruments. See also “Risk Factors” in Item 3 of this Annual Report. The forward looking statements in this Annual Report are contained principally under Item 5 – “Operating and Financial Review and Prospects.”

 

4AHISTORYAND DEVELOPMENTOFTHE COMPANY

 

Ansell Limited’s business originated in 1893 as a branch of Dunlop of the United Kingdom (“Dunlop UK”) conducting an Australian bicycle tire business. The Company was incorporated under theCorporations Act of Australia (the “Corporations Act”) on 16 August 1920 in Victoria, Australia under the name of Dunlop Rubber Company of Australia Limited, at which time it acquired the rights in Australia to the trademark and tradename Dunlop and the right to use certain technology of Dunlop UK.

 

Until the 1960s the Company was engaged primarily in the manufacture of rubber based products. During the 1960s and the 1970s, the Company undertook a geographic and product diversification program, including the addition of clothing and footwear businesses (which were the foundation for the Pacific Brands Group) and the establishment of manufacturing facilities in Malaysia, New Zealand and the Philippines.

 

In 1980, the Company merged with another Australian industrial company, Olympic Consolidated Industries Limited (“Olympic”), which was engaged in the tire, polyurethane foam, cable and polystyrene businesses. Both the Company and Olympic had substantial tire manufacturing operations in an industry with over capacity, and the merger led to significant consolidation. After the merger, the Company operated under the name Dunlop Olympic Limited until 1986, when it changed its name to Pacific Dunlop Limited.

 

In 1984, the Company acquired the New Zealand businesses of Canzac Cables Ltd and Dunlop New Zealand Ltd., with their cables, tire manufacturing and retailing, industrial products and sporting goods operations fitting in well with the Company’s operations in Australia.

 

During the course of the 1980s, the Company further expanded its operations in Australia and internationally through acquisitions, increased international marketing activity and the construction of new manufacturing facilities, particularly in Asia and North America. The Company also completed a series of joint ventures which complemented and strengthened its prior activities, the most significant of which was the combination of its Australian and New Zealand tire manufacturing and retailing activities with those of The Goodyear Tire and Rubber Company in March 1987.

8


PART I

 

Item 4 : Information on the Company


 

4AHISTORYAND DEVELOPMENTOFTHE COMPANY(continued)

 

In addition, during the 1980s, the Company significantly expanded its battery operations through the acquisition of the battery operations of Chloride Group Plc in the United States, Australia and New Zealand and the acquisition of GNB Technologies Inc., a United States battery manufacturer.

 

During 1988–1989, the Company acquired certain health and medical businesses, which led to the creation of the Medical Group. The Company also acquired during 1988–1989 the automotive parts distribution businesses of Repco Limited in Australia. Shortly thereafter, the Company acquired the Edmont industrial glove business (“Edmont”) and in 1995 acquired the Perry medical gloves business.

 

These two acquisitions significantly increased the size of the Ansell Healthcare business. Sales during 1995-1996 included adidas, a number of businesses in the Industrial Foam and Fibre Group and the public float of Cochlear Ltd. In 1996–1997 Loscam Ltd and the Telectronics business of the Medical Group were sold and Ansell Healthcare acquired the Golden Needles Knitting business.

 

On 29 November 1996, the Telectronics implantable medical device business was sold for US$135 million ($166 million net proceeds) to St Jude Medical, Inc. of the United States. Responsibility for products manufactured prior to the sale of the business (including the Accufix Pacing Leads Litigation) was not assumed by the purchaser.

 

During the 1998 fiscal year the Olex Communications division of the Cables and Engineered Products Group was sold for $23 million. GNB Environmental Services Inc. (ESI), a subsidiary of GNB was also sold in that year.

 

The Australian, New Zealand and Sri Lankan cable businesses were sold on 2 June 1999. Proceeds from the sale, including certain property sales of the Cables Group, amounted to $300 million. The sale generated a breakeven result after providing for appropriate write-downs for the Chinese and Indonesian facilities, which were sold during the 2000 fiscal year. During that year the Company also purchased the Medical Glove business of Johnson & Johnson for US$86 million and announced the intention to sell its Electrical Distribution business and GNB Technologies Group.

 

The sales of the Electrical Distribution business and GNB Technologies Group were finalised during the 2001 fiscal year for $343 million and US$333 million respectively. Other key events that occurred during the 2001 fiscal year were:

 

resolution of the outstanding Accufix Pacing Leads class action litigation in the United States within the previously provided provisions,

 

the strengthening of Ansell Healthcare’s global leadership and competitiveness in barrier protection products by continuing the integration of the Johnson & Johnson medical gloves business, fully commissioning the new Thailand condom plant and commencing a major manufacturing and marketing restructure,

 

the acquisition and integration by Pacific Brands of Clarks Shoes and the Sara Lee Apparel business in Australasia and Fiji,

 

the closure of South Pacific Tyres heavy truck tire plant and the realignment of the marketing function along consumer and commercial lines,

 

effective 1 August 2000, the Novare joint venture between the Company and Andersen Consulting (now Accenture) for the provision of business support services and information technology solutions to companies across the manufacturing, distribution and retail industries in Australia and New Zealand formally commenced operation.

 

In addition to the above, the Company also released announcements concerning a restructuring of its activities including the sale of the Pacific Automotive and Pacific Brands businesses, the acquisition of Accenture’s 50% interest in the Novare joint venture and an agreement with the Goodyear Tire and Rubber Company of the United States governing the restructure of the South Pacific Tyres Joint Venture.

 

During the 2002 fiscal year the sales of the Pacific Automotive and Pacific Brands businesses were finalised for $251.5 million and $730 million respectively. The agreement with the Goodyear Tire and Rubber Company of the United States was also completed. This agreement included reducing manufacturing facilities from five to two and franchising a number of company owned stores.

9


PART I

 

Item 4 : Information on the Company


 

4AHISTORYAND DEVELOPMENTOFTHE COMPANY(continued)

 

As part of the agreement, an option in favour of the Company was executed (exercisable in four to five years)between August 2005 and August 2006) which enables the Company to put the business to Goodyear. If the option is not exercised, Goodyear has a call option exercisable in the following six months. Under these agreements the Company is not required to contribute any further cash, its contribution being limited to its equity invested of $140 million and its current loans of $56.3 million.

 

As a result of this agreement, the Company effective 1 July 2001, discontinued its past practice of including 50% of the result of South Pacific Tyres (after elimination of intercompany items) in its statements of income.income prepared under Australian GAAP. The Company’s interest in the South Pacific Tyres Partnership is carried as an investment.

 

Also effective 31 August 2001 the Company acquired Accenture’s 50% interest intook full ownership of the Novare joint venture by acquiring Accenture’s 50% interest for $19.3 million.

 

In April 2002 the Company changed its name from Pacific Dunlop Limited to Ansell Limited and reduced the number of ordinary shares and exercisable options on issue by means of a 1 for 5 share consolidation.

 

During the 2003 fiscal year, the Company completed most of the remaining corporate and restructuring activities associated with its former structure.

 

Also during fiscal 2003 the Company launched the first phase of Operation Full Potential, a three year program designed to significantly enhance Ansell’s operating performance. The first phase concentrated on business growth and development initiatives and provided capabilities and resources to address business challenges that emerged during the year.

 

The Company also progressed its Occupational Value Proposition (OVP), an exciting and radically different approach begun at Ford Motor Company in 2001, to move Ansell ‘from“from products to solutions’solutions” by developing our expertise in guiding customers in hand injury reduction techniques using our products and know-how. During fiscal 2003 the Company progressed OVP from concept through to trials completed successfully in potential customers’ production facilities. The Company is in the advanced stages of negotiations with several customers.

 

During the 2004 fiscal year, the Company moved into the second phase of Operation Full Potential resulting in the activities, capabilities and program structure being integrated into the respective business segments.

Also during fiscal 2004 Ansell continued its successful push to help customers change the way they manage their hand protection costs to focus on the total value of hand protection rather than the more traditional concentration on glove procurement cost. This approach has lead to a number of significant glove contracts during the year.

The Company also adopted the globally recognised Six Sigma operational excellence methodology during the 2004 fiscal year. This methodology has a focus on improving customer satisfaction and delivering on customer expectations by reducing variations in products and processes.

The Company’s registered head office is located at 678 Victoria Street Richmond, Victoria, Australia. Its telephone number is (61 3) 9270 –7270 and fax number is (61 3) 9270-7300. Further information can be found by viewing the Company’s website www.ansell.com.www.ansell.com. However, such information is not part of this Annual Report.

Refer to Item 5.B for information on the Company’s principal capital expenditures and divestitures since the beginning of the last three financial years. There are no material capital expenditures or divestitures currently in progress.

10


PART I

Item 4 : Information on the Company

 

4BBUSINESS OVERVIEWBusiness Overview

 

ORGANIZATION

 

FollowingAlthough the downsizing ofCompany continues to be listed on the GroupAustralian Stock Exchange and the significant shift of operational activity away from Australia, a number of the services formerly provided by the Group’smaintains its registered head office in Australia, are now undertaken at the Ansell Healthcareits operational head office is located in Red Bank, New Jersey, USA. The Company’s Chief Executive Officer, Chief Financial Officer and most of the senior management team are based in New Jersey.

 

ANSELL HEALTHCARE

 

Ansell Healthcare provides essential healthcare barrier protection against injury, infection and contamination for millions of people at work, in medical situations, in the home and in special environments, such as food preparations and microelectronics.

 

The following table sets forth certain information with respect to Ansell Healthcare for the periods and dates indicated.

 

  For Years Ended 30 June  For Years Ended 30 June

$ in millions


  2003

  2002

  2001

  2004

  2003

  2002

Sales

  1,294  1,414  1,412  1,113  1,294  1,414

Operating Profit

  160  162  144  146  160  162

Gross Assets(1)

  748  921  1,130  663  707  865

Employees

  11,991  12,118  12,076  11,509  11,991  12,118

 

(1)Gross assets exclude cash, goodwill and brand names.

PART I

Item 4 : Information on the Company


4BBUSINESS OVERVIEW(continued)

ANSELL HEALTHCARE(continued)

 

Ansell operates in three broad market segments: Professional Healthcare (surgeons’ and examination gloves); Occupational Healthcare (industrial hand protection); and Consumer Healthcare (condoms and household gloves). The Company is organized across three geographic regions – the Americas, Europe and Asia Pacific – supported by a shared operations/supply chain, a Science and Technology group and global marketing teams. More than 5048 percent of Ansell’s sales in fiscal year 20032004 were in the Americas, with a further 36 percent in the European region and the balance in Asia Pacific. Refer to Item 5.A. for additional information on the breakdown of total revenues by category of activity and geographic market.

 

Medical gloves are marketed principally under the umbrella brands of Ansell and Ansell Perry and specific product brands include Gammex, Conform, Encore, Nutex, MicrOptic, X-AM, Synsation, Dermaclean, Nitratouch, Allergard, Surgikos, Maxxus, Neutralon, Ultralon, Dispos-a-Glove, Micro Touch Ultra and Micro Touch Plus.

 

Condom brands include Lifestyles, Mates, Mannix, Contempo, Primex, Checkmate and Kama Sutra.

Ansell Healthcare believes it is one of the world’s largest manufacturermanufacturers and marketermarketers of synthetic dipped and sewn industrial gloves, which are principally branded Ansell Edmont. Specific product brands include Ansell, Nitrilite, Solvex, Hycron, Golden Needles and HyFlex.

Condom brands include Lifestyles, Mates, Mannix, Contempo, Primex, Chekmate and Kama Sutra.

Refer to Item 5.C for additional information on new product development.

 

With the exception of most types of industrial gloves and some medical gloves, Ansell Healthcare’s products are predominantly made of natural and synthetic latex and, accordingly, share common manufacturing processes and polymer dipping technology. Ansell Healthcare believes that the expertise it has developed in proprietary latex process and engineering technology enables it to produce high quality natural and synthetic latex gloves and condoms at low cost and that it has a flexible supply and logistics infrastructure that allows it to switch production between various products to take advantage of changes in market demand.

 

The Operations and Supply Chain group support product flows to the markets through 1715 global production facilities located in Asia, North America and the UK. ApproximatelyAlmost 80% of the product sourced is manufactured at these facilities with the balance outsourced under strict quality and performance specifications.

 

Ansell11


PART I

Item 4 : Information on the Company

4BBUSINESS OVERVIEW (continued)

ANSELL HEALTHCARE(continued)

Each on Ansell’s products faces competition with each of its products from a variety of sources, including international and local producers. Major international competitors include Seaton Scholl Limited,SSL International PLC, the world leader in condoms; Regent, which competes with most of Ansell’s latex product range;produces medical surgical gloves; Allegiance (a Division of Cardinal Healthcare), which manufacturers and distributes medical examination and surgical gloves; MAPA, (a subsidiary of the French Elf PetroleumTOTAL group) which produces household and light industrial gloves and condoms; Kimberley Clark Corporation, a U.S. company that manufacturers and markets disposable latex and synthetic glove products; Sempermed (a Division of Austria’s Semperit), which produces disposable medical gloves; and Church & Dwight, which is a major producer of condoms in the United States.

 

Ansell Healthcare’s operations are not impacted by seasonal factors.

 

DISCONTINUED OPERATIONSDiscontinued Operations

 

OverSince the last three yearsmid 1990’s the Company has pursued a policy of divesting major businesses to enable greater focus on the Ansell Healthcare operations. The divestments were largely completed by the end of fiscal 2002 with principally only the investment in the South Pacific Tyres (SPT) business remaining within discontinued operations (refer Item 4A). SPT is not treated as discontinued for US GAAP reporting.

 

The following table sets forth certain information with respect to these discontinued operations for the periods and dates indicated.

 

  For Years Ended 30 June  For Years Ended 30 June

$ in millions


  2003

  2002

  2001

  2004

  2003

  2002

Sales

  —    809  2,745  —    —    809

Operating Profit

  —    61  133  —    —    61

Gross Assets(1)

  223  253  1,457  210  223  253

Employees

  —    —    11,333  —    —    —  

 

(1)Gross assets exclude cash, goodwill and brand names.

PART I

Item 4 : Information on the Company


4BBUSINESS OVERVIEW(continued)

DISCONTINUED OPERATIONS(continued)

 

The major business groups divested during the last three years are as follows:

 

Pacific Brands

 

The Pacific Brands business was sold in November 2001 for $730 million to an investor consortium led by CVC Asia Pacific and co-led by Catalyst Investment Managers Pty Ltd.

 

Pacific Brands was a large Australian consumer goods business marketing many brands that are household names and was organised into four key operating groups: Clothing, Household Products, Footwear and Sport, Leisure and Workwear.

 

Pacific Automotive

 

The Company sold its Australian and New Zealand automotive parts business effective 31 August 2001 for $251.5 million to a company owned and funded by GS Private Equity, Gresham Private Equity and Macquarie Direct Investment.

 

Pacific Automotive traded under the trade names of Repco Auto Parts, CarParts, Autopro, Motospecs, Ashdown and Appco and was a supplier of general autoparts selling to the trade, service stations and reseller markets.

 

12


GNB Technologies GroupPART I

 

TheItem 4 : Information on the Company completed the sale of the GNB Technologies Group to Exide Corporation, a US corporation, effective 30 September 2000 for US$333 million cash and 4 million Exide shares.

GNB Technologies manufactured industrial and automotive lead acid batteries. Its batteries were used in the telecommunications, power control, automotive and power markets. GNB Technologies consisted of two business units: Automotive and Industrial. In addition, GNB Technologies was a recycler of lead.

The Electrical Group

 

The Company completed the sale of the Electrical Distribution business in Australia and New Zealand to Hagemeyer Group effective 31 July 2000 for $343 million.

The Electrical Group comprised Australia’s largest distributor of electrical installation products. Lawrence & Hanson, Wattmaster, Auslec in Australia and Corys Frasers in New Zealand had a combined total of more than 220 outlets. The business supplied electrical contractors, mining, government and industrial customers.

4BBUSINESS OVERVIEW(continued)

 

RAW MATERIALS

 

Raw materials are a significant manufacturing cost for many of Ansell Healthcare’s products, the most significant being latex. Latex prices can be volatile and are dependent upon world supply and demand and currency movements.

 

Ansell Limited attempts to obtain raw materials from the most economical and reliable sources wherever situated, with regard to world supply, prices and commodity markets. The Company has multiple suppliers for its major raw materials to minimise the risks associated with sole suppliers. No material shortages are anticipated in any of Ansell Healthcare’s operations. The Company attempts to pass on to its customers raw material price fluctuations. Careful monitoring and management of raw material costs is carried on throughout Ansell Healthcare’s business segments.

 

REGULATIONAND ENVIRONMENTAL MATTERS

 

Government Regulation

 

The products Ansell Limited manufactures are subject to regulations of varying degrees in each of the countries in which the Company markets its products. These regulations have been particularly advanced in the United States by the Safe Medical Devices Act of 1990 and in Europe, with the completion of the work required by the Single European Act of 1986 and its on-going implementation. In addition, harmonisation of regulatory requirements and reciprocity of testing procedures and data, on an international basis, has led to the adoption of an international quality management system standard, which is being implemented progressively by various regulatory authorities including the FDA and the Commission of the European Union.

PART I

Item 4 : Information on the Company


4BBUSINESS OVERVIEW(continued)

REGULATIONAND ENVIRONMENTAL MATTERS(continued)

 

Changes in existing requirements or adoption of new requirements could adversely affect Ansell Healthcare’s ability to comply with regulatory requirements. Failure to comply with regulatory requirements could have a material adverse effect on the business, financial condition and results of operations.

 

United States

 

In the United States, products offered through Ansell’s Professional Healthcare and Personal Healthcare segments are regulated as medical devices under the Federal Food, Drug and Cosmetic Act (the FDC Act) by the FDA. We believe that all of the Company’s products regulated by the FDC Act are in compliance in all material respects with the relevant sections of the FDC Act and the advice and guidance provided by the FDA. Medical device manufacturers are subject to periodic inspections and audits by the FDA for compliance with the FDA’s current Quality System Regulation, which specifies good manufacturing practices (known as QSR/GMP requirements) for medical devices. The FDA has a number of compliance and enforcement procedures when deviations from QSR/GMP requirements are observed during such inspections. Which procedures are used depends upon the seriousness of the observations as well as the compliance history of the facility inspected and the company owning it.

 

13


PART I

Item 4 : Information on the Company

4BBUSINESS OVERVIEW(continued)

REGULATIONAND ENVIRONMENTAL MATTERS(continued)

As a general matter, the FDA often seeks to resolve observed QSR/GMP deficiencies on a voluntary basis without resorting to formal administrative enforcement action. In many cases, the FDA and the affected company enter into an agreement whereby the company retains one or more recognised, expert consultants to assist the company in achieving substantial compliance with the relevant QSR/GMP requirements and to certify that such efforts have been successful. When observed QSR/GMP deficiencies cannot be resolved through voluntary action and in a timely manner, the FDA has the option of initiating further enforcement action, including warning letters, import alerts, product bans, field corrections, seizures, recalls, injunctions, civil penalties, fines based on the equitable remedy of disgorgement, adverse publicity issued by the FDA and criminal prosecutions.

 

Each manufacturing operation of Ansell Healthcare has a Quality Assurance/Quality Control (QA/QC) department with its own budget. Also, we operate in a total quality environment where all participants in the manufacturing process are responsible for quality. It is the responsibility of the QA/QC department along with manufacturing to maintain the quality systems and records.

 

The FDA has periodically inspected most of Ansell Healthcare’s condom and medical glove manufacturing facilities, including Ansell Healthcare’s overseas manufacturing facilities and has made observations on how manufacturing operations could be improved. In upgrading manufacturing facilities to address the FDA’s observations and evolving technology and to otherwise comply with QSR/GMP requirements, we have and will continue to expend time, monies and efforts in the areas of product and quality control.

 

The FDA currently requires manufacturers intending to market a new medical examination glove, surgical glove or condom or to modify significantly a previously cleared medical examination glove, surgical glove or condom or the labelling of one of these products to obtain prior clearance. Although we typically have not experienced delays in obtaining clearance for new medical examination glove, surgical glove or condom products, there can be no assurance that we will not experience such delays for future products. An adverse determination by the FDA or a request for additional data or information could have the effect of delaying or precluding clearance and, at the same time, could materially delay or block the commencement of marketing new medical examination glove, surgical glove or condom products.

 

The FDA examines medical examination gloves, surgical gloves and condoms that are imported into the United States by randomly testing some but not all shipments for defects. If a shipment of any of these products is found to be defective, the manufacturing facility that produced the defective product will be subject to a Level 1 import alert. Under Level 1, no further shipments will be cleared for import unless tested and shown not to be defective.

PART I

Item 4 : Information on the Company


4BBUSINESS OVERVIEW(continued)

REGULATIONAND ENVIRONMENTAL MATTERS(continued)

 

A facility will be removed from Level 1 if five consecutive shipments are tested and shown not to be defective. The facility can then import shipments without prior testing but subject to possible FDA testing on a random basis. If a second shipment is found to be defective during testing while on Level 1 or in random FDA testing during the 24 months after removal from Level 1, the manufacturing facility will be placed on Level 2 import alert. On Level 2, no further shipments will be cleared for import unless tested and shown not to be defective.

 

A facility will be removed from Level 2 if ten consecutive shipments are tested and shown not to be defective. The facility can then import shipments without prior testing but subject to possible FDA testing on a random basis. If a second shipment is found to be defective during testing while on Level 2 or in random FDA testing during the 24 months after removal from Level 2, the manufacturing facility may be placed on Level 3 import alert. A facility on Level 3 cannot import further shipments even if they have been tested and shown not to be defective.

 

14


PART I

Item 4 : Information on the Company

4BBUSINESS OVERVIEW(continued)

REGULATIONAND ENVIRONMENTAL MATTERS(continued)

United States (continued)

A facility can be removed from Level 3 only by showing the FDA that the facility complies with QSR/GMP requirements based on an acceptable FDA inspection or a certification by the facility based on an independent audit by a qualified third party. After this, the facility will be placed on Level 1 detention and must seek removal from that status as described above.

 

Ansell’s condom manufacturing facilities in Bangalore, India and Surat Thani, Thailand are currentlywere placed on Level 2 detention. Thus, if any shipment from either of these facilities is found to be defective by the FDA while the Level 2detention in March 2003. The import alerts remainremained in effect or during the 24-month period after their removal, the facility responsible for the shipment may be placed on Level 3 import alert, resultingapproximately 1 month and were lifted in a ban on imports of additional shipments from that facility into the United States.

April 2003. Ansell’s glove manufacturing facility in Shah Alam, Malaysia was placed on Level 1 detention in October 2002. The import alert remained in effect for 3 months and was lifted on January 6, 2003. Thus, if any shipment from this facility is found to be defective by the FDA through January 2005, the facility will be placed on Level 2 detention, and must meet the quality standards presented above. See also Item 5A “Operating Results.”Results”.

 

Labelling and promotional material for medical examination gloves, surgical gloves, and condoms are regulated by the FDA under the FDC Act and violations are subject to enforcement action as described above. Advertising for medical examination gloves, surgical gloves, and condoms is regulated by the Federal Trade Commission (FTC) under the Federal Trade Commission Act and violations are subject to enforcement action by the FTC including orders prohibiting objectionable claims, civil monetary penalties, monetary consumer redress, and orders requiring corrective advertising. We believe that the labelling and advertising of all Ansell products complies in all material respects with FDA and FTC requirements.

 

Europe

 

Condoms and medical gloves are regulated by Directive 93/42/EEC of the European Commission on medical devices that came into effect on 1 January 1995 and became a mandatory requirement for sales in Europe in June 1998. This directive regulates the sale of all medical devices throughout the European Union and the European Economic Area (which comprises the fifteen states of the European Union plus Iceland, Norway and Liechtenstein). Ansell Healthcare’s condoms and medical gloves are in compliance with the requirements of this directive and all relevant standards (including rules for the affixing and use of CE conformity marking set forth by Directive 93/465/EEC of the European Commission) allowing these products to carry the CE mark and to be sold in all European countries except, with respect to condoms, France, without further approval. Pursuant to Article 8 of Directive 93/42/EEC, France requires testing of condoms in addition to the requirement necessary to obtain a CE mark.

 

Occupational gloves are governed under the directive for personal protective equipment, Directive 89/686/EEC. Ansell Healthcare’s occupational gloves are in compliance with the requirements of this directive and all relevant standards (including rules for the affixing and use of CE conformity marking set forth by Directive 93/465/EEC of the European Commission) allowing these products to carry the CE mark and to be sold in all European countries without further approval.

PART I

Item 4 : Information on the Company


4BBUSINESS OVERVIEW(continued)

REGULATIONAND ENVIRONMENTAL MATTERS(continued)

 

Ansell Healthcare is also required to comply with regulations governing packaging waste, including Directive 94/62/EEC, which requires that certain percentages of waste material must be reused or recycled in every European Union country. The required percentage will increase over the next few years, andyears. Ansell Healthcare must also show compliance with Directive 46/95/EEC, which regulates the privacy of personal data on customers and individuals submitting complaints.

 

15


PART I

Item 4 : Information on the Company

4BBusiness Overview(continued)

REGULATIONAND ENVIRONMENTAL MATTERS(continued)

Other Government Regulation

 

Whether or not the FDA clearance is obtained for a new product, approval or clearance of a product by regulatory authorities in foreign countries may be required prior to the commencement of sales of the product in such countries. The requirements governing product approvals or clearances vary widely from country to country, and the time required for approval may be longer or shorter than that required for FDA approval. There are also several local country quality marks that, although not required, are essential to sales in various countries.

 

Additionally, Ansell Healthcare operates plants in the United Kingdom, Malaysia, Sri Lanka, Thailand, Mexico and India. The occupational, health and safety laws and regulations vary dramatically within these countries. Ansell Healthcare’s policy is to operate a more stringent Ansell-wide approach to occupational health and safety regardless of these prescribed regulations and to ensure that an internationally acceptable work environment is provided for employees. We coordinate an international occupational health and safety program through Ansell Healthcare’s Global Safety, Health and Environment Director. All plants are required to report on all occupational health and safety issues on a monthly basis to senior management.

 

Details of other regulatory and environmental matters are referred to in Note 36 to the Consolidated Financial Statements contained within Items 17 andItem 18.

 

4CORGANISATIONAL STRUCTURE

 

Note 37 to the Financial Statements included in Items 17 andItem 18 contains a listing of the Company’s subsidiaries, their countries of incorporation and the Company’s proportion of ownership interest in each.

 

4DPROPERTY, PLANTSAND EQUIPMENT

 

Set out below is a breakdown by geographic location of the Company’s manufacturing facilities (with distribution facilities attached to manufacturing facilities not counted separately), as at 30 June 2003.2004.

 

Geographic Region


  

Products Produced


  No. of Manufacturing
Facilities


United States

  Industrial gloves    53

Malaysia

  Household, surgical and examination gloves  3

United Kingdom

  Industrial gloves  1

Thailand

  Household, surgical and examination gloves and condoms  2

Mexico

  Industrial gloves  2

Sri Lanka

  Industrial and surgical gloves  1

India

  Surgical gloves and condoms  3
      

Total

     1715
      

PART I

Item 4 : Information on the Company


4DPROPERTY, PLANTSAND EQUIPMENT(continued)

 

The Company’s material leased properties are as set forth below:

 

Country


  

City


  Floor Space (Sq ft)

  

Use


Premises/Property:

         

Australia

  Richmond  29,750  Corporate

England

  Tamworth  26,000  Manufacturing, Warehousing

England

  Surbiton  9,000  Marketing

England

  Newark  12,000  Marketing

Germany

  Munich  7,000  Marketing

France

  Paris  27,000  Marketing

Belgium

  Brussels  22,000  Marketing

Belgium

  Aalst  56,000  Warehousing

USA

  Red Bank  45,877  Marketing, Corporate

USA

Dothan82,000Manufacturing, Warehousing

Mexico

  Juarez  219,000  Manufacturing

Property Only:

         

Sri Lanka

  Colombo  1,080,000  Manufacturing

 

All of16


PART I

Item 4 : Information on the above listed properties are fully utilised, except for the Richmond, Australia facility, of which 34.3% was unoccupied.Company

4DPROPERTY, PLANTSAND EQUIPMENT(continued)

 

The Company believes that its facilities are suitable and adequate for its present needs and are in good operating condition. Ansell Limited has in place insurance covering casualty and certain other risks to which its worldwide facilities and operations may be subject. Generally, the current insurance policies do not cover political risks.

 

Pursuant to Company policy, the Company’s principal capital intensive and strategic manufacturing and distribution facilities are owned. Those facilities that are not owned are generally leased by the Company for periods varying from 1 to 10 years, and comprise certain warehouse/distribution centres and sales and administration office accommodation. The Company does not believe its business is dependent on any single facility.

No major encumbrances on material tangible fixed assets or environmental issues exist that may affect the Company’s utilisation of the assets.

17


PART I

 

Item 5 : Operating and Financial Review and Prospects


 

5AOPERATING RESULTS

 

The following discussion and analysis is based upon or derived from the Consolidated Financial Statements included in this Annual Report, which are prepared in accordance with Australian GAAP.

 

Notes 4039 and 4140 to the Consolidated Financial Statements contain a discussion of the major differences between Australian GAAP and U.S. GAAP and reconciliation to U.S. GAAP.

 

The following tables set forth the contributions of each business group to sales revenue and operating profit of the Company for the fiscal years ended 30 June 2001, 2002, 2003 and 2003:2004:

 

OPERATING REVENUE BY BUSINESS GROUP(1)

(EXCLUDING UNALLOCATED & NON RECURRING ITEMS)

        For Years Ended 30 June

$ In millions


  2003

  %

  2002

  %

  2001

Occupational Healthcare

  625  (2.3%) 640  (1.7%) 651

Professional Healthcare

  453  (17.2%) 547  0.4% 545

Consumer Healthcare

  216  (4.8%) 227  5.0% 216

Discontinued Businesses

  —    —    809  (70.5%) 2,745
   
  

 
  

 

Total Operating Revenue

  1,294  (41.8%) 2,223  (46.5%) 4,157
   
  

 
  

 

OPERATING REVENUE BY BUSINESS GROUP(1)

(EXCLUDINGUNALLOCATED &NONRECURRINGITEMS(2))

   For Years Ended 30 June

$ In millions


  2004

  % change

  2003

  % change

  2002

Occupational Healthcare

  545  (12.8%) 625  (2.3%) 640

Professional Healthcare

  382  (15.7%) 453  (17.2%) 547

Consumer Healthcare

  186  (13.9%) 216  (4.8%) 227
   
  

 
  

 

Total Healthcare

  1,113  (14.0%) 1,294  (8.5%) 1,414

Discontinued Businesses

  —    —    —    —    809
   
  

 
  

 

Total Operating Revenue

  1,113  (14.0%) 1,294  (41.8%) 2,223
   
  

 
  

 

 

(1)The sales figures in this table exclude intergroup sales. There were no significant intergroup sales during any of these three fiscal years.

 

OPERATING PROFIT BEFORE TAX (1)        For Years Ended 30 June 

$ in millions


  2003

  %

  2002

  %

  2001

 

Occupational Healthcare

  63  70.3% 37  (15.9%) 44 

Professional Healthcare

  54  (41.9%) 93  30.9% 71 

Consumer Healthcare

  43  30.3% 33  13.8% 29 

South Pacific Tyres JV Share

  —    0% —    0% (30)

Unallocated Items and Eliminations

  (48)    (57)    (70)

Non Recurring/Discontinued Businesses

  (6)    (108)    109 

Net Interest, including borrowing costs

  (27)    (55)    (99)
   

 

 

 

 

Total Operating Profit Before Tax

  79     (57)    54 
   

 

 

 

 

(2)Refer to Industry Segments in Item 18 Financial Statements for details of Non Recurring Items.

OPERATING PROFIT BEFORE TAX(1)

   For Years Ended 30 June

 

$ in millions


  2004

  % change

  2003

  % change

  2002

 

Occupational Healthcare

  74  17.5% 63  70.3% 37 

Professional Healthcare

  41  (24.1%) 54  (41.9%) 93 

Consumer Healthcare

  32  (25.6%) 43  30.3% 33 

Unallocated Items and Eliminations

  (35)    (48)    (57)

Non Recurring/Discontinued Businesses

  (2)    (6)    (108)

Net Interest, including borrowing costs

  (17)    (27)    (55)
   

 

 

    

Total Operating Profit Before Tax

  93  17.7% 79     (57)
   

 

 

    

 

(1)The operating profit figures in this table exclude unrealised operating profit on inventory which has been purchased by one business group from another.

 

SALES REVENUE BY GEOGRAPHIC MARKET

 

The following table sets forth the Company’s sales revenue from continuing businesses by geographic market for the fiscal years ended 30 June 2001, 2002, 2003 and 2003.2004. The revenue has been classified by location of the customer and excludes intergroup sales.

 

  For Years Ended 30 June  For Years Ended 30 June

$ in millions


  2003

  2002

  2001

  2004

  2003

  2002

Australia, New Zealand and Southeast Asia

  174  170  161  168  174  170

North, Central and South America

  656  800  813  545  656  800

Europe

  464  444  438  400  464  444
  
  
  
  
  
  

Total

  1,294  1,414  1,412  1,113  1,294  1,414
  
  
  
  
  
  

18


PART I

 

Item 5 : Operating and Financial Review and Prospects


 

5AOPERATING RESULTS(continued)

 

RESULTSOF OPERATIONS

 

Consolidated

 

Ansell Limited recorded a pretax profit after tax to shareholders of $137.2$70.7 million for the year ended 30 June 2003, compared to a $195.62004, which was 42% higher than the profit of $49.9 million pre-tax profit in the previous year. After allowing foryear due to improved margins and lower expenses, net interest borrowing costs, goodwill amortisation and one-off non-recurring items after tax of $6.1 million, the result attributable to Ansell shareholders was a profit of $49.9 million. The result reflects the first full year’s trading as essentially a single global business.taxation.

 

Operating Revenue

 

Total revenue in 2002/20032003/2004 of $1.320.1$1,131.1 million included other revenue of $15.2$5.3 million, which related to proceeds from the sale of non-current assets. SalesTotal revenue in 2001/20022002/2003 was $2,222.8$1,320.1 million compared with $4,156.8$3,190.4 million in 2000/2001.2001/2002 which included $939.7 million of proceeds from the sale of businesses.

 

Sales revenue in 2002/20032003/2004 from Healthcare businesses (Occupational, Professional and Consumer) was $1,293.6$1,113.3 million, compared with $1,293.6 million in 2002/2003 and $1,414.2 million in 2001/2002 and $1,412.2 million in 2000/2001.2002. The decrease in sales revenue in 2002/2003over the last two years was largely due to the strengthening of the Australian dollar against the US dollar.

On a geographic basis, sales in Asia Pacific and Europe were ahead of the previous year, whereas sales in the Americas were $656 million, down from the previous year’s $799.5 million. This was due to a weaker U.S. manufacturing environment, shortfalls in supply of knitted product during the transfer of production from the U.S. to Mexico, supply disruptions in surgeons’ gloves, an FDA import alert on certain of Ansell’s products and price erosion in examination gloves.

 

Operating Profit from Ordinary Activities before Income Tax Expense

 

Ansell Limited recorded an Operating Profit of $93.3 million for 2003/2004, compared to a profit of $79.3 million for 2002/2003 compared toand a loss of $57.2 million forin 2001/2002 and a profit of $54.1 million in 2000/2001.2002.

 

A review of the carrying value of all assets in 2002/2003 resulted in the write-down in the value of the Company’s non-core investment in Ambri Limited. A non-recurring, non-cash write-off of $6.1 million was incurred to bring the book value of Ansell Limited’s investment into line with the market price of the shares.

 

The 2001/2002 result was impacted by a $99.9 million write-down of all amounts owing by and shares held in Exide Technologies of the USA, as a result of this company being placed infiling for bankruptcy protection under Chapter 11.11 of the U.S. Bankruptcy Code. In addition, the manufacturing facility at Troy, Alabama in the USA was written-down by $63.1 million, following its announced closure. The 2001/2002 result also included a net gain of $25.7 million on the divestiture of businesses.

 

The 2000/2001 result included the gain on the sale of the Electrical Distribution business of $145 million, the write-down of the assets of the Pacific Automotive business of $97.7 million and rationalisation and restructuring of $111.0 million.

Income Tax Expense

 

Income tax expense for the year was $26.8$20.7 million, compared to the previous year’s $26.8 million and $55.8 million and $189.9 million for 2000/2001. The current2001/2002. In the 2004 fiscal year expense benefitedthe Company continued to benefit from the utilisation of unbooked U.S.US tax losses following the full utilisation of U.S. deferred tax assets previously held on the balance sheet.losses.

 

The prior year’s2001/2002 tax expense included the write off of tax balances attributable to the Australian operations of $15.2 million in 2001/2002 and $158.5 million in 2000/2001.million.

19


PART I

 

Item 5 : Operating and Financial Review and Prospects


 

5AOPERATING RESULTS ((continued)continued)

 

ANSELL HEALTHCARE

 

YEAR ENDED JUNE 2004V JUNE2003 v

Ansell Healthcare’s sales of $1,113.3 million were 13.9% lower than the previous year, while operating profit of $146.3 million was 8.3% lower. Sales and operating profit were both materially impacted by currency movements, compared to the prior period.

Occupational Healthcare

Sales of $545.2 million were lower than the previous year by 12.9% while operating profit of $74.2 million was higher by 18.0%. Operating profit margin increased from 10.1% to 13.6%.

This segment accounted for approximately 49% of Ansell Healthcare’s total revenues and 51% of operating profit.

The expanding Hyflex® family of products continued to drive sales with substantial year on year growth. Sales of traditional knitted gloves were stronger in the second half of the year as increased production improved product availability. The knitting plant in North Carolina, USA was closed and the Mexico knitting plants’ results improved significantly due to this consolidation and improved production process.

Benefits are beginning to flow from our growing and innovative proprietary selling programs – Safety Net in Europe and Ansell Value Proposition in North America.

Professional Healthcare

Sales of $381.8 million were lower than the prior period by 15.6% while operating profit of $40.5 million was lower by 24.9%. Operating profit margin decreased from 11.9% to 10.6%.

This segment accounted for approximately 34% of Ansell Healthcare’s revenue and 27% of operating profit.

In the USA, recovery in the surgical business was slower then expected as we continued to concentrate on our market share recovery program assisted by product improvements. Profitability in Europe and Australia was impacted by currency-associated price reductions and worldwide by examination glove competitive price pressures and latex cost increases. Surgical glove sales in Europe were lower in the first half following a strategic decision to reduce our reliance on private label customers in favour of sales of Ansell branded product. We did however gain market share in surgical gloves in France. Sales of examination gloves in Europe improved in the second half of the year as prices were adjusted to meet the competitive environment created by a stronger Euro.

Consumer Healthcare

Sales of $186.3 million were lower than the prior period by 13.8%, while operating profit of $31.6 million was lower by 26.2%. Operating profit margin decreased from 19.8% to 17.0%.

This segment accounted for approximately 17% of Ansell Healthcare’s revenues and 22% of operating profit.

Condom volumes increased by 7% year on year primarily due to bid contracts in both Brazil and India. Retail condom results were essentially flat in all regions, where new retail entrants and heightened competition in several markets, particularly the UK, adversely impacted sales growth and caused additional selling and advertising expenditure. We remained in partnership with Freudenburg Household Products, our global distributor of Household gloves. However Household glove sales in the second half of the year were below the same period in the prior year primarily due to reductions and clearances of older technology products in anticipation of deliveries in the coming year of the new Foamlined gloves.

20


PART I

Item 5 : Operating and Financial Review and Prospects

5AOPERATING RESULTS(continued)

YEAR ENDED JUNE 2003V JUNE 2002

 

Ansell Healthcare’s sales of $1293.6$1,293.6 million were 8.5% lower than the previous year, while operating profit of $159.6 million was 1.7% lower. Both sales and operating profit were materially impacted by currency movements compared to the prior period.

 

Occupational Healthcare

 

Sales of $624.9 million were lower than the previous year by 2.4% while operating profit of $62.9 million was higher by 70%. Operating profit margin increased from 5.8% to 10.1%.

 

Ansell Healthcare’s Occupational business is the recognized global leader for Occupational Health and Safety gloves, holding approximately 18% of the market for the non-cotton and leather categories. This segment accountsaccounted for approximately 48% of Ansell Healthcare’s total revenues and 39% of operating profit.

The value of the global market for occupational hand protection is estimated at $5,800 million (US$3,400 million), and our product range targets the higher end of the market. Ansell, however, does not materially compete in the more commoditised leather and cotton gloves segment, which compromises roughly 50 percent of the total market. Ansell’s extensive range of technically advanced synthetic gloves covers a broad spectrum of occupational health and safety hand-protection needs, and a wide variety of industries and applications.

 

The premium HyFlex® family of lightweight, ergonomic gloves continued to show robust growth during fiscal year 2003. HyFlex® delivers to wearers the promise of unprecedented levels of comfort and productivity by way of a combination of flexibility, comfort, dexterity and grip.

The Occupational Value Proposition (OVP) program targets major industrial glove users, and is designed to leverage Ansell’s expertise in hand injury prevention to offer an innovative program addressing the total cost of worker hand protection and productivity improvement. It continues to run smoothly at Ford USA, and is being progressively introduced to a number of other end users and distributors who have demonstrated interest in this novel approach. Trials are currently underway at a number of major potential customers’ plants.

 

During the period, the restructuring of Occupational Healthcare’s manufacturing operations started to produce improved operating profits from reduced manufacturing costs. As announced last financial year, theThe Troy plant was closed during fiscal year 2003.

 

Despite the sluggish global economy, Occupational Healthcare has delivered positive volume, market share and profit growth.

 

Professional Healthcare

 

Sales of $452.6 million were lower than the prior period by 17.2% while operating profit of $53.9 million was lower by 41.9%. Operating profit margin decreased from 17% to 11.9%.

 

The Professional Healthcare segment supports healthcare providers with medical, surgical and examination gloves for hand-barrier protection and infection control. It accounts for approximately 35% of Ansell Healthcare’s revenue and 34% of operating profit.

 

During fiscal year 2003, outstanding performances in Asia Pacific and Europe were offset by first half surgeons’ gloves supply interruption in the USA and examination glove price reductions, especially in the USA. The supply interruption was due to start-up problems at Ansell’s glove manufacturing facility in Shah Alam, Malaysia and was exacerbated when US imports from that facility were placed on a Level 1 detention by the FDA in October 2002, resulting in a loss of approximately 4% of US market share in powder-free surgical gloves. The FDA’s detention remained in effect for 3 months and was lifted on January 6, 2003. Item 4B “Business Overview” – “Regulatory and Environmental Matters” contains more detailed information concerning this detention.

reductions. Operating expenses were higher in the second half due to non-recurring airfreight costs in resupplying the surgeons’ gloves market and higher latex raw material costs. Surgeons’ gloves supply improved markedly in the second half, and distributor inventories are now atreturned to normal levels.

PART I

Item 5 : Operating and Financial Review and Prospects


5AOPERATING RESULTS(continued)

ProfessionalHealthcare(continued)

 

Concern about latex sensitivity among healthcare workers, increased awareness of hand hygiene and better infection control continue to drive growth, especially in the powder-free and synthetic segments of the market. In Germany, France, the UK, the Nordic region and Australia, Ansell has already seensaw very high conversion rates to powder-free gloves. While the large US market lags, it remains an ongoing growth opportunity for Ansell as momentum builds for the conversion to powder-free gloves.

 

The emergence of the SARS epidemic and global awareness of the virus in fiscal year 2003 helped drive some Asian markets to disposable (single-use) products. SARS also focused the worldwide healthcare industry on the importance of better infection control procedures and the role of high-quality gloves as barriers against infection.

 

The examination glove market also continued to convert to powder-free and synthetic gloves. Due to the lower barriers of entry into this market, there has been an increased supply of lower-cost gloves and difficulty in differentiating our premium products, resulting in a deterioration of pricing. However, recent substantial cost increases in natural rubber latex raw material have forced some producers of low-end examination gloves to increase their selling prices, leading to a period of more stable prices in the premium segment through the second half of the year.

 

21


PART I

Item 5 : Operating and Financial Review and Prospects

5AOPERATING RESULTS(continued)

Consumer Healthcare

 

Sales of $216.1 million were lower than the prior period by 4.8%, while operating profit of $42.8 million was higher by 31.3%30.3%. Operating profit margin increased from 14.4% to 19.8%.

 

Consumer Healthcare covers the markets for condoms and other personal products, including a range of housekeeping gloves, and is approximately 17% of Ansell Healthcare’s revenues and 27% of operating profit. Consumer Healthcare ranks in the global top 3 in the condom segment, covering both retail and public sectors.

 

Ansell’s condom business continues to build on a reputation for high quality. The European Region saw gains in market share in the UK and France, based significantly on the new “Xtra PleasureTM condom. This success was replicated in the Asia Pacific Region, with strong improvement in New Zealand, Malaysia and Thailand. In the Americas Region, USA total branded retail condom market share held steady, while the important Public Sector segment remained strong.

 

Ansell believes its condom business is well poised to grow in both the branded retail and public sector categories. Ansell continues to develop relationships with social organizations that provide condoms and education at grass-root levels. Ansell’s leading branded product lines such at MatesTM in the UK; LifestylesTM in the US, Australia, Latin America and Europe; Kama SultraTM in India; and ManixTM in France are well-developed, enjoy high consumer awareness and hold significant market shares in their respective markets. New products continue to drive growth.

Ansell’s household gloves are marketed throughout the world under a long-standing relationship with a leading European consumer products company. Products include the unique foam-lined glove that provides enhanced perspiration absorption and comfort. Ansell holds about 15% market share in the household glove category, and new growth is expected from the launch of products containing moisturizers that actively benefit the skin quality of the wearers’ hands during use – a technology developed in conjunction with our Professional Division.

YEAR ENDED JUNE 2002V JUNE 2001

Ansell Healthcare’s sales of $1,414.2 million were essentially flat with 2000/2001, while operating profit of $162.3 million was 12.5% higher.

Ansell Healthcare held or increased market share in most of its markets and products in a difficult trading environment.

PART I

Item 5 : Operating and Financial Review and Prospects


5AOPERATING RESULTS(continued)

Sales of the Occupational Healthcare segment were lower than the previous year by 1.7%, while operating profit of $37.0 million was lower by 16.5%. The economic recession that affected most industrialised countries during the period negatively impacted this segment. The business also undertook major restructuring activities involving the transfer of most manufacturing activity from USA to Mexico and Asia. The rollout of the Ford Global Distribution Alliance contract in the USA commenced during the year.

Sales of the Professional Healthcare segment were essentially flat with the prior period, while operating profit of $92.7 million improved by 31.3%. Global marketing programs focused on the new powder-free and synthetic latex ranges of both surgeons’ and examination gloves drove sales growth in all regions. Conversion rates to powder-free products range from above 60% in Australia to 35% in USA and somewhat less in Europe. During the period, production of surgeons’ gloves ceased at the Massillon, USA facility and the volume was transferred to the Shah Alam facility in Malaysia at a significant cost saving. The focus in examination gloves continued to shift towards higher margin powder-free and synthetic latex products and away from more commoditised powdered gloves, and as such, sales of examination gloves were 5% lower in the period.

Sales of the Consumer Healthcare segment improved by 5% over the period year, while operating profit of $32.6 million was higher by 10.9%. Significant improvement in performance was driven by steady gains in market share in the growing world market for condoms, as well as the initial benefits from the transfer of manufacturing to Asia, which was fully implemented in the period. Consumer Healthcare’s marketing teams in USA, Europe and Australia again won a number of awards for innovative packaging and advertising.

YEAR ENDED JUNE 2001 v JUNE 2000

Sales increased by 20% over the prior period largely due to a full year contribution from the Johnson & Johnson medical business (4 months in prior year) and the devaluation of the Australian dollar against the US dollar and Euro. Operating Profit increased by 4.6% over the prior period. A majority of product costs are denominated in US dollars or currencies linked to the US dollar and the strength of the US dollar against the Euro significantly reduced the profitability of European sales.

Sales for the Occupational Healthcare segment increased by 15%. Excellent volume growth was achieved in new product ranges, which include the HyFlex® ergonomic glove range and disposable nitrile examination gloves. Improved volumes in core products were also achieved. The economic slowdown in the USA adversely affected sales in the second half of the year in that region however results were strong in both Europe, excluding the effects of the Euro devaluation, and Australia and South East Asia.

Sales for the Professional Healthcare segment increased by 26% assisted by an additional 8 months reporting of results from the medical business acquired from Johnson & Johnson. Organic volume growth of over 10% in both powder free surgical and examination glove categories was achieved. While average prices for powder free examination gloves reduced by a further 10% during the period, prices stabilised in the second half of the year.

Sales for the Consumer Healthcare segment increased by 23%. Global volume growth of 8% for condoms was driven by 18% gains in both the USA retail branded market and the global tender business. Major profitability improvements were achieved as the new condom plant in Thailand ramped up to full capacity during the year.

Over half of Ansell Healthcare’s sales were in North America with another third in Europe and the balance in the Australia and South East Asia region. Overall performance was affected by the over-capacity and pricing competition, particularly in the first half, in the US$1 billion world market for examination gloves. Notwithstanding this Ansell Healthcare maintained full plant utilisation.

In the US$600 million growing world market for surgical gloves, Ansell’s Professional Healthcare business maintained its market share with very strong growth in the emerging powder-free segment.

DISCONTINUED BUSINESSES

 

YEAR ENDED JUNE 2004V JUNE2003 v

The business disposed of during 2001/2002 did not trade during the year.

YEAR ENDED JUNE 2003V JUNE 2002

 

The business disposed of during 2001/2002 and 2000/2001 did not trade during the year.

22


PART I

 

Item 5 : Operating and Financial Review and Prospects


 

5A5BOPERATING RESULTS(continued)

DISCONTINUED BUSINESSES(continued)

Pacific Brands

YEAR ENDED JUNE 2002 v JUNE 2001

The Pacific Brands business was sold in November 2001. The results for the five months that it was owned by the Company were ahead of the previous year, assisted by the acquisition of the Sara Lee business in March 2001.

Sales of $662 million were up on the corresponding period of $595.5 million. Operating profit for the period was $52.4 million, up 7.8% on the previous corresponding period of $48.6 million.

YEAR ENDED JUNE 2001 v JUNE 2000

Whilst sales increased 6.5% to $1,359 million profit fell by 7.4% to $100 million.

The softer result in 2000/2001 was largely driven by a contraction in profit margins in what was a difficult trading environment within the Australian retail sector, exacerbated by a number of external factors, most notably the depreciation of the Australian dollar, introduction of the Goods and Services Tax (GST) and the impact of the Sydney Olympics. This was largely offset by the contribution from acquisitions and strong performance of overseas businesses together with Pacific Brands’ ability to push through price increases.

One of the key features of the year was the successful integration and rejuvenation of Sara Lee’s Australian brands following their acquisition for $59.8 million in March 2001 giving Pacific Brands leadership in the new markets of hosiery and workwear and expanding its position in the clothing and intimate apparel markets.

Clarks Shoes and its range of premium children’s and adult footwear including Hush Puppies, acquired in September 2000, benefited from its access to the infrastructure of the Footwear Group and was returned to profitability.

The Sport Leisure & Workwear Group, the largest Australian-owned sporting business, performed strongly. Growth continued in the Dunlop and Everlast brands.

The downturn in the housing market led to a difficult year for the Household Products Group. The bedding market remained subdued however the new Tontine pillow plant in Melbourne operated at capacity.

Restructuring continued with the sale of Bonds spinning and the Vita Pacific upholstered furniture business. The closure of four clothing plants in Australia and New Zealand was also announced. Warehousing was further reorganised as part of the supply chain improvement program.

Pacific Automotive

YEAR ENDED JUNE 2002 v JUNE 2001

The Pacific Automotive business was sold effective 31 August 2001. Revenue for the two months that Pacific Automotive was owned by the Company was $132 million, which compared with the $130 million in the corresponding period of the previous year. Operating profit was $7.5 million, compared with $4.5 million for the previous corresponding period.

YEAR ENDED JUNE 2001 v JUNE 2000

Market conditions remained difficult during fiscal year 2001 with sales down 4% to $762 million and operating profit down 13.3% to $39 million.

The results were after including restructuring and acquisition costs and the impact on sales and margins of the introduction of the Goods and Services Tax in Australia. Sales improved in the second half including a strong performance by Repco New Zealand.

The year’s main focus was consolidation of the Group’s five operating businesses into a stronger operational platform as the largest wholesale and retail distributor of its kind in Australia and New Zealand. This included the successful establishment of Motospecs as a specialty Australian importing and knitting business and ongoing rationalisation of the distribution network which included closure of a further five distribution centres.

PART I

Item 5 : Operating and Financial Review and Prospects


5BLIQUIDITYAND CAPITAL RESOURCES

 

The Company operates internationally and in many different economic climates but inflation has not had a material effect on the Company’s results of operations. The Company does not have material subsidiaries in any economies that have been subject to hyperinflation.

 

The Company operates a Central Treasury from its office in Melbourne, Australia. The Treasury manages Ansell’s external debt, invests excess cash held centrally and acts to hedge all foreign exchange exposures worldwide. Treasury does take minor foreign exchange positions for trading purposes for short periods. The Company has small bank borrowings outside Australia and cash is generated in operating subsidiaries around the world in a number of currencies. Where possible excess funds are accumulated at the Central Treasury.

 

Cash and deposits at 30 June 20032004 were $318.1 million, compared with $299.8 million compared withat 30 June 2003 and $276.9 million at 30 June 2002 and $337.9 million at 30 June 2001.2002. Cash and deposits at 30 June 20032004 included restricted deposits of $13.8$10.3 million ($18.413.8 million at 30 June 20022003 and $27.0$18.4 million at 30 June 2001)2002) which have been set aside to cover the provisions established to address any remaining liability of members of the Group to claims arising with respect to the Accufix Pacing Lead.

 

The Company believes its working capital is sufficient for the Company’s present requirements.

 

Net cash from operating activities

 

Net cash provided by operating activities for 2002/20032003/2004 was $161.6$179.2 million compared to $161.6 million in 2002/2003 and $113.1 million in 2001/2002 and $226.6 million in 2000/2001.2002. This included $26.8$7.1 million onof non-recurring payments compared to $82.7$26.8 million in the previous year and $54.5$82.7 million in 2000/2001. Payments2001/2002. In 2002/2003 payments in respect of Ansell Healthcare’s restructuring program of $15.1 million were a major component of these non-recurring payments.

 

Payments in respect of the Accufix Pacing Leads litigation and settlement totalled $2.7$3.1 million compared with $2.7 million in 2002/2003 and $10.7 million in 2001/2002 and $24.3 million in 2000/2001.2002. Payments under operating leases for the year totalled $24.1$20.0 million compared with $24.1 million in 2002/2003 and $37.5 million in 2001/2002 and $79.2 million in 2000/2001.2002. The Group anticipates payments of $14$11.8 million over the next fiscal year to 30 June 20042005 in respect of current operating lease commitments, with a further $33.3$30.1 million payable during the period 1 July 20042005 to 30 June 20082009 and $11.1$14.4 million in subsequent years.

 

Net cash fromused in investing activities

 

Net cash used in investing activities was $6.4 million compared to $4.0 million provided by investing activities was $4.0 million compared toin 2002/2003 and $874.5 million provided by investing activities in 2001/2002. The 2001/2002 and $628.7 million in 2000/2001. The priorfiscal year included $936.4 million of proceeds from the sale of the Pacific Automotive and Pacific Brands businesses.

 

23


PART I

Item 5 : Operating and Financial Review and Prospects

5BLIQUIDITYAND CAPITAL RESOURCES(continued)

Capital expenditure for the year was $15.4$13.8 million, compared to $15.4 million in 2002/2003 and $34.3 million in 2001/2002 and $76.0 million in 2000/2001.2002. There are no material commitments for capital expenditure at 30 June 2003.2004. The following table presents a summary of capital expenditure by Business Segment for the past three years:

 

  For Years Ended 30 June  For Years Ended 30 June

$ in millions


  2003

  2002

  2001

  2004

  2003

  2002

Occupational Healthcare

  3  7  9  6  3  7

Professional Healthcare

  9  13  8  5  9  13

Consumer Healthcare

  3  2  5  3  3  2

Discontinued Businesses

  —    12  39  —    —    12

Corporate Services

  —    —    15  —    —    —  
  
  
  
  
  
  

Total

  15  34  76  14  15  34
  
  
  
  
  
  

 

Net cash fromused in financing activities

 

Net cash used in financing activities was $117.8$153.4 million, compared with $117.8 million in 2002/2003 and $1,041.1 million in 2001/2002 and $1,585.9 million in 2000/2001.2002. The strong cash flows of the Company enabled repayment of borrowings totalling $79.1$36.6 million during the year following repayments of $936.9$79.1 million and $1,213.9$936.9 million in the previous two years.

PART I

Item 5 : Operatingyears and Financial Reviewan on market buy back of over 11 million shares for $65.4 million in 2003/2004 and Prospects


5BLIQUIDITYAND CAPITAL RESOURCES(continued)

NETCASHFROMFINANCINGACTIVITIES(continued)$8.2 million in 2002/2003. A further off market buy back of up to $155 million has been approved for 2004/2005.

 

Net debt (i.e. borrowings including bills payable less cash) again reduced during the year falling from $365.6$186.4 million in 2001/20022002/2003 to $186.4$119.3 million at the end of 2002/2003.2003/2004. This reduction further improved balance sheet ratios for the Group with Net Debt to Equity falling from 41.8%22.0% to 22.1%14.7% and Net Liabilities to Equity decreasing from 79.7%53.1% to 53.0%46.3%.

 

The Company’s long–term debt has been rated by the U.S. credit rating agencies Standard & Poor’s Rating Group and Moody’s Investors Service Inc. since 1988-89. The Company’s current ratings are as follows:

 

   

Long Term



  

Outlook



  

Short Term



Moody’s

  Ba2Ba1  Stable  Not Prime

Standard & Poor’s

  BB+  Stable  B

 

The current ratings from both rating organisations were announced in September 2003.updated during the year.

 

The Company’s borrowing portfolio at 30 June 20032004 had an average maturity of 699816 days (previous year 949699 days), and was approximately 90%77% fixed and 10% floating, with an average duration of 398 days, compared to the previous years 711 days.23% floating. The average cost of debt at the end offor the year was 6.44%6.15%, updown from the previous year’s 6.25%6.44%.

 

Net interest expense and borrowing costs for the year were $26.5was $16.8 million compared to the previous year’s $26.5 million and $54.7 million and $99.4 million in 2000/2001. This fall was due to2001/2002. The reduced costs resulted from the continued reduction in net debt, a lower cost of funds as older high-cost borrowings matured and stronger Australian dollar.were repaid or replaced by new lower-cost borrowings and a better return on cash.

 

TheOn 30 April 2004, the Company completedentered into a new Revolving Credit Facility comprising a US$100200 million three-year revolving credit facility with four core banksfor 5 years and a US$50 million facility for 364 days. It is envisaged that the 5 year facility will be used to repay maturing Medium Term Notes while the short-term facility will remain available as required. The new facility will result in January 2002. Thisa reduction in future borrowing costs. There are a number of financial covenants attaching to this new facility remains unusedincluding restrictions on the level of borrowings of non guarantor subsidiaries, ensuring the assets of the guarantor subsidiaries are in excess of a specified percentage of total group assets and ensuring certain financial ratios are maintained. The interest rate for this facility is determined based on market rates at the Company believes that working capital is sufficient for its present requirements.time amounts are drawn down.

 

Currency Restrictions

 

The Company operates in a number of countries such as China, India, Sri Lanka and Malaysia where Central Banks in those countries have imposed currency restrictions and Malaysia has pegged its currency rate to the US dollar. These restrictions do not affect the daily operations of the relevant subsidiaries and to date have not restricted the flow of capital, interest or dividends. The Company anticipates that these restrictions will not have a material adverse affect on its operations.

 

24


PART I

Item 5 : Operating and Financial Review and Prospects

5CRESEARCH AND DEVELOPMENT

 

Ansell Healthcare spends about approximately 1%1.3% of sales on research and development. Product and process innovation is essential to continuing profitable growth.growth, and approximately 10% of total sales currently come from products developed in the previous three years. Note 4 to the Financial Statements included in Items 17 and 18 contains more detailed information concerning the Company’s research and development expenditures.

 

The Company’s commitment to innovation and new product development will bewas further enhanced with the recent establishment of Ansell Healthcare’s new world-class Science and Technology Centre in Shah Alam, outside Kuala Lumpur, Malaysia. Eleven members of the total 70-member technical staff hold PhDs, while another 16 hold masters degrees in the fields of chemistry, chemical engineering, materials and fiber technologies. Ansell also has a smaller fibre-technology centre associated with American Association of Fibers & Knitting technologies in Seneca, South Carolina. Starting in April 2004, Ansell established small application engineering groups in four (4) of its plants to focus on technology transfer as it applies to new product & process development. These satellite centers are located in Surat Thani, Thailand; Redditch, UK; and Bermudez and Salvarcar in Mexico.

 

While Science and Technology was heavily involved in advancing process-related technologies for improved quality and cost-savings, the group also delivered a range of new products to the market during the past year. New products that generate, or will likely generate, significant sales are coated microthin surgical gloves, condoms with desensitizing and warming lubricants, foam-lined household gloves, a glove that magnetically detects metal particles for use in food processing, as well as a new ultrahigh cut resistant HyFlex® CR variant.

We have establishedmaintain relationships with several medical and materials research institutions, such as the University of Sydney (Australia), Drexel University, and Johns Hopkins University (USA). and Clemson University. Ansell also supports ongoing research at the University of Tampere in Finland and the Medical College of Wisconsin, USA. Ansell Healthcare’s sponsored research includes the identification and isolation of natural rubber latex proteins, linked to latex allergies in some people, as well as more accurate testing methods. We use the results of this research to improve the product quality and we encourage the researchers to publish their findings in the scientific journals as part of the AnsellCares® program.

PART I

Item 5 : Operating and Financial Review and Prospects


5CRESEARCH AND DEVELOPMENT(continued)

 

The AnsellCaresTM®Scientific Advisory Board, established in 1992, is composed of some of the leading latex allergy researchers worldwide. The Advisory Board’s charter is to direct research into critical hand barrier protection issues, such as latex and chemical allergy, factors affecting glove barrier integrity and the development of synthetic glove polymers. Research groups on three continents are responsible for numerous scientific breakthroughs, and have presented their work at many national and international allergy conferences. The output from Ansell Healthcare’s Advisory Board has paved the way for a greater understanding of these complex issues and, through publication and dissemination, has allowed us to reduce the allergen content of Ansell Healthcare’s products. It has also provided clinicians with guidelines on how to better manage latex-sensitive healthcare workers and patients, and to reduce the risk of sensitisation for future generations. The AnsellCares® program includes accredited continuing medical education programs, video presentations, technical bulletins, newsletters, and periodic lectures and seminars.

While the Science and Technology group was devoted to implementing the operational restructuring plan for much of the year, a number of new products were brought to market or passed on to manufacturing for the new year. New products that generate, or will likely generate, significant sales are hand friendly exam and surgeons’ gloves, Dermaprene Ultra synthetic surgeons’ gloves, and a new line extension for the HyFlex family of ergonomic gloves with improved fit and feel and resistance to cuts and abrasions.

 

5DTREND INFORMATION

 

Please refer to Item 4B – Business Overview and Item 5A – Operating Results.

 

5EOFF-BALANCE SHEET ARRANGEMENTS

 

Not ApplicableThe Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

25


PART I

Item 5 : Operating and Financial Review and Prospects

 

5FCONTRACTUAL OBLIGATIONS

   PAYMENTS DUEBY PERIODIN $ MILLIONS

CONTRACTUAL OBLIGATIONS


  Total

  LESS
THAN 1
YEAR


  1-3 YEARS

  3-5 YEARS

  MORE
THAN 5
YEARS


Long-Term Debt Obligations

  236.0  —    121.3  101.6  13.1

Operating Lease Obligations

  56.3  11.8  17.2  12.9  14.4

Purchase Obligations

  —    —    —    —    —  

Other Long-Term Liabilities

  47.4  —    11.5  8.2  27.7
   
  
  
  
  

Total

  399.7  11.8  150.0  122.7  55.2
   
  
  
  
  

5GSAFE HARBOUR

Not applicable

5HCRITICAL ACCOUNTING POLICIES

 

The preparation of the Company’s consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the consolidated financial statements and the reported turnover and costs during the reported period. On an ongoing basis, our management evaluates its estimates and judgements in relation to assets, liabilities, contingent liabilities, turnover and costs. Management bases its estimates and judgements on historical experience and on other various factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

 

Our management has identified the following critical accounting policies under Australian GAAP.policies.

 

Revenue Recognition

Revenue from the sale of goods and disposal of other assets is recognised when persuasive evidence, usually in the form of an executed sales agreement or the existence of an arrangement indicating there has been a transfer of title, risks and rewards to the customer exists. Additional indicators are that no further work or processing is required by the Ansell Group, the quantity and quality of the goods has been determined with reasonable accuracy, the price is fixed or determinable, and collectibility is reasonably assured.

In the majority of sales for most commodities, sales agreements specify that title passes on the invoice date which is the date the commodity is generally delivered. Revenue is recognised on the delivery date.

Long- LivedLong-Lived Assets – Valuation

 

Fixed assets, goodwill and brand names are assessed to ensure carrying values do not exceed estimated recoverable amounts.

PART I

Item 5 : Operating and Financial Review and Prospects


5FCRITICAL ACCOUNTING POLICIES(continued)

LONG-LIVED ASSETS – VALUATION(continued)

The carrying value of each long-lived asset is reviewed annually to evaluate whether the carrying amount is recoverable. Assets may be reviewed more regularly if an event or change in circumstances indicates that the carrying amount of an asset may not be recoverable. If the asset is determined to be impaired, an impairment loss will be recorded, and the asset written down, based upon the amount by which the asset carrying amount exceeds the higher of net realisable value and value in use. Value in use is generally determined by discounting expected future cash flows using a risk-adjusted discount rate. Future cash flows are estimated based on production and sales plans, commodity prices (considering current and historical prices, price tends and related factors), operating costs, and planned capital costs. These estimates are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter these projections, which may impact the recoverability of these assets.

 

Taxation

 

Full provision is made for deferred taxation on all timing differences which have arisen but not reversed at the balance sheet date, except as follows:

 

tax payable on the future remittance of the past earnings of subsidiaries, associates and joint ventures is provided only to the extent that dividends have been accrued as receivable or a binding agreement to distribute all past earnings exists;

 

deferred tax is not recognised on the difference between book values and fair values of non-monetary assets arising on acquisitions or purchased fixed assets which have subsequently been revalued unless there is a binding agreement to sell such an asset and the gain or loss expected to arise has been recognised; and

 

deferred tax assets are recognised only to the extent that it is more likely than notvirtually certain that they will be recovered.

 

26


PART I

Item 5 : Operating and Financial Review and Prospects

5HCRITICAL ACCOUNTING POLICIES(Continued)

Provision for Doubtful Accounts

 

The Company maintains a provision for doubtful accounts, as well as provisions for sales rebates and allowances. Significant management judgements and estimates must be made and used in connection with establishing these provisions. Actual results could be different from the Company’s current estimates, possibly resulting in increased future charges to earnings.

 

The Company provides for doubtful accounts for all individual receivables judged to be unlikely for collection. This provision is based on management’s analysis of the age of the receivable balances, historical bad debts write-off experience and general customer creditworthiness.

 

The Company provides for sales rebates and allowances based on existing agreements with customers.

 

Inventory Valuation

 

The Company uses certain estimates and judgements to properly value inventory. In general, the Company’s inventories are recorded at the lower of actual cost, manufactured cost or market value. The Company has an ongoing process of evaluating inventories for obsolescence and excess quantities. Inventories that are considered obsolete are written down to an estimated net sales value where such value is below cost.

 

Rationalisation and Restructuring

 

Provisions for rationalisation and restructuring are only recognised when a detailed plan has been approved and the restructuring has either commenced or been publicly announced or firm contracts related to the restructuring have been entered into. Costs related to ongoing activities are not provided for.

 

Contingencies, Accufix Pacing Lead Related Expenses and Insurance Claims

 

The consolidated entity provides for certain specifically identified or obligated costs when these amounts are reasonably determinable.

PART I

Item 5 : Operating and Financial Review and Prospects


5GCONTRACTUAL OBLIGATIONS

 

The Group has no significant long-termlong term contractual obligations for the purchase of raw materials. The Group enters into lease arrangements for office and warehouse facilities in the normal course of business with such leases ranging from one to twenty years.

27


PART I

 

Item 6:6 : Directors, Senior Management and Employees


 

6ADIRECTORSAND SENIOR MANAGEMENT

 

The business of Ansell Limited is managed by a Board of Directors of such number of not fewer than four and not more than eight as the Directors determine. At presentthe date of this report there are six Directors in office, of which Mr H. BoonD. Tough is Chief Executive Officer and Managing Director. Mr. H. Boon resigned on 30 June 2004 and was replaced as Chief Executive Officer and Managing Director by Mr. D. Tough effective 1 July 2004. There are no family relationships (within the meaning of Item 6 of Form 20-F) between any director or executive officer and any other director or executive officer.

 

As of 30 June 20032004 the Directors of Ansell Limited were as follows:

 

Name


  Age

  Position

  

Year of
Initial

Appointment


  

Expiration of

Current
Term (1)


  Age

  Position

  

Year of
Initial

Appointment


  

Expiration
of

Current
Term(1)


 

Edward Tweddell

  62  Chairman  2001  2004  63  Chairman  2001  2005 

Peter L Barnes

  60  Director  2001  2004

Harry Boon

  55  Chief Executive Officer  2002  

Peter L. Barnes(2)

  61  Director  2001  2004 

L. Dale Crandall

  62  Director  2002      2005(2)  63  Director  2002  2005(3)

Herbert J. Elliott

  65  Director  2001  2004  66  Director  2001  2004 

Stanley P Gold(3)

  60  Director  2001  2004

Michael J. McConnell(4)(5)

  38  Director  2004  2007 

 

(1)Other than the Chief Executive Officer, the directors are subject to re-election at the Annual General Meeting next following their appointment and retirement by rotation every three years. At least one third of the Company’s Directors (those whomwho have served the longest since last being re-elected) retire each year and may offer themselves for re-election by the shareholders.

 

(2)Mr Peter L. Barnes was re-elected by a vote of shareholders at the Annual General Meeting held in October 2004.

(3)Mr L. Dale Crandall was appointed a Director in November 2002 and his appointment was confirmed by a vote of shareholders at the Annual General Meeting held in October 2003.

 

(3)(4)Mr. Michael J. McConnell haswas appointed to the Board on 16 April 2004 having actively served as an alternate to Mr. Stanley P. Gold since October 2001.2002. Mr. McConnell’s appointment was confirmed by a vote of shareholders at the Annual General Meeting held in October 2004.

(5)Mr. Stanley P. Gold has served as alternate to Mr. Michael J. McConnell since 16 April 2004.

 

As of 30 June 20032004 the Executive Officers(1) who were not Directors were:

 

Name


  Age

  

Position


  Year of
Initial
Appointment


  

Commenced

employment

with Ansell
Limited


  

Position


  Year of
Initial
Appointment


  

Commenced

employment

with Ansell
Limited


Phil Corke

  49  Senior Vice President, Human Resources & Communications  1998  1998  Senior Vice President, Human Resources & Communications  1998  1998

Duane Dickson

  44  Head of Global Marketing and Program Director  2002  2002

Werner Heintz

  45  Senior Vice President & Regional Director – Europe  2001  1999  Senior Vice President & Regional Director – Europe  2001  1999

Rustom Jilla

  42  Chief Financial Officer  2002  2002  Senior Vice President & Chief Financial Officer  2002  2002

Neil O’Donnell

  Senior Vice President & Regional Director – Asia Pacific  2001  1988

William Reed

  56  Senior Vice President & Regional Director – Americas  2001  1989  Senior Vice President & Regional Director – Americas  2001  1989

William G Reilly

  51  Senior Vice President & General Counsel  2000  2000

Peter Soszyn

  51  Senior Vice President & Chief Information Officer  1995  1995

William G Reilly, Jr.

  Senior Vice President & General Counsel  2000  2000

 

(1)Executive Officers serve at the discretion of the Board of Directors.

28


PART I

Item 6 : Directors, Senior Management and Employees

6ADIRECTORSAND SENIOR MANAGEMENT(continued)

 

The following is a brief biography of each of the Directors and Executive Officers of Ansell Limited as at 1 October 2003:30 June 2004 and as at the date of this report:

 

Edward Tweddell,BSC,MBBS (HONS.),FRACGP,FAICD

 

Chairman and Non-executive Director since October 2001. A Director of National Australia Bank, Australia Post and CSIRO. HeCSIRO, he is also Chairman of the Nepenthe Group Pty Ltd.

 

Dr Tweddell’s experience includes 10 years with a multi-national pharmaceutical company primarily involved in medical affairs and drug development, an appointment as President and Chief Executive of a consumer-products healthcare company in Japan, and 8 years as Chief Executive of an Australian-based pharmaceutical company.

Resident Adelaide. Age 6263

PART I

Item 6: Directors, Senior Management and Employees


6ADIRECTORSAND SENIOR MANAGEMENT(continued)

 

Peter L Barnes,B.COM, (HONS.)MBAMELB

 

Appointed Non-executive Director in October 2001. He is chairmanChairman of Samuel Smith & Son Pty Limited and a Director of The News Corporation Limited and Metcash Trading Limited and Gold Coin Management Holdings Ltd. of Malaysia.Limited. He is also President of the Winemakers Federation of Australia and a Member of the National Food Industry Council.

 

Mr Barnes has experience in senior roles in finance, marketing and general management in the international arena. His background includes a long career with a leading global consumer marketing organisation in USA, Europe, Asia and Australia.

Resident Sydney. Age 6061

 

Harry Boon,Doug D Tough,LLBMBA (HONS),B.COMBBA

 

Managing Director and Chief Executive Officer since 1 July 2004.

Prior to joining Ansell, Mr. Tough spent 17 years with Cadbury Schweppes plc in a number of Ansell Limited since April 2002. He has been with Ansell since 1976,international and has beendomestic leadership roles, most recently as President and Chief Executive Officer and Managing Director of Ansell Healthcare since February 1989.its largest division world wide, Dr Pepper/Seven Up, North America.

 

Resident USA. Age 55

 

L. Dale Crandall,MBAUC Berkeley, BERKELEY,CPA

 

Non-executive Director since November 2002. Director of Union Bank of California, Covad Communications Group and BEA Systems, Trustee of Dodge & Cox Mutual Funds.

 

Mr Crandall has a background in accounting and finance and is a former Group Managing Partner for Southern California for Price Waterhouse. He was formerly President and Chief Operating Officer of Kaiser Foundation Health Plan and Hospitals in the United States.

Resident USA. Age 6263

 

Herbert J Elliott,AC,MBE,MACANTAB

 

Non-executive Director since February 2001. Chairman of the Telstra Foundation Limited and Director of Sydney Olympic Parks Authority.Fortescue Metals Group Limited and Board member of Athletics Australia.

Mr Elliot has experience in marketing and general management, including an appointment as President and Chief Executive of North America for Puma, the sporting goods company.

 

Resident Perth. Age 6566

Michael J McConnellAB,MBA (HONS)VIRGINIA

Managing Director Shamrock Capital Advisors Inc. and Shamrock Holdings Inc. and Chairman of Shamrock’s Investment Committee. He is also a Director of Neo Technology Ventures.

Mr. McConnell was appointed to the Board in April 2004 having actively served as Alternate Director to Mr. Stanley Gold since October 2002.

Mr McConnell has an investment banking background having served with Kidder Peabody and Merrill Lynch. He received an AB from Harvard University in Economics, and an MBA with honours from The Darden School of The University of Virginia.

Resident USA. Age 38

29


PART I

Item 6 : Directors, Senior Management and Employees

6ADIRECTORSAND SENIOR MANAGEMENT(Continued)

 

Stanley P Gold,AB,JD (Alternate to Mr. Michael J McConnell since April 2004)

 

Non-executive Director since October 2001. President and Chief Executive Officer of Shamrock Holdings, Inc., and President of Shamrock Capital Advisors Inc., Director of The Walt Disney Company and Chairman of Tadiran Communications Ltd.

 

Resident USA. Age 60

Michael J McConnell, (Alternate to Mr Stanley Gold since October 2001)

Managing Director of Coolmain Capital Advisors LLC and Shamrock Capital Advisors, Inc. He is also a Director of Newport Technology Fund, Nuplex Industries and Port-Link International.

Resident USA. Age 3761

 

EXECUTIVE OFFICERSWHOARENOTDIRECTORS

 

Phil Corke

 

Senior Vice President Human Resources and Communications

 

Phil Corke has been with Ansell since 1998 when he was appointed Senior Vice President of Human Resources. Prior to joining Ansell, he held senior human resources positions with Alpharma Inc., Textran Inc. and the Bristol-Myers group in the United Kingdom and the United States.

Duane Dickson

Head of Global Marketing and Program Director

Mr Dickson joined Ansell in July 2002 as Program Director to lead Ansell’s strategic business initiative – Operation Full Potential. He was given additional responsibility for Global Marketing in March 2003. Prior to joining Ansell, Mr Dickson was responsible for directing the strategic turnaround effort of Hercules. Prior to that he was Vice President and General Manager of the Industrial Performance Chemicals Division of Union Carbide Corp (Dow).

PART I

Item 6: Directors, Senior Management and Employees


6ADIRECTORSAND SENIOR MANAGEMENT(continued)

EXECUTIVE OFFICERSWHOARENOTDIRECTORS(continued)

 

Werner Heintz

 

Senior Vice President and Regional Director – Europe

 

Mr Heintz joined Ansell in 1999 as Managing Director Ansell Protective Products Europe, Middle East and Africa. In February 2001 he assumed the position of Regional Director Europe, Middle East and Africa. Prior to joining Ansell, he was the European Marketing Director for Nynas, a leading producer and distributor of bitumen and specialty oils.

 

Rustom Jilla

 

Senior Vice President and Chief Financial Officer

 

Mr Jilla joined Ansell Limited on 23 Septemberin 2002. Mr Jilla has extensive experience in financial roles with global companies and prior to joining Ansell was most recently Vice President Financial Operations of Perkin Elmer Inc. This followed a successful international career with BOC Group Plc from 1988-2000, both in the United States and New Zealand, in planning, product management and finance.finance culminating in the role of Vice President Finance, BOC Edwards Americas.

Neil O’Donnell

Senior Vice President and Regional Director – Asia Pacific.

Neil O’Donnell has been with Ansell since 1988 and has held a number of senior marketing roles in Australia and in the Asia Pacific region. He has been the Regional Director for the Asia Pacific region since February 2001, working to build markets throughout Asia, following a period where he ran the domestic Australian marketing operations. Prior to joining Ansell Mr. O’Donnell spent most of his career with Duracell Australia, the last eight years as CEO.

 

William Reed

 

Senior Vice President and Regional Director – Americas

 

Mr Reed has been with Ansell since 1989 following the acquisition of the Edmont Industrial glove business from Becton Dickinson and Co. He has been Senior Vice President and Regional Director of the Americas since February 2001. He was Executive Vice President and Regional Director of the Occupational Healthcare Division for the Americas from 1996 and was previously Americas Regional Director for the Consumer Division. Prior to 1993, he was Regional Director of Europe, based in Brussels.

 

William G. Reilly, Jr.

 

Senior Vice President and General Counsel

 

WithMr Reilly has been with Ansell since 2000 when he was appointed Senior Vice President & General Counsel. Prior to joining Ansell, Mr Reilly was Associate General Counsel of C.R. Bard Inc. from 1990 to 2000. Prior to Bard, Mr Reilly held increasingly responsible positions as senior counsel with The Hertz Corporation, McKesson Corporation, Dresser Industries and GAF Corporation.

 

Peter Soszyn

Senior Vice President and Chief Information Officer

Mr Soszyn has been with Ansell since 1995, when he was appointed Chief Information Officer. Prior to that, Mr Soszyn was with the Pacific Dunlop Group as Head of Corporate Information Systems for South Pacific Tyres from 1990 through 1995 and as Manager of Information Manufacturing Systems from 1985 to 1990. Prior to joining Pacific Dunlop Limited, Mr Soszyn served in a number of manufacturing and systems positions with Leigh Mardon Pty. Ltd., Amatil Pty. Ltd. and the State Planning Authority of New South Wales.30


PART I

 

Item 6:6 : Directors, Senior Management and Employees


 

6BCOMPENSATION

 

The aggregate amount of remuneration paid or accrued by the Company on a worldwide basis during 2002-20032003-2004 as compensation to its Directors and its executive officers named below as a group was $8,121,776.$10,543,867.

 

In accordance with the provisions of Australian law, amounts notionally attributed to pension and retirement benefits are deemed to be remuneration and such amounts are included in the total amount set out in the preceding paragraph.

 

The following table sets out the remuneration provided to the Directors and the most highly remunerated officers of the Company and the Group (including those based overseas) for the financial year.

 

   

Fixed

Remuneration(a)

A$


  

Fees(b)

A$


  

Incentives(c)

A$


  

Superannuation

Contributions(d)

A$


  

Notional Value

of Equity

Compensation(e)

A$


  

Retirement

Payments(f)

A$


  

Total

A$


NON-EXECUTIVE DIRECTORS

                     

E D Tweddell(g)

Chairman

  156,000  180,000  —    10,519  —    152,615(j) 499,134

P L Barnes

  —    67,500  —    6,075  —    59,058(j) 132,633

L D Crandall(h)

  —    42,815  —    3,853  —    22,330  68,998

H J Elliott

  —    64,387  —    5,795  —    80,358(j) 150,540

S P Gold(i)

  —    60,000  —    5,400  —    53,150  118,550

S C H Kay(h)

  —    19,408  —    1,747  —    84,647(j) 105,802
MANAGING DIRECTOR AND OFFICERS(R) OF THE COMPANY AND THE GROUP

H Boon(k)(p)

Group Managing

Director and Chief

Executive Officer

  1,160,483     459,291  411,962(n) 475,000(l)    2,506,736

P Corke(k)(p)

  389,088     117,679  43,559(n) 38,721     589,047

D Dickson(k)(p)

  515,848        26,774(n) 77,443     620,065

W Heintz(m)(q)

  553,447     180,504  85,911(o) 38,721     858,583

R Jilla(k)(p)

  399,137        34,276(n) 142,495     575,908

W Reed(k)(p)

  446,710     151,256  37,452(n) 46,466     681,884

W. Reilly(k)(p)

  377,153     121,739  44,251(n) 38,721     581,864

P Soszyn(k)(p)

  385,678     112,530  95,103(n) 38,721     632,032

NON

EXECUTIVE

DIRECTORS


  

Cash salary
and fees(a)
(b)

A$


  

Cash bonus
(c)

A$


  

Superannuation

Contributions
(d)

A$


  

Notional Value

of Equity

Compensation
(e)

A$


  

Termination
benefits

A$


  

Other(f)

$A


  

Total

A$


E D Tweddell Chairman

  234,375  —    21,094  —    —    —    255,469

P L Barnes

  91,875  —    8,287  —    —    —    100,162

L D Crandall

  82,500  —    7,425  —    —    —    89,925

H J Elliott

  82,500  —    7,425  —    —    —    89,925

M J McConnell(g)

  17,187  —    1,547  —    —    —    18,734

S P Gold(h)

  65,625  —    5,906  —    —    —    71,531
MANAGING DIRECTOR AND OFFICERS(O) OF THE COMPANY AND THE GROUP

H Boon(i)(j)(l) Group Managing

Director and Chief Executive Officer

  966,981  419,545  356,636  537,500  2,204,960  714,893  5,200,515

P Corke(i)(l)

  320,613  149,685  20,123  97,573  —    43,119  631,113

W Heintz(k)(m)

  386,845  190,824  125,926  152,988  —    259,624  1,116,207

R Jilla(i)(l)

  398,978  190,009  29,162  407,732  —    51,223  1,077,104

N O’Donnell

  196,000  61,985  39,004  99,176  —    32,160  428,325

W Reed(i)(l)

  363,401  122,118  19,605  142,945  —    58,032  706,101

W Reilly(i)(l)

  334,866  159,351  19,092  97,572  —    22,139  633,020

D Tough(i)(l)(n)

  124,715  —    —    —    —    1,021  125,736

 

(a)Comprises the cost to the Company of cash salary, non-cash benefits, expatriate assignment costs and associated taxes.

 

(b)Includes fees in connection with Board and Board Committee responsibilities.

 

(c)Performance-based payments pursuant to the Company’s short-term incentive program.

 

(d)Includes for two US-based Officers, an imputedFor Directors includes notional contribution calculated at an actuarial rate, and in the case of Directors,contributions at the rate that would satisfysatisfies Australian Superannuation Guarantee requirements. No amounts were required to be paid to the Australian super-annuationSuperannuation fund in respect of the year ended 30 June 20032004 upon advice of the Trustee. TheFor US based Executives, includes contributions to US benefit or non-qualified pension plans as applicable and to a European pension plan for Mr Heintz. For Messrs Boon and O’Donnell it also includes an imputed notional contribution amounts do not form part of the remuneration of Directors and executives set out in Note 28 to the Financial Statements contained in Items 17 and 18.Australian superannuation fund calculated at an actuarial rate.

31


PART I

 

Item 6:6 : Directors, Senior Management and Employees


 

6BCOMPENSATION(continued)

 

(e)In accordance with the requirements of guidelines issued by the Australian Securities and Investments Commission,Accounting Standards, remuneration includes a proportion of the notionalfair value of Optionsoptions or Performance Share Rights (PSRs) granted or outstanding during the year pursuant to the Company’s equity-based long term incentive plan. In accordance with these requirements, the notionalThe fair value is determined as at grant date and is progressively allocated over the ‘vesting period’vesting period for these securities. The amount included as remuneration is not related to nor indicative of the benefit (if any) that individual executives may ultimately realise should the Optionsoptions or PSRs vest. The notional valueNo amount in respect of Optionsoptions or PSRs (as the case may be) as at their effective date of grant has been determinedincluded in accordance with Accounting Exposure Draft 108 applying the Monte Carlo Simulation valuation method.

Typedetermination of

Security/

No. Granted


Effective

Date the remuneration of

Grant


Vesting

Date


Notional

Value


Option

1,000,000

1/7/2002

30/6/2003

30/6/2004

0.47

0.96

Option

300,000

1/7/2002

30/6/2003

30/6/2004

30/6/2005

0.51

1.03

1.20

PSR

437,500

1/7/2002

30/6/2003

30/6/2004

30/6/2005

2.69

2.54

2.06

the Chief Executive Officer as the vesting period for these instruments commenced after balance date.

 

CalculationThe fair value of Optionoptions or PSRs is calculated at the date of the grant using binomial tree techniques. The fair values and PSRthe factors and assumptions used in determining the fair values of the tranches of options and PSRs applicable for the 2004 financial year are as follows:

Instrument


  Number
Issued


  Grant Date

  Expiry
Date


  Fair Value
per Option/
PSR


  Exercise
Price


  Share
Price
on
Grant
Date


  Estimated
Volatility


  Risk
Free
Interest
Rate


  Dividend
Yield


 

Options

  1,000,000  12/4/2002  30/6/2006  $2.15  $6.32  $6.40  30.0% 6.0% 0.0%

Options

  300,000  23/9/2002  23/9/2012  $2.66 -$2.70  $6.97  $6.88  20.0% 5.3% 0.0%

Options

  525,000  30/6/2004  30/6/2014  $2.35 -$2.38  $7.40  $7.74  20.0% 6.1% 2.0%

PSRs

  437,500  19/2/2003  30/6/2005  $6.07   N/A  $6.07  20.0% N/A  0.0%

PSRs

  515,000  18/12/2003  30/6/2006  $5.89 -$6.12   N/A  $6.19  20.0% N/A  2.0%

PSRs

  150,000  30/6/2004  30/6/2007  $6.94 -$7.22   N/A  $7.74  20.0% N/A  2.0%

Estimated volatility is based on aan analysis of historical share price of $6.58 as at 1 July 2002 using a risk-free interest rate of 5.5 per cent, a market-derived volatility rate and a median rate of discount to reflect the probability of meeting the performance hurdles.data.

 

(f)Includes accrued entitlementscash benefits such as motor vehicle allowances, home office expenses, executive insurance, housing allowances and statutory amounts paid on termination of the Non-executive Directors to retirement benefits, paid out as at 30 June 2003, as detailed in Item 6C – Board Practices.including accumulated annual leave and long service leave.

 

(g)Includes remuneration for extra services (now ceased) related to the resolution of matters carried over from the previous Pacific Dunlop Limited structure.Mr M J McConnell was appointed as a director on 16 April 2004.

 

(h)MsMr S C H KayP Gold retired as a Directordirector and Mr L D Crandall was appointed as a Directoralternate director for Mr McConnell on 1 November 2002.16 April 2004.

 

(i)Mr M J McConnell was appointed alternate director for Mr Gold on 26 October 2001. In accordance with the Company’s Constitution, Mr McConnell receives no separate emoluments from the Company for acting as Mr Gold’s alternate.

(j)The payment of entitlements for Australian-based directors was made by a Group-sponsored superannuation fund, not the Company.

(k)US-based Officers.

 

(l)(j)TheNotional value of Equity Compensation includes the notional value of remuneration for Mr Boon includes a value attributed to 600,000 Options500,000 options granted to Mr Boon in 1997, prior to his appointment as Group Managing Director and Chief Executive Officer, pursuant to the former Pacific Dunlop Executive Share Option Plan. Following the 5 for 1 consolidation of capital, 120,000 Options remained ‘live’ withApril 2002. The options, which have an exercise price of $16.50 each. The$6.32 for each share acquired, vested upon achievement of performance conditions attachingapplicable to these options were not satisfied and the Options lapsed on 11 December 2002. In accordance with Guidelines issued by the Australian Securities and Investments Commission a value of $384,000 would have applied to these options over the five-year vesting period. Notwithstanding this ‘notional value’, as the options lapsed unexercised, Mr Boon derived no value from these Options and their value is not included in the table above.2004 year.

 

(m)(k)European-based Officer.

 

(n)(l)Includes contributions to US benefit or non-qualified pension plan.

(o)Includes contributions to European pension plan.

(p)US-based Officers are paid in US$. The average exchange rate for the period, as set out in the Financial Statements, is US$0.586510.7016 = A$1.00.

 

(q)(m)Europe-based Officer paid in €. The average exchange rate for the period is €0.55872€0.5775 = A$1.00.

 

(r)(n)Mr Tough was appointed as an Executive on 11 May 2004 and Chief Executive Officer and Managing Director on 1 July 2004.

(o)The Officers included in this disclosure are those executives having, during the year, the greatest authority for managing the Group. Other personnel who have not had such authority may have received remuneration at a level in excess of that shown for the executives named above.

PART I

Item 6: Directors, Senior Management and Employees


6BCOMPENSATION(continued)

 

The Company had agreements with each of the Non-executive Directors, which provided for benefits upon termination. The full extent of the liabilities of the Company under these agreements has been undertaken, either by the Company or by a superannuation fund of which the Company is employer sponsor. These agreements have beenwere terminated as at 30 June 2003.

 

The Company has operated two share plans for employees and Directors.

 

the Pacific Dunlop Executive Share Plan (“Executive Plan”); and

 

the Pacific Dunlop Employee Share Plan (“Employee Plan”).

 

No issue of shares has been made under either Plan since February 1994. The Board determined during 1996 that no further issues of shares would be made under the Executive Plan.

 

32


PART I

Item 6 : Directors, Senior Management and Employees

6BCOMPENSATION(continued)

The Executive Plan is no longer available for new share issues. Shares issued under the Executive Plan to selected employees (“Executives”) were paid up to 5 cents and were subject to restrictions for a determined period (for the 1993/94 issue – 8¼ years). While partly paid, the shares are not transferable, carry no voting rights and no entitlement to dividends (but are entitled to participate in bonus or rights issues as if fully paid). The price payable for shares issued under the Executive Plan varies according to the event giving rise to a call being made. Market price at the date of the call is payable if an Executive ceases employment with the Company (other than for death, retrenchment, retirement or upon the sale of a business)retirement) prior to expiration of the restriction period. Once restrictions cease, the price payable upon a call being made will be the lesser of $10.00 ($2.50 for issues prior to 13 September 1991) or the last sale price of the Company’s ordinary shares on the Australian Stock Exchange Limited. As of 30 June 2003, no offers to Executives were outstanding and as noted above, no further issues will be made under this Plan. The aggregate number of Executive Plan Shares on issue could not exceed 5% of the total issued capital of the Company.

 

The number of Executive Plan Shares outstanding at 30 June 20032004 was 922,100738,000 and as of 31 October 20032004 was 765,100387,000 shares. During the fiscal year, the amounts outstanding on 252,500184,100 existing Executive Plan Shares were fully paid. From the end of the fiscal year through 31 October 2003,2004, the amounts outstanding on an additional 157,000351,000 Executive Plan Shares were fully paid.

 

Under Australian law, the Company is not required to disclose and does not otherwise disclose the number of Executive Plan Shares held by each executive officer individually, unless such executive officer is also a Director. There were no Executive Plan Shares held by Directors of Ansell Limited as of 30 June 2003.2004.

 

In addition to the Executive Plan, the Company maintains an Employee Plan under which 210,679149,763 fully paid Ordinary Shares were held as of 30 June 20032004 by employees of the Company and 161,488145,102 shares (including Ordinary Shares issued as bonus shares) were held as of 31 October 2003.2004. The Employee Plan permits full-time and part-time employees, who have completed three or more years continuous service with the Company and who do not participate in the Executive Plan, to acquire 20 ordinary shares in the capital of the Company for each completed year of service. The shares are issued at market value as of the date of issue, payable as to 50 cents per share by the employee, the balance financed by an interest free loan from the Company (provided that no loans will be made in contravention of applicable law, including Section 13(k) of the Securities Exchange Act of 1934) repayable, at latest, on cessation of employment. Loans underThe US GAAP compensation cost component of this plan have been made and any future loans under this plan will be made, only if permitted under the relevant securities laws.is zero for all years presented.

 

The shares are not transferable while a loan remains outstanding, but carry voting rights and entitlement to dividends (although dividends are applied in reduction of the loan). Invitations are made under the Employee Plan from time to time. As of 30 June 2003,2004, no offer to employees was outstanding. The aggregate number of Employee Plan Shares on issue may not exceed 5% of the total issued capital of the Company.

 

Issues of shares under the Employee Plan to date have been in 1986–1987 at $23.60 per share, in 1987–1988 at $20.05 per share, in 1988–1989 at $20.65 per share, in 1990–1991 at $22.10 per share, in 1991–1992 at $21.50 per share and in 1993–1994 at $25.00 per share. Holders of Employee Plan Shares at June 1987, May 1989 and October 1993 became entitled to bonus shares (stock dividends) totalling 1,960,062 shares in respect of bonus issues (stock dividends) declared in June 1987, May 1989 and October 1993.

PART I

Item 6: Directors, Senior Management and Employees


6BCOMPENSATION(continued)

 

During the 2002-20032003-2004 fiscal year, the loan liability of members in respect of 467,62160,916 fully paid ordinary shares of $2.50 each was discharged. From the end of the fiscal year through 31 October 20032004 the loan liability in respect of an additional 49,1914,661 fully paid shares was discharged. No new shares were issued during 2002-20032003-2004 under the Employee Plan.

 

The Company’s accounting policy in respect of the Employee Plan is to recognise the paid-up capital and share premium upon allotment and the receivable created by the loan to employees to acquire the shares. In respect of the Executive Plan, no amount is recognised upon issue, apart from the capital paid-up on the shares, as the amount of the call payable is not known at the time of issue. Once a call has been made upon the shares and paid, the Company recognises the increase in paid-up capital and share premium.capital. A loss of $13,288$4,366 pre tax in respect of the Employee Share Plan was recognised for the year 2002-2003,2003-2004, compared to a loss of $535,381$13,288 pre tax for the year 2001-20022002-2003 and in 2000-20012001-2002 a loss pre tax of $312,980.$535,381.

33


PART I

Item 6 : Directors, Senior Management and Employees

6BCOMPENSATION(continued)

 

The Company has also adopted the Ansell Limited Stock Incentive Plan (“Stock Incentive Plan”) for the benefit of key employees of the Company. The Stock Incentive Plan provides for equity-based awards in the form of stock options and performance share rights (“PSRs”). The Board administers the Stock Incentive Plan and determines the employees eligible for awards, and the type and amount of awards that will be granted to each eligible employee. The Board can unilaterally amend or terminate the Stock Incentive Plan at any time.

 

TheIn general, grants are made annually, each award being three equal tranches. Each tranche is subject to performance targets set by the Board in respect of a stock option undereach of the Stock Incentive Plan entitlesthree successive years. These rights entitle the employeeholder to purchasean equivalent number of fully-paid ordinary shares upon achievement of Company common stockthe performance targets. The options may be exercised at a price that is fixed atbased on the time the option is granted. Once vested, an employee can elect to exercise the option at any time prior to its expiration date. A PSR entitles the employee to one fully paid ordinary share of common stockaverage of the CompanyAnsell share price on the five days preceding the grant. PSRs, when vested, are converted to fully-paid ordinary shares at no cost to the timeexecutive. Upon vesting participants are permitted to sell shares to cover tax liabilities and up to 50% of the PSR vests. Employeesremaining vested tranche. The balance remains restricted for a further 12 months. PSRs that have vested but remain restricted attract dividends.

During 2004 525,000 options and 150,000 PSRs were granted to Mr Tough upon his appointment as an executive, pursuant to the Plan. The options, which are subject to performance conditions, have an exercise price of $7.40, are not requiredexercisable until one year after they vest and will lapse if not exercised on or before 30 June 2014. The PSRs convert to payshares at no cost to the executive upon satisfaction of performance conditions. Both the options and PSRs were granted in three tranches, and are subject to the achievement of long-term performance targets and stretch targets established by the Board. Targets for financial year 2005 and future years are yet to be finalised and are subject to further Board consideration of the shares receivednext stage of the Company’s development under a PSR.the leadership of the new Chief Executive Officer. The vesting period for both the options and PSRs commenced 1 July 2004.

 

The Companyoptions granted to Mr Boon have now vested. The first tranche of 500,000 options are now exercisable at $6.32 for each share acquired. The second tranche of 500,000 options may be exercised, again at $6.32 for each share acquired, after 30 June 2005. Both tranches of options may only be exercised prior to 30 June 2006.

During the 2003 financial year Mr Jilla was granted PSRs to eligible employees, effective July 1, 2002. The PSR award was divided into300,000 options in three equal tranches that vest over a three-year period, beginningof 100,000 options, each with the fiscal year ended June 30, 2003, provided thatan exercise price of $6.97 and subject to certain EBITA performance targets are achieved.aligned to EBITA of the Ansell Healthcare business and the achievement of certain financial ratios for the 2003-2005 financial years. In respect of the first two tranches the performance targets have been met and these options have vested. The first tranche is exercisable after 30 June 2004, the second after 30 June 2005. These options expire on 23 September 2012.

During 2003 437,500 PSRs, exercisable in three equal tranches, were granted to senior Group executives pursuant to the Plan. The performance targettargets applicable to the first two tranches have been met and those tranches have vested. The third tranche is subject to the achievement of performance targets for the fiscal year ended June 30, 2003 was achieved and2005 financial year.

During 2004 a further 665,000 PSRs, exercisable in three equal tranches, were granted to executives (including those granted to Mr Tough). The performance targets in respect of the first tranche of PSRs granted in the PSRs vested on that date. Employees are prohibited from trading 50%current year (with the exception of the shares received on vesting of the PSRs for a period of 12 months following the vesting date. Employees subject to tax outside of Australia can trade additional shares in an amount sufficient to cover any taxes due upon vesting of the PSRs. A second round of awards on similar terms to the first round was made effective July 1, 2003. The hurdle periods for the second round of awards are for the three fiscal years commencing with June 30, 2004. Unless the Board determines otherwise, unvested PSRs are forfeited if the employee terminates employment prior to the vesting date.those

 

Unless determined otherwise in an award agreement, upon a change in control of the Company all vestedgranted to Mr Tough) have been achieved and these PSRs whichhave vested. The second and third tranches are subject to transfer restrictions will ceasethe achievement of performance targets for the 2005 and 2006 financial years respectively.

In relation to be restricted,the 2005 financial year the performance condition applicable to options and all vested options may be exercised within a 30 day period followingPSR’s issued to executives other than Mr Tough is that the dateEBITA for the Ansell Healthcare business meets or exceeds US$115 million. Performance targets for periods beyond financial year 2005 are under review pending Board notifies participantsconsideration of the change in control. The Board, in its discretion, may also accelerate the vesting of unvested awards. Change in control is defined in the Stock Incentive Plan and includes (i) a takeover bid for more than 50%next stage of the Company’s issued shares of stock, (ii) a court ordered meeting in connection with a proposed compromise or arrangement fordevelopment under the purpose of or in connection with a scheme for the reconstructionleadership of the Company or it amalgamation with any other company, (iii) a person becoming bound or entitled to acquire shares of Company stock under section 414 or Chapter 6A of the Australian Corporations Act 2001, (iv) a resolution for voluntary winding up of the Company, or (v) an order for compulsory winding up of the Company.recently-appointed Chief Executive Officer.

34


PART I

 

Item 6:6 : Directors, Senior Management and Employees


 

6CBOARDBOARD PRACTICESPRACTICES

 

The Board works under a set of well established corporate governance policies that reinforce the responsibilities of all Directors in accordance with the requirements of the Australian Corporations Act, and the Australian Stock Exchange (ASX)., the Securities Exchange Act of 1934 and the NASDAQ Stock Market. In addition, many of the governance elements are enshrined in the Company’s Constitution.

 

The Board regularly reviews and updates its corporate governance policies, to ensure that the Company’s policies remain in accordance with best practice. The Board is aware of, and has had regard to developments in Australia and overseas in relation to corporate governance “best practice.”

 

The Board has for some time satisfied the majority of the recommendations of the ASX Corporate Governance Council and has incorporated its provisions in its annual review of corporate governance practices.

 

The corporate governance section of the Company’s website contains various materials relating to corporate governance, including Board charter, Committee charters, Code of Conduct and other information. The link to the corporate governance section of the Ansell website iswww.ansell.com/corpgov/index.shtml.www.ansell.com.

 

Board Responsibilities

 

The Board has ultimate responsibility to set policy regarding the business and affairs of the Company and its subsidiaries for the benefit of the shareholders and other stakeholders of the Company. The Board is accountable to shareholders for the performance of the Group.

 

The Board has the following responsibilities and functions, namely, to:

 

review and approve corporate strategies, budgets, plans and policies developed by management and evaluate performance of the Group against those strategies and business plans in order to:

 

monitor the performance of functions delegated to the executive team including the progress of major capital expenditures, capital management, acquisitions, divestitures and strategic commitments; and

 

assess the suitability of the Company’s overall strategies, business plans and resource allocation;

 

appoint a Chief Executive Officer for the ongoing management of the business and its strategies;

 

regularly evaluate the performance of the Chief Executive Officer and Senior Management and ensure appropriate executive succession planning is conducted;

 

monitor financial and business results (including the audit process) to understand at all times the financial position of the Group;

 

ensure regulatory compliance and maintain adequate risk management processes;

 

report to shareholders; and

 

implement a culture of compliance with the highest legal and ethical standards and business practices.practices to ensure social accountability.

 

In carrying out its duties, the Board meets formally over one or two days at least six times a year, with additional meetings held as required to address specific issues. Directors also participate in meetings of various Board Committees, which assist the full Board in examining particular areas or issues.

 

It is also the Company’s practice for Directors to visit a number of the Company’s facilities in each year. During the 2004 financial year, Board meetings were held in conjunction with visits to Ansell facilities in Europe and South-east Asia.

 

The Board delegates management of the Company’s resources to the executive team under the leadership of the Chief Executive Officer, to deliver the strategic direction and achieve the goals determined by the Board. Any powers not specifically reserved for the Board have been delegated to the executive team.

35


PART I

 

Item 6:6 : Directors, Senior Management and Employees


 

6CBOARDBOARD PRACTICESPRACTICES(continued)

 

Risk Management and Code of Conduct

 

Ansell places high priority on risk identification and management throughout all its operations and has processes in place to review their adequacy. These include:

 

a comprehensive risk control program that includes property protection and health, safety and environmental audits using underwriters, self-audits, engineering and professional advisers; and

 

a process to identify and measure business risk.

 

The Company also has in place a system of internal controls for the identification and management of financial risk including a system of internal sign-offs to ensure the Company is in compliance with its legal obligations, including those which arise under the US Sarbanes-Oxley Act. The Chief Executive Officer and Chief Financial Officer also provide assurances to the Board as to the integrity of the Company’s risk management and internal compliance and control systems and financial reports.

 

Ansell is committed to upholding the highest legal, moral and ethical standards in all of its corporate activities and has adopted a Code of Conduct, which aims to strengthen its ethical climate and provide basic guidelines for situations in which ethical issues arise.

 

The Code of Conduct applies to Directors, executives, management and employees, sets high standards for ethical behaviour and business practice beyond complying with the law, and is based on the following key principles whereby Ansell:

 

strives to do businessuphold high ethical standards in all corporate activities;

is committed to competing lawfully, fairly and ethically in the marketplace, consistent with customersits aim of providing quality products to its customers;

is committed to pursuing sound growth and suppliersearnings goals, by operating in the best interests of sound business characterthe Company and reputation;shareholders;

 

strives to maintaintreat all employees and applicants with fairness, honesty and respect;

expects all employees to work together for the highest standard of ethical behaviour in business dealingscommon good and to behaveavoid placing themselves in a position that is in conflict with integrity in all dealings with customers, shareholders, government, employees, suppliers and the community;interests of the Company;

 

is committed to good corporate citizenship and participating actively in and improving the communities in which the Company does not knowingly support any public or private organisation, which espouses discriminatory policies or practices;business; and

 

expects all our employees to perform their dutiesconduct themselves in accordance with honesty, truthfulness and integrity.the guiding principles.

 

It is the policy of Ansell to comply with the letter and spirit of all applicable laws, including those relating to employment, discrimination, health, safety, medical device, consumer protection, privacy, intellectual property, antitrust, securities and the environment. The Company has also developed procedures to ensure that employees are aware of and discharge their obligations under relevant privacy laws in their handling of information provided to the Group. No Director, officer, executive or manager of Ansell has authority to violate any law or to direct another employee or any other person to violate any law on behalf of the Company.

The Company has appointed a Compliance Officer to assist in the administration of the Code of Conduct. As part of its commitment to legal and ethical conduct, the Company expects its employees to report information about actual or suspected violations of the Code of Conduct or of the law.

The Code of Conduct also sets out the Company’s policies in respect of ethical issues such as conflicts of interest, social accountability and fair dealing. In addition, the Company has developed specific policies in relation to several matters covered in the Code of Conduct. These policies, along with the Code of Conduct are publicly available on the Company’s website,www.ansell.com.

36


PART I

Item 6 : Directors, Senior Management and Employees

6CBOARDPRACTICES(continued)

Risk Management and Code of Conduct (continued)

 

The Company’s ethical practices and procedures are reviewed regularly, and processes are in place to promote and communicate these policies within the Company. Employees and Directors are encouraged to participate in Company sponsored compliance programs presented by or on behalf of the Company to ensure that they remain up to date regarding relevant legal and industry developments. Assistance is also available to clarify whether particular laws apply and how they may be interpreted.

 

Board Composition

 

The Board’s policy is that there should be a majority of independent, Non-executive Directors. This is a requirement embodied in the Company’s Constitution, ensuring that all Board discussions or decisions have the benefit of predominantly outside views and experience, and that the majority of Directors are free from interests and influences that may create a conflict with their duty to the Company. Maintaining a balance of experience and skills is an important factor in Board composition.

PART I

Item 6: Directors, Senior Management and Employees


6CBOARD PRACTICES(continued)

 

The requirement under the Constitution is for at least twice as many Non-executive Directors as Executive Directors. As an additional safeguard in preserving independence, an Executive Director cannot hold the office of Chairman.

 

The Board has adopted the definition of independence set out in the IFSA Blue Book (December 2002).1 The Board has developed guidelines to determine materiality thresholds for the purposes of that definition. Broadly speaking, these guidelines seek to determine whether the director is generally free of any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company.

 

The Company currently has 6 Directors, 1 of whom is an Executive Director (the Chief Executive Officer who is also Managing Director). The remaining 5 Directors are Non-executive, 4 of whom, including the Chairman, are “independent.” InThe Board considers that, in addition one alternateto the Managing Director, has been appointed to represent Mr Gold,McConnell is not independent by virtue of his position as an overseas-based Director. Mr Gold, who isofficer of Shamrock Capital Advisors Inc., a Directorrelated body corporate of and represents, the largest single shareholder in the Company, Shamrock Holdings of California Inc., is a substantial shareholder.

In addition Mr Gold who retired as a Director in April 2004, has been appointed as an alternate to Director to represent Mr McConnell. This allows the only Non-executive Director whoBoard to continue to benefit from the experience and insight of Mr Gold from time to time. For the purpose of completeness Mr Gold does not meet the Board’s definition of independence. For the purposesindependence, due to his financial interests in Trefoil International III, L.P., a related body corporate of completeness, Mr Gold’s alternate, Mr McConnell is also not considered independent. In the opinionShamrock Holdings of the Board, the present composition fairly represents the interests of all shareholders in the Company. California Inc.

Any Director can seek independent professional advice at the Company’s expense in the furtherance of his or her duties, subject to prior discussion with the Chairman. If this occurs, the Chairman must notify the other Directors of the approach, with any resulting advice received to be generally circulated to all Directors.


1Corporate Governance, A Guide for Fund Managers and CorporationsBlue Book, Investment and Financial Services Association, December 2002 (copy available at www.ifsa.com.au).

 

37


PART I

Item 6 : Directors, Senior Management and Employees

6CBOARDPRACTICES(continued)

Board Review and Election Processes

 

The Board periodically conducts a formal review of its performance in meeting shareholder and stakeholder expectations. Such reviews include:

 

comparing Board performance against agreed external benchmarks;

 

assessment and consideration of the effectiveness and composition of the Board;

 

an assessment of the performance of the Chief Executive Officer and Managing Director by the Non-executive Directors;

 

assessing whether corporate governance principles are appropriate and reflect “good practice” (by way of self-assessment using a structured approach); and

 

assessing whether the expectations of differing shareholder groups have been met.

 

New Directors are nominated by the Board, as described below, and then must face a vote of shareholders at the next Annual General Meeting in order to be confirmed in office. The criteria for considering new candidates for the Board are set by the Nomination, Remuneration and Evaluation Committee. All Directors other than the Managing Director are required to seek re-election at least once in every three years on a rotating basis.

 

Appointment Terms

 

In order to ensure that composition of the Board will change over time, the Board has a general policy that Non-executive Directors should not serve for a period exceeding 12 years, and that the Chairman should not serve in that role for more than 10 years.

 

In order to ensure that Directors are able to fully discharge their duties to the Company, all Directors must consult with the Chairman of the Board, and advise the Nomination, Remuneration and Evaluation Committee, prior to accepting a position as a Non-executive Director of another company.


1Corporate Governance, A Guide for Fund Managers and Corporations – Blue Book, Investment and Financial Services Association, December 2002 (copy available at www.ifsa.com.au).

PART I

Item 6: Directors, Senior Management and Employees


6CBOARD PRACTICES(continued)

 

Remuneration

 

Non-executive Directors are paid an annual fee within a fixed amount approved for all Non-executive Directors by shareholders. The total annual amount approved for Ansell is currently $750,000, which was set in 1989. This is a maximum aggregate amount, andIn June 2003, the Company does not, at this time, intend on distributing that full amount by way of fees.

The Board has determined thatresolved to discontinue the practice of paying retirement benefits to Non-executive Directors be discontinued (notwithstanding that the payment of retirement benefits had previously been approved by shareholders). At the June 2003 Board meeting the Board resolved that:

no new Non-executive Director appointed to the Board will be entitled to the paymentThe retirement benefits of a retirement benefit upon retirement from office; and

the entitlements of currentexisting Non-executive Directors cease to accrue with effect fromwere quantified and paid as at 30 June 2003 andas detailed in the accrued entitlements of Directors be calculated and paid outAnnual Review 2003. The Company has no ongoing liability regarding those amounts. In addition to each Director as at that date.

For the period 1 July 2002 to 30 June 2003, Directors received an annual fee of $60,000 for Board duties, with the Chair receiving $180,000. A fee of $5,000 per annum was paid to Directors appointed to the Audit Committee and the Nomination, Remuneration and Evaluation Committee with the Committee Chair in each case receiving a fee of $7,500 per annum.

After receiving independent expert advice, undertaking a review of comparative companies and following the decision to cease paying retirement benefits totheir fees, Non-executive Directors the annual fee payable to each Non-executive Director has been increased, with effect from 1 July 2003, to $75,000 per annum for Board duties, with the Chair receiving $225,000 per annum. A fee of $7,500 per annum will be paid to Directors appointed to the Audit Committee and the Nomination, Remuneration and Evaluation Committee with the Committee Chair receiving a fee of $9,375 per annum.The adopted increases remain within the aggregate fee cap approved by shareholders.

The fees paid to Directors take into account what is paid by comparable companies, and what is necessary to attract high-calibre people to consider Board appointment. In line with general industry practice, the Board reviews its remuneration strategies in relation to Non-executive Directors from time to time.

Each Non-executive Director is required to reinvest a minimum 10 per cent of their annual gross fee in acquiring shares in the Company until their shareholding is equal to at least one year’s fees, pursuant to a Non-executive Directors’ Share Plan. The Plan enables Non-executive Directors to elect to apply up to 100 per cent of their fees in acquiring shares in the Company.

As members of management, Executive Directors, when appointed, do notnow only receive fees or Directors’ retirement benefits. They are members of the Company’s Superannuation Fund and, as such, participate in Company sponsored superannuation.superannuation contributions at rates that accord with statutory requirements.

 

Dealings in Shares

The Company has adopted a policy on dealing in Ansell shares by Directors and employees generally which is publicly available on the Company’s websitewww.ansell.com

 

Subject to the restriction that persons may not deal in any securities when they are in possession of price-sensitive information, Directors and employees generally may only buy or sell Ansell shares in the periods immediately following any price-sensitive announcements, including the half-year and full year results and Annual General Meeting. At other times, Directors dealing in Ansell shares must obtain prior approval from the Chairman.

PART I

Item 6: Directors, Senior Management and Employees


6CBOARD PRACTICES(continued)

 

Conflict of Interest

 

In order to ensure that any ‘interests’ of a Director in a particular matter to be considered by the Board are brought to the attention of each Director, the Company has developed protocols, consistent with obligations imposed by the Corporations Act and the Listing Rules, to require each Director to disclose any contracts, offices held, interests in transactions and other directorships which may involve any potential conflict. Appropriate procedures have been adopted to ensure that, where the possibility of a material conflict arises, relevant information is not provided to the Director, and the Director does not participate in discussion on the particular issue, or vote in respect of the matter at the meeting where the matter is considered.

 

38


PART I

Item 6 : Directors, Senior Management and Employees

6CBOARDPRACTICES(continued)

Board Committees

 

The Board has established two standing Committees, being the:

 

Audit Committee; and

 

Nomination, Remuneration and Evaluation Committee.

 

The Board periodically reviews the charter of each Committee.

 

The Board also delegates specific functions to ad hoc Committees of Directors on an “as needs” basis. The powers delegated to these Committees are set out in Board resolutions.

 

Senior executives attend Board and Committee meetings by invitation, whenever particular matters arise that require management presentations or participation.

 

Audit Committee

 

The members of the Audit Committee during the year were all“independent” “independent” Non-executive Directors and comprised:

 

Mr P L Barnes (Chair);

 

Mr L D Crandall (from 11 December 2002)Crandall; and

 

Mr H J Elliott; and

Ms S C H Kay (until 1 November 2002)Elliott.

 

Members of the Audit Committee are financially literate and the Board is of the opinion that the members of the Committee possess sufficient financial expertise and knowledge of the industry in which the Company operates.

 

The Audit Committee reviews the financial statements, adequacy of financial controls and the annual audit arrangements, both internal and external. It monitors the controls and financial reporting systems, applicable Company policies, national and international accounting standards and other regulatory or statutory requirements.

 

The Committee also liaises with the Company’s internal auditors and external auditors,Independent Registered Public Accounting Firm, reviews the scope of their activities, reviews the external auditors’Independent Registered Public Accounting Firm’s remuneration and independence, and advises the Board on their remuneration, appointment and removal. It is Board policy that the lead external audit partner and review partner not serve for more than 5 consecutive years. The Board has adopted a policy in relation to the provision of non-audit services by the Company’s external auditorIndependent Registered Public Accounting Firm that is based on the principle that work that may detract from the auditor’sIndependent Registered Public Accounting Firm’s independence and impartiality, or be perceived as doing so, should not be carried out by the external auditor.Independent Registered Public Accounting Firm. The Company’s Independent Registered Public Accounting Firm has also confirmed its independence to the Directors in accordance with applicable laws and standards.

 

The Committee also reviews the processes in place for the identification, management and reporting of business risk, and reviews the findings reported.

 

The Chief Executive Officer, Chief Financial Officer, Group Chief Accountant, Director - Internal Audit, other relevant Company officers (as required) and the principal external audit partner participate at meetings of the Committee.

39


PART I

 

Item 6:6 : Directors, Senior Management and Employees


 

6CBOARDBOARD PRACTICESPRACTICES(continued)

 

Nomination, Remuneration and Evaluation Committee

 

The members of the Nomination, Remuneration and Evaluation Committee during the year were all Non-executive Directors and comprised:

 

Dr E D Tweddell (Chair);

 

Mr P L Barnes; and

 

Mr S P Gold (until 16 April 2004); and

Mr M J McConnell (from 16 April 2004),

 

a majority of whom are “independent” Non-executive Directors.

 

This Committee’s charter provides for it to periodically review the structure and performance of the Board, Board Committees and individual Directors and recommend changes when necessary. This includes identifying suitable candidates for appointment as Non-executive Directors.

 

In doing so, the Committee establishes the policies and criteria for Non-executive Director selection. The criteria include a candidate’s personal qualities, professional and business experience, and availability and time to commit to all aspects of the Board’s program.

 

The Committee also considers matters including succession and senior executive compensation policy, including short and long-term incentive plans and the Company’s recruitment, retention and termination policies, and advises the Board accordingly. The Committee makes recommendations to the Board regarding the specific remuneration of the Chief Executive Officer (including base pay, incentive payments, equity awards, retirement rights and service contracts). The remuneration of Non-executive Directors is a matter that is determined by the Board, although the Committee may request management or external consultants to provide necessary information upon which the Board may make its determination.

 

The Committee has available to it the services of independent professional advisers to assist in the search for high calibre people at all levels and ensure that the terms and conditions offered by the Company are competitive with those offered by comparable companies.

 

Disclosure to Investors

The Company has implemented procedures to ensure that it provides relevant and timely information to its shareholders and to the broader investment community, in accordance with its obligations under the ASX continuous disclosure regime. The Company’s Continuous Disclosure policy is available on its website, atwww.ansell.com.

In addition to the Company’s obligations to disclose information to the ASX and to distribute information to shareholders, the Company publishes annual and half-year reports, media releases and other investor publications on its website.

The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and discussion of the Group’s strategy and goals. The company invites the external auditor to attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the Report of Independent Registered Public Accounting Firm.

40


PART I

Item 6 : Directors, Senior Management and Employees

6CBOARDPRACTICES(continued)

ATTENDANCEAT BOARDAND BOARD COMMITTEE MEETINGSDURINGTHE YEAR ENDED 30 JUNE 20032004

 

  Board

  Audit

  Nomination,
Remuneration
and Evaluation


  Board

 Audit

  Nomination,
Remuneration
and Evaluation


 
  Held

  Attd

  Held

  Attd

  Held

  Attd

  Held

  Attd

 Held

  Attd

  Held

  Attd

 

Directors – Continuing

                                 

E D Tweddell

  8  8  1  1  3  3  7  7  —    —    4  4 

P L Barnes

  8  8  5  5  3  3  7  7  5  5  4  3 

H Boon

  8  8              6  6  —    —    —    —   

L D Crandall

  6  6  3  3        7  7  5  5  —    —   

H J Elliott

  8  8  4  4        7  7  5  5  —    —   

M J McConnell

  2  2  —    —    —    —   

S P Gold

  8  8        3  2  5  5* —    —    4  3*

Directors – Former

                  

S C H Kay

  2  2  2  2      

 

Held – Indicates the number of meetings held while each Director was in office.

 

Attd – Indicates the number of meetings attended during the period that each Director was in office. Ms S C H Kay retired on 1 November 2002.

Mr L D Crandall was appointed on 1 November 2002.

 

Mr S P Gold attended four Board meetings in person and was represented at each other meeting by his alternate,retired on 16 April 2004. Mr M J McConnell.

PART IMcConnell was appointed on 16 April 2004.

 

Item 6: Directors, Senior Management and EmployeesMr M J McConnell, who was previously an alternate for Mr Gold, attended two Board meetings as a director.


*Mr S P Gold who retired as a Director and was appointed as an alternate for Mr McConnell, did not attend any Board meetings as a Director but was represented at five meetings by his alternate. Mr Gold was represented at two meetings of the Nomination, Remuneration and Evaluation Committee by his alternate.

 

6C6DBOARD PRACTICES(continued)

A meeting of a special Board Committee comprising Dr E D Tweddell and Mr P L Barnes was convened on 3 September 2002 in relation to the signing of the Accounts for the year ended 30 June 2002. A meeting of a special Board Committee comprising Dr E D Tweddell and Mr P L Barnes was convened on 13 February 2003, in relation to the review and lodgment of the Half-Year Results announcement, Reports and Financial Statements for the six months ended 31 December 2002.

A special Board Committee comprising Dr E D Tweddell and Mr H Boon was convened and met on 16 April 2003 and 30 April 2003 in connection with the Company’s share buy-back program.

6DEMPLOYEES

 

As of 30 June 20032004 Ansell Limited employed 12,01311,530 full time equivalent employees.employees (12,013 as at 30 June 2003 and 12,160 as at 30 June 2002) .

 

Approximately 16% of the total workforce of Ansell, who are predominantly located outside of Australia, belong to trade unions, while the length of the union contracts is typically 3 years. Management believes it has good relations with its unions.

 

The following is an analysis of the Group’s employees by geographic location (information regarding activities undertaken by employees is not available):

Location


  2004

  2003

  2002

Americas

         

USA (including Mexico)

  1,943  1,935  2,120

Canada

  44  44  44

Asia Pacific

         

Australia

  87  87  104

India

  1,540  1,847  1,774

Malaysia

  3,543  3,679  3,711

Sri Lanka

  1,919  1,959  1,861

Thailand

  2,033  2,030  2,089

Rest of Asia

  6  9  12

Europe

         

Belgium

  171  125  124

United Kingdom

  157  172  197

France

  51  66  54

Rest of Europe

  36  60  70
   
  
  

Total

  11,530  12,013  12,160
   
  
  

41


PART I

Item 6 : Directors, Senior Management and Employees

6E6ESHARE OWNERSHIP

 

The relevant interests of each of those Directors in the share capital of the Company as at the date of this Report, as notified to the Australian Stock Exchange Limited pursuant to the Listing Rules and section 205G of the Corporations Act, were:

 

  1*

  2*

  3*

  1

  2

  3

E D Tweddell

  30,872  —    —    34,220  —    —  

P L Barnes

  10,370  —    —    11,685  —    —  

H Boon

  56,701  1,000,000  —  

D D Tough

  —    675,000  —  

L D Crandall

  3,828  —    —    8,108  —    —  

H J Elliott

  7,798  —    —    8,976  —    —  

S P Gold

  9,065  —    24,428,841

M J McConnell (alternate to S P Gold)

  20,000  —    — ��

M J McConnell

  26,406  —    —  

S P Gold (alternate to M J McConnell)

  15,239  —    16,428,840

 

1.Beneficially held in own name, or in the name of a trust, nominee company or private company.

 

2.Beneficial Executive Share Options.Options (525,000) and Performance Share Rights (PSRs) (150,000). These were granted upon Mr Tough’s appointment in 2002 and have an exercise price of $6.32. They were granted in two equal tranches of 500,000 options, with each tranche being independent of the other. The first tranche may only be exercised if a hurdle applicable to the 2003 financial year is achieved. This hurdle has been achieved and the first tranche may be exercised after 30 June 2004 and prior to 30 June 2006. The second tranche may only be exercised if a hurdle applicable to the 2004 financial year is achieved.May 2004.

 

3.Non-beneficial. Mr Gold has an indirect interest in these shares by virtue of a 10% economiclimited partnership interest in the holding of Trefoil International III, SPRL ofLP which he is also a Director. Trefoil International III, SPRL is a related body corporate of Shamrock Holdings of California Inc.

 

The shareholdingsNote: In addition, Mr H Boon who retired on 30 June 2004, held, as at the date of each Director represents lesshis retirement, 56,701 share beneficially in his own name or in the name of a trust, nominee company or private company and 1,000,000 options pursuant to the Ansell Limited Stock Incentive Plan.

No director holds more than 1%one percent of the Company’s ordinary shares on issue, with the exceptionbeneficially or of Mr Gold, who has an indirect interest in 10.18% of the Company’s shares by virtue of his economic interest in Shamrock Holdings of California Inc.record.

 

Non-executive Directors’ Share Plan

 

Shareholders approved the participation by Non-executive Directors in the Plan in October 2000 and April 2002 (on amended terms). Since receiving shareholder approval, shares have been purchased on ASX under the Plan at the prevailing market price on behalf of each of the then current Non-executive Directors.

PART I

Item 6: Directors, Senior Management and Employees


6ESHARE OWNERSHIP(continued)

Non-executive Directors’ Share Plan(continued)

 

Details of securities acquired on ASX on behalf of Non-executive Directors under the Ansell Non-executive Directors Share Plan during the financial year are set out below in accordance with ASX Listing Rule 10.15A.

 

Director


  Number of shares
acquired


  Date of Acquisition

  

Acquisition Price

A$


Dr E D Tweddell

  853
904
842
749
  19/09/2003
16/12/2003
17/03/2004
16/06/2004
  $
$
$
$
6.84
6.46
6.94
7.80
   
  
  

Mr P L Barnes

  337
355
330
293
  19/09/2003
16/12/2003
17/03/2004
16/06/2004
  $
$
$
$
6.84
6.46
6.94
7.80
   
  
  

Mr L D Crandall

  1,943
1,777
296
264
  19/09/2003
16/12/2003
17/03/2004
16/06/2004
  $
$
$
$
6.84
6.46
6.94
7.80
   
  
  

Mr H J Elliott

  300
318
296
264
  19/09/2003
16/12/2003
17/03/2004
16/06/2004
  $
$
$
$
6.84
6.46
6.94
7.80
   
  
  

Mr M J McConnell

  1,406  16/06/2004  $7.80
   
  
  

42


PART I

ITEM 6 : Directors, Senior Management and Employees

Director6E


Number of
shares acquiredSHAREOWNERSHIP
(continued)


Date of
Acquisition


Acquisition Price

A$


Dr E D Tweddell

642

607

888

756

19/9/2002

17/12/2002

17/3/2003

20/6/2003

$

$

$

$

6.98

7.38

5.05

5.93

Mr P L Barnes

240

227

333

283

19/9/2002

17/12/2002

17/3/2003

20/6/2003

$

$

$

$

6.98

7.38

5.05

5.93

Mr L D Crandall

864

1516

1448

17/12/2002

17/3/2003

20/6/2003

$

$

$

7.38

5.05

5.93

Mr H J Elliott

214

202

296

325

19/9/2002

17/12/2002

17/3/2003

20/6/2003

$

$

$

$

6.98

7.38

5.05

5.93

Mr S P Gold

1546

1281

4181

1336

19/9/2002

17/12/2002

17/3/2003

20/6/2003

$

$

$

$

6.98

7.38

5.05

5.93

Non-executive Directors’ Share Plan(continued)

 

In addition, MsMr S C H KayP Gold participated in the Plan prior to herhis retirement as a Director of the Company, acquiring 232acquiring:

1,943 shares on 19 September 200219/09/2003 at $6.98$6.84 per share.share;

1,777 shares on 16/12/2003 at $6.46 per share;

2,176 shares on 17/03/2004 at $6.94 per share; and

278 shares on 16/06/2004 at $7.80 per share (being purchases from fees paid for the period 1-16 April 2004).

 

Executives Share Ownership

 

The relevant interests of senior executives in the share capital of the Company as at the date of this Report, were:

 

  1

  2

  3

  1

  2

  3

Mr P. Corke

  —    —    25,000  2,772  —    31,667

Mr D. Dickson

  —    —    50,000

Mr W. Heintz

  —    —    25,000  8,333  —    46,667

Mr R. Jilla

  6,000  300,000  —    6,000  300,000  50,000

Mr N. O’Donnell

  5,000  —    30,000

Mr W. Reed

  100  —    30,000  3,602  —    45,000

Mr W. Reilly

  —    —    25,000  5,545  —    31,667

Mr P. Soszyn

  1,100  —    25,000

 

1.Beneficially held in own name, or in the name of a trust, nominee company or private company.

 

2.Beneficial Executive Share Options. TheseOptions were granted inon 23 September 2002, and have an exercise price of $6.97. They were granted in three equal tranches$6.97 and an expiry date of 100,000 options, with each tranche being independent of the other. The first tranche could only be exercised if23 September 2012. Tranches 1 & 2 have a hurdle applicable to the 2003 financial year was achieved. This hurdle was achieved and the first tranche may be exercised afterfair value at 30 June 2004. The second2004 of $2.66 and third tranches may only be exercised if hurdles applicable to the 2004 and 2005 financial years are achieved.Tranche 3 has a fair value of $2.70.

 

3.Performance Share Rights (PSR’s). The award of a PSR by the Company entitles the participant to receive one fully paid ordinary share in the Company at the end of a Performance Period. The number of PSR’s that vest will be contingent on the degree to which performance measures and, as appropriate, service conditions established at the time of the grant are met. Grants of PSR’s to each executive comprise three equal tranches, each tranche subject to performance hurdles for vesting to occur. The hurdles applicable to the first tranche have been met and that tranche has vested.

 

The shareholdings of each Executive Officer represents less than 1% of the Company’s shares on issue.

43


PART I

 

Item 7:7 : Major Shareholders and Related Party Transactions


 

7AMAJOR SHAREHOLDERS

 

To the best of its knowledge, Ansell Limited is not directly, or indirectly, controlled by any corporation, orby any foreign government.government or by any other natural or legal person(s) severally or jointly. Ansell Limited does not know of any arrangement, the operation of which may result in a change of control of Ansell Limited.

 

The names of substantial shareholders in the Company and the number of fully paid ordinary shares in which each has an interest as at 1 February 2005 are as follows:

 

   

No. of Fully

Paid Shares


  

% of
Issued

Capital


 

Maple-Brown Abbott Ltd.

  20,954,605  11.24%

Shamrock Holdings of California and its related bodies corporate

  18,928,840  10.18%

Perpetual Trustees Australia Limited

  18,274,579  9.83%

Harris Associates L.P.

  16,840,730  9.06%
   

No. of Fully

Paid Shares


  

% of
Issued

Capital


 

Perpetual Investments

  23,209,414  14.55%

Barclays Global Investors (Group)

  13,183,909  8.27%

Maple-Brown Abbott Ltd.

  12,710,924  7.97%

CDC IXIS Asset Mgt (Group)

  7,672,861  4.81%

 

None of the Company’s substantial shareholders has voting rights that differ from those granted to Ansell Limited’s ordinary shareholders by the Company’s Constitution.

 

Voting rights as governed by the Constitution of the Company provide that each ordinary shareholder present in person or by proxy at a meeting shall have:

 

(a)on a show of hands, one vote only;

 

(b)on a poll, one vote for every fully paid ordinary share held.

 

On 30 June 2003, 333,0462004, 285,234 ADSs (equivalent to 1,332,1841,140,936 Ordinary Shares, which represents approximately 0.7%0.6% of the Ordinary Shares then outstanding) were outstanding and held by 142135 registered holders with addresses in the United States.

 

7BRELATED PARTY TRANSACTIONS

 

During the period from 30 June 2000 to 30 June 2003, the largest aggregate amount of indebtedness owed by Directors or senior management to Ansell Limited was $1,050,000. This indebtedness was outstanding under the Housing Loan Plan, which has allowed certain individuals to borrow money to purchase a residence. The rate of interest paid or charged on such indebtedness was 4.00% for fiscal years 2003, 2002 and 2001. As at the date of this report, all amounts owing under the Plan have been repaid.

Refer to NoteNotes 28 and 34 to the Financial Statements included in Items 17 andItem 18 for additional details of Related Party Transactions.

 

7CINTERESTSOF EXPERTSAND COUNSEL

 

Not Applicable

44


PART I

 

Item 8 : Financial Information


 

8ACONSOLIDATED STATEMENTSANDOTHER FINANCIAL INFORMATION

 

The Consolidated Financial Statements are included herein as Items 17 andItem 18.

 

Refer to Note 26 to the Consolidated Financial Statements for details of legal proceedings.

 

The Company has no fixed policy on dividend distribution. The payment of dividends is at the discretion of the Board.

 

8BSIGNIFICANT CHANGES

 

Refer to Note 39 to the Financial Statements included herein as Items 17 and 18 for details ofThere have been no significant eventevents subsequent to the end of the financial year. However, since the end of the financial year, the detail of the US GAAP differences pertaining to the consolidated financial statements of the South Pacific Tyres partnership, which are filed by Ansell Limited in accordance with Rule 3.09 of Regulation S-X, have been fully reassessed by the partners.

This reassessment resulted in restatements of Ansell’s equity accounted US GAAP results in 2001, 2002 and 2003. The full detail of the restatements is set out in Notes 39 and 40 to the consolidated financial statements. The cumulative effect of the restatements for the three years ended 30 June 2003 is $432,145. The cumulative impact of SPT restatements prior to 2001 of $2.8 million (net of tax) has been adjusted against opening equity under US GAAP.

In addition, further restatement of 2003 results has been made in respect of the cumulative impacts of changes in accounting principles arising on adoption of SFAS 142 and SFAS 143. This resulted in a charge of $5.3 million (net of nil tax).

An additional minimum liability of $7.9 million in respect of the Company’s US pension plans has been recorded in Other Comprehensive Income in 2003.

45


PART I

 

Item 9:9 : The Offer and Listing


 

9AOFFERAND LISTING DETAILS

 

The following table sets out for the periods indicated ($A) the highest and lowest market quotation for the Ordinary Shares reported on the Daily Official List of The Australian Stock Exchange Limited and (US$) the highest and lowest bid prices for ADSs quoted on the NASDAQ National Market System.

 

  

$A

Ordinary Shares


  

US$

Per ADS(1)


  

$A

Ordinary Shares


  

US$

Per ADS(1)


Period


Period


  High

  Low

  High

  Low

  High

  Low

  High

  Low

Last 5 Financial Years

Last 5 Financial Years

                        

Fiscal Year 2004

  7.900  5.840  22.810  15.500

Fiscal Year 2003

Fiscal Year 2003

  7.690  4.960  17.900  12.100  7.690  4.960  17.900  12.100

Fiscal Year 2002

Fiscal Year 2002

  7.010  3.400  15.310  6.550  7.010  3.400  15.310  6.550

Fiscal Year 2001

Fiscal Year 2001

  8.400  4.000  19.375  8.205  8.400  4.000  19.375  8.205

Fiscal Year 2000

Fiscal Year 2000

  12.400  6.850  31.875  14.220  12.400  6.850  31.875  14.220

Fiscal Year 1999

  16.250  10.800  38.750  28.125

By Quarter 2004-2005

            

First Quarter

  8.840  7.580  25.700  21.711

Second Quarter

  9.300  8.740  28.880  25.510

By Quarter 2003-2004

By Quarter 2003-2004

                        

First Quarter

First Quarter

  6.950  5.840  18.310  15.500  6.950  5.840  18.310  15.500

Second Quarter

  7.220  6.190  20.020  18.090

Third Quarter

  7.170  6.320  22.220  19.260

Fourth Quarter

  7.900  7.310  22.810  20.200

By Quarter 2002-2003

By Quarter 2002-2003

                        

First Quarter

First Quarter

  7.150  6.450  15.480  13.800  7.150  6.450  15.480  13.800

Second Quarter

Second Quarter

  7.690  6.670  17.200  14.500  7.690  6.670  17.200  14.500

Third Quarter

Third Quarter

  7.650  4.960  17.900  12.100  7.650  4.960  17.900  12.100

Fourth Quarter

Fourth Quarter

  6.370  5.250  16.220  12.200  6.370  5.250  16.220  12.200

By Quarter 2001-2002

            

First Quarter

  4.300  3.400  9.145  6.550

Second Quarter

  5.200  3.550  10.750  7.402

Third Quarter

  6.200  5.150  13.000  10.005

Fourth Quarter

  7.010  6.000  15.310  12.650

Last 6 Months

Last 6 Months

                        

November 2003

  6.960  6.510  20.020  18.650

October 2003

  7.220  6.700  19.990  18.190

September 2003

  6.950  6.550  18.310  17.420

August 2003

  6.920  6.020  17.770  15.760

July 2003

  6.150  5.840  16.000  15.600

June 2003

  6.040  5.650  15.750  14.990

February 2005

  10.130  9.190  31.920  29.000

January 2005

  9.450  8.860  28.500  26.810

December 2004

  9.300  8.930  28.880  27.360

November 2004

  9.190  9.040  28.750  27.200

October 2004

  9.050  8.740  26.650  25.510

September 2004

  8.840  8.500  25.700  23.750

 

(1)Each ADS represents four Ordinary Shares.

 

The total market capitalisation of Ansell Limited at 30 June 20032004 was $1,086$1,362 million. The total market capitalisation of Ansell Limited at 28 November 2003,February 2005, was $1,195$1,617 million and the closing price for Ansell Limited ordinary shares on the ASX on that date was $6.53.$10.11.

 

9BPLANOF DISTRIBUTION

 

Not Applicable

46


PART I

 

Item 9:9 : The Offer and Listing


 

9CMARKETS

 

The principal trading market for Ansell Limited’s Ordinary Shares (“Ordinary Shares”), is the Australian Stock Exchange Limited (ASX). The Ordinary Shares are also listed on the London Stock Exchange and the Stock Exchange of New Zealand. The Company’s American Depositary Shares (“ADSs”), represented by American Depositary Receipts (“ADR’s”) issued by Morgan Guaranty Trust Company of New York, as Depositary (the “Depositary”), are traded in the United States in the over-the-counter market and are quoted on the NASDAQ National Market System.

 

The stock market operated by the ASX is the principal stock exchange in Australia. The exchange operates by way of the Stock Exchange Automated Trading System (SEATS) which is a fully computerised system.

 

Trading on SEATS takes place each business day between the hours of 10:00am and 4:00pm, Australian Eastern Standard Time or Australian Eastern Summer Time. At 4:05pm each day, the ASX subsequently matches any buy and sell orders in the system, which are at the same price. The prices of all listed Shares are continuously quoted while the market is open and the system prioritises the orders first by price and second by placement in the system.

 

Exchange participants can cross stock between buying and selling orders, at the buy or sell quote provided those quotes are no more than one marketable bid apart and can cross outside this range in amounts of A$1 million or more. Transactions on the ASX are settled on the third business day following the trade date.

 

9DSELLING SHAREHOLDERS

 

Not Applicable

 

9EDILUTION

 

Not Applicable

 

9FEXPENSESOFTHE ISSUE

 

Not Applicable

47


PART I

 

Item 10:10 : Additional Information


 

10ASHARE CAPITAL

 

Not Applicable

 

10BCONSTITUTION

 

The Company adopted its current Constitution on 12 April 2002. Set out below is a summary of the Constitution’s key provisions.

 

Under Australian company law, a company is permitted, but not required, to have an objects clause or statement of purposes in its Constitution. The Company deleted its previousCompany’s constitution does not contain an objects clause from its Constitution on 16 November 1992.clause. Pursuant to the provisions of the Corporations Act 2001, (Cth), (the “Corporations Act”) the Company has the legal capacity of an individual and all of the powers of a body corporate.

 

Rule 38(b) of the Company’s Constitution permits the Directors to exercise all the powers of the Company, at their discretion, including:

 

(a)to raise or borrow money;

 

(b)to charge any of the Company’s property or business or any amount unpaid on its shares; and

 

(c)to issue debentures or give any other security for a debt, liability or obligation of the Company or of any other person.

 

These borrowing powers, as with any provision of the Constitution, can be amended by the shareholders of the Company passing a special resolution at a general meeting.

 

Rule 5 permits the Company to issue shares and grant options for shares on such terms and with such rights and restrictions as decided by the Directors. The issue and terms of issue of preference shares must be approved by the Company’s shareholders in general meeting as required by the Corporations Act.

 

The Constitution contains provisions consistent with ASX Listing Rules, which permit the Company to divest holdings of less than a marketable parcel (i.e. holdings which are worth less than $A500).

 

Rule 53 provides that, subject to any rights or restrictions attached to any shares or class of shares, the profits of the Company are divisible amongst the holders of ordinary shares (being the only class of shares currently on issue) in proportion to the capital paid up, or credited as paid, upon the shares held by them respectively.

 

Rule 32 provides that the maximum number of Directors is 8 and the minimum number is 4. There is no age limit prescribed in the Company’s Constitution for Directors. All Directors of the Company, other than the Managing Director, are required to seek re-election at least once in every three years on a rotating basis.

 

Rule 37(f) of the Company’s Constitution permits a Director who has an interest in a matter that is being considered at a meeting of Directors to, despite that interest, vote, be present and be counted in a quorum at the meeting, unless prohibited by the Corporations Act. The Corporations Act prohibits a Director of the Company from being present at a meeting of Directors during consideration of, or voting upon, a matter in which that Director has a material personal interest. This does not apply to voting on Directors’ compensation. However, the total aggregate remuneration payable to the Non-executive Directors may not exceed the maximum amount approved by shareholders at a general meeting from time to time pursuant to rule 35(a) of the Company’s Constitution.

 

Rule 60 of the Constitution provides Directors with a right to access Company documents consistent with existing rights under the Corporations Act. Rule 61 of the Constitution provides for the provision of an indemnity and the maintenance of insurance in favour of certain Directors and officers of the Company and its related bodies corporate to the levels required by the Corporations Act.

 

As previously indicated, rule 53 provides for each share to participate in those of the Company’s profits the Board determines to distribute in proportion to the amount paid up on those shares, subject to any right or restriction attaching to a share or class of shares. In the event of liquidation, rule 59 permits the liquidator, with the sanction of a special resolution to divide among shareholders the whole or any part of the Company’s property and decide how the division is to be carried out as between the members or different classes of members.

48


PART I

 

Item 10:10 : Additional Information


 

10BCONSTITUTIONCONSTITUTION(continued)

 

Rule 58 provides that where the assets available upon a winding up are insufficient to repay all of the capital paid on shares, the losses will be borne by shareholders in proportion to the capital paid or that ought to have been paid on the shares at the commencement of the winding up. If surplus assets remain upon a winding up after having repaid the whole of the capital paid up, the excess is to be distributed amongst shareholders in proportion to the capital paid or that ought to have been paid on the shares at the commencement of the winding up.

 

There are no redemption or sinking fund provisions in the Constitution. However, the Corporations Act requires the approval of shareholders to the issue of preference shares with a right of redemption (or authorisation of the Board to issue such shares). Any amount of the issue price of a share that remains unpaid may, subject to any rights or restrictions attaching to a share, be called for payment by the Board pursuant to rule 10. However, once the full amount of the issue price of a share has been paid, a shareholder is not liable to contribute any further capital to the Company in respect of that share. The Company’s Constitution does not contain any provision discriminating against any existing or prospective shareholder as a result of such shareholder owning a substantial number of shares, nor does it contain any provisions pertaining to the changing of the rights of shareholders.

 

The provisions of the Constitution dealing with general meetings and proxies reflect the requirements in relation to the matters imposed by the Corporations Act. The Company is required by the Corporations Act to hold an annual general meeting at least once in each calendar year. In addition, the Corporations Act and rule 23 provide that the Directors (including any single Director) may at any time convene a general meeting of shareholders and the Directors must convene a general meeting upon the requisition of at least 100 shareholders or the holders of 5% of the votes that may be cast at the meeting. The Constitution does not impose any conditions upon the admission of shareholders to a general meeting, however, rule 25(a) permits the chair of a general meeting to take any action he or she considers appropriate for the safety of persons attending the meeting and the orderly conduct of the meeting and may refuse a person admission to, or require a person to leave and remain out of, the meeting if the person is disruptive.

 

The Company continues to rely on an exemption from the quorum requirement set forth in Nasdaq Marketplace Rule 4350(f). In accordance with Australian law, the Company’s Constitution provides that the quorum requirement is met at a general shareholder meeting if five or more shareholders entitled to vote on a resolution at the meeting are present.

Rule 30(a) provides, subject to any rights or restrictions attached to any shares or class of shares, that every shareholder present at a meeting has one vote on a show of hands and each share, on a poll is:

 

(a)if fully paid – entitled to one vote;

 

(b)if partly paid – entitled to a fraction of one vote which the amount paid (not credited) on the share bears to the total amounts paid and payable (excluding amounts credited).

 

The Constitution contains no limitations on the rights to own securities. In the event of a partial or proportional takeover bid being made for shares in the Company, rule 69 requires that a resolution to approve the takeover scheme be passed at a general meeting of shareholders before any registration of a transfer giving effect to the proportional takeover can be made. The Constitution contains no governing by-law provisions governing the ownership threshold above which shareholder ownership must be disclosed.

 

In addition to the information contained above, the Corporations Act:

 

(a)provides a code that regulates “takeovers” (changes in control) of Australian companies that applies, in general, where a shareholder becomes entitled to 20% or more of the issued shares of a company; and

 

(b)provides for disclosure of share ownership once a person and his or her associates become entitled to 5% or more of the issued shares in a company.

 

The Foreign Acquisition and Takeovers Act 1975 (Cth) regulates the acquisition of interests in Australian companies by foreign nationals in excess of 15% of the issued shares of a company. There are no conditions imposed under the Constitution governing changes in capital that are more stringent than required by Australian company law.

49


PART I

 

Item 10:10 : Additional Information


 

10CMATERIAL CONTRACTS

 

The following is a summary of theThere have been no material contracts entered into by the Company over the last two years:years.

 

Sale of Business Agreement dated 30 November 2001 made between the following Ansell Limited Group companies: Textile Industrial Design and Engineering Pty Ltd, Union Knitting Mills Pty Ltd, Boydex International Pty Ltd, Foamlite (Australia) Pty Ltd, Ativ Pac Pty Ltd, Pacific Dunlop Holdings (NZ) Limited, Pacific Dunlop Holdings (Europe) Ltd, Pacific Dunlop Holdings (USA) Inc, PD International Pty Limited, Pacific Dunlop Holdings (Singapore) Pte Ltd, PD Holdings (Malaysia) Sdn Bhd, PD Licensing Pty Ltd, Niblick Pty Ltd, Cliburn Investments Pty Ltd, PD Shared Services Holdings Pty Ltd and Ansell Limited (as sellers) and PB Holdings NV, Pacific Brands Holdings Pty Ltd, Pacific Brands Household Products Pty Ltd, Pacific Brands Footwear Pty Ltd, Pacific Brands Sports & Leisure Pty Ltd, Pacific Brands Clothing Pty Ltd and Pacific Brands Holdings (NZ) Ltd (as buyers) in relation to the sale of the business of manufacturing, marketing, selling and distribution of clothing and related apparel, foam, bedding accessories and products, footwear and sporting and leisure equipment carried on by the sellers and known as “Pacific Brands.”

50


PART I

 

The total consideration payable under the sale of business agreement and under related documents for the sale of equivalent businesses in New Zealand, Fiji, Indonesia, Hong Kong, Malaysia, USA, and the United Kingdom was approximately A$730 million.

Item 10 : Additional Information

 

10DEXCHANGE CONTROLS

 

Except for restrictions on foreign exchange transactions with ministers and senior officials of the Government of Zimbabwe and the supporters of the former Milosevic regime, the Reserve Bank of Australia (“RBA”) does not inhibit the import and export of funds, and no permission is required by Ansell Limited for the movement of funds in and out of Australia. Under Part 4 of theCharter of the United Nations Act 1945 and theCharter of the United Nations (Terrorism and Dealing with Assets) Regulations 2002(Cth) (“Regulations”), anybody holding financial or other assets of persons or entities listed as terrorists by either the Minister of Foreign Affairs in the Commonwealth Gazette or on the website of the Committee established by Resolution 1267 (1999) of the Security Council of the United Nations, is prohibited from dealing with those assets. It is also a criminal offence to make assets available to such persons or entities. TheIraq (Reconstruction and Repeal of Sanctions) Regulations 2003(Cth) imposes a freeze on the financial resources of the previous government of Iraq, Saddam Hussein, other senior officials of his regime, and their immediate families. Accordingly, at the present time, remittance of any dividends, interest or other payment by Ansell Limited to non-resident holders of Ansell Limited’s securities in the United States is not restricted by exchange controls or other limitations, unless the non-resident holder is a person or entity listed by the Minister or on the Committee website under the Regulations.

 

Ansell Limited has 185,706,901175,962,865 Ordinary Shares (excluding Employee Plan Shares, as defined in “Compensation of Directors and Executive Officers”) and shares bought back by the Company prior to 30 June 2004 but not cancelled at that date) on issue as at 30 June 2003.2004. Non-residents of Australia may freely hold and vote Ordinary Shares, subject to compliance with the Foreign Acquisitions and Takeovers Act 1975 of Australia (the “Foreign Takeovers Act”). Takeovers of Australian companies by foreign interests are subject to review and approval by the Treasurer of the Commonwealth of Australia under the Foreign Takeovers Act. Technically, the statute applies to any acquisition of 15% or more of the outstanding shares of an Australian company that has total assets valued $5 million or more ($3 million or more if greater than 50% of the assets of the company are in the form of rural land) or any acquisition which results in one foreign person or group of associated foreign persons controlling 15% or more of total voting power. In addition, the statute applies to any acquisition by non-associated foreign persons resulting in foreign persons controlling, in the aggregate, 40% or more of total voting power or ownership.

 

Since the Australian government’s Economic Statement of February 1992, the policy of the body which reviews foreign investment (the Foreign Investment Review Board) is that only acquisitions of shares in companies which have assets in excess of $50 million will require approval. The Corporations Act also regulates acquisitions giving rise to ownership of substantial amounts of a company’s shares.

PART I

Item 10: Additional Information


10DEXCHANGE CONTROLS(continued)

 

The Corporations Act prohibits any person (including a corporation), whether foreign or not, from acquiring a relevant interest in voting shares in a company if, after the acquisition, that person’s or any other person’s voting power in the company increases from 20% or below to more than 20%, or increases from a starting point that is above 20% and below 90%.

 

A person is considered to have voting power in respect of a share under the Corporations Act if the person or an associate (as defined in the Corporations Act) is the holder of the share, or has, or is deemed under the Corporations Act to have, power (whether direct or indirect and whether legally enforceable or not and irrespective of certain restrictions and restraints on such powers and other matters and things as specified in the Corporations Act):

 

(1)to exercise, or to control the exercise of, the right to vote attached to that share; or

 

(2)to dispose of, or to control the exercise of a power to dispose of, that share.

 

This prohibition is subject to certain exceptions which must be strictly complied with to be applicable. Some of the more significant exceptions are as follows:

 

Section 611(1)611, item 1 of the Corporations Act permits a person to acquire more than 20% of the voting shares of a company under a formal takeover bid, being an offer to the shareholders of the target company to acquire their shares. The takeover bid may be an off-market bid or a market bid; and

 

under Section 611(9)611, item 9 of the Corporations Act, a person who is already entitled to at least 19% of the voting shares is permitted to increase their voting power by not more than 3% in any period of six months.

51


PART I

Item 10 : Additional Information

10DEXCHANGECONTROLS (CONTINUED)

 

Dividends paid to holders of Ordinary Shares who are non-residents of Australia are subject to certain Australian withholding tax requirements. See “Taxation-Australian Taxation.”

 

Dividends paid to United States Holders (as defined below) are also subject to United States federal income tax requirements, although those paid to non-United States Holders generally are not.

 

AMERICAN DEPOSITARY RECEIPTS

 

The following is a summary of all material provisions of the Second Amended and Restated Deposit Agreement (including any exhibits thereto, the “Deposit Agreement”) dated as of 26 March 1999 among the Company, Morgan Guaranty Trust Company of New York, as depositary (the “Depositary”), and the registered Holders from time to time of the ADR’s issued thereunder (“ADR’s”). This summary does not purport to be complete and is qualified in its entirety by reference to the Deposit Agreement. Copies of the Deposit Agreement are available for inspection at the principal office of the Depositary in New York, New York (the “Principal New York Office”), which is presently located at 60 Wall Street, New York, New York 10260. Terms used herein and not otherwise defined shall have the respective meanings set forth in the Deposit Agreement.

 

ADR’s evidencing American Depository Shares (“ADSs”) are issuable by the Depositary pursuant to the terms of the Deposit Agreement. Each ADS represents, as of the date hereof, the right to receive four Shares deposited under the Deposit Agreement (together with any additional Shares deposited thereunder and all other securities, property and cash received and held thereunder at any time in respect of or in lieu of such deposited Shares, the “Deposited Securities”) with the Custodian under the Deposit Agreement (together with any successor or successors thereto, the Custodian).

 

An ADR may evidence any number of ADSs. Only persons in whose name ADR’s are registered on the books of the Depositary will be treated by the Depositary and the Company as Holders. As the context requires, the term ADR refers to certificated receipts as well as to ADSs reflected on the direct registration system maintained by the Depositary.

PART I

Item 10: Additional Information


10DEXCHANGE CONTROLS(continued)

 

DEPOSIT, TRANSFERAND WITHDRAWAL

 

In connection with the deposit of Shares under the Deposit Agreement, the Depositary or the Custodian may require the following in a form satisfactory to it:

 

(a)a written order directing the Depositary to issue to, or upon the written order of, the person or persons designated in such order an ADR or ADR’s evidencing the number of ADSs representing such deposited Shares (a “Delivery Order”);

 

(b)proper endorsements or duly executed instruments of transfer in respect of such deposited Shares;

 

(c)instruments assigning to the Custodian or its nominee any distribution on or in respect of such deposited Shares or indemnity therefor;therefore; and,

 

(d)proxies entitling the Custodian to vote such deposited Shares until such Shares are transferred and recorded on the register of shareholders of the Company in the name of the Depositary or its nominee.

 

As soon as practicable after the Custodian receives Deposited Securities pursuant to any such deposit or pursuant to the form of ADR, the Custodian shall present such Deposited Securities for registration of transfer into the name of the Depositary or its nominee, to the extent such registration is practicable, at the cost and expense of the person making such deposit (or for whose benefit such deposit is made) and shall obtain evidence satisfactory to it of such registration. Deposited Securities shall be held by the Custodian for the account and to the order of the Depositary at such place or places and in such manner as the Depositary shall determine. Deposited Securities may be delivered by the Custodian to any person only under the circumstances expressly contemplated in the Deposit Agreement.

52


PART I

Item 10 : Additional Information

10DEXCHANGECONTROLS (CONTINUED)

 

After any such deposit of Shares, the Custodian shall notify the Depositary of such deposit and of the information contained in any related Delivery Order by letter, first class airmail postage prepaid, or, at the request, risk and expense of the person making the deposit, by cable, telex or facsimile transmission. After receiving such notice from the Custodian, the Depositary, subject to the terms and conditions of the Deposit Agreement, shall properly issue at the Transfer Office, which is presently located at the Principal New York Office, to or upon the order of any person named in such notice, an ADR or ADR’s registered as requested and evidencing the aggregate ADSs to which such person is entitled.

 

Subject to the terms and conditions of the Deposit Agreement, the Depositary may so issue ADR’s for delivery at the Transfer Office only against deposit with the Custodian of:

 

(a)Shares in form satisfactory to the Custodian;

 

(b)rights to receive Shares from the Company or any registrar, transfer agent, clearing agent or other entity recording Share ownership or transactions; or,

 

(c)other rights to receive Shares (until such Shares are actually deposited pursuant to (a) or (b) above, “Pre-released ADR’s”) only if:

 

 (i)Pre-released ADR’s are fully collateralised (marked to market daily) with cash or U.S. government securities held by the Depositary for the benefit of Holders (but such collateral shall not constitute “Deposited Securities”);

 

 (ii)each recipient of Pre-released ADR’s agrees in writing with the Depositary that such recipient (a) owns such Shares, (b) assigns all beneficial right, title and interest therein to the Depositary, (c) holds such Shares for the account of the Depositary and (d) will deliver such Shares to the Custodian as soon as practicable and promptly upon demand therefore; and

 

 (iii)all Pre-released ADR’s evidence not more than 30% of all ADSs (excluding those evidenced by Pre-released ADR’s), provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate. The Depositary may retain for its own account any earnings on collateral for Pre-released ADR’s and its charges for issuance thereof.

PART I

Item 10: Additional Information


10DEXCHANGE CONTROLS(continued)

DEPOSIT, TRANSFERAND WITHDRAWAL(continued)

 

At the request, risk and expense of the person depositing Shares, the Depositary may accept deposits for forwarding to the Custodian and may deliver ADR’s at a place other than its office. Every person depositing Shares under the Deposit Agreement is deemed to represent and warrant that such Shares are validly issued and outstanding, fully paid, non-assessable and free of pre-emptive rights, that the person making such deposit is duly authorised to do so and that such Shares (A) are not “restricted securities” as such term is defined in rule 144 under the Securities Act of 1933, as amended (the “Securities Act of 1933”) unless at the time of deposit they may be freely transferred in accordance with rule 144(k) and may otherwise be offered and sold freely in the United States or (B) have been registered under the Securities Act of 1933. Such representations and warranties shall survive the deposit of Shares and issuance of ADR’s.

��

Subject to the terms and conditions of the Deposit Agreement, upon surrender of an ADR in form satisfactory to the Depositary at the Transfer Office, the Holder thereof is entitled to delivery at the Custodian’s office of the Deposited Securities at the time represented by the ADSs evidenced by such ADR. At the request, risk and expense of the Holder thereof, the Depositary may deliver such Deposited Securities at such other place as may have been requested by the Holder. Notwithstanding any other provision of the Deposit Agreement or the ADR’s, the withdrawal of Deposited Securities may be restricted only for the reasons set forth in General Instruction I.A. (1) of Form F-6 (as such instructions may be amended from time to time) under the Securities Act of 1933.

 

DISTRIBUTIONSON DEPOSITED SECURITIES

 

Subject to the terms and conditions of the Deposit Agreement, to the extent practicable, the Depositary will distribute by mail to each Holder entitled thereto on the record date set by the Depositary therefor at such Holder’s address shown on the ADR Register, in proportion to the number of Deposited Securities (on which the following distributions on Deposited Securities are received by the Custodian) represented by ADSs evidenced by such Holder’s ADR’s:

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PART I

Item 10 : Additional Information

10DEXCHANGECONTROLS (CONTINUED)

DISTRIBUTIONSON DEPOSITED SECURITIES(continued)

 

(a)Cash :

 

Any U.S. dollars available to the Depositary resulting from a cash dividend or other cash distribution or the net proceeds of sales of any other distribution or portion thereof authorised in the Deposit Agreement (“Cash”), on an averaged or other practicable basis, subject to:

 

 (i)appropriate adjustments for taxes withheld,

 

 (ii)such distribution being impermissible or impracticable with respect to certain Holders, and

 

 (iii)deduction of the Depositary’s expenses in (1) converting any foreign currency to U.S. dollars by sale or in such other manner as the Depositary may determine to the extent that it determines that such conversion may be made on a reasonable basis, (2) transferring foreign currency or U.S. dollars to the United States by such means as the Depositary may determine to the extent that it determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by public or private means in any commercially reasonable manner.

 

(b)Shares:

 

 (i)Additional ADR’s evidencing whole ADSs representing any Shares available to the Depositary resulting from a dividend or free distribution on Deposited Securities consisting of Shares (a “Share Distribution”), and

 

 (ii)U.S. dollars available to it resulting from the net proceeds of sales of Shares received in a Share Distribution, which Shares would give rise to fractional ADSs if additional ADR’s were issued therefore, as in the case of Cash.

PART I

Item 10: Additional Information


10DEXCHANGE CONTROLS(continued)

DISTRIBUTIONSON DEPOSITED SECURITIES(continued)

 

(c)Rights:

 

 (i)Warrants or other instruments in the discretion of the Depositary representing rights to acquire additional ADR’s in respect of any rights to subscribe for additional Shares or rights of any nature available to the Depositary as a result of a distribution on Deposited Securities (“Rights”), to the extent that the Company timely furnishes to the Depositary evidence satisfactory to the Depositary that the Depositary may lawfully distribute the same (the Company has no obligation to so furnish such evidence), or

 

 (ii)to the extent the Company does not so furnish such evidence and sales of Rights are practicable, any U.S. dollars available to the Depositary from the net proceeds of sales of Rights as in the case of Cash, or

 

 (iii)to the extent the Company does not so furnish such evidence and such sales cannot practicably be accomplished by reason of the non-transferability of the Rights, limited markets therefore, their short duration or otherwise, nothing (and any Rights may lapse). Subject to Australian law, the Company will, in connection with any offer of such Rights, make such Rights generally transferable or consent to the transfer thereof by foreign investors not resident in Australia; and

 

(d)Other Distributions:

 

 (i)Securities or property available to the Depositary resulting from any distribution on Deposited Securities other than Cash, Share Distributions and Rights (“Other Distributions”), by any means that the Depositary may deem equitable and practicable, or

 

 (ii)to the extent the Depositary deems distribution of such securities or property not to be equitable and practicable, any U.S. dollars available to the Depositary from the net proceeds of sales of Other Distributions as in the case of Cash.

 

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PART I

Item 10 : Additional Information

10DEXCHANGECONTROLS (CONTINUED)

DISTRIBUTIONSON DEPOSITED SECURITIES(continued)

Such U.S. dollars available will be distributed by checks drawn on a bank in the United States for whole dollars and cents (any fractional cents being withheld without liability for interest and added to future Cash distributions). To the extent that the Depositary determines in its discretion that any distribution is not practicable with respect to any Holder, the Depositary may make such distribution as it so determines is practicable, including the distribution of foreign currency, securities or property (or appropriate documents evidencing the right to receive foreign currency, securities or property) or the retention thereof as Deposited Securities with respect to such Holder’s ADR’s (without liability for interest thereon or the investment thereof). There can be no assurance that the Depositary will be able to effect any currency conversion or to sell or otherwise dispose of any distributed or offered property, subscription or other rights, Shares or other securities in a timely manner or at a specified rate or price, as the case may be.

 

DISCLOSUREOF INTERESTS

 

To the extent that the provisions of or governing any Deposited Securities may require disclosure of or impose limits on beneficial or other ownership of Deposited Securities, other Shares and other securities and may provide for blocking transfer, voting or other rights to enforce such disclosure or limits, Holders and all persons holding ADR’s agree to comply with all such disclosure requirements and ownership limitations and to cooperate with the Depositary in the Depositary’s compliance with any Company instructions in respect thereof, and, in the Deposit Agreement, the Depositary has agreed to use reasonable efforts to comply with such Company instructions.

PART I

Item 10: Additional Information


10DEXCHANGE CONTROLS(continued)

 

RECORD DATES

 

The Depositary may, after consultation with the Company if practicable, fix a record date (which shall be as near as practicable to any corresponding record date set by the Company) for the determination of the Holders who shall be entitled to receive any distribution on or in respect of Deposited Securities, to give instructions for the exercise of any voting rights, to receive any notice or to act in respect of other matters and only such Holders shall be so entitled.

 

VOTINGOF DEPOSITED SECURITIES

 

As soon as practicable after receipt from the Company of notice of any meeting or solicitation of consents or proxies of holders of Shares or other Deposited Securities, the Depositary shall mail to Holders a notice stating:

 

(a)such information as is contained in such notice and any solicitation materials;

 

(b)that each Holder on the record date set by the Depositary therefore will be entitled to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the Deposited Securities represented by the ADSs evidenced by such Holder’s ADR’s; and

 

(c)the manner in which such instructions may be given, including instructions to give a discretionary proxy to a person designated by the Company. Upon receipt of instructions of a Holder on such record date in the manner and on or before the date established by the Depositary for such purpose, the Depositary shall endeavour in so far as practicable and permitted under the provisions of or governing Deposited Securities to vote or cause to be voted the Deposited Securities represented by the ADSs evidenced by such Holder’s ADR’s in accordance with such instructions. The Depositary will not itself exercise any voting discretion in respect of any Deposited Securities.

 

INSPECTIONOF TRANSFER BOOKS

 

The Deposit Agreement provides that the Depositary will keep books at its Transfer Office for the registration, registration of transfer, combination and split-up of ADR’s, which at all reasonable times will be open for inspection by the Holders and the Company for the purpose of communicating with Holders in the interest of the business of the Company or a matter related to the Deposit Agreement.

 

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PART I

Item 10 : Additional Information

10DEXCHANGECONTROLS (CONTINUED)

REPORTSAND OTHER COMMUNICATIONS

 

The Depositary shall make available for inspection by Holders at the Transfer Office any reports and communications received from the Company which are both:

 

(a)received by the Depositary as the holder of the Deposited Securities; and

 

(b)made generally available to the holders of such Deposited Securities by the Company. The Depositary shall also send to the Holders copies of such reports when furnished by the Company. Any such reports and communications furnished to the Depositary by the Company shall be furnished in English.

 

On or before the first date on which the Company makes any communication available to holders of Deposited Securities or any securities regulatory authority or stock exchange, by publication or otherwise, the Company shall transmit to the Depositary a copy thereof in English or with an English translation or summary. The Company has delivered to the Depositary, the Custodian and any Transfer Office, a copy of all provisions of or governing the Shares and any other Deposited Securities issued by the Company or any affiliate of the Company and, promptly upon any change thereto, the Company shall deliver to the Depositary, the Custodian and any Transfer Office, a copy (in English or with an English translation) of such provisions as so changed. The Depositary and its agents may rely upon the Company’s delivery thereof for all purposes of the Deposit Agreement.

PART I

Item 10: Additional Information


10DEXCHANGE CONTROLS(continued)

 

CHANGES AFFECTING DEPOSITED SECURITIES

 

Subject to the terms and conditions of the Deposit Agreement, the Depositary may, in its discretion, amend the form of ADR or distribute additional or amended ADR’s (with or without calling the ADR’s for exchange) or cash, securities or property on the record date set by the Depositary therefor to reflect any change in par value, split-up, consolidation, cancellation or other reclassification of Deposited Securities, any Share Distribution or Other Distribution not distributed to Holders or any cash, securities or property available to the Depositary in respect of Deposited Securities from (and, in the Deposit Agreement, the Depositary is authorised to surrender any Deposited Securities to any person and to sell by public or private sale any property received in connection with) any recapitalisation, reorganisation, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all the assets of the Company, and to the extent the Depositary does not so amend the ADR or make a distribution to Holders to reflect any of the foregoing, or the net proceeds thereof, whatever cash, securities or property results from any of the foregoing shall constitute Deposited Securities and each ADS shall automatically represent its pro rata interest in the Deposited Securities as then constituted.

 

AMENDMENTAND TERMINATIONOF DEPOSIT AGREEMENT

 

The ADR’s and the Deposit Agreement may be amended by the Company and the Depositary, provided that any amendment that imposes or increases any fees or charges (other than stock transfer or other taxes and other governmental charges, transfer or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or that shall otherwise prejudice any substantial existing right of Holders, shall become effective 30 days after notice of such amendment shall have been given to the Holders.

 

Every Holder of an ADR at the time any amendment to the Deposit Agreement so becomes effective shall be deemed, by continuing to hold such ADR, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Holder of any ADR to surrender such ADR and receive the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.

 

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PART I

Item 10 : Additional Information

10DEXCHANGECONTROLS (CONTINUED)

AMENDMENTAND TERMINATIONOF DEPOSIT AGREEMENT (continued)

Any amendments or supplements which:

 

(i)are reasonably necessary (as agreed by the Company and the Depositary) in order for (a) the ADSs to be registered on Form F-6 under the Securities Act of 1933 or (b) the ADSs or Shares to be traded solely in electronic book-entry form; and

 

(ii)do not in either such case impose or increase any fees or charges to be borne by Holders, shall be deemed not to prejudice any substantial rights of Holders. Notwithstanding the foregoing, if any governmental body should adopt new laws, rules or regulations which would require amendment or supplement of the Deposit Agreement or the form of ADR to ensure compliance therewith, the Company and the Depositary may amend or supplement the Deposit Agreement and the ADR at any time in accordance with such changed rules. Such amendment or supplement to the Deposit Agreement in such circumstances may become effective before a notice of such amendment or supplement is given to Holders or within any other period of time as required for compliance.

 

The Depositary may, and shall at the written direction of the Company, terminate the Deposit Agreement and the ADR’s by mailing notice of such termination to the Holders at least 30 days prior to the date fixed in such notice for such termination. After the date so fixed for termination, the Depositary and its agents will perform no further acts under the Deposit Agreement and the ADR’s, except to receive and hold (or sell) distributions on Deposited Securities and deliver Deposited Securities being withdrawn.

PART I

Item 10: Additional Information


10DEXCHANGE CONTROLS(continued)

AMENDMENTAND TERMINATIONOF DEPOSIT AGREEMENT(continued)

 

As soon as practicable after the expiration of six months from the date so fixed for termination, the Depositary shall sell the Deposited Securities and shall thereafter (as long as it may lawfully do so) hold in a segregated account the net proceeds of such sales, together with any other cash then held by it under the Deposit Agreement, without liability for interest, in trust for the pro rata benefit of the Holders not theretofore surrendered. After making such sale, the Depositary shall be discharged from all obligations in respect of the Deposit Agreement and the ADR’s, except to advise Holders of such termination, account for such net proceeds and other cash. After the date so fixed for termination, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary and its agents.

 

CHARGESOF DEPOSITARY

 

The Depositary may charge each person to whom ADR’s are issued against deposits of Shares including deposits in respect of Share Distributions, Rights and Other Distributions and each person surrendering ADR’s for withdrawal of Deposited Securities, U.S. $5.00 for each 100 ADSs (or portion thereof) evidenced by the ADR’s delivered or surrendered. The Company will pay all other charges and expenses of the Depositary and any agent of the Depositary (except the Custodian) pursuant to agreements from time to time between the Company and the Depositary, except:

 

(i)stock transfer or other taxes and other governmental charges (which are payable by Holders or persons depositing Shares),

 

(ii)cable, telex and facsimile transmission and delivery charges incurred at the request of persons depositing, or Holders delivering Shares, ADR’s or Deposited Securities (which are payable by such persons or Holders),

 

(iii)transfer or registration fees for the registration of transfer of Deposited Securities on any applicable register in connection with the deposit or withdrawal of Deposited Securities (which are payable by persons depositing Shares or Holders withdrawing Deposited Securities; there are no such fees in respect of the Shares as of the date of the Deposit Agreement), and

 

(iv)expenses of the Depositary in connection with the conversion of foreign currency into U.S. dollars (which are paid out of such foreign currency).

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PART I

Item 10 : Additional Information

10DEXCHANGECONTROLS (CONTINUED)

 

LIABILITYOF HOLDERSFOR TAXES

 

If any tax or other governmental charge shall become payable by or on behalf of the Custodian or the Depositary with respect to the ADR’s, any Deposited Securities represented by the ADSs evidenced thereby or any distribution thereon, such tax or other governmental charge shall be paid by the Holder thereof to the Depositary. The Depositary may refuse to effect any registration, registration of transfer, split-up or combination thereof or, subject to the terms and conditions of the Deposit Agreement, any withdrawal of such Deposited Securities until such payment is made.

 

The Depositary may also deduct from any distributions on or in respect of Deposited Securities, or may sell by public or private sale for the account of the Holder thereof any part or all of such Deposited Securities (after attempting by reasonable means to notify the Holder thereof prior to such sale), and may apply such deduction or the proceeds of any such sale in payment of such tax or other governmental charge, the Holder thereof remaining liable for any deficiency, and shall reduce the number of ADSs evidenced thereby to reflect any such sales of Deposited Securities.

 

In connection with any distribution to Holders, the Company will remit to the appropriate governmental authority or agency all amounts (if any) required to be withheld and owing to such authority or agency by the Company; and the Depositary and the Custodian will remit to the appropriate governmental authority or agency all amounts (if any) required to be withheld and owing to such authority or agency by the Depositary or the Custodian.

PART I

Item 10: Additional Information


10DEXCHANGE CONTROLS(continued)

LIABILITYOF HOLDERSFOR TAXES(continued)

 

If the Depositary determines that any distribution in property other than cash (including Shares or rights) on Deposited Securities is subject to any tax that the Depositary or the Custodian is obligated to withhold, the Depositary may dispose of all or a portion of such property in such amounts and in such manner as the Depositary deems necessary and practicable to pay such taxes, by public or private sale, and the Depositary shall distribute the net proceeds of any such sale or the balance of any such property after deduction of such taxes to the Holders entitled thereto.

 

GENERAL LIMITATIONS

 

The Depositary, the Company, their agents and each of them shall:

 

(a)incur no liability,

 

 (i)if law, regulation, the provisions of or governing any Deposited Securities, act of God, war or other circumstance beyond its control shall prevent, delay or subject to any civil or criminal penalty any act which the Deposit Agreement or the form of ADR provides shall be done or performed by it, or

 

 (ii)by reason of any exercise or failure to exercise any discretion given it in the Deposit Agreement or the form of ADR;

 

(b)assume no liability except to perform its obligations to the extent they are specifically set forth in the ADR and the Deposit Agreement without gross negligence or bad faith;

 

(c)in the case of the Depositary and its agents, be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or the ADR;

 

(d)in the case of the Company and its agents under the Deposit Agreement, be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or the ADR’s, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense (including fees and disbursements of counsel) and liability be furnished as often as may be required; and

 

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PART I

Item 10 : Additional Information

10DEXCHANGECONTROLS (CONTINUED)

GENERAL LIMITATIONS (continued)

(e)not be liable for any action or inaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Holder, or any other person believed by it to be competent to give such advice or information. The Depositary, its agents and the Company may rely and shall be protected in acting upon any written notice, request, direction or other document believed by them to be genuine and to have been signed or presented by the proper party or parties. The Depositary and its agents will not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities (so long as any such inaction is in good faith), for the manner in which any such vote is cast (so long as any such action is in good faith) or for the effect of any such vote. The Depositary and its agents may own and deal in any class of securities of the Company and its affiliates and in ADR’s.

 

The Company has agreed to indemnify the Depositary and its agents under certain circumstances and the Depositary has agreed to indemnify the Company against losses incurred by the Company to the extent such losses are due to the negligence or bad faith of the Depositary. No disclaimer of liability under the Securities Act of 1933 is intended by any provision hereof.

 

Prior to the issue, registration, registration of transfer, split-up or combination of any ADR, the delivery of any distribution in respect thereof, or, subject to the terms and conditions of the Deposit Agreement, the withdrawal of any Deposited Securities, the Company, the Depositary or the Custodian may require:

 

(a)payment with respect thereto of

 

 (i)any stock transfer or other tax or other governmental charge,

 

 (ii)any stock transfer or registration fees in effect for the registration of transfers of Shares or other Deposited Securities upon any applicable register, and

PART I

Item 10: Additional Information


10DEXCHANGE CONTROLS(continued)

GENERAL LIMITATIONS(continued)

 

 (iii)any applicable charges as provided in the form of ADR;

 

(b)the production of proof satisfactory to it of

 

 (i)the identity and genuineness of any signature, and

 

 (ii)such other information, including without limitation, information as to citizenship, residence, exchange control approval, beneficial ownership of any securities, compliance with applicable law (including, but not limited to evidence of compliance with the Corporations Act, the Banking (Foreign Exchange) Regulations or the Foreign Acquisitions and Takeovers Act 1975 of Australia), regulations, provisions of or governing Deposited Securities and terms of the Deposit Agreement and the ADR’s, as it may deem necessary or proper; and

 

(c)compliance with such regulations as the Depositary may establish consistent with the Deposit Agreement. The issuance of ADR’s, the acceptance of deposits of Shares, the registration, registration of transfer, split-up or combination of ADR’s or, subject to the terms of the Deposit Agreement, the withdrawal of Deposited Securities may be suspended, generally or in particular instances, when the ADR Register or any register for Deposited Securities is closed or when any such action is deemed advisable by the Depositary or the Company.

 

GOVERNING LAW

 

The Deposit Agreement is governed by and shall be construed in accordance with the laws of the State of New York.

 

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PART I

Item 10 : Additional Information

10EAUSTRALIAN TAXATION

 

The following discussion outlines certain Australian tax considerations relevant to United States persons who are ADS holders or holders of Ordinary Shares. However, the discussion is by no means exhaustive of all possible Australian tax considerations.

 

The analysis regarding the Australian tax laws set forth below is based on laws in forceupon existing Australian tax law and established interpretations of that law as ofat the date of this report and is subject to change in Australian law, as well as any further changes to the double taxation convention concluded between the USUnited States and Australia (“the Treaty”), as amended by the protocol to the Treaty signed by the parties on September 27, 2001 (the “Protocol to the Treaty”), occurring after that date. The Australian Government has progressively implemented, and is continuing to implement, a number of business tax reform and integrity measures (the details of which continue to evolve). As part of the reform process, Australia’s international tax arrangements are a key focus and the Australian Government announced as part of the 2003 Federal Budget its wide-ranging program for international tax reform. While not addressed as part of the current international reform measures, certain aspects relating to investment into Australia have been proposed regarding new arrangements for collecting withholding tax from non-residents in respect of Australian source dividends and gains from the disposal of assets. While no legislation has been passed to give effect to these changes, it is likely to form part of Australia’s international tax reform process. This may impact on the tax analysis below (the taxation of company dividends and capital gains may change as a result of the review).

 

ADS holders and/or holders of Ordinary Shares are advised to consult their own tax advisors as to the Australian tax consequences of their ownership of the ADSs and/or Ordinary Shares.

 

TAXATIONOF DISTRIBUTIONS

 

Under the current double taxation convention concluded between Australia and the United States,Treaty, dividends paid to a shareholder of Ansell Limited who is a resident of the United States within the meaning of the convention,Treaty, including an ADS holder who is beneficially entitled to the dividends, may be subject to Australian withholding tax at a rate not exceeding 15% of the gross dividend. PursuantThe Protocol to the recently introduced Protocol amending the 1982 double tax convention,Treaty provides that the dividend withholding tax rate may be decreased to 5% for US corporate shareholders directly holding 10% or more of the voting power in Ansell Limited.

PART I

Item 10: Additional Information


10EAUSTRALIAN TAXATION(continued)

TAXATIONOF DISTRIBUTIONS(continued)

 

As withholding tax is a final tax, no other Australian tax is payable on the dividend. This withholding tax limitation does not apply to a shareholder whose holding is effectively connected with a permanent establishment in Australia or through which the shareholder carries on business in Australia, or in the case of a shareholder who performs independent personal services in Australia, with a “fixed base” situated in Australia.

 

Dividends paid to a non-resident of Australia will not be subject to Australian dividend withholding tax to the extent that the dividends have been franked. The concept of franking reflects that the underlying profits from which the dividends have been sourced are subject to Australian corporate income tax. No other Australian tax is payable on a dividend freed of withholding tax by franking.fully franked dividend.

 

Any dividend withholding tax suffered on the unfranked amount of the dividend is reduced to the extent that the dividend consists of a Foreign Dividend Account amount (FDA amount).

 

A dividend will consist of an FDA amount to the extent to which it is declared to consist of an FDA amount by the corporation paying the dividend. A corporation is able to declare an FDA amount where it has a surplus in its Foreign Dividend Account at the time of paying the dividend. The main component of the Foreign Dividend Account will be tax exempt dividends received from foreign companies in which the corporation has a voting interest amounting to at least 10% of the voting power, as well as dividends received from 100% owned Australian companies to the extent they are declared to consist of an FDA amount.

 

Dividends received by a United States citizen who is resident in Australia, or a United States corporation that is resident in Australia, will be treated as assessable income for Australian income tax purposes. If the dividends are wholly or partly franked, the additional amount representing the franking credits is also included in assessable income, with a “tax offset” being available equal to the franking credits. The tax offset acts to reduce the tax liability on the dividend income. In order to be entitled to claim the tax offset in relation to the franked dividend amount, the recipient of the dividend must be a “qualified person.” Broadly, to be a qualified person, two tests must be satisfied namely the “holding period rule” and the “related payments rule.”

 

In broad terms, if individual shareholders have held the Shares at risk for 45 days (excluding the dates of acquisition and disposal), they are able to claim a tax offset for the amount of any franking credits attaching to the dividend.

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PART I

Item 10 : Additional Information

10EAUSTRALIAN TAXATION (CONTINUED)

Ansell Limited will provide all shareholders with a dividend notice which specifies the franked and unfranked amount of each dividend, and the amount (if any) of dividend withholding tax deducted.

As outlined above, the USdeducted and Australia have negotiated a Protocol to the 1982 doubleextent to which non-resident withholding tax convention. In Australia,is not payable because the Protocol has been given the forcedividend consists of the law pursuant to domestic legislation and has now entered into force following the exchange of instruments of ratification by both countries earlier this year.an FDA amount.

 

The Protocol amendsto the Treaty has amended the existing convention in a number of ways and with respect to dividends they continue to be taxable in both countries, but with changed limits on the tax that the source country may charge some types of residents of the other country who are beneficially entitled to the income. The Protocol has effect in Australia from 1 July 2003 in respect of the withholding tax on dividends, royalties and interest, and from the year of income beginning on or after 1 July 2004 in respect of Australian tax applicable to other income, profits or gains.

 

Ansell Limited paiddeclared an unfranked dividend of 11 cents a share in October 2003.March 2004. The dividend is unfranked due to the increase in profit contributed by the overseas operations relative to the Australian operations (only Australian tax paid creates franking credits) and the existence of tax losses in Australia.

 

TAXATIONOF CAPITALFUTURE GAINSSHAREDISPOSALS

 

A United States citizen who is resident in Australia, or a United States corporation that is resident in Australia may be liable to pay Australian income tax in respect of the profit or capital gain (if any) derived upon disposal of the ADSs or Ordinary Shares.

 

No income or other tax is payable in Australia on any profit arising from the disposal of the ADSs or Ordinary Shares held by persons not resident in Australia except in the following circumstances.

PART IShares Held on Revenue Account

 

Item 10: Additional Information


10EAUSTRALIAN TAXATION(continued)

TAXATIONOF CAPITAL GAINS(continued)

First, Australian tax may arise if the ADSs or Ordinary Shares are trading stock of the holder, or if an ordinary incident of the holder’s business represents the sale of securities for a profit, and, in either case, the profit is attributable to sources in Australia.

 

Second, To the extent an amount would be included in a non-Australian tax resident holder’s assessable income under both the capital gains tax provisions and the ordinary income provisions, the capital gain amount would generally be reduced, so that the holder would not be subject to double tax on any part of the gain.

Non-Australian tax resident holders who are assessable under the ordinary income provisions in respect of gains made on shares held on revenue account would be assessed for such gains at the Australian tax rates for non-Australian tax residents, which start at a marginal rate of 29% for individuals. Some relief from Australian income tax may be available to such non-Australian tax resident holders under the Treaty.

Shares held on Capital Account

Australian tax may arise if the sale is subject to Australian capital gains tax. Any gain arising upon disposal by a non-resident of the ADSs or Ordinary Shares may be subject to Australian capital gains tax if the asset has the necessary connection with Australia. The ADS or ordinary shares will be taken to have the necessary connection with Australia if at any time during the period of 5 years preceding the disposal (of ADSs or Ordinary Shares acquired after 19 September 1985) the non-resident (together with associates, if any) owns or owned 10% or more of the issued capital of Ansell Limited.

 

According to Australian income tax law, a taxpayer makes a capital gain if the capital proceeds they receive on the disposal of shares exceed the cost base of those Shares. If the capital proceeds received on disposal are less than the reduced cost base, the taxpayer makes a capital loss.

The cost base and reduced cost base of any Share is generally the amount paid to acquire the share plus any associated costs incurred (e.g. brokerage fees). Cost base adjustments may be required (and capital gains may arise) should a distribution representing a return of capital or certain other non-assessable amounts be paid.

61


PART I

Item 10 : Additional Information

10EAUSTRALIAN TAXATION (CONTINUED)

Where a taxpayer makes a capital gain, they must include the “net capital gain” in their Australian taxable income (in the income year in which the disposal occurred). The net capital gain is calculated as the current year capital gain less any current year or prior year unused Australian capital losses. Current or prior year Australian revenue losses may also be offset against net capital gains. Capital losses cannot be offset against other Australian sourced taxable income.

Australian capital gains tax is generally imposed at a taxpayer’s normal rate of tax, which starts at a marginal tax rate of 29% for non-Australian tax resident individuals.

A further reduction in the amount included in the taxpayer’s taxable income in respect of a net capital gain may apply for certain shareholders if the Shares had been held for 12 months or more. For individuals (whether the Shares were held by the individual directly or indirectly through a trust) the rate of discount is 50%. Capital losses must be applied to calculate a net capital gain before applying the discount capital gains tax provisions.

Treaty

These two exceptions are also subject to the operation of the double taxation conventionTreaty between Australia and the United States, which may affect Australia’s right to tax non-residents of Australia who hold ADSs or Ordinary Shares. Owners of ADSs and Ordinary Shares are advised to consult their own tax advisors as to the tax consequences of the operation of the convention.Treaty.

Dual Residency

If a shareholder were a resident of both Australia and another country under those countries’ domestic taxation laws, that shareholder may be subject to tax as an Australian resident. Owners of ADSs and Ordinary Shares should obtain specialist taxation advice in these circumstances.

International Tax Reform

 

For completeness, as part of Australia’s reform of international tax arrangements, the Australian Government will examine the feasibility of a more targeted capital gains tax exemption for capital gains on the disposal by non-residents of some or all of their non-portfolio interests in Australian companies, to the extent the capital gains has an underlying foreign source. At this stage, it is uncertain as to whether any such exemption will be introduced.

 

OTHER TAXES

 

No Australian State or Federal estate duty or other inheritance taxes will be payable in respect of ADSs or Ordinary Shares upon the death of the holder thereof, regardless of the holder’s domicile. For capital gains purposes, the death of the holder will not produce a deemed disposal, except if the ADSs or ordinary shares are bequeathed to a tax exempt entity or to a beneficiary who is not an Australian resident. In all other circumstances, the liability for tax on any gain is effectively transferred to the deceased’s legal representatives or beneficiaries for payment following disposal of the ADSs or Ordinary Shares by that person, subject to those matters referred to above. A deemed disposal or a disposal subsequently by the beneficiary will have the consequences set out above.

 

STAMP DUTY

 

No Australian stamp duty will be payable on the acquisition of ADSs or on any subsequent transfer of an ADS, provided that the ADR evidencing such ADS remains at all times outside Australia, that the instrument of transfer is not executed in Australia and remains at all times outside Australia, and that the Depository and the Custodian maintain no register of ADSs in Australia.

 

No stamp duty is payable on a transfer of Ordinary Shares, whilst the Ordinary Shares are quoted on the Australian Stock Exchange (ASX) or a recognised stock exchange. If the Ordinary Shares cease to be quoted on the ASX or a recognised exchange, any transfer of Ordinary Shares will ordinarily be subject to stamp duty at the rate of 0.6% of the consideration paid or the unencumbered value of the shares at the time of such transfer. Such stamp duty will need to be paid prior to the transfer of the Ordinary Shares being registered by Ansell Limited.

 

If the transfer of Ordinary Shares is effected by stockbrokers on the Australian Stock Exchange, each of the transferor and the transferee will be required to pay half of the stamp duty payable. If the transfer of the Ordinary

62


PART I

Item 10 : Additional Information

10EAUSTRALIAN TAXATION (CONTINUED)

Shares is not effected by stockbrokers on the Australian Stock Exchange, the transferee of the Ordinary Shares will generally be required to pay the stamp duty payable.

 

AUSTRALIAN TAXFOREIGN CREDITSOURCE SYSTEMINCOMERULES

 

Australia has a dual foreign tax credit/exemption system for relief from double taxation of dividends, whereby dividends received from foreign companies are either fully taxable in Australia, (with a credit available for both the foreign withholding tax paid and the income tax paid by the companies on their underlying profits) or exempt (with no foreign tax credit). Further, the taxation of the income of Ansell Limited’s foreign subsidiaries may be affected by the provisions of Australia’s Controlled Foreign Companies (CFC) legislation.

PART I

Item 10: Additional Information


10EAUSTRALIAN TAXATION(continued)

AUSTRALIAN TAX CREDIT SYSTEM(continued)

 

Under the Australian CFC provisions, income earned by foreign subsidiaries in certain specified countries, being “comparably taxed” countries generally would be exempt from Australian tax. However, certain forms of income earned by foreign subsidiaries in all other countries could be “attributed” to Ansell Limited or its Australian subsidiaries and be subject to Australian tax on an accruals basis, with a foreign tax credit available for relief from double taxation. This accruals-based system does, however, provide exemptions for foreign subsidiaries, which are engaged predominantly in an active business.

 

All non-portfolio dividends (i.e. a dividend paid to a company where that company holds 10% or more of the voting power in the dividend paying company) received from comparable tax countries and certain other countries on the limited exemption list will beare exempt from Australian tax. However, with effect from 1 July 2004, the exemption for foreign sourced non-portfolio dividends and certain foreign branch profits received by Australian companies and CFCs has been extended to cover profits repatriated from all listed and unlisted countries. Because these dividends are exempt, no credit is allowed for foreign taxes paid. DividendsOtherwise, dividends received from other countries will generally be taxed in Australia, with a foreign tax credit available for relief from double taxation for foreign taxes paid.

 

International Tax Reform

As part of the international tax reform process, a number of measures have also been announcedlegislated recently dealing with reforming Australia’s CFC measures. Specifically, Australian companies and their subsidiaries will be exempt from capital gains on the sale of non-portfolio interests in foreign companies which have underlying active business. The Australian Government also intends to removeremoved the obligation to attribute certain income of CFCs operating in comparable-tax countries (by introducing an exemption) and in relation to certain service income of CFCs.

 

The capital gains exemption forapplies from 1 April 2004 and applies to specified capital gains tax events relating to shares in foreign sourced non-portfolio dividendscompanies occurring after that date. The other CFC measure applies from 1 July 2004 and certain foreign branch profits received by Australian companies andapplies in relation to statutory accounting periods of CFCs will be extended to cover profits repatriated from listedbeginning on or unlisted countries. These changes are intended to be introduced progressively.after that date.

 

10FDIVIDENDSAND PAYING AGENTS

 

Not Applicable

 

10GSTATEMENTBY EXPERTS

 

Not Applicable

 

10HDOCUMENTSON DISPLAY

 

The documents referred to in this report can be inspected at the Company’s Head Office at 678 Victoria Street, Richmond, Victoria, Australia.

 

10ISUBSIDIARY INFORMATION

 

Not Applicable

63


PART I

 

Item 11:11 : Quantitative and Qualitative Disclosures about Market Risk


DERIVATIVE FINANCIAL INSTRUMENTS

 

The Company uses derivative financial instruments, principally foreign exchange and interest rate related, to reduce its exposure to movements in foreign exchange rate and interest rate movements.

 

The Company has adopted certain principles in relation to derivative financial instruments:

 

(i)it does not trade in a derivative that is not used in the hedging of an underlying business exposure of the Company;

 

(ii)derivatives acquired must be able to be recorded on the Company’s treasury management systems, which contain extensive internal controls; and

 

(iii)the Company does not deal with counter-parties rated lower than A- by Standard and Poor’s or A3 by Moody’s Investors Service for any overnight transactions.

 

The Company follows the same credit policies, legal processes, monitoring of market and operational risks in the area of derivative financial instruments, as they do in relation to financial assets and liabilities on the Statement of Financial Position, where internal controls operate.

 

The Company is involved in a range of derivative financial instruments, which can be defined in the following broad categories:

 

(i)Forward / Future Contracts

 

These transactions enable the Company to buy or sell specific amounts of foreign exchange, financial instruments or commodities at an agreed rate/price at a specified future date. Maturities of these contracts are principally between six months and two years.

 

(ii)Options

 

This is a contract between two parties, which gives the buyer of a put or call option the right, but not the obligation, to transact at a specified interest rate/exchange rate or commodity price at a future date, generally for a premium. Maturities of these contracts are principally between three months and two years.

 

(iii)Swaps

 

These agreements enable parties to swap interest rate (from or to a fixed or floating basis) or currency (from one currency to another currency) positions for a defined period of time. Maturities of the contracts are principally between two and five years.

 

DERIVATIVE FINANCIAL INSTRUMENTS HELDOR ISSUEDFOR PURPOSES OTHER THAN TRADING

 

Gains and losses on derivatives used as hedges are accounted for on the same basis as the underlying physical exposures they hedge. Accordingly, hedge gains and losses are included in the Statement of Financial Performance when the gain or loss arising on the related physical exposures are recognised in the Statement of Financial Performance.

 

When hedging an underlying interest rate exposure, with a derivative financial instrument, all gains and losses are accounted for on an accrual basis, thereby adjusting the underlying physical cost to the hedged rate over the life of the transaction. Gains or losses resulting from the termination of an interest rate swap contract where the underlying borrowing remains, are deferred on the Statement of Financial Position and then amortised over the life of the borrowing. Where the transaction is a single event, such as a foreign exchange exposure, the hedge gain or loss is taken to account on the actual exposure date.

 

Gains and losses on derivative financial instruments which hedge anticipated transactions are in the first instance deferred and later recognised in the Statement of Financial Performance when the hedged transaction occurs. Such deferrals only occur where the future transaction remains assured. Where an actual or anticipateda transaction is modified or extinguished any associated derivative financial instrument is also modified or extinguished and any gain or loss that no longer relates to an actual or anticipated exposure is immediately taken to the Statement of Financial Performance.

64


PART I

 

Item 11 : Quantitative and Qualitative Disclosures about Market Risk


DERIVATIVE FINANCIAL INSTRUMENTS(continued)

 

DERIVATIVE FINANCIAL INSTRUMENTS HELDOR ISSUEDFOR PURPOSES OTHER THAN TRADING( (continued)continued)

Gains and losses that arise prior to and upon the maturity of transactions entered into under rollover strategies are deferred and included in the measurement of the hedge, if the transaction is still expected to continue. If the transaction is no longer expected to continue, the gains and losses are recognised immediately in the Statement of Financial Performance.

 

DERIVATIVE FINANCIAL INSTRUMENTSHELDORISSUEDFORTRADINGPURPOSES

 

The Company also enters into a limited number of exchange rate related derivative contracts for trading purposes. These transactions are undertaken under strict guidelines, limits and internal controls and with appropriate stop loss parameters. Trading activities include taking positions within authorised and clearly defined limits to benefit from expected movementsthe consolidated entity do not trade in prices. The portfolio of derivative financial instruments heldor hold them for trading purposes is valued at market rates with all gains and losses being recognised in the Statement of Financial Performance for the current period.speculative purposes.

 

AFNTICIPATEDUTURE TRANSACTIONS

 

On a continuing basis, the Company monitors its anticipated future exposures and on some occasions hedges all or part of these exposures. The transactions that may be covered are future profitscash flows of overseas controlled entities and future foreign exchange requirements.

 

These exposures are then monitored against continuing analysis of anticipated positions and may be modified from time to time. These transactions predominantly do not exceed 12 months duration and hedge transactions the Company expects to occur in this time frame.

 

The following table shows the Company’s deferred gains and (losses), both realised and unrealised, that are currently held on the Statement of Financial Position and the expected timing of recognition as revenue or expense:

 

  Interest Rate

  Foreign Exchange

  Interest Rate

  Foreign Exchange

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

  2004

  2003

  2002

  2004

 2003

  2002

 

Anticipated Exposures

Less than 1 year

  —    —    —    1.9  (0.5) 1.4

Realized Swaps Deferred

Less than 1 year

  0.4  0.1  (0.5) —    —    —  

Exposures

               

Less than 1 year

  —    —    —    (0.1) 1.9  (0.5)

Realized Swaps Deferred

               

Less than 1 year

  0.7  0.4  0.1  —    —    —   

1 to 2 years

  0.8  0.7  0.2  —    —    —    0.7  0.8  0.7  —    —    —   

2 to 5 years

  0.9  2.2  (0.5) —    —    —    4.9  0.9  2.2  —    —    —   

Greater than 5 years

  —    —    1.6  —    —    —    —    —    —    —    —    —   

65


PART I

 

Item 11:11 : Quantitative and Qualitative Disclosures about Market Risk


DERIVATIVE FINANCIAL INSTRUMENTS(continued)

 

INTEREST RATE RISK

 

The Company’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:

 

  Weighted
Average
Effective
Interest
Rate


  Interest Rate Fixed Maturities

  Non
Interest
Bearing


  Total

 

$ in millions


   Floating

  1 year
or less


  1 to 5
years (1)


  Over 5
years


    Weighted
Average
Effective
Interest
Rate


  Floating

  Interest Rate Fixed
Maturities


  Non
Interest
Bearing


  Total

$ in millions


 1 year
or less


 1 to 5
years (1)


 Over 5
years


  
   %       

Financial Assets

         

On-Balance Sheet

         

Cash on hand and at bank

  1.1% 20.5  —    —    —    50.2  70.7

Short-term deposits

  4.8% 231.8  —    15.6  —    —    247.4

Receivables – trade

  N/A  —    —    —    —    183.0  183.0

Receivables – other

  6.1% 62.8  —    —    —    46.5  109.3

Investments (excl. associated companies)

  N/A  —    —    —    —    141.4  141.4
   

 

 

 
  
  

Total Financial Assets 2004

   315.1  —    15.6  —    421.1  751.8
   

 

 

 
  
  

Financial Liabilities

         

Recognised

         

Payables – trade

  N/A  —    —    —    —    124.1  124.1

Payables – other

  N/A  —    —    —    —    38.6  38.6

Bank overdraft

  1.5% 3.3  —    —    —    —    3.3

Bank and other loans

  5.6% 321.2  —    101.7  —    —    422.9

Provisions (including certain employee entitlements)

  N/A  —    —    —    —    41.0  41.0

Unrecognised

         

Net interest rate swaps

  2.0% (147.4) 121.1  26.3  —    —    —  
   

 

 

 
  
  

Total Financial Liabilities 2004

   177.1  121.1  128.0  —    203.7  629.9
   

 

 

 
  
  

Net Financial Assets/(Liabilities) 2004

   138.0  (121.1) (112.4) —    217.4  121.9
   

 

 

 
  
  

Net Financial Assets/(Liabilities) 2003

                          

Financial Assets

  %                        

On-Balance Sheet

                 

Recognised

         

Cash on hand and at bank

  1.3% 61.4  —    —    —    —    61.4   1.3% 61.4  —    —    —    —    61.4

Short-term deposits

  3.9% 238.4  —    —    —    —    238.4   3.9% 238.4  —    —    —    —    238.4

Receivables – trade

  N/A  —    —    —    —    197.5  197.5   N/A  —    —    —    —    197.5  197.5

Receivables – other

  5.4% 62.7  —    —    —    59.2  121.9   5.4% 62.7  —    —    —    59.2  121.9

Investments (excl. associated companies)

  N/A  —    —    —    —    141.4  141.4   N/A  —    —    —    —    141.4  141.4
  

 

 

 

 
  
  

   

 

 

 
  
  

Total Financial Assets 2003

    362.5  —    —    —    398.1  760.6    362.5  —    —    —    398.1  760.6
  

 

 

 

 
  
  

   

 

 

 
  
  

Financial Liabilities

                          

Recognised

                          

Payables – trade

  N/A  —    —    —    —    130.1  130.1   N/A  —    —    —    —    130.1  130.1

Payables – other

  N/A  —    —    —    —    27.5  27.5   N/A  —    —    —    —    27.5  27.5

Bank overdraft

  3.2% 1.3  —    —    —    1.3  2.6   3.2% 1.3  —    —    —    1.3  2.6

Bank and other loans

  6.4% 370.0  24.2  75.0  —    —    469.2   6.4% 370.0  24.2  75.0  —    —    469.2

Provisions (including certain employee entitlements)

  N/A  —    —    —    —    39.4  39.4   N/A  —    —    —    —    39.4  39.4

Unrecognised

                          

Net interest rate swaps

  2.5% (319.4) 168.8  150.6  —    —    —     2.5% (319.4) 168.8  150.6  —    —    —  
  

 

 

 

 
  
  

   

 

 

 
  
  

Total Financial Liabilities 2003

    51.9  193.0  225.6  —    198.3  668.8    51.9  193.0  225.6  —    198.3  668.8
  

 

 

 

 
  
  

   

 

 

 
  
  

Net Financial Assets/(Liabilities) 2003

    310.6  (193.0) (225.6) —    199.8  91.8    310.6  (193.0) (225.6) —    199.8  91.8
  

 

 

 

 
  
  

   

 

 

 
  
  

Net Financial Assets/(Liabilities) 2002D

                 

Financial Assets

                 

Recognised

                 

Cash on hand and at bank

  1.1% 72.2  —    —    —    —    72.2 

Short-term deposits

  3.3% 174.1  30.6  —    —    —    204.7 

Receivables – trade

  N/A  —    —    —    —    232.5  232.5 

Receivables – other

  2.6% 32.9  25.0  —    —    70.0  127.9 

Investments (excl. associated companies)

  N/A  —    —    —    —    145.8  145.8 
  

 

 

 

 
  
  

Total Financial Assets 2002

    279.2  55.6  —    —    448.3  783.1 
  

 

 

 

 
  
  

Financial Liabilities

                 

Recognised

                 

Payables – trade

  N/A  —    —    —    —    166.6  166.6 

Payables – other

  N/A  —    —    —    —    29.8  29.8 

Bank overdraft

  3.3% 14.6  —    —    —    —    14.6 

Bank and other loans

  6.1% 466.0  20.8  122.7  —    —    609.5 

Provisions (including certain employee entitlements)

  N/A  —    —    —    —    48.5  48.5 

Unrecognised

                 

Net interest rate swaps

  5.1% (375.9) —    375.9  —    —    —   
  

 

 

 

 
  
  

Total Financial Liabilities 2002

    104.7  20.8  498.6  —    244.9  869.0 
  

 

 

 

 
  
  

Net Financial Assets/(Liabilities) 2002

    174.5  34.8  (498.6) —    203.4  (85.9)
  

 

 

 

 
  
  

      1-2 yrs

  2-3 yrs

  3-4 yrs

  4-5 yrs

  Total

 

(1) Analysis of Fixed Rate Maturities 1 to 5 years

                 

2003

                 

Bank & Other Loans

      75.0  —    —    —    75.0 

Net Interest Rate Swaps

      123.5  —    27.1  —    150.6 
      

 

 
  
  

      198.5  —    27.1  —    225.6 
      

 

 
  
  

2002

                 

Bank & Other Loans

      17.7  105.0  —    —    122.7 

Net Interest Rate Swaps

      189.9  154.1  —    31.9  375.9 
      

 

 
  
  

      207.6  259.1  —    31.9  498.6 
      

 

 
  
  

(1)Analysis of Fixed Rate Maturities 1 to 5 years

   1-2 yrs

  2-3 yrs

  3-4 yrs

  4-5 yrs

  Total

2004

               

Bank & Other Loans

  101.7  —    —    —    101.7

Net Interest Rate Swaps

  26.3  —    —    —    26.3
   
  
  
  
  
   128.0  —    —    —    128.0
   
  
  
  
  

2003

               

Bank & Other Loans

  75.0  —    —    —    75.0

Net Interest Rate Swaps

  123.5  —    27.1  —    150.6
   
  
  
  
  
   198.5  —    27.1  —    225.6
   
  
  
  
  

66


PART I

 

Item 11:11 : Quantitative and Qualitative Disclosures about Market Risk


DERIVATIVE FINANCIAL INSTRUMENTS(continued)

 

INTEREST RATE RISK(continued)

 

Provisions, including amounts contained within income tax, deferred income tax, contingencies, rationalisation and restructure, Accufix Pacing Lead related expenses and insurance claims amounting to $57.7 million (2003 – $64.4 million (2002 –million; 2002 - $86.5 million; 2001—$144.2 million) are not included within the table above as it is considered that they do not meet the definition of a financial instrument.

 

A separate analysis of debt by currency can be found at Note 19 to the Financial Statements – Interest Bearing Liabilities.

 

CREDIT RISKAND NET FAIR VALUE

 

Recognised Financial Instruments

 

(i)Credit Risk

 

The credit risk on financial assets, excluding investments, of the Company which have been recognised on the Statement of Financial Position, is the carrying amount, net of any provision for doubtful debts. The Company minimises concentrations of credit risk by undertaking transactions with a large number of customers and counter parties in various countries.

 

The Company is not materially exposed to any individual overseas country or individual customer.

 

(ii)Net Fair Value

 

The Directors considerCompany considers that the carrying amount of recognised financial assets and financial liabilities approximates their net fair value.

Refer to Note 1 to the Financial Statements for accounting policies in respect of the carrying values of financial assets and financial liabilities.

 

Unrecognised Financial Instruments

 

Credit risk on unrecognised derivative contracts is minimised, as counterparties are recognised financial intermediaries with acceptable credit ratings determined by a recognised rating agency. It is not felt that there is a material exposure to any single counterparty or group of counterparties. The Company’s exposure is almost entirely (over 99%) to banks.

67


PART I

 

Item 11 : Quantitative and Qualitative Disclosures about Market Risk


DERIVATIVE FINANCIAL INSTRUMENTS(continued)

 

CREDIT RISKAND NET FAIR VALUE(continued)

 

The following table displays:

 

(i)Face Value:

 

This is the contract’s value upon which a market rate is applied to produce a gain or loss, which becomes the settlement value of the derivative financial instrument.

 

(ii)Credit Risk:

 

This is the maximum exposure to the Company in the event that all counterparties who have amounts outstanding to the Company under derivative financial instruments, fail to honour their side of the contracts. The Company’s exposure is almost entirely to banks (see (v) below). Amounts owed by the Company under derivative financial instruments are not included.

 

(iii)Net Fair Value:

 

This is the amount at which the instrument could be extinguished between willing parties in a normal market in other than a liquidation or forced sale environment. The net amount owed by / (owing to) financial institutions under all derivative financial instruments would have been ($11.1)$1.6 million (2002—$(23.8)(2003 - $(11.1) million, 2001—$5.92002 – ($23.8) million) if all contracts were closed out on 30 June 2003.2004.

 

  Face Value

  Credit Risk

  Net Fair Value

   Face Value

  Credit Risk

  Net Fair Value

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

  2003

   2002

   2001

   2004

  2003

  2002

  2004

  2003

  2002

  2004

 2003

 2002

 

Foreign Exchange Contracts

                                                

Purchase/Sale Contracts:

                                                

-U.S. dollars

  112.0  329.7  1,231.7  0.3  1.6  22.0  (0.4)  (7.3)  17.6   77.0  112.0  329.7  0.4  0.3  1.6  0.2  (0.4) (7.3)

-Australian dollars

  47.5  49.4  237.2  1.8  —    —    1.8   —     —     22.0  47.5  49.4  —    1.8  —    —    1.8  —   

-Other currencies

  44.8  216.5  186.5  —    2.5  1.7  (0.9)  2.4   (1.5)  33.4  44.8  216.5  0.2  —    2.5  0.1  (0.9) 2.4 

Cross Currency Swaps:

                                                

-U.S. dollars

  69.4  96.5  240.2  2.7  2.2  0.7  2.7   (1.5)  (16.5)  53.8  69.4  96.5  1.9  2.7  2.2  1.9  2.7  (1.5)

-Other Currencies

  —    16.5  35.2  —    —    5.8  —     (2.1)  5.8   —    —    16.5  —    —    —    —    —    (2.1)

Foreign Exchange Options

                                                

Zero Cost Collar:

                                                

-Euro/U.S. dollars

  103.5  —    —    0.8  —    —    (2.6)  —     —     193.5  103.5  —    2.2  0.8  —    0.7  (2.6) —   

Premium Paid (put)

                                                

-Euro/U.S. dollars:

  19.8  —    —    0.2  —    —    0.2   —     —     —    19.8  —    —    0.2  —    —    0.2  —   

Interest Rate Contracts

                                                

Interest Rate Swaps:

                                                

-U.S. dollars

  369.4  435.1  452.7  0.3  3.0  6.6  (10.9)  (14.5)  0.5   141.0  369.4  435.1  0.4  0.3  3.0  (1.2) (10.9) (14.5)

-Australian dollars

  100.0  300.0  300.0  —    —    1.2  (1.0)  (0.8)  0.3   50.0  100.0  300.0  —    —    —    (0.1) (1.0) (0.8)

-Other currencies

  —    17.5  16.7  —    —    —    —     —     (0.3)  —    —    17.5  —    —    —    —    —    —   
  
  
  
  
  
  
  

  

  

  
  
  
  
  
  
  

 

 

Total

  866.4  1,461.2  2,700.2  6.1  9.3  38.0  (11.1)  (23.8)  5.9   570.7  866.4  1,461.2  5.1  6.1  9.3  1.6  (11.1) (23.8)
  
  
  
  
  
  
  

  

  

  
  
  
  
  
  
  

 

 

 

From time to time in the ordinary course of business, the Company enters into forward exchange contracts to hedge a proportion of anticipated purchase and sale commitments denominated in foreign currencies (principally US dollars). The amount of anticipated future purchases and sales is forecast in light of current market conditions and commitments from customers. Hedge contracts are used to cover the next available trading exposure until all contracts are fully utilised. Hedge cover generally does not exceed 3 months.

 

(iv)Market/Liquidity Risk:

 

The Company seeks to reduce the risk of:

 

(a)being forced to exit derivative financial instrument positions at below their real worth; or

 

(b)finding it cannot exit the position at all, due to lack of liquidity in the market;

 

byBy:

 

(a)dealing only in liquid contracts dealt by many counterparties; and

 

(b)dealing only in large and highly liquid and stable international markets.

68


PART I

 

Item 11 : Quantitative and Qualitative Disclosures about Market Risk


DERIVATIVE FINANCIAL INSTRUMENTS(continued)

 

CREDIT RISKAND NET FAIR VALUE(continued)

 

(v)Credit Risk by Maturity:

 

The following table indicates the value of amounts owing by counterparties by maturity. Based on the Group policy of not having overnight exposures to an entity rated lower than A- by Standard & Poor’s or A3 by Moody’s Investors Service, it is felt the risk to the Company of the counterparty default loss is not material.

 

  Foreign Exchange
Related Contracts


  Interest Rate
Contracts


  Foreign Exchange
Options


  Total

  Foreign Exchange
Related Contracts


  Interest Rate
Contracts


  Foreign Exchange
Options


  Total

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

  2003

  2002

  2001

  2003

  2002

  2001

  2004

  2003

  2002

  2004

  2003

  2002

  2004

  2003

  2002

  2004

  2003

  2002

Term

                                                                        

0 to 6 mths

  2.1  4.1  27.0  0.3  —    1.2  0.4  —    —    2.8  4.1  28.2  0.6  2.1  4.1  —    0.3  —    1.1  0.4  —    1.7  2.8  4.1

6 to 12 mths

  —    —    2.5  —    —    —    0.6  —    —    0.6  —    2.5  0.1  —    —    —    —    —    1.1  0.6  —    1.2  0.6  —  

1 to 2 yrs

  0.2  —    —    —    3.0  0.8  —    —    —    0.2  3.0  0.8  —    0.2  —    —    —    3.0  —    —    —    —    0.2  3.0

2 to 5 yrs

  2.5  2.2  —    —    —    5.8  —    —    —    2.5  2.2  5.8  1.8  2.5  2.2  0.4  —    —    —    —    —    2.2  2.5  2.2

5 to 10 yrs

  —    —    0.7  —    —    —    —    —    —    —    —    0.7  —    —    —    —    —    —    —    —    —    —    —    —  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

Total

  4.8  6.3  30.2  0.3  3.0  7.8  1.0  —    —    6.1  9.3  38.0  2.5  4.8  6.3  0.4  0.3  3.0  2.2  1.0  —    5.1  6.1  9.3
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

 

(vi)Historical Rate Rollovers:

 

It is the Company’s policy not to engage in historical rate rollovers except in circumstances where the maturity date falls on a bank holiday. In these instances, settlement occurs on the next trading day.

69


PART I

 

Item 12 : Description of Securities Other than Equity Securities


Not Applicable

70


PART II

 

Item 13 : Defaults, Dividend Arrearages and Delinquencies


Not Applicable

71


PART II

 

Item 14 : Material Modifications to the Rights of Security Holders


Not Applicable

72


PART II

 

Item 15 : Controls and Procedures


Not Applicable

73


PART II

 

Item 16 : [Reserved]


16AAUDIT COMMITTEE FINANCIAL EXPERT

 

Not ApplicableThe Company’s Board of Directors has determined that Mr. L.D. Crandall, a member of the Company’s Audit Committee, is a financial expert and is independent as that term is defined.

 

16BCODE OOFF ETHICS

 

Not ApplicableThe Company has adopted a Code of Conduct which applies to Directors, executives, management and employees. The Code of Conduct is posted on the Company’s website – refer to Item 6C Board Practices for further details.

 

16CPRINCIPAL ACCOUNTANT FEESAND SERVICES

 

 (a)Audit Fees

 

  Consolidated

  The Company

Audit and Review of Financial Reports

($ in Thousands)


  Consolidated

  The
Company


  2003

  2002

  2003

  2002

2004

  2003

  2004

  2003

Auditors of Ansell Limited and Australian entities – KPMG

  1,183  1,653  983  1,391  1,013  1,183  927  983

Other Member firms of KPMG

  1,661  1,891  —    —    1,423  1,661  —    —  
  
  
  
  
  
  
  
  

Total

  2,844  3,544  983  1,391  2,436  2,844  927  983
  
  
  
  
  
  
  
  

 

 (b)Audit-Related Fees

 

   Consolidated

  The Company

Other Audit and Assurance Services (including disposals and acquisitions)
($ in Thousands)


  2003

  2002

  2003

  2002

Auditors of Ansell Limited and Australian entities – KPMG

  259  4,944  90  4,746

Other Member firms of KPMG

  78  25  —    —  
   
  
  
  

Total

  337  4,969  90  4,746
   
  
  
  

Other Audit and Assurance Services (including disposals and

acquisitions) ($ in Thousands)


  Consolidated

  The
Company


  2004

  2003

  2004

  2003

Auditors of Ansell Limited and Australian entities – KPMG(1)

  131  259  131  90

Other Member firms of KPMG(2)

  77  78  —    —  
   
  
  
  

Total

  208  337  131  90
   
  
  
  

(1)Includes audit of local statutory accounts and Ansell’s US GAAP financial statements and audit of a warranty claim.

(2)Includes the audit of defined benefit pension plans in the USA and the audit of local statutory accounts of foreign subsidiaries.

 

 (c)Tax Fees

 

Taxation and Other Services

($ in Thousands)


  Consolidated

  The
Company


  2004

  2003

  2004

  2003

Auditors of Ansell Limited and Australian entities – KPMG

  40  32  40  32

Other Member firms of KPMG

  150  90  —    —  
   
  
  
  

Total

  190  122  40  32
   
  
  
  

Represents fees for tax compliance services in respect of statutory lodgements.

   Consolidated

  The Company

Taxation and Other Services

($ in Thousands)


  2003

  2002

  2003

  2002

Auditors of Ansell Limited and Australian entities – KPMG

  32  439  32  331

Other Member firms of KPMG

  90  66  —    —  
   
  
  
  

Total

  122  505  32  331
   
  
  
  

 

 (d)All Other Fees

 

   Consolidated

  The Company

($ in Thousands)


  2003

  2002

  2003

  2002

Auditors of Ansell Limited and Australian entities – KPMG

  —    —    —    —  

Other Member firms of KPMG

  —    —    —    —  
   
  
  
  

Total

  0  0  0  0
   
  
  
  
Consolidated

The
Company


($ in Thousands)


2004

2003

2004

2003

Auditors of Ansell Limited and Australian entities – KPMG

—  —  —  —  

Other Member firms of KPMG

—  —  —  —  




Total

—  —  —  —  




 

 (e)The Audit Committee is required to approve in advance all audit and non-audit services provided by the Company’s external auditors. Non-audit services that are perceived to be materially in conflict with the role of auditor, should not be provided by the external auditor. These services are expected to include investigations and consulting advice and subcontracting of operational activities normally undertaken by management and where the external auditor may ultimately be required to express an opinion on its own work.

 

 (f)Not applicable.

74


PART II

 

Item 16 : [Reserved]                                                                                                                                                                             


16D16D EXEMPTIONSFROMTHE LISTING STANDARDSFOR AUDIT COMMITTEES

Not Applicable

16EPURCHASES OF EQUITY SECURITIES BY THE ISSUER

Period


  Total
Number of
Shares
Purchased


  

Average
Price Paid
per Share

$A


  Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs


  Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs


1 July – 31 July 2003

  504,923  5.82  504,923  12,086,657

1 August – 31 August 2003

  249,220  6.22  249,220  11,837,437

1 September – 30 September 2003

  459,537  6.72  459,537  11,377,900

1 October – 31 October 2003

  459,234  6.86  459,234  10,918,666

1 November – 30 November 2003

  1,303,541  6.82  1,303,541  9,615,125

1 December – 31 December 2003

  2,538,783  6.39  2,538,783  7,076,342

1 January – 31 January 2004

  2,393,205  6.41  2,393,205  4,683,137

1 February – 29 February 2004

  636,168  6.41  636,168  4,046,969

1 March – 31 March 2004

  682,653  6.99  682,653  3,364,316

1 April – 30 April 2004

  563,500  7.05  563,500  2,800,816

1 May – 31 May 2004

  192,757  7.43  192,757  11,807,243

1 June – 30 June 2004

  5,531  7.50  5,531  11,801,712
   
  
  
   

Total

  9,989,052  6.46  9,989,052   
   
  
  
   

The Company announced on 16 April 2003 that it would undertake an on-market buy-back of up to 10 million shares. As at 30 June 2003 the Company had bought back 1,408,420 shares. During fiscal year 2004 the on-market buyback was extended by up to a further 4 million shares with 9,790,764 shares being acquired between 1 July 2003 and 30 April 2004 when purchases ceased under this program.

On 3 May 2004, the Company announced that it would undertake a further on-market buy-back of up to 12 million shares over the following 12 month period. As at 30 June 2004, the Company had bought back 198,288 shares under this program. Purchase of shares under this program were suspended while consideration was given to an alternative off-market buy-back proposal.

On 10 August 2004 the Company announced that the Board was considering a proposal for an off-market buy-back of 17 million shares. The off-market buy-back proposal was approved by shareholders at the Company’s Annual General Meeting on 14 October 2004.

75


PART II

Item 17 : Financial Statements

 

Not Applicable

76


PART III

 

Items 17 &Item 18 : Consolidated Financial Statements


 

Statements of Financial PerformanceSTATEMENTSOF FINANCIAL PERFORMANCE

 

of Ansell Limited and its Controlled Entities for the year endedas at 30 June 20032004

 

      Consolidated

  The Company

 
   Note

  2003
$m


  2002
$m


  2001
$m


  2003
$m


  2002
$m


  2001
$m


 

Revenue

                      

Total revenue

  3  1,320.1  3,190.4  5,267.3  263.0  1,257.4  1,904.7 

Expenses

                      

Cost of goods sold

     830.4  1,493.3  2,895.4  62.6  354.4  1,054.7 

Selling, distribution and administration

     310.3  504.8  996.5  32.3  141.8  445.2 

Depreciation and amortisation

     56.5  82.3  139.8  0.1  8.4  22.5 

Write-down of assets

     6.1  176.5  97.7  —    82.4  890.7 

Net assets of businesses disposed

     —    922.4  895.2  —    514.5  36.2 

Other

     —    —    —    (32.4) —    —   
      

 

 

 

 
  

Total expenses, excluding borrowing costs

     1,203.3  3,179.3  5,024.6  62.6  1,101.5  2,449.3 

Borrowing costs

  4  37.8  70.2  144.3  36.1  67.0  129.5 

Share of net profit/(loss) of associates’ and joint venture entities

     0.3  1.9  (44.3) —    —    —   
      

 

 

 

 
  

Profit/(loss) from ordinary activities before income tax expense

     79.3  (57.2) 54.1  164.3  88.9  (674.1)

Income tax expense/(benefit) attributable to ordinary activities

  8  26.8  55.8  189.9  (0.5) 17.3  81.8 
      

 

 

 

 
  

Net profit/(loss) from ordinary activities after income tax expense

     52.5  (113.0) (135.8) 164.8  71.6  (755.9)

Outside equity interests in net profit/(loss) after income tax

     2.6  2.8  3.6  —    —    —   
      

 

 

 

 
  

Net profit/(loss) after income tax attributable to Ansell Limited shareholders

     49.9  (115.8) (139.4) 164.8  71.6  (755.9)
      

 

 

 

 
  

Non-owner transaction changes in equity

                      

Decrease in asset revaluation reserve

     —    —    (14.1) —    —    —   

Net exchange difference on translation of financial statements of self-sustaining foreign operations

     (71.3) (69.6) (73.0) —    —    —   
      

 

 

 

 
  

Total valuation adjustments attributable to Ansell Limited shareholders recognised directly in equity

     (71.3) (69.6) (87.1) —    —    —   
      

 

 

 

 
  

Total changes in equity from non-owner related transactions attributable to Ansell Limited shareholders

     (21.4) (185.4) (226.5) 164.8  71.6  (755.9)
      

 

 

 

 
  

Earnings/(loss) per share is based on net profit/(loss) after income tax attributable to Ansell Limited shareholders

   Consolidated

 
  Note

 

2004

$m


 

2003

$m


 

2002

$m


 

Revenue

   

Total revenue

  3  1,131.1  1,320.1  3,190.4 

Expenses

   

Cost of goods sold

   662.1  830.4  1,493.3 

Selling, distribution and administration

   289.8  310.3  504.8 

Depreciation and amortisation

   46.7  56.5  82.3 

Write-down of assets

   9.8  6.1  176.5 

Net assets of businesses disposed

   —    —    922.4 

Other

  4(b) —    —    —   
   

 

 

Total expenses, excluding borrowing costs

   1,008.4  1,203.3  3,179.3 

Borrowing costs

  4(a) 29.4  37.8  70.2 

Share of net profit of associates and joint venture entities

  38  —    0.3  1.9 
   

 

 

Profit/(loss) from ordinary activities before income tax expense

   93.3  79.3  (57.2)

Income tax expense/(benefit) attributable to ordinary activities

  8  20.7  26.8  55.8 
   

 

 

Net profit/(loss) from ordinary activities after income tax expense

   72.6  52.5  (113.0)

Outside equity interests in net profit after income tax

  10  1.9  2.6  2.8 
   

 

 

Net profit/(loss) after income tax attributable to Ansell Limited shareholders

  6  70.7  49.9  (115.8)
   

 

 

Non-owner transaction changes in equity

   

Net exchange difference on translation of financial statements of self-sustaining foreign operations

  6  (7.4) (71.3) (69.6)
   

 

 

Total valuation adjustments attributable to Ansell Limited shareholders recognised directly in equity

   (7.4) (71.3) (69.6)
   

 

 

Total changes in equity from non-owner related transactions attributable to Ansell Limited shareholders

  7  63.3  (21.4) (185.4)
   

 

 

Earnings/(loss) per share is based on net profit/(loss) after income tax attributable to Ansell Limited shareholders

   
     cents

  cents

  cents

    cents

 cents

 cents

 

Basic earnings per share

  35  26.7  (61.9) (71.8)  35  39.1  26.7  (61.9)

Diluted earnings per share

  35  26.6  (61.7) (71.4)  35  39.0  26.6  (61.7)

 

The above statements of financial performance should be read in conjunction with the accompanying notes.

77


PART III

 

Items 17 &Item 18 : Consolidated Financial Statements


 

Statements of Financial PositionSTATEMENTSOF FINANCIAL POSITION

 

of Ansell Limited and its Controlled Entities as at 30 June 20032004

 

     Consolidated

  The Company

      Consolidated

 
  Note

  2003
$m


  2002
$m


  2001
$m


  2003
$m


  2002
$m


  2001
$m


   Note

  

2004

$m


 

2003

$m


 

2002

$m


 

Current Assets

                      

Cash assets

  11  286.0  258.5  310.9  1.4  4.2  28.3   11  307.8  286.0  258.5 

Cash assets - restricted deposits

  11  13.8  18.4  27.0  —    —    —     11  10.3  13.8  18.4 

Receivables

  12  262.4  293.7  643.8  796.1  821.0  2,147.0   12  228.7  262.4  293.7 

Inventories

  13  187.9  235.1  794.3  12.5  13.7  205.9   13  190.5  187.9  235.1 

Prepayments

     10.9  15.8  27.4  4.2  3.6  6.6      11.7  10.9  15.8 
     

 

 

 

 

 

     

 

 

Total Current Assets

     761.0  821.5  1,803.4  814.2  842.5  2,387.8      749.0  761.0  821.5 
     

 

 

 

 

 

     

 

 

Non-Current Assets

                      

Receivables

  12  57.0  66.7  92.0  1.2  33.4  84.1   12  63.6  57.0  66.7 

Investments accounted for using the equity method

  14  —    13.3  14.6  —    0.2  0.2   14  —    —    13.3 

Other financial assets

  14  141.4  145.8  212.0  1,484.5  1,547.2  1,826.3   14  141.4  141.4  145.8 

Property, plant and equipment

  15  262.9  332.5  669.9  0.3  0.4  98.9   15  227.8  262.9  332.5 

Intangible assets

  16  324.5  403.2  556.5  —    —    10.7   16  293.4  324.5  403.2 

Deferred tax assets

  17  32.0  49.7  106.8  —    —    32.2   17  24.2  32.0  49.7 

Other

     —    —    21.0  —    0.2  13.5      —    —    —   
     

 

 

 

 

 

     

 

 

Total Non-Current Assets

     817.8  1,011.2  1,672.8  1,486.0  1,581.4  2,065.9      750.4  817.8  1,011.2 
     

 

 

 

 

 

     

 

 

Total Assets

     1,578.8  1,832.7  3,476.2  2,300.2  2,423.9  4,453.7      1,499.4  1,578.8  1,832.7 
     

 

 

 

 

 

     

 

 

Current Liabilities

                      

Payables

  18  154.4  192.7  420.9  610.7  761.0  1,722.9   18  159.4  154.4  192.7 

Interest bearing liabilities

  19  151.8  107.6  748.8  133.8  66.7  715.7   19  190.2  151.8  107.6 

Provisions

  20  57.5  85.4  264.4  5.9  7.9  131.8   20  52.0  57.5  85.4 

Current tax liabilities

  20  3.1  1.9  10.5  —    —    —     20  2.6  3.1  1.9 

Other

  21  1.1  1.2  5.2  0.2  —    1.8   21  —    1.1  1.2 
     

 

 

 

 

 

     

 

 

Total Current Liabilities

     367.9  388.8  1,449.8  750.6  835.6  2,572.2      404.2  367.9  388.8 
     

 

 

 

 

 

     

 

 

Non-Current Liabilities

                      

Payables

  18  3.2  3.7  5.1  —    —    0.3   18  3.3  3.2  3.7 

Interest bearing liabilities

  19  320.0  516.5  861.9  320.0  516.3  861.5   19  236.0  320.0  516.5 

Provisions

  20  21.7  23.3  54.9  0.4  0.4  4.8   20  23.9  21.7  23.3 

Deferred tax liabilities

  20  21.5  24.4  22.1  —    —    —     20  20.2  21.5  24.4 

Other

  21  —    —    16.2  —    —    16.2 
     

 

 

 

 

 

     

 

 

Total Non-Current Liabilities

     366.4  567.9  960.2  320.4  516.7  882.8      283.4  366.4  567.9 
     

 

 

 

 

 

     

 

 

Total Liabilities

     734.3  956.7  2,410.0  1,071.0  1,352.3  3,455.0      687.6  734.3  956.7 
     

 

 

 

 

 

     

 

 

Net Assets

     844.5  876.0  1,066.2  1,229.2  1,071.6  998.7      811.8  844.5  876.0 
     

 

 

 

 

 

     

 

 

Equity

                      

Contributed equity

  5  1,448.3  1,455.5  1,454.3  1,448.3  1,455.5  1,454.3   5  1,383.9  1,448.3  1,455.5 

Reserves

  6  (268.9) (176.2) (118.0) —    10.2  10.2   6  (275.6) (268.9) (176.2)

Accumulated losses

  6  (345.7) (417.0) (289.9) (219.1) (394.1) (465.8)  6  (306.7) (345.7) (417.0)
     

 

 

 

 

 

     

 

 

Total equity attributable to Ansell Limited shareholders

     833.7  862.3  1,046.4  1,229.2  1,071.6  998.7      801.6  833.7  862.3 

Outside equity interests

  10  10.8  13.7  19.8  —    —    —     10  10.2  10.8  13.7 
     

 

 

 

 

 

     

 

 

Total Equity

     844.5  876.0  1,066.2  1,229.2  1,071.6  998.7      811.8  844.5  876.0 
     

 

 

 

 

 

     

 

 

 

The above statements of financial position should be read in conjunction with the accompanying notes.

78


PART III

 

Items 17 &Item 18 : Consolidated Financial Statements


 

Statements of Cash FlowsSTATEMENTSOF CASH FLOWS

 

of Ansell Limited and its Controlled Entities for the year ended 30 June 20032004

 

      Consolidated

  The Company

 
   Note

  2003
$m


  2002
$m


  2001
$m


  2003
$m


  2002
$m


  2001
$m


 

Cash Flows Related to Operating Activities

                      

Receipts from customers (excluding non-recurring and Accufix Research Institute)

     1,357.0  2,356.5  4,404.8  94.0  532.8  1,637.8 

Payments to suppliers and employees (excluding non-recurring and Accufix Research Institute)

     (1,159.9) (2,124.8) (4,090.4) (118.5) (540.0) (1,725.0)
      

 

 

 

 

 

Net receipts from customers (excluding non-recurring and Accufix Research Institute)

     197.1  231.7  314.4  (24.5) (7.2) (87.2)

Income taxes paid

     (8.6) (25.5) (34.7) —    —    —   

Dividends received

     2.6  0.3  0.1  30.4  196.8  26.2 
      

 

 

 

 

 

Net cash provided by/(used in) Operating Activities (excluding non-recurring and Accufix Research Institute)

     191.1  206.5  279.8  5.9  189.6  (61.0)

Non-recurring payments to suppliers and employees

     (26.8) (82.7) (54.5) (11.1) (39.7) (44.9)

Payments to suppliers and employees net of customer receipts (Accufix Research Institute)

     (2.7) (10.7) (24.3) —    —    (1.8)

Amounts refunded from Accufix Settlement Funds (United States) by the Court

     —    —    25.6  —    —    7.6 
      

 

 

 

 

 

Net Cash Provided by/(Used in) Operating Activities

  31(a)  161.6  113.1  226.6  (5.2) 149.9  (100.1)
      

 

 

 

 

 

Cash Flows Related to Investing Activities

                      

Payments for businesses, net of cash acquired

     —    (40.9) (94.3) —    —    (70.0)

Payments for property, plant and equipment

     (15.4) (34.3) (76.0) (0.2) (7.7) (16.4)

Payments for brand names/trademarks

     —    —    (0.5) —    —    —   

Proceeds from sale of businesses, net of cash disposed*

     —    936.4  906.8  —    517.4  211.5 

Proceeds from sale of plant and equipment in the ordinary course of business

     6.1  12.1  15.1  0.1  2.0  6.4 

Loans (made)/repaid

     4.2  1.2  (63.1) —    —    (63.1)

Net loans to controlled entities

  31(c)     —    —    (24.0) 331.5  833.4 

Proceeds from sale of other investments

     9.1  —    0.8  6.6  —    0.8 

Payments for investments in controlled entities

        —    —    (6.2) —    —   

Payments for other investments

     —    —    (60.1) —    —    (2.2)
      

 

 

 

 

 

Net Cash Provided by/(Used in) Investing Activities

     4.0  874.5  628.7  (23.7) 843.2  900.4 
      

 

 

 

 

 

Cash Flows Related to Financing Activities

                      

Proceeds from borrowings

     7.8  737.0  10,093.6  —    738.9  8,135.4 

Repayments of borrowings

     (86.9) (1,673.9) (11,307.5) (68.8) (1,680.2) (8,667.1)
      

 

 

 

 

 

Net (repayments of) / proceeds from borrowings

     (79.1) (936.9) (1,213.9) (68.8) (941.3) (531.7)

Proceeds from issues of shares

     1.0  1.2  2.5  1.0  1.2  2.5 

Payments for share buy-back

     (8.2) —    (165.4) (8.2) —    (165.4)

Lease payments

     —    —    (0.5) —    —    —   

Dividends paid

     (1.7) (48.3) (108.5) —    (46.5) (103.3)

Interest received

     8.0  13.1  44.6  139.1  36.5  130.3 

Interest and borrowing costs paid

     (37.8) (70.2) (144.7) (36.1) (67.0) (129.5)
      

 

 

 

 

 

Net Cash (Used in)/Provided by Financing Activities

     (117.8) (1,041.1) (1,585.9) 27.0  (1,017.1) (797.1)
      

 

 

 

 

 

Net (Decrease)/Increase in Cash Held

     47.8  (53.5) (730.6) (1.9) (24.0) 3.2 

Cash at the beginning of the financial year

     262.3  328.4  1,019.8  3.3  27.3  24.1 

Effects of exchange rate changes on the balances of cash held in foreign currencies at the beginning of the financial year

     (12.9) (12.6) 39.2  —    —    —   
      

 

 

 

 

 

Cash at the End of the Financial Year

  31(b) 297.2  262.3  328.4  1.4  3.3  27.3 
      

 

 

 

 

 

*The Company 2001 includes a distribution from the Distribution Trust arising from the sale of the Electrical Distribution business (refer Note 4(b)).
      Consolidated

 
   Note

  

2004

$m


  

2003

$m


  

2002

$m


 

Cash Flows Related to Operating Activities

             

Receipts from customers (excluding non-recurring and Accufix Research Institute)

     1,155.9  1,357.0  2,356.5 

Payments to suppliers and employees (excluding non-recurring and Accufix Research Institute)

     (950.6) (1,159.9) (2,124.8)
      

 

 

Net receipts from customers (excluding non-recurring and Accufix Research Institute)

     205.3  197.1  231.7 

Income taxes paid

     (15.9) (8.6) (25.5)

Dividends received

     —    2.6  0.3 
      

 

 

Net cash provided by Operating Activities (excluding non-recurring and Accufix Research Institute)

     189.4  191.1  206.5 

Non-recurring payments to suppliers and employees

     (7.1) (26.8) (82.7)

Payments to suppliers and employees net of customer receipts

             

(Accufix Research Institute)

     (3.1) (2.7) (10.7)
      

 

 

Net Cash (Used in)/Provided by Operating Activities

  31(a) 179.2  161.6  113.1 
      

 

 

Cash Flows Related to Investing Activities

             

Payments for businesses, net of cash acquired

     —    —    (40.9)

Payments for property, plant and equipment

     (13.8) (15.4) (34.3)

Proceeds from sale of businesses, net of cash disposed

     —    —    936.4 

Proceeds from sale of plant and equipment in the ordinary course of business

     5.3  6.1  12.1 

Loans repaid

     3.4  4.2  1.2 

Proceeds from sale of other investments

     —    9.1  —   

Payments for other investments

     (1.3) —    —   
      

 

 

Net Cash (Used in)/Provided by Investing Activities

     (6.4) 4.0  874.5 
      

 

 

Cash Flows Related to Financing Activities

             

Proceeds from borrowings

     104.3  7.8  737.0 

Repayments of borrowings

     (140.9) (86.9) (1,673.9)
      

 

 

Net repayments of borrowings

     (36.6) (79.1) (936.9)

Proceeds from issues of shares

     1.0  1.0  1.2 

Payments for share buy-back

     (65.4) (8.2) —   

Dividends paid

     (32.7) (1.7) (48.3)

Interest received

     9.0  8.0  13.1 

Interest and borrowing costs paid

     (28.7) (37.8) (70.2)
      

 

 

Net Cash (Used in)/Provided by Financing Activities

     (153.4) (117.8) (1,041.1)
      

 

 

Net (Decrease)/Increase in Cash Held

     19.4  47.8  (53.5)

Cash at the beginning of the financial year

     297.2  262.3  328.4 

Effects of exchange rate changes on the balances of cash held in foreign currencies at the beginning of the financial year

     (1.8) (12.9) (12.6)
      

 

 

Cash at the End of the Financial Year

  31(b) 314.8  297.2  262.3 
      

 

 

 

The above statements of cash flows should be read in conjunction with the accompanying notes.

79


PART III

 

Items 17 &Item 18 : Consolidated Financial Statements


 

Industry SegmentsINDUSTRY SEGMENTS

 

of Ansell Limited and its Controlled Entities for the year ended 30 June 20032004

 

   Operating Revenue

  Operating Result

 
   2003
$m


  2002
$m


  2001
$m


  2003
$m


  2002
$m


  2001
$m


 
       

INDUSTRY

                   

Ansell Healthcare

                   

Occupational Healthcare

  624.9  640.2  651.0  62.9  37.0  44.3 

Professional Healthcare

  452.6  546.9  544.9  53.9  92.7  70.6 

Consumer Healthcare

  216.1  227.1  216.3  42.8  32.6  29.4 
   

 

 

 

 

 

Total Ansell Healthcare

  1,293.6  1,414.2  1,412.2  159.6  162.3  144.3 

Unallocated Items

  26.5  27.9  60.6  (22.4) (27.7) (29.4)
            

 

 

            137.2  134.6  114.9 

Discontinued Businesses

                   

Trading

     808.6  2,744.6     61.0  132.9 
            

 

 

Operating EBITA

           137.2  195.6  247.8 

NON RECURRING

                   

Discontinued Businesses

                   

Net gain on sale of interests in Associated Companies

           5.5       

Proceeds/ Net gain on sale of Controlled Entities and Businesses

     939.7  1,049.9     25.7  155.2 

Rationalisation/Restructuring

                   

Ansell Healthcare

           (4.6) (11.6) (60.2)

Engineered Products

                 (27.4)

Tyres

                 (16.2)

Other

           (5.5) (6.5) (7.2)

Write-down of assets

                   

Ansell Healthcare

              (63.1)   

Exide Investment

              (99.9)   

Other

           (1.5) (13.5) (97.7)
            

 

 

            131.1  26.7  194.3 

Goodwill amortisation

           (25.3) (29.2) (40.8)
            

 

 

Earnings before Net Interest and Tax (EBIT)

           105.8  (2.5) 153.5 

Borrowing Costs net of Interest Revenue

           (26.5) (54.7) (99.4)
            

 

 

Operating Profit before Tax

           79.3  (57.2) 54.1 

Tax

           (26.8) (55.8) (189.9)

Outside Equity Interests

           (2.6) (2.8) (3.6)
   

 

 

 

 

 

Total Consolidated

  1,320.1  3,190.4  5,267.3  49.9  (115.8) (139.4)
   

 

 

 

 

 

REGIONS

                   

Asia Pacific

  173.7  170.7  160.5  35.9  32.9  30.7 

Americas

  656.0  799.5  813.0  80.2  99.1  98.7 

Europe

  463.9  444.0  438.7  43.5  30.3  14.9 
   

 

 

 

 

 

   1,293.6  1,414.2  1,412.2  159.6  162.3  144.3 
   

 

 

 

 

 

   Assets Employed

  Liabilities

 
   2003
$m


  2002
$m


  2001
$m


  2003
$m


  2002
$m


  2001
$m


 

INDUSTRY

                   

Ansell Healthcare

                   

Occupational Healthcare

  300.9  376.0  512.6  118.8  124.7  117.3 

Professional Healthcare

  331.5  404.3  457.8  108.3  114.3  96.9 

Consumer Healthcare

  115.7  140.8  160.0  52.8  54.6  57.5 
   

 

 

 

 

 

Total Ansell Healthcare

  748.1  921.1  1,130.4  279.9  293.6  271.7 

Unallocated Items

  (16.6) (21.1) (5.2) 426.1  619.9  1,699.1 

Discontinued Businesses

  223.0  252.6  1,456.6  28.3  43.2  439.2 

Goodwill and Brand names

  324.5  403.2  556.5          

Cash

  299.8  276.9  337.9          
   

 

 

 

 

 

Total Consolidated

  1,578.8  1,832.7  3,476.2  734.3  956.7  2,410.0 
   

 

 

 

 

 

REGIONS

                   

Asia Pacific

  269.5  318.4  359.4  78.6  83.0  80.6 

Americas

  297.5  398.6  572.0  173.2  181.9  165.8 

Europe

  181.1  204.1  199.0  28.1  28.7  25.3 
   

 

 

 

 

 

   748.1  921.1  1,130.4  279.9  293.6  271.7 
   

 

 

 

 

 

Prior year comparatives have been adjusted for reclassification of former Industry Segment businesses which have been sold or abandoned and hence classified as Discontinued Businesses.

   Operating Revenue

  Operating Result

 
   

2004

$m


  

2003

$m


  

2002

$m


  

2004

$m


  2003
$m


  

2002

$m


 

INDUSTRY

                   

Ansell Healthcare

                   

Occupational Healthcare

  545.2  624.9  640.2  74.2  62.9  37.0 

Professional Healthcare

  381.8  452.6  546.9  40.5  53.9  92.7 

Consumer Healthcare

  186.3  216.1  227.1  31.6  42.8  32.6 
   
  
  
  

 

 

Total Ansell Healthcare

  1,113.3  1,293.6  1,414.2  146.3  159.6  162.3 

Unallocated Items

  17.8  26.5  27.9  (13.1) (22.4) (27.7)
            

 

 

            133.2  137.2  134.6 

Discontinued Businesses

                   

Trading

        808.6        61.0 
            

 

 

Operating EBITA

           133.2  137.2  195.6 

NON RECURRING

                   

Discontinued Businesses

                   

Net gain on sale of interests in Associated Companies

              5.5    

Proceeds/Net gain on sale of

                   

Controlled Entities and Businesses

        939.7        25.7 

Other

           17.8       

Rationalisation/Restructuring

                   

Ansell Healthcare

              (4.6) (11.6)

Other

           (9.7) (5.5) (6.5)

Write-down of assets

                   

Ansell Healthcare

           (8.8)    (63.1)

Exide Investment

                 (99.9)

Other

           (1.0) (1.5) (13.5)
            

 

 

            131.5  131.1  26.7 

Goodwill amortisation

           (21.4) (25.3) (29.2)
            

 

 

Earnings before Net Interest and Tax (EBIT)

           110.1  105.8  (2.5)

Borrowing Costs net of Interest Revenue

           (16.8) (26.5) (54.7)
            

 

 

Operating Profit before Tax

           93.3  79.3  (57.2)

Tax

           (20.7) (26.8) (55.8)

Outside Equity Interests

           (1.9) (2.6) (2.8)
   
  
  
  

 

 

Total Consolidated

  1,131.1  1,320.1  3,190.4  70.7  49.9  (115.8)
   
  
  
  

 

 

REGIONS

                   

Asia Pacific

  168.2  173.7  170.7  41.4  35.9  32.9 

Americas

  544.7  656.0  799.5  65.0  80.2  99.1 

Europe

  400.4  463.9  444.0  39.9  43.5  30.3 
   
  
  
  

 

 

Total Ansell Healthcare

  1,113.3  1,293.6  1,414.2  146.3  159.6  162.3 
   
  
  
  

 

 

   Assets Employed

  Liabilities

 
   

2004

$m


  

2003

$m


  

2002

$m


  

2004

$m


  2003
$m


  2002
$m


 

INDUSTRY

                   

Ansell Healthcare

                   

Occupational Healthcare

  274.8  284.4  353.8  96.1  90.0  105.2 

Professional Healthcare

  277.4  310.8  376.6  68.1  63.9  81.5 

Consumer Healthcare

  110.4  111.5  135.3  37.2  39.4  44.3 
   
  
  
  

 

 

Total Ansell Healthcare

  662.6  706.7  865.7  201.4  193.3  231.0 

Unallocated Items

  15.6  24.8  34.3  463.8  512.7  682.5 

Discontinued Businesses

  209.7  223.0  252.6  22.4  28.3  43.2 

Goodwill and Brand names

  293.4  324.5  403.2          

Cash

  318.1  299.8  276.9          
   
  
  
  

 

 

Total Consolidated

  1,499.4  1,578.8  1,832.7  687.6  734.3  956.7 
   
  
  
  

 

 

REGIONS

                   

Asia Pacific

  268.3  269.5  318.4  75.3  78.6  83.0 

Americas

  227.5  256.1  343.2  90.6  86.6  119.3 

Europe

  166.8  181.1  204.1  35.5  28.1  28.7 
   
  
  
  

 

 

Total Ansell Healthcare

  662.6  706.7  865.7  201.4  193.3  231.0 
   
  
  
  

 

 

 

The above industry segments report should be read in conjunction with the accompanying notes, including Note 30.

80


PART III

 

Items 17 &Item 18 : Consolidated Financial Statements


Notes to the Financial Statements

 

1.Summary of Significant Accounting PoliciesSUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

General

 

Ansell Limited is a multinational healthcare solutions provider of barrier protection products against injury, infection and contamination. The Company’s principal line of business, determined and reported on the basis of differing products and services, is the manufacture and supply of barrier protection products into the Occupational, Professional and Consumer healthcare markets.

 

The Ansell Healthcare group manufactures industrial gloves, medical gloves and consumer products including household gloves and condoms in the Asia Pacific region and America, and markets these products globally.

 

The significant policies which have been adopted in the preparation of this financial report are:

 

Basis of Preparation of Financial Report

 

The financial report is a general purpose financial report which has been prepared in accordance with Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

 

It has been prepared on the basis of historical costs and except where stated, does not take into account changing money values or fair values of non-current assets.

 

The accounting policies adopted in preparing the financial report have been consistently applied by each entity in the consolidated entity and except where there is a change in accounting policy as set out in Note 2, are consistent with those of the previous year.

 

Comparative information is reclassified where appropriate to enhance comparability.

 

Principles of Consolidation

 

The consolidated financial statements of the Ansell Limited Group (“the consolidated entity”) include the financial statements of Ansell Limited (“the Company”), being the parent entity, and its controlled entities.

 

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by the Company as at balance date and the results of all controlled entities for the year then ended. The effects of all transactions between entities in the consolidated entity are eliminated in full. Outside interests in the results and equity of controlled entities are shown separately in the consolidated Statement of Financial Performance and Statement of Financial Position respectively.

 

Results of controlled entities are included in the consolidated Statement of Financial Performance from the date on which control commences and continue to be included until the date control ceases to exist.

 

Revenue Recognition

 

Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST).

 

Sales Revenue

 

Sales revenue comprises revenue earned (net of returns, discountsrebates and allowances)allowances which are accrued at expected levels as sales occur) from the provision of products to entities outside the consolidated entity. Sales revenue is recognised when the goods are shipped and title passes.

 

Interest Income

 

Interest income is recognised as it accrues.

 

Asset Sales

 

The net proceeds of asset sales are included as revenue of the consolidated entity. The profit or loss on disposal of assets is brought to account at the date control passes and a contract of sale has been signed.

 

The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of the disposal and the net proceeds on disposal.

 

Any related balance in the asset revaluation reserve is transferred to retained profits/accumulated losses on disposal.

 

Borrowing Costs

 

Borrowing costs include interest, amortisation of ancillary costs incurred in connection with the arrangement of borrowings and other related charges.

Ancillary costs incurred in connection with the arrangement of term borrowings are capitalised and amortised over the life of the borrowings.

81


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

1.Summary of Significant Accounting PoliciesSUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(continued)

 

Goods and Services Tax

 

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

 

Receivables and payables are stated with the amount of GST included.

 

The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the Statement of Financial Position.

 

Cash flows are included in the Statement of Cash Flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

 

Income Tax

 

The consolidated entity adopts the income statement liability method of tax effect accounting.

 

Income tax expense is calculated at current rates on the accounting profit adjusted for permanent differences and income tax over/under provided in the previous year. The estimated liability for income tax outstanding in respect of the period’s operations is included in the Statement of Financial Position as a current liability.

 

Future income tax benefits and liabilities arising because some items are included in accounting profit in a period different from that in which the items are assessed for income tax, are included in the Statement of Financial Position as a non-current asset and a non-current liability respectively. As provided for in Accounting Standard AASB 1020, these deferred tax balances have been offset, where applicable, in the financial statements of the individual entities.

The eventual recoverability of future income tax benefits and payment of the non-current tax liability is contingent upon taxable income being earned in future periods, continuation of the relevant taxation laws and each relevant company continuing to comply with the appropriate legislation.

 

Future income tax benefits attributable to tax losses (including capital losses) are only recorded where virtual certainty of recovery exists.

 

Provision is made for overseas taxes, which may arise in the event of retained profits of foreign controlled entities being remitted to Australia, when the dividend is declared. Provision is made for capital gains tax, which may arise in the event of sale of revalued assets, only when such assets are sold.

Tax Consolidation

The Company is the head entity in the tax-consolidated group comprising all the Australian wholly owned subsidiaries set out in Note 37. The implementation date for the tax-consolidated group was 1 July 2002. There has been no material impact on the financial statements of the Company or consolidated entity as a result of adopting tax consolidation as all tax balances of the Company and all Australian wholly owned subsidiaries were written off in a prior period.

 

Receivables

 

Trade Debtors

 

Trade debtors are recognised as at the date they are invoiced and are principally on 30 day terms. A provision for doubtful debts is recognised when collection of the full amount is no longer probable.

 

Other Amounts Receivable

 

Other amounts receivable comprise amounts due as a result of transactions outside the normal course of trading.

 

Inventories

 

Stock on Hand and Work in Progress

 

Stock on hand and work in progress are consistently valued on the basis of the lower of cost and net realisable value. The methods generally adopted throughout the consolidated entity in determining costs are:

 

Raw Materials and Other Stock

 

Actual costs, determined on a first in, first out basis or standard costs approximating actual costs.

 

82


PART III

Item 18 : Consolidated Financial Statements

1.SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories (continued)

Finished Goods and Work in Progress

 

Standard costs approximating actual costs include an appropriate allocation of manufacturing overheads. Merchant lines are valued at actual cost into store, determined on a first in, first out or average cost basis.

Obsolete and slow moving stocks are written down to net realisable value where such value is below cost. Net realisable value is determined on the basis of each inventory line’s normal selling pattern. Expenses of marketing, selling and distribution to customers are estimated and are deducted to establish net realisable value.

PART III

Items 17 & 18 : Financial Statements


Notes to the Financial Statements

1.Summary of Significant Accounting Policies(continued)

 

Investments

 

Controlled Entities

All investments are valued at the lower of cost and recoverable value. Dividends and distributions are brought to account in the Statement of Financial Performance when they are paid by the controlled entities.

Associated Companies

 

An associate is an entity, other than a partnership, over which the consolidated entity exercises significant influence, where the investment in that entity is material and has not been acquired with a view to disposal in the near future.

 

In the consolidated financial statements, investments in associates are accounted for using equity accounting principles. Investments in associates are carried at the lower of the equity accounted amount and recoverable amount. The consolidated entity’s share of the associates’ net profit after tax is recognised in the consolidated Statement of Financial Performance after adjusting for: revisions in depreciation of depreciable assets and amortisation of goodwill arising from adjustments made as at the date of acquisition; dissimilar accounting policies; and the elimination of unrealised profits and losses on transactions between the associate and any entities inSubsequent to 2002 the consolidated entity or another associate ofhas no investments that meet the consolidated entity. Other movements in reserves are recognised directly in consolidated reserves.

Revenue from dividends from associates is recognised by the parent entity when dividends are received.

The consolidated entity disposed of its interests incriteria for recognition as an associated companies during the year.company.

 

Other Companies

 

Investments in other listed and unlisted companies are carried at cost less any amount provided for diminution in value as determined by the Directors. Dividends are recognised when they are received.

 

Interest in Partnership

 

The consolidated entity’s 50% interest in the South Pacific Tyres partnership is carried as an investment.investment at cost. The principal activity of the partnership is the manufacture and sale of tyres and related products.

 

Property, Plant and Equipment

 

Acquisition

 

Items of property, plant and equipment are initially recorded at cost and depreciated as set out below. The cost of property, plant and equipment constructed by the consolidated entity includes the cost of materials, direct labour and capitalised interest.

 

Depreciation and Amortisation

 

Depreciation and amortisation is calculated on a straight line basis so as to write off the net cost of each item of property, plant and equipment, excluding land, over its estimated useful life.

 

The expected useful lives are as follows:

 

Freehold buildings of the Company and all Australian controlled entities

  - 40 years

Freehold buildings of overseas controlled entities

  Allowable taxation rates20 -40 years

Leasehold buildings

  - Life of lease

Plant and equipment

  - 3 to 10 years

 

Depreciation and amortisation rates and methods are reviewed annually for appropriateness.

 

Leases

 

Operating lease payments are expensed as incurred.incurred on a straight line basis over the term of the lease.

83


PART III

Item 18 : Consolidated Financial Statements

1.SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Recoverable Amount of Non-Current Assets Valued on Cost Basis

 

The carrying amounts of non-current assets valued on the cost basis are reviewed to determine whether they are in excess of their recoverable amount at balance date. If the carrying amount of a non-current asset exceeds its recoverable amount, the asset is written down to the lower amount. The write-down is recognised as an expense in the net profit or loss in the reporting period in which it occurs.

 

In assessing and measuring recoverable amounts of non-current assets the relevant cash flows have been discounted to their present value.

 

Brand Names

 

Brand names acquired since 1 July 1987 are recorded in the financial statements at cost. No amortisation is provided against the carrying value of these brand names on the basis that the lives of these assets are considered unlimited at this point in time.

 

Brand names have an unlimited legal life and the brand names recorded in the financial statements are not currently associated with products which are likely to become commercially or technically obsolete.

PART III

Items 17 & 18 : Financial Statements


Notes to the Financial Statements

1.Summary of Significant Accounting Policies(continued)

 

Payables

 

Trade and Other Creditors

 

Trade and other creditors are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the Company or the consolidated entity. Trade liabilities are normally settled on 60 day terms.

 

Bills Payable

 

Bills payable are carried at the principal amount plus accrued interest.

 

Interest Bearing Liabilities

 

Bank and other loans are carried at their principal amount, subject to set-off arrangements. Interest is charged as an expense as it accrues.

 

Employee Entitlements

 

Wages, Salaries and Annual Leave

 

Liabilities for employee entitlements to wages, salaries and annual leave represent the amount which the consolidated entity has a present obligation to pay resulting from employees’ services provided up to the balance date calculated at undiscounted amounts based on expected wage and salary rates that will be paid when the obligation is settled and include related on-costs.

 

Long Service Leave and Post Retirement Health Benefits

 

The liability for employee entitlements to long service leave and post retirement health benefits represents the present value of the estimated future cash outflows to be made by the Company and the consolidated entity resulting from employees’ services provided up to the balance date.

 

The provision is calculated using estimated future increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using rates attaching to national government securities at balance date which most closely match the terms of maturity of the related liabilities. The unwinding of the discount is treated as long service leave expense.

 

Provisions

 

A provision is recognised when there is a legal, equitable or constructive obligation as a result of a past event and it is probable that a future sacrifice of economic benefits will be required to settle the obligation, the timing or amount of which is uncertain.

 

If the future sacrifice of economic benefits is material, a provision is determined by discounting the expected future cash flows required to settle the obligation at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is treated as part of the expense related to the particular provision.

84


PART III

Item 18 : Consolidated Financial Statements

1.SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Provisions (continued)

 

Rationalisation and Restructuring

 

Provisions for rationalisation and restructuring are only recognised when a detailed plan has been approved and the restructuring has either commenced or been publicly announced, or firm contracts related to the restructuring have been entered into. Costs related to ongoing activities are not provided for.

 

Contingencies, Accufix Pacing Lead Related Expenses and Insurance Claims

 

The consolidated entity provides for certain specifically identified or obligated costs when these amounts are reasonably determinable.

 

Dividends

 

A provision for dividends payable is recognised in the reporting period in which the dividends are declared.

 

Other Liabilities

 

Amounts due under contract

 

Amounts due under contract are carried at the outstanding consideration payable.

 

Superannuation Contributions

 

The Company and other controlled entities contribute to various defined benefit and accumulation superannuation funds as set out in Note 24. Employer contributions to these funds are charged against the operating profit as they are made.

PART III

Items 17 & 18 : Financial Statements


Notes The Company and the controlled entities have no legal or constructive obligation to the Financial Statementsfund any deficit.

1.Summary of Significant Accounting Policies(continued)

 

Employee and Executive Share Plans

 

The Company currently maintains two plans for employees of the consolidated entity - the Pacific Dunlop Employee Share Plan and the Ansell Limited Stock Incentive Plan. The outstanding options issued under the Pacific Dunlop Executive Share Option Plan expired during the year and aA further Plan, the Pacific Dunlop Executive Share Plan, was discontinued in 1996. Further information on these plans is set out in Note 25.

 

AsThe consolidated entity has recorded a resultcharge to the profit and loss for the current year of approximately $2.6 million based on the issueexpected vesting of 437,500 Performance Share Rights (PSR’s)issued to executives pursuant to the Ansell Limited Stock Incentive Plan duringover the year, the consolidated entity has recorded an accrual at 30 June 2003 of approximately $1 million based on the expected vesting of approximately 146,000 PSR’s at the market value of the Company’s shares as at 30 June 2003.past two years. Australian Accounting Standards do not currently require the recognition of compensation expense in relation to issuance of shares to employees, however the Company considers the recognition of such to be consistent with appropriate accounting criteria given the movement towards the recognition of such compensation under Exposure Draft 108 Equity Based Compensation.

 

Accounting for Acquisitions (Goodwill)

 

Acquired businesses are accounted for on the basis of the cost method. Fair values are assigned at date of acquisition to all the identifiable underlying assets acquired and to the liabilities assumed. Specific assessment is undertaken at the date of acquisition of any appropriate additional costs to be incurred. A liability for restructuring costs is only recognised as at the date of acquisition when there is a demonstrable commitment to restructuring together with a detailed plan. Further, the liability is only recognised when there is little or no discretion to avoid payment to other parties to settle such costs and a reliable estimate of the amount of the liability can be made.

Goodwill represents the excess of the purchase consideration plus incidental costs over the fair value of the identifiable net assets acquired. Acquired goodwill is capitalised and amortised to the Statement of Financial Performance on a straight line basis over the future period of expected benefit.

 

The benefits from the goodwill acquired may exceed 20 years but the goodwill is written off over periods not exceeding 20 years in compliance with Australian Accounting Standards. The unamortised balance of goodwill is reviewed at least at each reporting date and any material diminution in value is charged to the Statement of Financial Performance. For the purposes of this review process, goodwill is allocated to cash generating units (which equate to the Group’s reportable business units i.e. Occupational, Professional and Consumer) upon acquisition. Acquired businesses can readily be allocated to one of the business units on the basis of products manufactured and/or marketed. Such manufacturing and marketing operations tend to cover more than one geographical region.

85


PART III

Item 18 : Consolidated Financial Statements

1.SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Foreign Currency Translations

 

Transactions in foreign currencies are recorded at the rate of exchange ruling on the date of each transaction. At balance date, amounts payable and receivable in foreign currencies are converted at the rates of exchange ruling at that date.

 

The financial statements of overseas controlled entities that are self sustaining foreign operations are maintained in their functional currencies and are converted to the Group’s reporting currency using the current rate method. Equity items are translated at historical rates. Variations occurring from year to year arising from this translation method are transferred to the foreign currency translation reserve.reserve until disposal, or partial disposal, of the operations.

 

Exchange differences arising on foreign currency amounts payable and receivable are brought to account in the Statement of Financial Performance. On consolidation, exchange differences on long term foreign currency amounts payable and receivable that hedge a net investment in an overseas controlled entity are transferred to the foreign currency translation reserve on a net of tax basis where applicable.

 

Derivatives

 

The Company and consolidated entity use derivative financial instruments, principally foreign exchange and interest rate related, to reduce their exposure to movements in foreign exchange rate and interest rate movements.

 

The consolidated entity has adopted certain principles in relation to derivative financial instruments:

 

 (i)it does not trade in a derivative that is not used in the hedging of an underlying business exposure of the consolidated entity;

 

 (ii)derivatives acquired must be able to be recorded on the consolidated entity’s treasury management systems, which contain extensive internal controls; and

 

 (iii)the consolidated entity does not deal with counter-parties rated lower than A- by Standard and Poor’s or A3 by Moody’s Investors Service for any overnight transactions.

 

The Company and consolidated entity follow the same credit policies, legal processes, monitoring of market and operational risks in the area of derivative financial instruments, as they do in relation to financial assets and liabilities on the Statement of Financial Position, where internal controls operate.

PART III

Items 17 & 18 : Financial Statements


Notes to the Financial Statements

1.Summary of Significant Accounting Policies(continued)

 

Derivative Financial Instruments Held or Issued for Purposes Other Than Trading

 

On a continuing basis, the consolidated entity monitors its anticipated future exposures and on some occasions hedges all or part of these exposures. The transactions which may be covered are future profitsnet cash flows of overseas controlled entities, and future foreign exchange requirements.requirements and interest rate positions.

 

These exposures are then monitored against continuing analysis of anticipated positions and may be modified from time to time. TheseThe foreign exchange transactions predominantly do not exceed 12 months duration and hedge transactions the consolidated entity expects to occur in this time frame.

Gains and losses on derivatives used as hedges are accounted for on the same basis as the underlying physical exposures they hedge. Accordingly, hedge gains and losses are included From time to time minor mismatches occur in the Statement of Financial Performance when the gain orforward book, however these mismatches are managed under strict guidelines, limits and internal controls with stop loss arising on the related physical exposures are recognised in the Statement of Financial Performance.parameters. Interest rate derivative instruments can be for periods up to 5 years.

 

When hedging an underlying interest rate exposure, with a derivative financial instrument, all gains and losses are accounted for on an accrual basis, thereby adjusting the underlying physical cost to the hedged rate over the life of the transaction. Gains or losses resulting from the termination of an interest rate swap contract where the underlying borrowing remains, are deferred on the Statement of Financial Position and then amortised over the life of the borrowing. Where the transaction is a single event, such as a foreign exchange exposure, the hedge gain or loss is taken to account on the actual exposure date.

 

Gains and losses on derivative financial instruments which hedge anticipated transactions are in the first instance deferred and later recognised in the Statement of Financial Performance when the hedged transaction occurs. Such deferrals only occur where the future transaction remains assured. Where an actual or anticipateda transaction is modified or extinguished any associated derivative financial instrument is also modified or extinguished and any gain or loss that no longer relates to an actual or anticipated exposure is immediately taken to the Statement of Financial Performance.

Gains and losses that arise prior to and upon the maturity of transactions entered into under rollover strategies are deferred and included in the measurement of the hedge, if the transaction is still expected to continue. If the transaction is no longer expected to continue, the gains and losses are recognised immediately in the Statement of Financial Performance.

 

Derivative Financial Instruments Held or Issued for Trading Purposes

 

The Company and the consolidated entity also enter into a limited number of exchange rate related derivative contracts for trading purposes. These transactions are undertaken under strict guidelines, limits and internal controls and with appropriate stop loss parameters. Trading activities include taking positions within authorised and clearly defined limits to benefit from expected movementsdo not trade in prices. The portfolio of derivative financial instruments heldor hold them for trading purposes is valued at market rates with all gains and losses being recognised in the Statement of Financial Performance for the current period.speculative purposes.

 

86


PART III

Item 18 : Consolidated Financial Statements

1.SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of Estimates

 

The preparation of consolidated financial statements in conformity with Australian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. The estimates and associated assumptions are based on historical experience and various factors that are believed to be reasonable under the circumstances and are reviewed on an ongoing basis. Actual results could differ from these estimates. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Earnings per Share

Basic earnings per share (EPS) is calculated by dividing the net profit attributable to members of the parent entity for the reporting period, after excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares of the Company, adjusted for any bonus issue.

Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after tax effect of financing costs associated with dilutive potential ordinary shares and the effect on revenues and expenses of conversion to ordinary shares associated with dilutive potential ordinary shares, by the weighted average number of ordinary and dilutive potential ordinary shares adjusted for any bonus issue.

87


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

2.Change in Accounting PolicyIMPACTOF ADOPTING AUSTRALIAN EQUIVALENTSTO INTERNATIONAL FINANCIAL REPORTING STANDARDS

 

The consolidated entity has applied AASB 1044 “Provisions, Contingent Liabilities and Contingent Assets”Ansell will be required to prepare financial statements using Australian equivalents to International Reporting Standards (IFRS) for the year ending 30 June 2006. Ansell will report for the first time from 1 July 2002.in compliance with IFRS when the results for the half-year ending 31 December 2005 are released.

 

Dividends are now recognised at the time they are declared, determined or publicly recommended. Previously, final dividends were recognised in theIFRS requires that entities reporting their financial year to which they related, even though the dividends were announced after the end of that financial year.

The consolidated entity has applied the revised AASB 1012 “Foreign Currency Translation” and the revised AASB 1028 “Employee Benefits”statements for the first time fromunder IFRS must also restate their comparatives using all IFRS with the exception of IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement. This will mean the opening IFRS balance sheet will be a restated comparative balance sheet, dated 1 July 2002.2004. Most adjustments required on transition to IFRS will be made, retrospectively, against opening accumulated losses on 1 July 2004, however transitional adjustments relating to those standards where comparatives are not required will only be made on 1 July 2005. Comparatives restated to comply with IFRS will be reported, for the first time, in the financial statements for the half-year ending 31 December 2005.

 

There were no materialAnsell has established a project team to plan and implement the transition process to IFRS. As at 30 June 2004, the project team has completed an impact study to identify key areas that will be impacted by IFRS. The impact study addressed key differences in accounting policies and disclosures, business issues associated with Australian equivalents to IFRS and key milestones for IFRS implementation including a high-level project plan.

The key differences in accounting policies that are expected to arise from adopting IFRS are as follows:

Intangible Assets - the amortisation of goodwill will be prohibited, and will be replaced by annual impairment testing of cash flows of the cash-generating unit to which the asset belongs.

Impairment of Assets - the recoverable amount of an asset will be determined on a discounted cash flow basis, with strict tests for determining whether the value of goodwill or cash-generating units have been impaired.

Superannuation - surpluses and deficits in defined benefit superannuation plans sponsored by entities within the consolidated entity will be recognised in the Statement of Financial Performance and Statement of Financial Position.

Share-Based Payments - equity-based compensation in respect of options will be recognised as an expense in the periods during which the employee provides related services.

Financial Instruments - derivative financial impactsinstruments will be carried at fair value in the Consolidated entity’s Statement of Financial Position.

The above should not be regarded as a complete list of changes to accounting policies that will result from the adoptiontransition to Australian equivalents to IFRS, as some decisions have not yet been made where choices of these revised standards.accounting policies are available. For this reason it is not possible at this time to quantify the potential impact of the transition to Australian equivalents to IFRS on the consolidated entity’s financial performance and financial position.

 

3.Total RevenueTOTAL REVENUE

 

  Consolidated

  The Company

  Consolidated

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

  2004

  2003

  2002

Revenue from the Sale of Goods

  1,293.6  2,222.8  4,156.8  86.0  498.9  1,527.0  1,113.3  1,293.6  2,222.8

Revenues From Other Operating Activities

                           

Dividend income

                           

From shares in wholly owned controlled entities

  —    —    —    27.8  195.5  25.2

From shares in associated companies

  —    —    —    2.6  1.3  1.0

From shares in other companies

  —    0.3  0.6  —    —    —    —    —    0.3

Interest Received or Due and Receivable

                           

From wholly owned controlled entities

  —    —    —    139.1  34.3  127.7

From related parties

  3.3  2.5  0.8  0.8  2.0  0.8  3.5  3.3  2.5

From others

  8.0  13.0  44.1  —    1.9  1.8  9.0  8.0  13.0
  
  
  
  
  
  
  
  
  

Total revenue from other operating activities

  11.3  15.8  45.5  170.3  235.0  156.5  12.5  11.3  15.8
  
  
  
  
  
  
  
  
  

Revenue from Outside Operating Activities

                           

Proceeds from the Sale of Non-Current Assets

  15.2  12.1  15.1  6.7  2.0  6.4  5.3  15.2  12.1

Proceeds Received from the Sale of Businesses*

  —    939.7  1,049.9  —    521.5  214.8

Proceeds Received from the Sale of Businesses

  —    —    939.7
  
  
  
  
  
  
  
  
  

Total revenue from outside operating activities

  15.2  951.8  1,065.0  6.7  523.5  221.2  5.3  15.2  951.8
  
  
  
  
  
  
  
  
  

Total Revenue

  1,320.1  3,190.4  5,267.3  263.0  1,257.4  1,904.7  1,131.1  1,320.1  3,190.4
  
  
  
  
  
  
  
  
  

 

*The Company 2001 includes a distribution from The Distribution Trust arising from the sale of the Electrical Distribution business (refer to Note 4(b)).

88


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

4.Profit/(Loss) from Ordinary Activities Before Income TaxPROFIT/(LOSS)FROM ORDINARY ACTIVITIES BEFORE INCOME TAX

 

  Consolidated

  The Company

   Consolidated

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

(a) Profit/(loss) from ordinary activities before income tax has been arrived at after charging/(crediting) the following items:

                 

Borrowing Costs

                 

Interest Paid or Due and Payable:

                 

To others

  33.9  61.8  140.8  32.8  59.4  127.4   25.4  33.9  61.8 

Other Borrowing Costs

  3.9  8.4  3.5  3.3  7.6  2.1   4.0  3.9  8.4 
  

 

 

 
  

 

  

 

 

Total Borrowing Costs

  37.8  70.2  144.3  36.1  67.0  129.5   29.4  37.8  70.2 

Depreciation

                 

Buildings

  1.8  3.9  4.8  —    0.9  0.4   1.1  1.8  3.9 

Plant & equipment

  27.7  46.4  85.4  0.1  7.0  16.3   22.7  27.7  46.4 

Amortisation

                 

Leasehold land and buildings

  1.7  2.8  5.1  —    0.2  0.7   1.5  1.7  2.8 

Goodwill

  25.3  29.2  40.8  —    0.3  1.4   21.4  25.3  29.2 

Deferred costs

  —    —    3.7  —    —    3.7 

Research and Development Costs Expensed as Incurred

  12.8  17.0  23.9  —    0.4  0.3   12.6  12.8  17.0 

Net Bad Debts Expense

  (0.6) 0.8  1.9  0.1  0.4  0.9   0.4  (0.6) 0.8 

Amounts Set Aside to Provision for:

                 

Doubtful trade debts

  (2.5) (2.9) 7.9  0.1  1.0  (0.1)  1.2  (2.5) (2.9)

Employee entitlements

  10.8  29.2  60.9  0.7  8.5  26.7   13.0  10.8  29.2 

Rationalisation and restructuring costs

  10.1  20.3  61.0  2.9  (0.3) (1.3)  9.7  10.1  20.3 

Rebates, allowances and warranty claims

  11.5  7.2  7.1  1.4  2.4  0.3   9.6  11.5  7.2 

Environmental remediation

  —    —    (3.7) —    —    —   

Net foreign exchange (gain)/loss

  4.0  (0.4) (2.4) 2.5  23.3  37.8 

Net foreign exchange loss/(gain)

  1.0  4.0  (0.4)

Profits Arising from the Sale of Property, Plant and Equipment

  (0.3) (7.6) (1.1) —    (6.7) (0.4)  (0.8) (0.3) (7.6)

Losses Arising from Sale of Property, Plant and Equipment

  0.2  13.2  8.5  —    7.7  7.8   —    0.2  13.2 

Operating Lease Rentals

  24.1  37.5  79.2  0.7  9.5  44.2   20.0  24.1  37.5 

Write-down in Value of Inventories

  5.9  3.0  3.7  —    1.3  (1.0)  3.7  5.9  3.0 

(b) Individually significant items included in profit/(loss) from ordinary activities before income tax expense

                 

Refund of Sales Tax

  17.8  —    —   

Write-down of Ansell Healthcare fixed assets

  (8.8) —    (63.1)

GNB Workers Compensation costs

  (7.5) —    —   

Write-down of receivable/investment

  (6.1) (99.9) —    —    —    —     —    (6.1) (99.9)

Write-down of Ansell Healthcare fixed assets

  —    (63.1) —    —    —    —   

Net gain on sale of controlled entities and businesses

  —    25.7  155.2  32.4  7.0  152.4(1)

Write-down of assets and write-down of investments and intercompany balances in subsidiaries

  —    —    (97.7) —    (82.4) (890.7)

Engineered Products restructure

  —    —    (27.4) —    —    (27.4)

Ansell Healthcare restructure

  —    —    (60.2) —    —    —   

(1) Represents the distribution from the Distribution Trust arising from the sale of the Electrical Distribution business.

Net gain/(loss) on sale of controlled entities and businesses

  —    —    25.7 

(c) Auditors’ Remuneration ($ in Thousands)

                 

Audit and review of the financial reports:

                 

Auditors of Ansell Limited and Australian entities - KPMG

  1,183  1,653  2,986  983  1,391  2,250   1,013  1,183  1,653 

Other member firms of KPMG

  1,661  1,891  1,940  —    —    —     1,423  1,661  1,891 
  

 

 

 
  

 

  

 

 

  2,844  3,544  4,926  983  1,391  2,250   2,436  2,844  3,544 
  

 

 

 
  

 

  

 

 

Other services:

                 

Other audit and assurance services (including disposals and acquisitions)

                 

Auditors of Ansell Limited and Australian entities - KPMG

  259  4,944  2,997  90  4,746  2,222   131  259  4,944 

Other member firms of KPMG

  78  25  1,110  —    —    —     77  78  25 

Taxation and other services

                 

Auditors of Ansell Limited and Australian entities - KPMG

  32  439  847  32  331  725   40  32  439 

Other member firms of KPMG

  90  66  22  —    —    —     150  90  66 

Systems Implementation/Design

              

Auditors of Ansell Limited and Australian entities - KPMG

  —    —    364  —    —    282 
  

 

 

 
  

 

  

 

 

Total other services

  459  5,474  5,340  122  5,077  3,229   398  459  5,474 
  

 

 

 
  

 

  

 

 

Total auditors remuneration

  3,303  9,018  10,266  1,105  6,468  5,479   2,834  3,303  9,018 
  

 

 

 
  

 

  

 

 

89


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

5.Contributed EquityCONTRIBUTED EQUITY

 

   Consolidated

  The Company

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

 

Issued and Paid up Capital

                   

185,917,580 (2002 - 187,073,500; 2001 - 186,757,900) ordinary shares, fully paid *

  1,448.2  1,455.4  1,454.2  1,448.2  1,455.4  1,454.2 

922,100 (2002 - 1,174,600; 2001 - 1,481,700) ordinary plan shares, paid to 5 cents

  0.1  0.1  0.1  0.1  0.1  0.1 
   

 
  

 

 
  

Total Issued and Paid up Capital

  1,448.3  1,455.5  1,454.3  1,448.3  1,455.5  1,454.3 
   

 
  

 

 
  

*  includes 210,679 (2002 - 678,300; 2001 - 747,666) shares issued in accordance with the Employee Share Plan

Ordinary Shares Reconciliation

                   

Balance at the beginning of the financial year

  1,455.5  1,454.3  1,617.2  1,455.5  1,454.3  1,617.2 

Increase in Contributed Equity:

                   

Additional capital issued

  1.0  1.2  2.5  1.0  1.2  2.5 

Decrease in Contributed Equity:

                   

Share buy-back

  (8.2) —    (165.4) (8.2) —    (165.4)
   

 
  

 

 
  

Balance at the end of the financial year

  1,448.3  1,455.5  1,454.3  1,448.3  1,455.5  1,454.3 
   

 
  

 

 
  

   Consolidated

$ in millions


  2004

  2003

  2002

Issued and Paid up Capital

         

176,310,916 (2003 - 185,917,580 ; 2002 - 187,073,500)

         

ordinary shares, fully paid *

  1,383.8  1,448.2  1,455.4

738,000 (2003 - 922,100 ; 2002 - 1,174,600)

         

ordinary plan shares, paid to 5 cents

  0.1  0.1  0.1
   
  
  

Total Issued and Paid up Capital

  1,383.9  1,448.3  1,455.5
   
  
  

*includes 149,763 (2003 - 210,679 ; 2002 - 678,300) shares issued in accordance with the Employee

Share Plan and 198,288 (2003 - nil; 2002 - nil) shares bought back by the Company prior to 30 June 2004

but not cancelled as at that date.

Ordinary Shares Reconciliation

         

Balance at the beginning of the financial year

  1,448.3  1,455.5  1,454.3

Increase in Contributed Equity:

         

Additional capital issued

  1.0  1.0  1.2

Decrease in Contributed Equity:

         

Share buy-back

  (65.4) (8.2) —  
   

 

 

Balance at the end of the financial year

  1,383.9  1,448.3  1,455.5
   

 

 

 

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any proceeds of liquidation. Note 25 provides details of shares subject to options and Performance Share Rights granted under the Ansell Limited Stock Incentive Plan.

 

Share Consolidation

As previously reported, effective 12 April 2002, Ansell Limited reduced the number of ordinary shares and exercisable options on issue by means of a 1 for 5 share consolidation, which received shareholder approval at an Extraordinary General Meeting held on that date.

The quantity of share capital on issue in prior periods has been adjusted for the effect of the share consolidation.

Share Buy-Back

 

Pursuant to itsThe Company, on 30 April 2004, ceased buying back shares under the on-market buy-back,buy back announced on 16 April 2003, after buying back 11,199,184 shares for a total outlay of $72.1 million representing 6% of ordinary shares issued on that date. On 3 May 2004, the Company hasannounced that it would undertake a further on-market buy-back of up to 12 million shares over the following 12 month period. As at 30 June 2004, the Company had bought back 1,408,420198,288 shares at an average buy-back price of approximately $5.80 per share. The Company intends to continue the buy-back program to a total of 10 million shares.for $1.47 million.

 

Executive Share Plan

 

As previously reported, the Pacific Dunlop Executive Share Plan was closed to new members effective 12 September 1996, and no further issues of Executive Plan Shares will be made.

During the financial year, the amounts outstanding on 252,500184,100 existing Executive Plan shares were fully paid. Since the end of the financial year, the amounts outstanding on a further 4,00023,800 Executive Plan shares have been fully paid. Shares allotted under the Pacific Dunlop Executive Share Plan have been paid to 5 cents per share. Refer to Note 25 ‘Ownership-Based Remuneration Schemes’ for details of price payable for shares issued under this plan.

 

Employee Share Plan

 

During the financial year, the loan liability of members in respect of 467,62160,916 fully paid ordinary shares of $2.50 each was discharged. Since the end of the financial year, no further payments in respect of Employee Plan shares have been made. Under the Employee Share Plan, 50 cents was payable on subscription for each Plan share allotted to eligible employees, the balance of issue price being funded by way of interest free loans from the Company to the member. No new shares were issued during the financial year or up to the date of this Report under the Pacific Dunlop Employee Share Plan.

90


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

6.(Accumulated Losses)/Retained Profits and ReservesACCUMULATED LOSSESAND RESERVES

 

  Consolidated

  The Company

   Consolidated 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

Asset revaluation reserve

  1.5  14.7  6.2  —    10.2  10.2   0.7  1.5  14.7 

General reserve

  1.8  2.7  3.0  —    —    —     3.3  1.8  2.7 

Foreign currency translation reserve

  (272.2) (193.6) (127.2) —    —    —     (279.6) (272.2) (193.6)
  

 

 

 

 

 

  

 

 

Total Reserves

  (268.9) (176.2) (118.0) —    10.2  10.2   (275.6) (268.9) (176.2)

(Accumulated losses)/retained profits

  (345.7) (417.0) (289.9) (219.1) (394.1) (465.8)

Accumulated losses

  (306.7) (345.7) (417.0)
  

 

 

 

 

 

  

 

 

Total (Accumulated Losses)/Retained Profits and Reserves

  (614.6) (593.2) (407.9) (219.1) (383.9) (455.6)

Total Accumulated Losses and Reserves

  (582.3) (614.6) (593.2)
  

 

 

 

��

 

  

 

 

Movements during the year:

                

Asset Revaluation Reserve

                

Balance at beginning of the financial year

  14.7  6.2  20.2  10.2  10.2  10.2   1.5  14.7  6.2 

Adjustment upon adoption of AASB 1041

  —    —    (14.1) —    —    —   

Transfer from/(to) retained profits

  (13.2) 8.5  0.1  (10.2) —    —     (0.8) (13.2) 8.5 
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  1.5  14.7  6.2  —    10.2  10.2   0.7  1.5  14.7 
  

 

 

 

 

 

  

 

 

General Reserve

                

Balance at beginning of the financial year

  2.7  3.0  2.8  —    —    —     1.8  2.7  3.0 

Transfer from/(to) retained profits

  (0.9) (0.3) 0.2  —    —    —     1.5  (0.9) (0.3)
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  1.8  2.7  3.0  —    —    —     3.3  1.8  2.7 
  

 

 

 

 

 

  

 

 

Foreign Currency Translation Reserve

                

Balance at the beginning of the financial year

  (193.6) (127.2) (54.2) —    —    —     (272.2) (193.6) (127.2)

Transfers to retained profits

  (7.3) 3.2  —    —    —    —     —    (7.3) 3.2 

Exchange fluctuations on assets and liabilities held in foreign currencies

                

net gain/(loss) on translation of net assets

  (121.1) (120.3) 279.1  —    —    —   

net gain/(loss) on hedge borrowings

  49.8  50.7  (352.1) —    —    —   

net loss on translation of net assets

  (16.8) (121.1) (120.3)

net gain on hedge borrowings

  9.4  49.8  50.7 
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  (272.2) (193.6) (127.2) —    —    —     (279.6) (272.2) (193.6)
  

 

 

 

 

 

  

 

 

(Accumulated Losses)/Retained Profits

             

Accumulated Losses

   

Balance at the beginning of the financial year

  (417.0) (289.9) (103.6) (394.1) (465.8) 336.7   (345.7) (417.0) (289.9)

Transfer (to)/from reserves

  21.4  (11.4) (0.3) 10.2  —    —     (0.7) 21.4  (11.4)

Net profit/(loss) after income tax attributable to Ansell Limited shareholders

  49.9  (115.8) (139.4) 164.8  71.6  (755.9)  70.7  49.9  (115.8)

Dividends provided for or paid *

  —    0.1  (46.6) —    0.1  (46.6)  (31.0) —    0.1 
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  (345.7) (417.0) (289.9) (219.1) (394.1) (465.8)  (306.7) (345.7) (417.0)
  

 

 

 

 

 

  

 

 

 

*2002 dividends represents an overprovision in the prior year.

 

Nature and purpose of reserves

 

Asset Revaluation

 

The asset revaluation reserve includes the net revaluation increments and decrements arising from the revaluation of non-current assets in accordance with AASB 1041. The balance of $1.5$0.7 million (the Company: Nil) is not available for future asset write-downs as a result of using the deemed cost election for land and buildings when adopting AASB 1041.

 

General

 

The amount standing to the credit of the general reserve resulted from prior period allocations of retained profits for non-specific purposes and is available for release to retained profits.

 

Foreign currency translation

 

The foreign currency translation reserve records the foreign currency differences arising from the translation of self-sustaining foreign operations, the translation of transactions that hedge the Company’s net investment in a foreign operation or the translation of foreign currency monetary items forming part of the net investment in a self-sustaining operation. Refer to Significant Accounting Policy Note 1.

91


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

7.Total Equity ReconciliationTOTAL EQUITY RECONCILIATION

 

   Consolidated

  The Company

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

 

Total equity at the beginning of the financial year

  876.0  1,066.2  1,499.9  1,071.6  998.7  1,964.1 

Total changes in equity from non-owner related transactions attributable to Ansell Limited shareholders

  (21.4) (185.4) (226.5) 164.8  71.6  (755.9)

Transactions with owners as owners:

                   

Contributions of equity

  1.0  1.2  2.5  1.0  1.2  2.5 

Share buy-back

  (8.2) —    (165.4) (8.2) —    (165.4)

Dividends

  —    0.1  (46.6) —    0.1  (46.6)

Total changes in outside equity interest

  (2.9) (6.1) 2.3  —    —    —   
   

 

 

 

 

 

Total equity at the end of the financial year

  844.5  876.0  1,066.2  1,229.2  1,071.6  998.7 
   

 

 

 

 

 

8.      Income Tax

 

                   
   Consolidated

  The Company

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

 

Prima facie income tax expense/(benefit) calculated at 30% (2002: 30%, 2001: 34%) on profit/(loss) from ordinary activities

  23.8  (17.2) 18.4  49.3  26.7  (229.2)

Increased taxation arising from:

                   

Write down of assets

  2.3  48.9  43.2  —    —    7.8 

Net restructuring costs

  1.4  5.4  19.6  —    —    —   

Write down of intergroup investments and intercompany balances

  —    —    —    —    —    300.9 

Goodwill amortisation

  1.1  1.4  4.8  —    —    0.5 

Foreign losses and costs not deductible

  —    —    0.2  —    —    —   

Income tax under provided in prior years

  1.3  0.2  1.6  —    —    0.6 

Net higher overseas tax rates

  8.3  4.1  —    —    —    —   

Reduced taxation arising from:

                   

Net gain on sale of businesses and controlled entities

  —    (7.7) (49.3) (10.0) (2.1) (65.4)

Tax exempt dividends from foreign companies

  —    —    —    —    —    (8.6)

Income tax over provided in previous years

  —    —    —    —    (2.3) —   

Investment and export incentive allowances

  (6.7) (6.3) (8.9) —    —    —   

Net lower overseas tax rates

  —    —    (0.9) —    —    —   

Other permanent differences*

  (4.6) 12.4  3.8  (39.8) (22.3) (13.2)

Share of associates’ net profit

  (0.1) (0.6) (1.1) —    —    —   

Income tax expense/(benefit) on profit from ordinary activities before individually significant items and effect of change in tax rate

  26.8  40.6  31.4  (0.5) —    (6.6)

Individually significant income tax items:

                   

Write off of tax balances attributable to Australian operations

  —    15.2  158.5  —    17.3  88.4 
   

 

 

 

 

 

Income tax expense/(benefit) attributable to profit/(loss) from ordinary activities

  26.8  55.8  189.9  (0.5) 17.3  81.8 
   

 

 

 

 

 

Income tax expense/(benefit) attributable to operating profit/(loss) is made up of:

                   

Provision attributable to current year

  0.7  8.0  20.5  (0.5) (12.6) (31.9)

(Over)/Under provision in respect of previous years

  1.3  0.2  1.6  —    (2.3) 0.6 

Provision attributable to future years

                   

Deferred income tax liability

  0.3  (2.0) 4.5  —    —    —   

Future income tax benefit

  24.5  49.6  163.3  —    32.2  113.1 
   

 

 

 

 

 

   26.8  55.8  189.9  (0.5) 17.3  81.8 
   

 

 

 

 

 

   Consolidated

 

$ in millions


  2004

  2003

  2002

 

Total equity at the beginning of the financial year

  844.5  876.0  1,066.2 

Total changes in equity from non-owner related transactions attributable to Ansell Limited shareholders

  63.3  (21.4) (185.4)

Transactions with owners as owners:

          

Contributions of equity

  1.0  1.0  1.2 

Share buy-back

  (65.4) (8.2) —   

Dividends

  (31.0) —    0.1 

Total changes in outside equity interest

  (0.6) (2.9) (6.1)
   

 

 

Total equity at the end of the financial year

  811.8  844.5  876.0 
   

 

 

8.INCOMETAX

   Consolidated

 

$ in millions


  2004

  2003

  2002

 

Prima facie income tax expense/(benefit) calculated at 30%

  28.0  23.8  (17.2)

(2003: 30%, 2002: 30%) on profit/(loss) from ordinary activities

          

Increased taxation arising from:

          

Write down of assets

  2.9  2.3  48.9 

Net restructuring costs

  2.9  1.4  5.4 

Goodwill amortisation

  0.9  1.1  1.4 

Income tax under provided in prior years

  2.2  1.3  0.2 

Net higher overseas tax rates

  —    8.3  4.1 

Reduced taxation arising from:

          

Net (gain)/loss on sale of businesses and controlled entities

  —    —    (7.7)

Investment and export incentive allowances

  (6.8) (6.7) (6.3)

Net lower overseas tax rates

  (0.9) —    —   

Other permanent differences*

  (8.5) (4.6) 12.4 

Share of associates’ net profit

  —    (0.1) (0.6)

Income tax expense/(benefit) on profit from ordinaryactivities before individually significant items and effect of change in tax rate

  20.7  26.8  40.6 

Individually significant income tax items:

          

Write off of tax balances attributable to Australian operations

  —    —    15.2 
   

 

 

Income tax expense/(benefit) attributable to profit/(loss) from ordinary activities

  20.7  26.8  55.8 
   

 

 

Income tax expense/(benefit) attributable to operating profit/(loss) is made up of:

          

Provision attributable to current year

  17.2  0.7  8.0 

Under/(Over) provision in respect of previous years

  2.2  1.3  0.2 

Provision attributable to future years

          

Deferred income tax liability

  (1.5) 0.3  (2.0)

Future income tax benefit

  2.8  24.5  49.6 
   

 

 

   20.7  26.8  55.8 
   

 

 

 

*Includes tax benefit on loss from Australian trading operations not brought to account/toaccount/recovery of tax losses not previously brought to account.

92


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

9.Dividends Paid or DeclaredDIVIDENDS PAIDOR DECLARED

 

The Company

$ in millions


2003

2002

2001

Dividends paid

No dividends were paid by the company during the year (2002 - nil; 2001 - 5 cents, unfranked)

—  —  46.6

Dividends declared

Since the end of the financial year the Directors declared the following dividend:

- final dividend of 11 cents, unfranked (2002 - nil; 2001 - nil)

20.5—  —  

The financial effect of this dividend has not been brought to account in the financial statements for

the year ended 30 June 2003 and will be recognised in subsequent financial reports.

Dividend Franking Account

The balance of available franking credits in the franking account as at 30 June 2003 was nil (2002 - nil; 2001 - nil).

   Consolidated

$ in millions


  2004

  2003

  2002

Dividends paid

         

The following dividends were paid during the year to Ansell Limited shareholders:

         

A final dividend for the year ended 30 June 2003 of 11 cents per share unfranked, was paid on 9 October 2003

  20.4  —    —  

An interim dividend for the year ended 30 June 2004 of 6 cents per share unfranked, was paid on 8 April 2004

  10.6  —    —  

Dividends declared

         

Since the end of the financial year the Directors declared the following dividend payable to Ansell Limited shareholders:

         

final dividend of 7 cents, unfranked (2003 -11 cents; 2002 - nil)

  12.3  20.4  —  

The financial effect of this dividend has not been brought to account in the financial statements For the year ended 30 June 2004 and will be recognised in subsequent financial reports.

         

Dividend Franking Account

         

As a result of entering the Tax Consolidation regime the balance of available franking credits in the franking account as at 30 June 2004 was $2.7 million (2003 - nil; 2002 - nil).

         

 

10.Outside Equity InterestsOUTSIDE EQUITY INTERESTS

 

  Consolidated

   Consolidated

 

$ in millions


  2003

  2002

  2001

   2004

 2003

 2002

 

Outside equity interests comprise:

          

Contributed equity

  2.1  4.5  11.6   2.1  2.1  4.5 

Reserves

  (2.2) 2.4  4.6   (3.0) (2.2) 2.4 

Retained profits at the beginning of the financial year

  6.8  3.6  5.2   10.9  6.8  3.6 

Profits/(losses) for the year

  2.6  2.8  3.6 

Profits for the year

  1.9  2.6  2.8 

Dividends paid/provided for during the year

  (1.7) (1.8) (5.2)  (1.7) (1.7) (1.8)

Outside equity interests disposed/acquired during the year

  3.2  2.2  —     —    3.2  2.2 

Retained profits at the end of the financial year

  10.9  6.8  3.6   11.1  10.9  6.8 
  

 

 

  

 

 

Total Outside Equity Interests

  10.8  13.7  19.8   10.2  10.8  13.7 
  

 

 

  

 

 

 

11.Cash AssetsCASH ASSETS

 

  Consolidated

  The Company

  Consolidated

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

  2004

  2003

  2002

Cash on hand

  0.6  0.2  0.6  —    —    0.1  0.9  0.6  0.2

Cash at bank

  60.8  72.0  115.7  1.4  4.2  21.0  69.8  60.8  72.0

Short-term deposits

  224.6  186.3  194.6  —    —    7.2  237.1  224.6  186.3
  
  
  
  
  
  
  
  
  
  286.0  258.5  310.9  1.4  4.2  28.3  307.8  286.0  258.5

Restricted deposits

  13.8  18.4  27.0  —    —    —    10.3  13.8  18.4
  
  
  
  
  
  
  
  
  

Total Cash Assets

  299.8  276.9  337.9  1.4  4.2  28.3  318.1  299.8  276.9
  
  
  
  
  
  
  
  
  

 

Restricted deposits represent cash set aside to cover the provisions established to address any remaining liability of members of the Group for claims arising with respect to the Accufix Pacing Lead.

93


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

12.ReceivablesRECEIVABLES

 

  Consolidated

  The Company

   Consolidated

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

Current

                

Trade debtors

  218.2  264.8  597.4  16.2  11.6  154.4   204.7  218.2  264.8 

Less provision for doubtful debts

  6.9  17.5  33.1  0.3  0.4  4.4   6.7  6.9  17.5 

Less provision for rebates, allowances and warranty claims

  13.8  14.8  41.2  1.8  1.6  9.7   15.0  13.8  14.8 
  

 

 

 

 

 

  

 

 

  197.5  232.5  523.1  14.1  9.6  140.3   183.0  197.5  232.5 

Amounts owing by South Pacific Tyres partnership

  7.6  —    —    7.2  —    —     0.5  7.6  —   

Amounts owing by wholly owned controlled entities

  —    —    —    1,458.9  1,488.3  2,684.9 

Less provision for doubtful debts

  —    —    —    698.0  691.4  707.9 

Other amounts receivable

  57.3  61.2  120.7  13.9  14.5  29.7   45.2  57.3  61.2 
  

 

 

 

 

 

  

 

 

Total Current

  262.4  293.7  643.8  796.1  821.0  2,147.0   228.7  262.4  293.7 
  

 

 

 

 

 

  

 

 

Non-Current

                

Interest bearing amount owing by South Pacific Tyres partnership

  55.1  59.4  25.8  —    27.6  25.8   62.3  55.1  59.4 

Amounts owing by other related parties

  —    0.2  4.0  —    0.2  4.0   —    —    0.2 

Interest bearing amount owing by external entities

  —    2.5  33.7  —    1.3  33.7   —    —    2.5 

Other amounts receivable

  2.4  6.8  28.5  1.2  4.3  20.6   1.6  2.4  6.8 

Less provision for doubtful debts

  0.5  2.2  —    —    —    —     0.3  0.5  2.2 
  

 

 

 

 

 

  

 

 

Total Non Current

  57.0  66.7  92.0  1.2  33.4  84.1   63.6  57.0  66.7 
  

 

 

 

 

 

  

 

 

Total Receivables

  319.4  360.4  735.8  797.3  854.4  2,231.1   292.3  319.4  360.4 
  

 

 

 

 

 

  

 

 

Included in other amounts receivable are:

                

(i) Loans to employees in relation to the employee share plan

                

- current

  —    0.7  1.0  —    0.7  1.0 

- non-current

  1.2  3.6  7.6  1.2  3.6  7.6 

current

  —    —    0.7 

non-current

  0.8  1.2  3.6 

(ii) Loans to Executive Directors of Ansell Limited and Executives who are Directors of certain controlled entities secured under the Ansell Housing Scheme repayable at a future date at concessional interest rates

                

- non-current

  —    0.2  0.4  —    0.2  0.4 

non-current

  —    —    0.2 

Repayments received

  0.2  0.2  0.2  0.2  0.2  0.2   —    0.2  0.2 
The reconciliations of provision for doubtful debts - trade are presented below:The reconciliations of provision for doubtful debts - trade are presented below:   
  Consolidated

  The Company

   Consolidated

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

Balance at the beginning of the financial year

  17.5  33.1  33.5  0.4  4.4  6.0   6.9  17.5  33.1 

Acquisitions/(disposals) of entities

  —    (8.2) (8.4) —    (4.8) —     —    —    (8.2)

Amounts charged/(released) to profit/(loss) from operating activities

  (2.5) (2.9) 7.9  0.1  1.0  (0.1)  1.2  (2.5) (2.9)

Amounts utilised for intended purposes

  (7.4) (4.0) (2.1) (0.2) (0.2) (1.5)  (1.3) (7.4) (4.0)

Net foreign currency differences on translation of self-sustaining operations

  (0.7) (0.5) 2.2  —    —    —   

Net foreign currency differences on translation of self-sustaining

   

operations

  (0.1) (0.7) (0.5)
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  6.9  17.5  33.1  0.3  0.4  4.4   6.7  6.9  17.5 
  

 

 

 

 

 

  

 

 

13. Inventories

             
  Consolidated

  The Company

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

 

At Cost

             

Raw materials

  21.6  31.9  78.8  0.1  0.9  32.6 

Work in progress

  13.1  17.0  32.9  —    —    9.7 

Finished goods

  137.2  181.1  592.7  12.4  12.8  128.2 

Other stock

  5.5  5.1  6.6  —    —    2.6 
  

 

 

 

 

 

Total Inventory at Cost

  177.4  235.1  711.0  12.5  13.7  173.1 
  

 

 

 

 

 

Net Realisable Value

             

Raw materials

  —    —    6.0  —    —    2.4 

Work in progress

  —    —    1.6  —    —    —   

Finished goods

  10.5  —    69.9  —    —    30.4 

Other stock

  —    —    5.8  —    —    —   
  

 

 

 

 

 

Total Inventory at Net Realisable Value

  10.5  —    83.3  —    —    32.8 
  

 

 

 

 

 

Total Inventories

  187.9  235.1  794.3  12.5  13.7  205.9 
  

 

 

 

 

 

13.INVENTORIES

   Consolidated

$ in millions


  2004

  2003

  2002

At Cost

         

Raw materials

  20.1  21.6  31.9

Work in progress

  13.6  13.1  17.0

Finished goods

  112.0  137.2  181.1

Other stock

  3.9  5.5  5.1
   
  
  

Total Inventory at Cost

  149.6  177.4  235.1
   
  
  

Net Realisable Value

         

Finished goods

  37.9  10.5  —  

Other stock

  3.0  —    —  
   
  
  

Total Inventory at Net Realisable Value

  40.9  10.5  —  
   
  
  

Total Inventories

  190.5  187.9  235.1
   
  
  

94


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

14.Other Financial Assets (Investments)OTHER FINANCIAL ASSETS (INVESTMENTS)

 

    Consolidated

  The Company

     Consolidated

$ in millions


 Notes

  2003

  2002

  2001

  2003

  2002

  2001

  Notes

  2004

  2003

  2002

(a) Shares in Controlled Entities and Other financial assets

                    

Controlled entities

                    

Not quoted on a prescribed stock exchange:

                    

At cost(1)

    —    —    —    2,184.0  2,246.7  2,442.8

Less Provision for diminution in value

    —    —    —    699.5  699.5  618.7

Other financial assets

                                

Quoted on a prescribed stock exchange:

                                

At cost

    —    9.3  71.6  —    —    —       —    —    9.3

At market value

    3.1  —    —    —    —    —       2.1  3.1  —  

Not quoted on a prescribed stock exchange:

                                

At cost

    —    —    5.3  —    —    2.2     1.3  —    —  

South Pacific Tyres N.Z. Ltd

    21.9  20.1  18.7  —    —    —       21.6  21.9  20.1

Investment in Partnerships

                    

Investment in Partnership

            

South Pacific Tyres

    116.4  116.4  116.4  —    —    —       116.4  116.4  116.4
    
  
  
  
  
  
     
  
  

Total Other Financial Assets

    141.4  145.8  212.0  1,484.5  1,547.2  1,826.3     141.4  141.4  145.8
    
  
  
  
  
  
     
  
  

(b) Investments accounted for using the equity method

                                

Shares in Unlisted Associated Companies

                                

Equity Accounted

 

38

  —    13.3  14.6  —    —    —    38  —    —    13.3

Cost

    —    —    —    —    0.2  0.2
    
  
  
  
  
  
     
  
  

Total Investments accounted for using the equity method

    —    13.3  14.6  —    0.2  0.2     —    —    13.3
    
  
  
  
  
  
     
  
  

 

(1)The Directors have adopted the cost basis of valuation in accordance with AASB 1041 ‘Revaluation of Non-Current Assets’.

 

15.Property, plant and equipmentPROPERTY, PLANTAND EQUIPMENT

 

  Consolidated

  The Company

  Consolidated

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

  2004

  2003

  2002

(a) Freehold Land

                           

At cost

  13.4  16.3  43.3  —    —    9.7  12.6  13.4  16.3

(b) Freehold Buildings

                           

At cost

  39.8  45.6  114.4  —    —    20.0  37.7  39.8  45.6

Less provision for depreciation

  11.9  7.6  16.7  —    —    1.2  11.7  11.9  7.6
  
  
  
  
  
  
  
  
  
  27.9  38.0  97.7  —    —    18.8  26.0  27.9  38.0
  
  
  
  
  
  
  
  
  

(c) Leasehold Land and Buildings

                           

At cost

  53.4  62.6  99.1  —    —    6.3  52.2  53.4  62.6

Less provision for amortisation

  11.1  12.1  25.9  —    —    3.2  12.2  11.1  12.1
  
  
  
  
  
  
  
  
  
  42.3  50.5  73.2  —    —    3.1  40.0  42.3  50.5
  
  
  
  
  
  
  
  
  

(d) Plant and Equipment

                           

At cost

  436.3  502.5  979.2  1.4  2.4  179.1  400.6  436.3  502.5

Less provision for depreciation

  266.1  286.7  555.3  1.1  2.0  115.8  260.2  266.1  286.7
  
  
  
  
  
  
  
  
  
  170.2  215.8  423.9  0.3  0.4  63.3  140.4  170.2  215.8
  
  
  
  
  
  
  
  
  

(e) Buildings and Plant under construction

                           

At cost

  9.1  11.9  31.8  —    —    4.0  8.8  9.1  11.9
  
  
  
  
  
  
  
  
  

Total property, plant and equipment

  262.9  332.5  669.9  0.3  0.4  98.9  227.8  262.9  332.5
  
  
  
  
  
  
  
  
  

 

In accordance with the consolidated entity’s policy of obtaining an independent valuation of land and buildings every three years, an independenta valuation was carried out as at 31 December 20002003 by CB Richard Ellis (Victoria) Pty Ltd.independent valuers. This valuation was on the basis of Fair Value - - Existing Use, subject to continued occupation by the operating entity or, where this was not the case, Fair Value - Alternative Use. With respect to land and buildings owned as at 30 June 2003 and 30 June 2002,2004, this resulted in a valuation of freehold land of $40,127,553 (the Company: Nil) and$33,527,961and a valuation of freehold buildings of $85,605,413 (the Company: Nil).$52,227,266.

 

As land and buildings are recorded at cost, the valuation has not been brought to account.

95


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

15.Property, plant and equipmentPROPERTY,PLANTANDEQUIPMENT (continued)(continued)

 

Reconciliations

 

Reconciliations of the balances for each class of property, plant and equipment are set out below:

 

  Consolidated

  The Company

   Consolidated

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

Freehold Land

                

Balance at the beginning of the financial year

  16.3  43.3  37.7  —    9.7  4.5   13.4  16.3  43.3 

Additions

  —    —    1.0  —    —    1.0 

Additions through entities acquired

  —    —    4.7  —    —    4.7 

Disposal of entities

  —    (20.8) —    —    (8.1) —     —    —    (20.8)

Disposals/Write-downs

  (0.6) (4.6) (0.5) —    (1.6) (0.5)  (1.5) (0.6) (4.6)

Transfers (to)/from related companies

  —    —    —    —    —    —   

Transfer from capital works in progress

  —    —    —    —    —    —   

Net foreign currency differences on translation of self-sustaining operations

  (2.3) (1.6) 0.4  —    —    —     0.7  (2.3) (1.6)
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  13.4  16.3  43.3  —    —    9.7   12.6  13.4  16.3 

Freehold Buildings

                

Balance at the beginning of the financial year

  38.0  97.7  85.5  —    18.8  10.9   27.9  38.0  97.7 

Additions

  0.1  0.3  0.2  —    —    —     0.1  0.1  0.3 

Additions through entities acquired

  —    —    8.2  —    —    8.2 

Disposal of entities

  —    (33.3) (0.1) —    (14.9) —     —    —    (33.3)

Disposals/Write-downs

  (3.4) (19.4) (0.7) —    (3.0) —     (2.0) (3.4) (19.4)

Transfers (to)/from related companies

  —    —    —    —    —    0.1 

Transfer from capital works in progress

  0.1  —    2.9  —    —    —     0.2  0.1  —   

Depreciation

  (1.8) (3.9) (4.8) —    (0.9) (0.4)  (1.1) (1.8) (3.9)

Net foreign currency differences on translation of self-sustaining operations

  (5.1) (3.4) 6.5  —    —    —     0.9  (5.1) (3.4)
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  27.9  38.0  97.7  —    —    18.8   26.0  27.9  38.0 

Leasehold Land and Buildings

                

Balance at the beginning of the financial year

  50.5  73.2  72.1  —    3.1  4.1   42.3  50.5  73.2 

Additions

  0.8  1.1  1.6  —    0.1  0.2   0.1  0.8  1.1 

Additions through entities acquired

  —    1.9  0.2  —    —    0.2   —    —    1.9 

Disposal of entities

  —    (14.8) (8.8) —    (2.7) (0.3)  —    —    (14.8)

Disposals/Write-downs

  —    (2.7) (0.4) —    (1.6) (0.4)  (0.2) —    (2.7)

Transfers (to)/from related companies

  —    —    —    —    —    —   

Transfers from capital works in progress

  0.2  1.4  0.2  —    1.3  —     0.7  0.2  1.4 

Transfers from fixed assets

  —    —    —    —    —    —   

Amortisation

  (1.7) (2.8) (5.1) —    (0.2) (0.7)  (1.5) (1.7) (2.8)

Net foreign currency differences on translation of self-sustaining operations

  (7.5) (6.8) 13.4  —    —    —     (1.4) (7.5) (6.8)
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  42.3  50.5  73.2  —    —    3.1   40.0  42.3  50.5 

Plant and Equipment

                

Balance at the beginning of the financial year

  215.8  423.9  432.9  0.4  63.3  71.0   170.2  215.8  423.9 

Additions

  5.4  11.4  37.6  0.2  4.6  9.0   3.9  5.4  11.4 

Additions through entities acquired

  —    3.4  11.1  —    —    9.6   —    —    3.4 

Disposal of entities

  —    (104.4) (34.5) —    (48.8) (3.3)  —    —    (104.4)

Disposals/Write-downs

  (3.7) (74.4) (20.3) (0.2) (13.1) (12.4)  (9.7) (3.7) (74.4)

Transfers (to)/from related companies

  —    —    —    —    —    1.4 

Transfers from capital works in progress

  9.5  30.5  36.6  —    1.4  4.3   8.3  9.5  30.5 

Depreciation

  (27.7) (46.4) (85.4) (0.1) (7.0) (16.3)  (22.7) (27.7) (46.4)

Net foreign currency differences on translation of self-sustaining operations

  (29.1) (28.2) 45.9  —    —    —     (9.6) (29.1) (28.2)
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  170.2  215.8  423.9  0.3  0.4  63.3   140.4  170.2  215.8 

96


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

15.Property, plant and equipmentPROPERTY, PLANTANDEQUIPMENT (CONTINUED)(continued)

 

   Consolidated

  The Company

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

 

Buildings and Plant under construction

                   

Balance at the beginning of the financial year

  11.9  31.8  30.0  —    4.0  2.5 

Additions

  9.1  21.5  35.6  —    3.0  6.2 

Additions through entities acquired

  —    —    0.4  —    —    0.4 

Disposal of entities

  —    (7.0) (0.1) —    (3.8) —   

Disposals/Write-downs

  —    (0.4) (0.5) —    (0.5) (0.4)

Transfers (to)/from related companies

  —    —    —    —    —    (0.4)

Transfers to the statement of financial performance

  —    —    (0.3) —    —    —   

Transfers to property, plant & equipment

  (9.8) (31.9) (39.7) —    (2.7) (4.3)

Net foreign currency differences on translation of self-sustaining operations

  (2.1) (2.1) 6.4  —    —    —   
   

 

 

 
  

 

Balance at the end of the financial year

  9.1  11.9  31.8  —    —    4.0 

16.    Intangible Assets

                   
   Consolidated

  The Company

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

 

Brand Names

                   

At cost

  121.2  142.5  217.5  —    —    7.3 
   

 

 

 
  

 

Goodwill

                   

Directors’ valuation 30/06/1996

  —    —    4.0  —    —    —   
   

 

 

 
  

 

   —    —    4.0  —    —    —   

Less provision for amortisation

  —    —    2.0     —    —   
   

 

 

 
  

 

   —    —    2.0  —    —    —   
   

 

 

 
  

 

At cost

  385.6  445.9  536.8  —    —    8.4 

Less provision for amortisation

  182.3  185.2  199.8  —    —    5.0 
   

 

 

 
  

 

   203.3  260.7  337.0  —    —    3.4 
   

 

 

 
  

 

Total Goodwill

  203.3  260.7  339.0  —    —    3.4 
   

 

 

 
  

 

Total Intangibles

  324.5  403.2  556.5  —    —    10.7 
   

 

 

 
  

 

17.    Deferred Tax Assets

                   
   Consolidated

  The Company

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

 

Future income tax benefit arising from:

                   

Accumulated timing differences

  26.0  32.2  75.4  —    —    32.2 

Accumulated tax losses

  6.0  17.5  31.4  —    —    —   
   

 

 

 
  

 

   32.0  49.7  106.8  —    —    32.2 
   

 

 

 
  

 

   Consolidated

 

$ in millions


  2004

  2003

  2002

 

Buildings and Plant under construction

          

Balance at the beginning of the financial year

  9.1  11.9  31.8 

Additions

  9.7  9.1  21.5 

Disposal of entities

  —    —    (7.0)

Disposals/Write-downs

  —    —    (0.4)

Transfers to property, plant & equipment

  (9.2) (9.8) (31.9)

Net foreign currency differences on translation of self-sustaining operations

  (0.8) (2.1) (2.1)
   

 

 

Balance at the end of the financial year

  8.8  9.1  11.9 

16.INTANGIBLE ASSETS

   Consolidated

$ in millions


  2004

  2003

  2002

Brand Names

         

At cost

  117.4  121.2  142.5
   
  
  

Goodwill

         

At cost

  375.3  385.6  445.9

Less provision for amortisation

  199.3  182.3  185.2
   
  
  
   176.0  203.3  260.7
   
  
  

Total Intangibles

  293.4  324.5  403.2
   
  
  

17.DEFERRED TAX ASSETS

   Consolidated

$ in millions


  2004

  2003

  2002

Future income tax benefit arising from:

         

Accumulated timing differences

  23.6  26.0  32.2

Accumulated tax losses

  0.6  6.0  17.5
   
  
  
   24.2  32.0  49.7
   
  
  

 

The Group has unrecognised capital tax losses relating to controlled entities of $374.9 million (2003 - $267.9 million (2002million; 2002 - $331.3 million; 2001 - $242.5 million). Future income tax benefits of $363.9 million (2003 - $380.4 million (2002million; 2002 - $393.6 million; 2001 - $461.8 million) relating to trading tax losses of controlled entities have not been recognised in the financial statements.

 

The benefit of those trading losses will only be obtained if:

 

(a) the relevant company derives future assessable income of a nature and an amount sufficient to enable the benefit to be realised, or the benefit can be utilised by another company in the consolidated entity; and

 

(b) the relevant company and/or the consolidated entity continues to comply with the conditions for deductibility imposed by the law; and

 

(c) no changes in tax legislation adversely affect the relevant company and/or consolidated entity in realising the benefit.

 

The tax effect of temporary differences that give rise to significant portions of the future income tax benefit are presented below:

 

  Consolidated

   Consolidated

$ in millions


  2003

  2002

  2001

   2004

  2003

  2002

Trading stock tax adjustments

  4.9  4.0  13.0   3.5  4.9  4.0

Depreciation on property, plant and equipment adjustments

  —    —    1.5 

Provisions

  18.1  21.4  82.2   17.0  18.1  21.4

Accruals

  2.3  3.0  (1.0)  2.7  2.3  3.0

Unrealised foreign exchange losses

  —    0.5  0.2   —    —    0.5

Accumulated tax losses

  6.0  17.5  31.4   0.6  6.0  17.5

Other

  0.7  3.3  (20.5)  0.4  0.7  3.3
  
  
  

  
  
  

Total temporary differences

  32.0  49.7  106.8   24.2  32.0  49.7
  
  
  

  
  
  

97


PART IIII

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

18.PayablesPAYABLES

 

   Consolidated

  The Company

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

Current

                  

Amounts owing to wholly owned controlled entities

  —    —    —    595.4  739.1  1,623.3

Trade creditors

  130.1  166.6  363.2  4.5  8.1  77.9

Bills payable

  —    —    6.6  —    —    1.5

Other creditors

  24.3  26.1  51.1  10.8  13.8  20.2
   
  
  
  
  
  

Total Current

  154.4  192.7  420.9  610.7  761.0  1,722.9
   
  
  
  
  
  

Non-Current

                  

Trade creditors

  —    —    0.3  —    —    0.1

Other creditors

  3.2  3.7  4.8  —    —    0.2
   
  
  
  
  
  

Total Non-Current

  3.2  3.7  5.1  —    —    0.3
   
  
  
  
  
  

Total Payables

  157.6  196.4  426.0  610.7  761.0  1,723.2
   
  
  
  
  
  

19.    Interest Bearing Liabilities

                  
   Consolidated

  The Company

$ in Millions


  2003

  2002

  2001

  2003

  2002

  2001

Current

                  

Bank overdrafts

  2.6  14.6  9.5  —    0.9  1.0

Bank loans repayable in:

                  

Canadian dollars

  5.6  5.8  6.5  —    —    —  

Euro dollars

  —    14.9  16.7  —    —    —  

Malaysian ringgits

  9.2  5.8  —    —    —    —  

Other currencies

  0.6  0.7  1.6  —    —    —  

Other loans repayable in:

                  

Australian dollars

  —    —    578.1  —    —    578.3

Euro dollars

  —    —    15.7  —    —    15.7

Sterling Pounds

  —    16.2  —    —    16.2  —  

U.S. dollars

  133.8  49.6  120.7  133.8  49.6  120.7
   
  
  
  
  
  

Total Current

  151.8  107.6  748.8  133.8  66.7  715.7
   
  
  
  
  
  

Non-Current

                  

Bank loans repayable in:

                  

Other currencies

  —    0.2  0.5  —    —    —  

Other loans repayable in:

                  

Australian dollars

  116.0  116.0  346.8  116.0  116.0  346.9

Euro dollars

  —    34.0  16.7  —    34.0  16.7

Sterling Pounds

  —    —    16.7  —    —    16.7

U.S. dollars

  204.0  366.3  481.2  204.0  366.3  481.2
   
  
  
  
  
  

Total Non-Current

  320.0  516.5  861.9  320.0  516.3  861.5
   
  
  
  
  
  

Total Interest Bearing Liabilities

  471.8  624.1  1,610.7  453.8  583.0  1,577.2
   
  
  
  
  
  
   Consolidated

$ in millions


  2004

  2003

  2002

Current

         

Trade creditors

  124.1  130.1  166.6

Other creditors

  35.3  24.3  26.1
   
  
  

Total Current

  159.4  154.4  192.7
   
  
  

Non-Current

         

Other creditors

  3.3  3.2  3.7
   
  
  

Total Non-Current

  3.3  3.2  3.7
   
  
  

Total Payables

  162.7  157.6  196.4
   
  
  

19.INTEREST BEARING LIABILITIES

   Consolidated

$ in Millions


  2004

  2003

  2002

Current

         

Bank overdrafts

  3.3  2.6  14.6

Bank loans repayable in:

         

Canadian dollars

  —    5.6  5.8

Euro dollars

  —    —    14.9

Malaysian ringgits

  7.0  9.2  5.8

Other currencies

  0.8  0.6  0.7

Other loans repayable in:

         

Australian dollars

  50.0  —    —  

Sterling Pounds

  —    —    16.2

U.S. dollars

  129.1  133.8  49.6
   
  
  

Total Current

  190.2  151.8  107.6
   
  
  

Non-Current

         

Bank loans repayable in:

         

U.S. dollars

  101.6  —    —  

Other currencies

  —    —    0.2

Other loans repayable in:

         

Australian dollars

  66.0  116.0  116.0

Euro dollars

  —    —    34.0

U.S. dollars

  68.4  204.0  366.3
   
  
  

Total Non-Current

  236.0  320.0  516.5
   
  
  

Total Interest Bearing Liabilities

  426.2  471.8  624.1
   
  
  

 

At 30 June 20032004 bank overdraft and other loans totalling $1.4 million (2003: $1.7 million, (2002:2002: $2.4 million, 2001: $3.8 million) were secured, principally against Group property, plant and equipment having carrying values slightly in excess of the secured amounts payable. These security arrangements relate to acquired controlled entities and were in place prior to the companies concerned becoming part of the Ansell Limited Group.

 

The Group established a 3-year US$100250 million revolving credit bank facility in January, 2002.on 30 April 2004 of which US$200 million has a five year term and US$50 million a 364 day term. This facility can be accessed by the parent company and certain USA subsidiaries. No amounts haveUS$70 million of the five year term facility had been drawn down under this facility at 30 June 20032004 (June 2002: nil).2003: Nil) leaving an unused balance at that date of US$180 million. There are no restrictions on the access to this facility. There are a number of financial covenants attaching to this facility including restrictions on the level of borrowings of non guarantor subsidiaries, ensuring the assets of the guarantor subsidiaries are in excess of a specified percentage of total group assets and ensuring certain financial ratios are maintained. The interest rate for this facility is determined based on market rates at the time amounts are drawn down. The Company is in compliance with all covenants.

98


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

19.Interest Bearing Liabilities (continued)INTEREST BEARING LIABILITIES (CONTINUED)

 

The following table sets out detail in respect of the major components of Interest Bearing Liabilities at 30 June, 2003.2004.

 

Nature of Borrowing


  Amount
$m


  Interest Rate
% p.a.


  Maturity
Date


  Amount
$m


  Interest
Rate %
p.a.


  Maturity
Date


Bank Overdrafts

                  

Indian rupees

  0.6  9.00  At Call  0.8  3.80  At Call

Thai Baht

  1.8  1.80  At Call

United States dollars

  1.8  1.90  At Call  0.7  1.80  At Call

Other currencies

  0.2  Various  At Call
  
  
  
  
  
  

Total Bank Overdrafts

  2.6        3.3      
  
  
  
  
      

Bank Loans

                  

Current

                  

Canadian dollars

  5.6  4.69  2004

Malaysian ringgits

  9.2  3.00  2004  7.0  3.00  2005

Other currencies

  0.6  6.27  2004  0.8  2.50  2005
  
  
  
  7.8      
  
      

Non-Current

         

United States dollars

  101.6  4.07  2009
  
  
  
  
  
  

Total Bank Loans

  15.4        109.4      
  
  
  
  
      

Other Loans

                  

Current

                  

Australian dollars

  50.0  6.77  2005

United States dollars

  133.8  2.41  2004  129.1  6.92  2005
  
  
  
  
  
  
  133.8        179.1      
  
  
  
  
      

Non-Current

                  

Australian dollars

  50.0  5.53  2005  50.0  6.54  2007

Australian dollars

  50.0  5.84  2007  16.0  7.76  2007

Australian dollars

  16.0  7.04  2007

United States dollars

  133.4  4.79  2005

United States dollars

  30.0  2.19  2006  29.0  2.19  2006

United States dollars

  27.1  1.66  2007  26.3  5.99  2007

United States dollars

  13.5  1.97  2010  13.1  1.97  2010
  
  
  
  
  
  
  320.0        134.4      
  
  
  
  
      

Total Other Loans

  453.8        313.5      
  
  
  
  
      

Total Interest Bearing Liabilities

  471.8        426.2      
  
  
  
  
      

Maturity Schedule


                  

Term to maturity:

                  

Within one year

  151.8        190.2      

One to two years

  183.4        29.0      

Two to three years

  30.0        92.3      

Three to four years

  93.1      

Four to five years

  —          101.6      

Greater than five years

  13.5        13.1      
  
  
  
  
      

Total

  471.8        426.2      
  
  
  
  
      

 

  Consolidated

  The Company

  Consolidated

$ in Millions


  2003

  2002

  2001

  2003

  2002

  2001

  2004

  2003

  2002

Net Interest Bearing Debt

                           

Cash at bank and short-term deposits (net of restricted deposits)

  285.4  258.3  310.3  1.4  4.2  28.2  306.9  285.4  258.3

Current borrowings

  151.8  107.6  748.8  133.8  66.7  715.7  190.2  151.8  107.6

Current bills payable

  —    —    6.6  —    —    1.5

Non-current borrowings

  320.0  516.5  861.9  320.0  516.3  861.5  236.0  320.0  516.5
  
  
  
  
  
  
  
  
  

Net interest bearing debt

  186.4  365.8  1,307.0  452.4  578.8  1,550.5  119.3  186.4  365.8
  
  
  
  
  
  
  
  
  

99


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

20.ProvisionsPROVISIONS

 

  Consolidated

  The Company

   Consolidated

 

$ in Millions


  2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

Current

                

Provision for employee entitlements

  17.7  25.2  80.3  3.0  3.4  31.4   17.1  17.7  25.2 

Provision for contingencies

  4.8  2.8  3.2  —    —    —     4.6  4.8  2.8 

Provision for rationalisation and restructuring costs

  13.5  30.0  111.9  2.9  4.5  47.3   13.1  13.5  30.0 

Provision for Accufix Pacing Lead related expenses

  14.5  18.6  11.5  —    —    6.5   11.2  14.5  18.6 

Provision for claims

  7.0  8.8  10.9  —    —    —     6.0  7.0  8.8 

Provision for dividend

  —    —    46.6  —    —    46.6 
  

 

 

 

 

 

  

 

 

  57.5  85.4  264.4  5.9  7.9  131.8   52.0  57.5  85.4 

Provision for income tax

  3.1  1.9  10.5  —    —    —     2.6  3.1  1.9 
  

 

 

 

 

 

  

 

 

Total Current

  60.6  87.3  274.9  5.9  7.9  131.8   54.6  60.6  87.3 
  

 

 

 

 

 

  

 

 

Non-Current

                

Provision for employee entitlements

  21.7  23.3  37.1  0.4  0.4  4.8   23.9  21.7  23.3 

Provision for Accufix Pacing Lead related expenses

  —    —    17.8  —    —    —   
  

 

 

 

 

 

  21.7  23.3  54.9  0.4  0.4  4.8 

Provision for deferred income tax

  21.5  24.4  22.1  —    —    —     20.2  21.5  24.4 
  

 

 

 

 

 

  

 

 

Total Non-Current

  43.2  47.7  77.0  0.4  0.4  4.8   44.1  43.2  47.7 
  

 

 

 

 

 

  

 

 

Total Provisions

  103.8  135.0  351.9  6.3  8.3  136.6   98.7  103.8  135.0 
  

 

 

 

 

 

  

 

 

The reconciliations of provisions are set out below:

             
Reconciliations of the carrying amount of each class of provision, except for employee entitlements, are set out below:Reconciliations of the carrying amount of each class of provision, except for employee entitlements, are set out below: 
  Consolidated

  The Company

   Consolidated

 

$ in Millions


  2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

Provision for contingencies

                

Balance at the beginning of the financial year

  2.8  3.2  2.7  —    —    —     4.8  2.8  3.2 

Amounts charged to profit after tax from operating activities

  2.4  —    —    —    —    —     —    2.4  —   

Net foreign currency differences on translation of self-sustaining operations

  (0.4) (0.4) 0.5  —    —    —     (0.2) (0.4) (0.4)
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  4.8  2.8  3.2  —    —    —     4.6  4.8  2.8 
  

 

 

 

 

 

  

 

 

Provision for rationalisation and restructuring

                

Balance at the beginning of the financial year

  30.0  111.9  169.1  4.5  47.3  66.2   13.5  30.0  111.9 

Acquisitions/(disposals) of entities

  —    (11.5) —    —    (11.5) —     —    —    (11.5)

Amounts charged/(released) to profit/(loss) from operating activities

  10.1  20.3  61.0  2.9  (0.3) (1.3)  9.7  10.1  20.3 

Amounts utilised for intended purposes

  (25.7) (88.0) (126.8) (4.5) (31.0) (17.6)  (10.1) (25.7) (88.0)

Net foreign currency differences on translation of self-sustaining operations

  (0.9) (2.7) 8.6  —    —    —     —    (0.9) (2.7)
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  13.5  30.0  111.9  2.9  4.5  47.3   13.1  13.5  30.0 
  

 

 

 

 

 

  

 

 

Provision for Accufix Pacing Lead related expenses

                

Balance at the beginning of the financial year

  18.6  29.3  21.9  —    6.5  0.7   14.5  18.6  29.3 

Amounts utilised for intended purposes

  (2.7) (10.7) (24.3) —    —    (1.8)  (3.1) (2.7) (10.7)

Transfer to controlled entities

  —    —    —    —    (6.5) —     —    —    —   

Amounts refunded by Court/recovered from Insurers

  —    1.5  29.0  —    —    7.6   —    —    1.5 

Net foreign currency differences on translation of self-sustaining operations

  (1.4) (1.5) 2.7  —    —    —     (0.2) (1.4) (1.5)
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  14.5  18.6  29.3  —    —    6.5   11.2  14.5  18.6 
  

 

 

 

 

 

  

 

 

Provision for claims (Captive Insurance Company)

                

Balance at the beginning of the financial year

  8.8  10.9  14.0  —    —    —     7.0  8.8  10.9 

Amounts utilised for intended purposes

  (1.8) (2.1) (3.1) —    —    —     (1.0) (1.8) (2.1)
  

 

 

 

 

 

  

 

 

Balance at the end of the financial year

  7.0  8.8  10.9  —    —    —     6.0  7.0  8.8 
  

 

 

 

 

 

  

 

 

The tax effect of temporary differences that give rise to significant portions of the provision for deferred income tax are presented below:The tax effect of temporary differences that give rise to significant portions of the provision for deferred income tax are presented below:  
  Consolidated

 

$ in Millions


  2004

 2003

 2002

 

Depreciation on plant adjustments

  1.8  9.3  4.1 

Amortisation of Intangible Assets

  12.4  13.5  16.8 

Other

  6.0  (1.3) 3.5 
  

 

 

Total

  20.2  21.5  24.4 
  

 

 

 

The tax effect of temporary differences that give rise to significant portions of the provision for deferred income tax are presented below:100

   Consolidated

 

$ in Millions


  2003

  2002

  2001

 

Trading Stock tax adjustments

  —    —    0.4 

Depreciation on property, plant and equipment adjustments

  9.3  4.1  1.4 

Provisions

  —    —    (1.4)

Accruals

  —    —    (1.1)

Unrealised foreign exchange gains

  —    —    0.9 

Other

  12.2  20.3  21.9 
   
  
  

Total

  21.5  24.4  22.1 
   
  
  


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

20.ProvisionsPROVISIONS (CONTINUED)(continued)

 

The present values of employee entitlements not expected to be settled within twelve months of balance date have been calculated using the following weighted averages:

 

  Consolidated

  The Company

   Consolidated

 

Employee Entitlements


  2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

Assumed rate of increase in wage and salary rates

  3.4% 4.0% 3.0% 3.4% 4.0% 3.0%  2.0% 3.4% 4.0%

Discount rate

  1.7% 2.3% 3.0% 1.7% 2.3% 3.0%  4.1% 1.7% 2.3%

Settlement term (years)

  10-15  10-15  10-15  10-15  10-15  10-15   10-15  10-15  10-15 

Number of employees at year end

  12,013  12,160  23,482  87  104  4,222   11,530  12,013  12,160 

21. Other Liabilities

             

21. OTHER LIABILITIES

   
  Consolidated

  The Company

   Consolidated

 

$ in Millions


  2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

Current

                

Deferred income

  1.1  1.2  3.6  0.2  —    0.4   —    1.1  1.2 

Amounts due under contractual arrangements

  —    —    1.6  —    —    1.4 
  

 

 

 

 

 

  

 

 

Total Current

  1.1  1.2  5.2  0.2  —    1.8 
  

 

 

 

 

 

Non-Current

             

Amounts due under contractual arrangements

  —    —    16.2  —    —    16.2 
  

 

 

 

 

 

Total Non-Current

  —    —    16.2  —    —    16.2 
  

 

 

 

 

 

Total Other Liabilities

  1.1  1.2  21.4  0.2  —    18.0 

Total Current Other Liabilities

  —    1.1  1.2 
  

 

 

 

 

 

  

 

 

22. Dissection of Liabilities

             

22. DISSECTIONOF LIABILITIES

   
  Consolidated

  The Company

   Consolidated

 

$ in Millions


  2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

Secured

                

Bank overdrafts and other loans

  1.1  1.5  2.2  —    —    —     0.6  1.1  1.5 

Bank loans

  0.6  0.9  1.6  —    —    —     0.8  0.6  0.9 

Unsecured

                

Amounts owing to wholly owned controlled entities

  —    —    —    595.4  739.1  1,623.3 

Bank overdrafts

  1.5  13.1  7.3  —    0.9  1.0   2.7  1.5  13.1 

Bank loans

  14.8  26.5  23.7  —    —    —     108.6  14.8  26.5 

Other loans

  453.8  582.1  1,575.9  453.8  582.1  1,576.2   313.5  453.8  582.1 

Trade creditors

  130.1  166.6  363.5  4.5  8.1  78.0   124.1  130.1  166.6 

Bills payable

  —    —    6.6  —    —    1.5 

Other creditors

  27.5  29.8  55.9  10.8  13.8  20.4   38.6  27.5  29.8 

Provisions (as per Note 20)

  103.8  135.0  351.9  6.3  8.3  136.6   98.7  103.8  135.0 

Other liabilities (as per Note 21)

  1.1  1.2  21.4  0.2  —    18.0   —    1.1  1.2 
  

 

 

 

 

 

  

 

 

Total Unsecured Liabilities

  732.6  954.3  2,406.2  1,071.0  1,352.3  3,455.0   686.2  732.6  954.3 
  

 

 

 

 

 

  

 

 

Total Liabilities

  734.3  956.7  2,410.0  1,071.0  1,352.3  3,455.0   687.6  734.3  956.7 
  

 

 

 

 

 

  

 

 

23. Expenditure Commitments

             

23. EXPENDITURE COMMITMENTS

   
  Consolidated

  The Company

   Consolidated

 

$ in Millions


  2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

(a) Capital expenditure commitments

                

Contracted but not provided for in the financial statements:

               —    0.2  0.2 

Land and buildings

  —    —    0.1  —    —    —   

Plant and equipment

  0.2  0.2  2.6  —    —    0.4   —    0.2  0.2 
  

 

 

 

 

 

  0.2  0.2  2.7  —    —    0.4 
  

 

 

 

 

 

  

 

 

Payable within one year

  0.2  0.2  2.7  —    —    0.4   —    0.2  0.2 
  

 

 

(b) Operating Lease Commitments

                

Future operating lease commitments not provided for in the financial statements and payable:

                

Within one year

  14.0  11.0  38.0  5.4  5.5  16.2   11.8  14.0  11.0 

One year or later and no later than five years

  33.3  29.1  90.7  11.5  13.5  39.2   30.1  33.3  29.1 

Later than five years

  11.1  15.6  28.3  2.4  3.6  16.2   14.4  11.1  15.6 
  

 

 

 

 

 

  

 

 

  58.4  55.7  157.0  19.3  22.6  71.6   56.3  58.4  55.7 
  

 

 

 

 

 

  

 

 

 

The Group leases property under operating leases expiring from one to twenty years. Leases generally provide the Group with a right of renewal at which time all terms are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based on either movements in the Consumer Price Index or operating criteria.

101


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

24.SuperannuationSUPERANNUATION

 

Ansell Limited and certain controlled entities contribute to certain defined benefit and accumulation Superannuation Funds maintained to provide superannuation benefits for employees. A total of 14 Superannuation Funds have been established worldwide.

 

The major defined benefit funds are listed below. Where applicable, amounts shown have been proportionately determined and are based on values extracted from the most recent financial report of the Fund. In respect of these funds, employer contributions are based on the advice of the plan’s actuary.

 

   The Company

$ in millions


  2003(1)

  2002(1)

Pacific Dunlop Superannuation Fund(2)

      

Net assets

  41.3  41.3

Accrued benefits

  26.7  26.7
   
  

Excess

  14.6  14.6
   
  

Vested benefits

  26.3  26.3

$ in millions


  2004

  2003

  2002

Defined Benefit
Plan


  Assets

  Accrued
benefits


  Excess /
(Deficiency)


  Vested
benefits


  Assets

  Accrued
benefits


  Excess /
(Deficiency)


  Vested
benefits


  Assets

  Accrued
benefits


  Excess /
(Deficiency)


  Vested
benefits


Plan sponsored by the Company

                                    

Pacific Dunlop Superannuation Fund

  37.4  26.7  10.7  22.5  41.3  26.7  14.6  26.3  41.3  26.7  14.6  26.3

Plans sponsored by other entities in the consolidated entity

                        

Ansell Cash Balance Pension Plan

  33.0  44.0  (11.0) 42.7  29.2  46.6  (17.4) 45.3  44.7  54.9  (10.2) 53.2

Ansell Healthcare Products Inc. Union Retirement Plan

  7.8  12.0  (4.2) 12.0  6.7  12.3  (5.6) 12.3  9.9  11.8  (1.9) 11.8

Ansell Cash Balance Restoration Plan

  —    1.3  (1.3) 1.3  —    1.6  (1.6) 1.6  —    1.9  (1.9) 1.9
   
  
  

 
  
  
  

 
  
  
  

 

Total for plans sponsored by the consolidated entity

  78.2  84.0  (5.8) 78.5  77.2  87.2  (10.0) 85.5  95.9  95.3  0.6  93.2
   
  
  

 
  
  
  

 
  
  
  

 

 

Pacific Dunlop Superannuation Fund

Country

  Australia

Benefit type

  Defined benefit/ Accumulation

Basis of contribution

  Balance of cost/ Cost/Defined Contribution

Date of last actuarial valuation

  01/07/2002

Actuary

  Mercer Human Resource Consulting Pty. Ltd.

 

(1)Plan net assets, accrued benefits and vested benefits have been calculated at 30 June 2002, being the date of the most recent financial statements of the plan. Accrued benefits are based on an actuarial valuation undertaken at 1 July 2002.

Plan net assets and vested benefits have been calculated at 30 June 2003, being the date of the most recent financial statements of the plan. Accrued benefits are based on an actuarial valuation undertaken at 1 July 2002. The values shown reflect amounts in respect of Ansell Limited employees only. Employees of South Pacific Tyres are also members of the fund through 1 April 2004. Effective 1 April 2004 the remaining Ansell members were transferred out of the Pacific Dunlop Superannuation Fund to Equipsuper (an independent Superannuation Fund). The transfer of assets from the Pacific Dunlop Superannuation Fund to Equipsuper has not as yet been completed.

 

(2)Ansell Cash Balance Pension PlanThe values shown reflect amounts in respect of Ansell Limited employees only. Employees of South Pacific Tyres are also members of the fund. Prior year comparatives have been adjusted accordingly.

   Consolidated

 

$ in millions


  2003

  2002

  2001

 

Ansell Cash Balance Pension Plan

          

Net assets

  29.2  44.7  53.9 

Accrued benefits

  46.6  54.9  60.2 
   

 

 

Excess/(Deficiency)

  (17.4) (10.2) (6.3)
   

 

 

Vested benefits

  45.3  53.2  58.3 

Country

  USA

Benefit type

  Defined Benefit

Basis of contribution

  Statutory Funding Requirements

Date of last actuarial valuation

  31/03/20032004

Actuary

  Retirement Plan Actuaries, Inc

Ansell Healthcare Products Inc. Union Retirement Plan

          

Net assets

  6.7  9.9  11.5 

Accrued benefits

  12.3  11.8  13.4 
   

 

 

Excess/(Deficiency)

  (5.6) (1.9) (1.9)
   

 

 

Vested benefits

  12.3  11.8  12.8 

Ansell Healthcare Products Inc. Union Retirement Plan

Country

  USA

Benefit type

  Defined Benefit

Basis of contribution

  Statutory Funding Requirements

Date of last actuarial valuation

  31/03/20032004

Actuary

Retirement Plan Actuaries, Inc

Ansell Cash Balance Restoration Plan

Country

USA

Benefit type

Defined Benefit

Basis of contribution

Contributions equal benefits paid

Date of last actuarial valuation

31/03/2004

Actuary

  Retirement Plan Actuaries, Inc

 

The Company and the controlled entities are obliged to contribute to the Superannuation Funds as a consequence of legislation or Trust Deeds; legal enforceability is dependent on the terms of the legislation or the Trust Deeds. In accordance with the various Trust Deeds, the Company and their controlled entities are under no legal or constructive obligation to make up any shortfall in the plans’ assets to meet payments due to employees and accordingly no provision has been raised for the deficiencies at 30 June 2004.

The directors, based on the advice of the trustees of the funds, are not aware of any changes in circumstances since the date of the most recent financial statements of the funds which would have a material impact on the overall financial position of the funds.

102


PART III

Item 18 : Consolidated Financial Statements

24.SUPERANNUATION (continued)

 

The directors, based on the advice of the trustees of the funds, are not aware of any changes in circumstances since the date of the most recent financial statements of the funds which would have a material impact on the overall financial position of the funds.

 

Definitions

 

Balance of cost:

  The consolidated entity’s contribution is assessed by the actuary by taking into account the members’ contribution and the values of the assets.

Defined contribution:

  The consolidated entity’s contribution is set out in the appropriate fund rules, usually as a fixed percentage of salary.

Accrued benefits:

  The present value of benefits which the fund is presently obliged to transfer in the future to members and beneficiaries as a result of membership of the fund to the calculation date.

Vested benefits:

  Benefits which are not conditional upon the continued membership of the respective fund or any factor other than resignation from the fund.

 

Details of contributions paid to the funds are as follows:

 

   Consolidated

  The Company

$ in Millions


  2003

  2002

  2001

  2003

  2002

  2001

Contributions to defined benefit funds during the year

  10.7  3.2  6.9  —    3.2  4.0

Contributions to accumulation funds during the year

  1.5  0.8  4.0  —    —    0.7

PART III

Items 17 & 18 : Financial Statements


Notes to the Financial Statements

   Consolidated

$ in millions


  2004

  2003

  2002

Contributions to defined benefit funds during the year

  9.9  10.7  3.2

Contributions to accumulation funds during the year

  1.1  1.5  0.8

 

25.Ownership-Based Remuneration SchemesOWNERSHIP-BASED REMUNERATION SCHEMES

 

Executive and Employee Share Plans

 

The Company has operated two share plans for employees and Directors of the consolidated entity:

 

the Pacific Dunlop Executive Share Plan (“Executive Plan”), and

 

the Pacific Dunlop Employee Share Plan (“Employee Plan”).

 

No issue of shares has been made under either Plan since February 1994 and the Board determined during 1996 that no further issues of shares will be made under the Executive Plan.

 

The employee planEmployee Plan permits full time and part time employees, who have completed three or more years continuous service within the consolidated entity and who do not participate in the Executive Plan to acquire 20 ordinary shares in the capital of the Company for each completed year of service. The shares are issued at market value as at the date of issue, payable as to 50 cents per share by the employee, the balance financed by an interest free loan from the Company repayable, at latest, on cessation of employment. The shares are not transferable while a loan remains outstanding, but carry a voting right and an entitlement to dividends (although dividends are applied in reduction of the loan). Invitations are made under the Employee Plan from time to time. As at reporting date no offer to employees was outstanding. The aggregate number of Employee Plan Shares on issue may not exceed 5% of the total issued capital of the Company.

 

As stated above, the Executive Plan is no longer available for new issues. Shares issued under that Plan to selected employees (“Executives”) were paid up to 5 cents and were subject to restrictions for a determined period (for the 1993/1994 issue-issue - 8 1/4 years). While partly paid, the shares are not transferable, carry no voting rightrights and no entitlement to dividends (but are entitled to participate in bonus or rights issues as if fully paid). The price payable for shares issued under the Executive Plan varies according to the event giving rise to a call being made. Market price at the date of the call is payable if an Executive ceases employment within the consolidated entity (other than for death, retrenchment or retirement) prior to expiration of the restriction period. Once restrictions cease the price payable upon a call being made will be the lesser of $10.00 ($2.50 for issues prior to 13 September 1991) and the last sale price of the Company’s ordinary shares on Australian Stock Exchange Limited. The aggregate number of Executive Plan Shares on issue could not exceed 5% of the total issued capital of the Company.

 

The Company’s accounting policy in respect of the Employee Plan is to recognise the paid up capital upon allotment and the receivable created by the loan to employees to acquire the shares. In respect of the Executive Plan, no amount was recognised upon issue, apart from the capital paid up on the shares, as the amount of the call payable was not quantifiable at the time of issue. Once a call had been made upon the shares and paid, the Company recognised the increase in paid up capital. The number of Employee Share Plan Shares and the number

103


PART III

Item 18 : Consolidated Financial Statements

25.OWNERSHIP-BASED REMUNERATION SCHEMES (CONTINUED)

of Executive Plan Shares (ordinary plan shares paid to five cents) as at balance date are shown in Note 5. A loss of $ 13,288$4,366 pre-tax in respect of the Employee Share Plan was recognised in the Company and the consolidated financial statements for 2003 (20022004 (2003 -$13,288 pre-tax; 2002 - $535,381 pre-tax; 2001 - - $312,980 pre tax)pre-tax).

 

The market price of the Company’s shares as at 30 June 20032004 was $5.86.$7.74.

 

Options - Generally

 

At reporting date and the date of this report 1,300,0001,825,000 unissued ordinary shares in the Company remain under option. During the year ended 30 June 2003, 207,000 options expired being the last of the options issued under the Pacific Dunlopoption (refer Note 28 Director and Executive Share Option Plan.Disclosures for details).

 

Ansell Limited Stock Incentive Plan

 

Shareholders at the 2002 Annual General Meeting approved a grant of options to the Managing Director pursuant toOptions and or Performance Share Rights (PSRs) are granted under the Ansell Limited Stock Incentive Plan (‘the Plan’). Decisions to grant options or PSRs are reviewed annually by the Board and are granted for no consideration. In general, grants are made annually, each award being three equal tranches. Each tranche is subject to performance targets set by the Board in respect of each of the three successive years. These rights entitle the holder to an equivalent number of fully-paid ordinary shares upon achievement of the performance targets.

The options may be exercised at a price based on the average of the Ansell share price on the five days preceding the grant. PSRs, when vested, are converted to fully-paid ordinary shares at no cost to the executive. Upon vesting participants are permitted to sell shares to cover tax liabilities and up to 50% of the remaining vested tranche. The balance remains restricted for a further 12 months. PSRs that have vested but remain restricted attract dividends.

During 2004 525,000 options and 150,000 PSRs were granted in two equal tranches of 500,000to the Chief Executive Officer upon his appointment as an executive, pursuant to the Plan. The options, withwhich are subject to performance conditions, have an exercise price of $6.32$7.40, are not exercisable until one year after they vest and will lapse if not exercised on or before 30 June 2014. The PSRs convert to shares at no cost to the executive upon satisfaction of performance conditions. Both the options and PSRs were granted in three tranches, and are subject to certainthe achievement of long-term performance hurdles thattargets and stretch targets established by the Board. Targets for financial year 2005 and future years are tiedyet to EBITA milestones for the Ansell Healthcare business. The performance hurdle in respectbe finalised and are subject to further Board consideration of the next stage of the Company’s development under the leadership of the new Chief Executive Officer. The vesting period for both the options and PSRs commenced 1 July 2004.

The options granted to the former Managing Director have now vested. The first tranche was achieved and theseof 500,000 options are now exercisable at $6.32 for each share acquired. The second tranche of 500,000 options may be exercised, again at $6.32 for each share acquired, after 30 June 2004 and before 30 June 2006. If the performance hurdle for the second tranche is satisfied those2005. Both tranches of options may only be exercised after 30 June 2005 and beforeprior to 30 June 2006.

 

During the 2003 financial year the Chief Financial Officer was granted 300,000 options in three equal tranches of 100,000 options, each with an exercise price of $6.97 and subject to certain performance and service hurdles. The performance hurdles aretargets aligned to increases in EBITA of the Ansell Healthcare business and the achievement of certain financial ratios for the 2002-20032003-2005 financial year in respect of the first tranche and for the years ending 30 June 2004 and 30 June 2005 for the second and third tranches.years. In respect of the first tranchetwo tranches the performance hurdlestargets have been met and these options have vested and arevested. The first tranche is exercisable after 30 June 2004.2004, the second after 30 June 2005. These options expire on 23 September 2012.

 

During the year certain2003 437,500 PSRs, exercisable in three equal tranches, were granted to senior Group executives have been granted, in total, 437,500 Performance Share Rights (‘PSR’s’) pursuant to the Plan. The award of a PSR by the Company under the Plan entitles the participant to receive one fully paid ordinary share in the Company at the end of a Performance Period. The number of PSR's that vest will be contingent on the degree to which performance measures and, as appropriate, service conditions established at the time of the grant are met.

Grants of PSR’s to each executive comprise three equal tranches, each tranche subject to performance hurdles for vesting to occur. The hurdlestargets applicable to the first tranchetwo tranches have been met and thatthose tranches have vested. The third tranche has vested.is subject to the achievement of performance targets for the 2005 financial year.

104


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

25.Ownership-Based Remuneration SchemesOWNERSHIP-BASED REMUNERATION SCHEMES (CONTINUED)(continued)

 

During 2004 a further 665,000 PSRs, exercisable in three equal tranches, were granted to executives (including those granted to the Chief Executive Officer). The shares issuedperformance targets in satisfactionrespect of the vested rights are,first tranche of PSRs granted in some circumstances, subjectthe current year (with the exception of those granted to restriction.the Chief Executive Officer) have been achieved and these PSRs have vested. The second and third tranches are subject to the achievement of performance hurdles intargets for the 2003-20042005 and 2004-20052006 financial years respectively.

 

The Board determinesIn relation to the participants to whom PSR’s are to be granted, the number of PSR’s to be the subject of each grant,2005 financial year the performance measurescondition applicable to options and PSR’s issued to executives other than the Chief Executive Officer is that the EBITA for the Ansell Healthcare business meets or serviceexceeds US$115 million. Performance targets for periods usedbeyond financial year 2005 are under review pending Board consideration of the next stage of the Company’s development under the leadership of the recently-appointed Chief Executive Officer.

In accordance with the disclosure requirements of Australian Accounting Standards remuneration includes a proportion of the fair value of options and PSRs granted or outstanding during the year. The fair value is determined as at grant date and is progressively expensed over the vesting period for determining whetherthese securities. The amount included as remuneration (as disclosed in Note 28 Director and Executive Disclosures) is not related to, or indicative of, the PSR’s vestbenefit (if any) that individual executives may ultimately realise should the options or PSRs vest. No amount in respect of options or PSRs has been included in the determination of the remuneration of the Chief Executive Officer as the vesting period for these instruments commenced after balance date.

The fair value of options and PSRs is calculated at the date of grant using binomial tree techniques. The fair values and the Performance Period during which each performance measure or service period will apply. No amount is payable byfactors and assumptions used in determining the participant upon the receiptfair values of the grant or vestingtranches of the PSR’s.options and PSRs applicable for financial year 2004 are as follows:

Instrument


  Number
Issued


  

Grant

Date


  Expiry
Date


  

Fair

Value per

Option/PSR


  Exercise
Price


  

Share Price
on

Grant Date


  Estimated
Volatility


  Risk Free
Interest
Rate


  Dividend
Yield


 

Options

  1,000,000  12/4/2002  30/6/2006  $2.15  $6.32  $6.40  30.0% 6.0% 0.0%

Options

  300,000  23/9/2002  23/9/2012  $2.66-$2.70  $6.97  $6.88  20.0% 5.3% 0.0%

Options

  525,000  30/6/2004  30/6/2014  $2.35-$2.38  $7.40  $7.74  20.0% 6.1% 2.0%

PSRs

  437,500  19/2/2003  30/6/2005  $6.07  N/A  $6.07  20.0% N/A  0.0%

PSRs

  515,000  18/12/2003  30/6/2006  $5.89-$6.12  N/A  $6.19  20.0% N/A  2.0%

PSRs

  150,000  30/6/2004  30/6/2007  $6.94-$7.22  N/A  $7.74  20.0% N/A  2.0%

Estimated volatility is based on an analysis of historical share price data.

 

26.Contingent Liabilities and Contingent AssetsCONTINGENT LIABILITIESAND CONTINGENT ASSETS

 

Indemnities and Guarantees

 

Ansell Limited (‘the Company’) has previously entered into Deeds of Indemnity with each of the Directors of the Company and certain officers of controlled entities, in relation to liabilities that they may incur (other than to Group companies) as Directors of the Company and Directors and officers of certain controlled entities respectively, to the extent permitted by law and the Company’s Constitution.

 

The Company has also guaranteed the performance of certain wholly-owned controlled entities which have negative shareholders’ funds.

 

At this time, no liabilities the subject of any such indemnity or guarantee have been identified and, accordingly, it is not possible to quantify any financial obligation of the consolidated entity under these indemnities and of the Company pursuant to its guarantee.

 

Accufix Litigation

 

ClaimsOnly a limited number of lawsuits in relation to the Accufix Pacing Leads which have been made against certain Group Companies remain on foot, the majority of which have been brought in a number of jurisdictions relating to the Accufix pacing leads manufactured by Accufix Research Institute, Inc. (formerly TPLC) (‘ARI’).France.

 

As at 30 June 2003, all lawsuits have been concluded with the exception of three lawsuits which remain outstanding in France in relation to the Accufix pacing leads: one involving 3 individual claimants, and two recently initiated actions one of which involves 8 claimants, the other involving only 1 claimant. In addition, claims may still be made by any of the 150 persons who opted out of the class settlement in the United States.

As at 30 June 2003,2004, the balance of the provisions made for settlements in relation to claims (approximately $14.5A$11.2 million) is considered adequate to address any remaining liability of members of the Ansell Group to claims made by individuals with respect to the manufacture of the Accufix pacing leads.Group.

105


PART III

Item 18 : Consolidated Financial Statements

26.CONTINGENT LIABILITIESAND CONTINGENT ASSETS (CONTINUED)

 

Latex Allergy Litigation

 

Proceedings have been broughtAs at 30 June 2004, there were approximately 46 product liability cases pending against variousone or more Ansell Group Companies (the “Ansell Defendants”) in the United States and Australia in relation to allergic reaction to exposure to natural rubber latex gloves.

As In a number of cases, distributors of latex gloves who have also been named as defendants, are pursuing cross-claims and third party claims against United States Group Companies. It is not possible, at 30 June 2003, there were approximately 313this time, to quantify the potential financial impact, of such cases, pending against one or more ofon the Ansell Defendants. Ansell Limited is no longer a defendant in any cases in the United States.

The Australian Competition and Consumer Commission has instituted legal action against the Company alleging breaches of the Trade Practices Act relating to the labelling and packaging of natural rubber latex gloves. The Company is vigorously defending this litigation.Group.

 

Business and Asset Sales

 

The Company and various Group Companies have, as part of the Group’s historical asset and business sale program, provided warranties, indemnities and other undertakings and, in some instances, the Company has guaranteed the warranties, indemnities and other obligations of various Group Companies, to the purchasers of Group assets and businesses. At this time, it is not possible to quantify the potential financial impact of those warranties, indemnities, undertakings or guarantees upon the economic entity. From time to time, the Company has received notices from purchasers of its businesses pursuant to the relevant sale agreements.

Simplot Australia Pty Ltd has instituted proceedings against the Company and other Group Companies in the Supreme Court of Victoria in relation to the sale of the Edgell-Bird’s Eye and Herbert Adams Bakeries businesses. The matter is scheduled to be heard in March 2004. The Company denies all of the allegations made against it and is continuing to strenuously defend the claim.

No other formal proceedings have been initiatedare currently on foot and, accordingly, it is not possible at this time to quantify the potential financial impact on the Group.

 

Exide Corporation

 

US legal proceedings are continuing against entities in the Exide Group that have not filed for bankruptcy (‘Non-Bankrupt Entities’), to recover amounts due to the Ansell Group in connection with the sale of the GNB business. These proceedings have been joined withProceedings against those entities in the Exide Group that have not filed for bankruptcy (‘Non-bankrupt Entities’) were transferred to the Delaware bankruptcy court (‘the Court’) where the Court determined that all of the Ansell Group’s claims against the Non-bankrupt Entities may only be asserted against Exide Technologies, bankruptcy case. Inc., a company which has emerged from bankruptcy.

The Ansell Group has opposed this joinder, and is seeking a motionrequested that the Court review its decision. The Court has yet to have the proceedings remitted to the Illinois State Court.do so. The Ansell Group will continue to aggressively pursue recovery of the amounts owed by the Non-Bankrupt Entities, includingExide Group, but the separationAnsell Group only expects to recover stock in the reorganised company (Exide Technologies, Inc.). The ultimate amount of thesethe Ansell Group’s claims have not yet been determined and therefore the amount and value of the stock that may be recovered from Exide Technologies bankruptcy case.Inc. is also undetermined.

106


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

27.Financial Instruments

 

Derivative Financial Instruments

 

The consolidated entity is involved in a range of derivative financial instruments, which can be defined in the following broad categories:

 

(i) Forward / Future Contracts

 

These transactions enable the consolidated entity to buy or sell specific amounts of foreign exchange, financial instruments or commodities at an agreed rate/price at a specified future date. Maturities of these contracts are principally between six months and two years.

 

(ii) Options

 

This is a contract between two parties, which gives the buyer of a put or call option the right, but not the obligation, to transact at a specified interest rate/exchange rate or commodity price at a future date, generally for a premium. Maturities of these contracts are principally between three months and two years.

 

(iii) Swaps

 

These agreements enable parties to swap interest rate (from or to a fixed or floating basis) or currency (from one currency to another currency) positions for a defined period of time. Maturities of the contracts are principally between two and five years.

 

Interest Rate Risk

 

The Company’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:

 

Net Financial Assets/(Liabilities)

 

  

Weighted

Effective
Interest
Rate %


  Floating

  Fixed Interest maturing in:

  

Non

Interest
Bearing


  Total

$ in millions


  

Weighted Average

Effective Interest
Rate %


  

Interest rate

Fixed Maturities
Floating


  

1 year

or less


  

1 to 5

years


  

Over

5 years


  

Non

Interest

Bearing


  Total

    1 year
or less


 1 to 5
years


 Over 5
years


  

Financial Assets 2004

         

Recognised

         

Cash on hand and at bank

  1.1% 20.5  —    —    —    50.2  70.7

Short-term deposits

  4.8% 231.8  —    15.6  —    —    247.4

Receivables - trade

  N/A  —    —    —    —    183.0  183.0

Receivables - other

  6.1% 62.8  —    —    —    46.5  109.3

Investments

  N/A  —    —    —    —    141.4  141.4
   

 

 

 
  
  

Total Financial Assets 2004

   315.1  —    15.6  —    421.1  751.8
   

 

 

 
  
  

Financial Liabilities 2004

         

Recognised

         

Payables - trade

  NA  —    —    —    —    124.1  124.1

Payables - other

  NA  —    —    —    —    38.6  38.6

Bank overdraft

  1.5% 3.3  —    —    —    —    3.3

Bank and other loans

  5.6% 321.2  —    101.7  —    —    422.9

Provision for employee entitlements

  N/A  —    —    —    —    41.0  41.0

Unrecognised

         

Net interest rate swaps

  2.0% (147.4) 121.1  26.3  —    —    —  
   

 

 

 
  
  

Total Financial Liabilities 2004

   177.1  121.1  128.0  —    203.7  629.9
   

 

 

 
  
  

Net Financial Assets/(Liabilities) 2004

   138.0  (121.1) (112.4) —    217.4  121.9
   

 

 

 
  
  

Financial Assets 2003

                          

Recognised

                          

Cash on hand and at bank

  1.3% 61.4  —    —    —    —    61.4   1.3% 61.4  —    —    —    —    61.4

Short-term deposits

  3.9% 238.4  —    —    —    —    238.4   3.9% 238.4  —    —    —    —    238.4

Receivables - trade

  N/A  —    —    —    —    197.5  197.5   N/A  —    —    —    —    197.5  197.5

Receivables - other

  5.4% 62.7  —    —    —    59.2  121.9   5.4% 62.7  —    —    —    59.2  121.9

Investments

  N/A  —    —    —    —    141.4  141.4   N/A  —    —    —    —    141.4  141.4
  

 

 

 

 
  
  

   

 

 

 
  
  

Total Financial Assets 2003

    362.5  —    —    —    398.1  760.6    362.5  —    —    —    398.1  760.6
  

 

 

 

 
  
  

   

 

 

 
  
  

Financial Liabilities 2003

                          

Recognised

                          

Payables - trade

  N/A  —    —    —    —    130.1  130.1   N/A  —    —    —    —    130.1  130.1

Payables - other

  N/A  —    —    —    —    27.5  27.5 

Payables -other

  N/A  —    —    —    —    27.5  27.5

Bank overdraft

  3.2% 1.3  —    —    —    1.3  2.6   3.2% 1.3  —    —    —    1.3  2.6

Bank and other loans

  6.4% 370.0  24.2  75.0  —    —    469.2   6.4% 370.0  24.2  75.0  —    —    469.2

Provision for employee entitlements

  N/A  —    —    —    —    39.4  39.4   N/A  —    —    —    —    39.4  39.4

Unrecognised

                          

Net interest rate swaps

  2.5% (319.4) 168.8  150.6  —    —    —     2.5% (319.4) 168.8  150.6  —    —    —  
  

 

 

 

 
  
  

   

 

 

 
  
  

Total Financial Liabilities 2003

    51.9  193.0  225.6  —    198.3  668.8    51.9  193.0  225.6  —    198.3  668.8
  

 

 

 

 
  
  

   

 

 

 
  
  

Net Financial Assets/(Liabilities) 2003

    310.6  (193.0) (225.6) —    199.8  91.8    310.6  (193.0) (225.6) —    199.8  91.8
  

 

 

 

 
  
  

   

 

 

 
  
  

Financial Assets 2002

                 

Recognised

                 

Cash on hand and at bank

  1.1% 72.2  —    —    —    —    72.2 

Short-term deposits

  3.3% 174.1  30.6  —    —    —    204.7 

Receivables - trade

  N/A  —    —    —    —    232.5  232.5 

Receivables - other

  2.6% 32.9  25.0  —    —    70.0  127.9 

Investments (excl. associated companies)

  N/A  —    —    —    —    145.8  145.8 
  

 

 

 

 
  
  

Total Financial Assets 2002

    279.2  55.6  —    —    448.3  783.1 
  

 

 

 

 
  
  

Financial Liabilities 2002

                 

Recognised

                 

Payables - trade

  N/A  —    —    —    —    166.6  166.6 

Payables - other

  N/A  —    —    —    —    29.8  29.8 

Bank overdraft

  3.3% 14.6  —    —    —    —    14.6 

Bank and other loans

  6.1% 466.0  20.8  122.7  —    —    609.5 

Provision for employee entitlements

  N/A  —    —    —    —    48.5  48.5 

Unrecognised

                 

Net interest rate swaps

  5.1% (375.9) —    375.9  —    —    —   
  

 

 

 

 
  
  

Total Financial Liabilities 2002

    104.7  20.8  498.6  —    244.9  869.0 
  

 

 

 

 
  
  

Net Financial Assets/(Liabilities) 2002

    174.5  34.8  (498.6) —    203.4  (85.9)
  

 

 

 

 
  
  

107


PART III

Item 18 : Consolidated Financial Statements

27.FINANCIAL INSTRUMENTS (continued)

 

Provisions, including amounts contained within income tax, deferred income tax, contingencies, rationalisation and restructure, Accufix Pacing Lead related expenses and insurance claims amounting to $64.4$57.7 million (2002(2003 - $86.5$64.4 million) are not included within the table above as it is considered that they do not meet the definition of a financial instrument.

 

A separate analysis of debt by currency can be found at Note 19 - Interest Bearing Liabilities.

PART III

Items 17 & 18 : Financial Statements


Notes to the Financial Statements

27.Financial Instruments(continued)

 

Credit Risk and Net Fair Value

Recognised Financial InstrumentsInstruments:

 

(i) Credit Risk

 

The credit risk on financial assets, excluding investments, of the consolidated entity which have been recognised on the Statement of Financial Position, is the carrying amount, net of any provision for doubtful debts.

The consolidated entity minimises concentrations of credit risk by undertaking transactions with a large number of customers and counter parties in various countries.

The consolidated entity is not materially exposed to any individual overseas country or individual customer.

 

(ii) Net Fair Value

 

The Directors considerCompany considers that the carrying amount of recognised financial assets and financial liabilities approximates their net fair value.

 

Refer to Note 1 for accounting policies in respect of the carrying values of financial assets and financial liabilities.

 

Unrecognised Financial InstrumentsInstruments:

 

Credit risk on unrecognised derivative contracts is minimised as counterparties are recognised financial intermediaries with acceptable credit ratings determined by a recognised rating agency. It is not felt that there is a material exposure to any single counterparty or group of counterparties. The consolidated entity’s exposure is almost entirely (over 99%) to banks.

 

The following table displays:

 

(i) Face Value

 

This is the contract’s value upon which a market rate is applied to produce a gain or loss which becomes the settlement value of the derivative financial instrument.

 

(ii) Credit Risk

 

This is the maximum exposure to the consolidated entity in the event that all counterparties who have amounts outstanding to the consolidated entity under derivative financial instruments, fail to honour their side of the contracts. The consolidated entity’s exposure is almost entirely to banks (see (v) below). Amounts owed by the consolidated entity under derivative financial instruments are not included.

 

(iii) Net Fair Value

 

This is the amount at which the instrument could be realised between willing parties in a normal market in other than a liquidation or forced sale environment. The net amount owed by / (owing to) financial institutions under all derivative financial instruments would have been $1.6 million (2003 - ($11.1) million (2002million; 2002 - ($23.8) million; 2001 - $5.9 million), if all contracts were closed out on 30 June 2003.2004.

 

  Face Value

  Credit Risk

  Net Fair Value

   Face Value

  Credit Risk

  Net Fair Value

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

  2003

   2002

   2001

   2004

  2003

  2002

  2004

  2003

  2002

  2004

 2003

 2002

 

Foreign Exchange Contracts

                                                

Purchase/Sale Contracts:

                                                

- U.S. dollars

  112.0  329.7  1,231.7  0.3  1.6  22.0  (0.4)  (7.3)  17.6   77.0  112.0  329.7  0.4  0.3  1.6  0.2  (0.4) (7.3)

- Australian dollars

  47.5  49.4  237.2  1.8  —    —    1.8   —     —     22.0  47.5  49.4  —    1.8  —    —    1.8  —   

- Other currencies

  44.8  216.5  186.5  —    2.5  1.7  (0.9)  2.4   (1.5)  33.4  44.8  216.5  0.2  —    2.5  0.1  (0.9) 2.4 

Cross Currency Swaps:

                                                

- U.S. dollars

  69.4  96.5  240.2  2.7  2.2  0.7  2.7   (1.5)  (16.5)  53.8  69.4  96.5  1.9  2.7  2.2  1.9  2.7  (1.5)

- Other currencies

  —    16.5  35.2  —    —    5.8  —     (2.1)  5.8   —    —    16.5  —    —    —    —    —    (2.1)

Foreign Exchange Options

                                                

Zero Cost Collar

                                                

- Euro/U.S. dollars

  103.5  —    —    0.8  —    —    (2.6)  —     —     193.5  103.5  —    2.2  0.8  —    0.7  (2.6) —   

Premium Paid (Put)

                                                

- Euro/U.S. dollars

  19.8  —    —    0.2  —    —    0.2   —     —     —    19.8  —    —    0.2  —    —    0.2  —   

Interest Rate Contracts

                                                

Interest Rate Swaps:

                                                

- U.S. dollars

  369.4  435.1  452.7  0.3  3.0  6.6  (10.9)  (14.5)  0.5   141.0  369.4  435.1  0.4  0.3  3.0  (1.2) (10.9) (14.5)

- Australian dollars

  100.0  300.0  300.0  —    —    1.2  (1.0)  (0.8)  0.3   50.0  100.0  300.0  —    —    —    (0.1) (1.0) (0.8)

- Other currencies

  —    17.5  16.7  —    —    —    —     —     (0.3)  —    —    17.5  —    —    —    —    —    —   
  
  
  
  
  
  
  

  

  

  
  
  
  
  
  
  

 

 

Total

  866.4  1,461.2  2,700.2  6.1  9.3  38.0  (11.1)  (23.8)  5.9   570.7  866.4  1,461.2  5.1  6.1  9.3  1.6  (11.1) (23.8)
  
  
  
  
  
  
  

  

  

  
  
  
  
  
  
  

 

 

108


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

27.Financial InstrumentsFINANCIAL INSTRUMENTS (continued)(continued)

 

From time to time in the ordinary course of business, the consolidated entity enters into forward exchange contracts to hedge a proportion of anticipatedits purchase and sale commitments denominated in foreign currencies (principally US dollars). The amount of anticipated future purchases and sales is forecast in light of current market conditions and commitments from customers. Hedge contracts are used to cover the next available trading exposure until all contracts are fully utilised. Hedge cover generally does not exceed 312 months.

 

(iv) Market/Liquidity Risk

 

The consolidated entity seeks to reduce the risk of:

 

(a)being forced to exit derivative financial instrument positions at below their real worth; or

 

(b)finding it cannot exit the position at all, due to lack of liquidity in the market; by:

by:

 

(a)dealing only in liquid contracts dealt by many counterparties; and

 

(b)dealing only in large and highly liquid and stable international markets.

 

(v) Credit Risk by Maturity

 

The following table indicates the value of amounts owing by counterparties by maturity. Based on the Group policy of not having overnight exposures to an entity rated lower than A- by Standard & Poor’s or A3 by Moody’s Investors Service, it is felt the risk to the consolidated entity of the counterparty default loss is not material.

 

  Foreign Exchange
Related Contracts


  Interest Rate
Contracts


  Foreign Exchange
Options


  Total

  Foreign Exchange
Related Contracts


  Interest Rate
Contracts


  Foreign Exchange
Options


  Total

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

  2003

  2002

  2001

  2003

  2002

  2001

  2004

  2003

  2002

  2004

  2003

  2002

  2004

  2003

  2002

  2004

  2003

  2002

Term: 0 to 6 mths

  2.1  4.1  27.0  0.3  —    1.2  0.4  —    —    2.8  4.1  28.2

Term:

                                    

0 to 6 mths

  0.6  2.1  4.1  —    0.3  —    1.1  0.4  —    1.7  2.8  4.1

6 to 12 mths

  —    —    2.5  —    —    —    0.6  —    —    0.6  —    2.5  0.1  —    —    —    —    —    1.1  0.6  —    1.2  0.6  —  

1 to 2 yrs

  0.2  —    —    —    3.0  0.8  —    —    —    0.2  3.0  0.8  —    0.2  —    —    —    3.0  —    —    —    —    0.2  3.0

2 to 5 yrs

  2.5  2.2  —    —    —    5.8  —    —    —    2.5  2.2  5.8  1.8  2.5  2.2  0.4  —    —    —    —    —    2.2  2.5  2.2

5 to 10 yrs

  —    —    0.7  —    —    —    —    —    —    —    —    0.7
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

Total

  4.8  6.3  30.2  0.3  3.0  7.8  1.0  —    —    6.1  9.3  38.0  2.5  4.8  6.3  0.4  0.3  3.0  2.2  1.0  —    5.1  6.1  9.3
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

 

(vi) Historical Rate Rollovers

 

It is the consolidated entity’s policy not to engage in historical rate rollovers except in circumstances where the maturity date falls on a bank holiday. In these instances, settlement occurs on the next trading day.

 

(vii) Hedges and Anticipated Future Transactions

 

The following table shows the consolidated entity’s deferred gains and (losses), both realised and unrealised, that are currently held on the Statement of Financial Position and the expected timing of recognition as revenue or expense:

 

  Interest Rate

  Foreign Exchange

  Interest Rate

  Foreign Exchange

 

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

  2004

  2003

  2002

  2004

 2003

  2002

 

Anticipated Exposures

                

Exposures

               

Less than 1 year

  —    —    —    1.9  (0.5) 1.4  —    —    —    (0.1) 1.9  (0.5)

Realised Swaps Deferred

                               

Less than 1 year

  0.4  0.1  (0.5)         0.7  0.4  0.1      

1 to 2 years

  0.8  0.7  0.2          0.7  0.8  0.7      

2 to 5 years

  0.9  2.2  (0.5)         4.9  0.9  2.2      

Greater than 5 years

  —    —    1.6        

109


PART I

Item 18 : Consolidated Financial Statements

 

28.Directors’ and Executives’ remunerationDIRECTORAND EXECUTIVE DISCLOSURES

 

   Consolidated

  The Company

$ in Thousands


  2003(d)(h)

  2003(d)

  2002(c)

  2001(c)

Directors

            

Aggregate remuneration paid or payable to Directors:(a)(e)

            

Directors’ fees and salaries of Ansell Limited Executive Directors

  1,695  590  1,225  1,313

Performance-based bonuses

  459  —    —    100

Other benefits(e)

  900  76  111  2,791
   
  
  
  

Total remuneration of Directors of Ansell Limited

  3,054  666  1,336  4,204
   
  
  
  

Specified Directors:

 

   Consolidated

   2003

  2002

  2001

Consolidated remuneration of directors of all Group Companies:

  11,930  26,153  35,713

The following persons were directors of Ansell Limited during the financial year:

 

   Consolidated

  The Company

Executives


  2003(d)

  2002(c)

  2001(c)

  2003(d)

  2002(c)

  2001(c)

Aggregate remuneration of the fourteen Senior Executives:(a)(b)(e)(f)

                  

Salaries

  5,644  3,788  4,322  423  1,688  3,253

Performance-based bonuses

  1,421  2,023  3,128  111  1,631  100

Other benefits(e)

  1,829  3,871  4,411  78  3,232  3,871
   
  
  
  
  
  

Total remuneration of Executives

  8,894  9,682  11,861  612  6,551  7,224
   
  
  
  
  
  

E.D. Tweddell - Chairman

H. Boon - Group Managing Director and Chief Executive Officer (retired 30 June 2004)

P.L. Barnes

L.D. Crandall

H.J. Elliott

S.P. Gold (resigned 16 April 2004. Alternate to M.J. McConnell from 16 April 2004)

M.J. McConnell (appointed 16 April 2004. Previously alternate to S.P. Gold)

Specified Executives (other than directors) with the Greatest Authority for Strategic Direction and Management:

The following persons were the specified executives with the greatest authority for the strategic direction and management of the consolidated entity during the financial year:

Name


Position


Employer


W. HeintzSenior Vice President and Regional, Director - EuropeAnsell Healthcare Europe N.V.
R. JillaSenior Vice President and Chief Financial OfficerAnsell Healthcare Products LLC.
N. O’DonnellSenior Vice President and Regional Director - Asia PacificAnsell Limited
W. ReedSenior Vice President and Regional Director - AmericasAnsell Healthcare Products LLC.
W. Reilly, Jr.Senior Vice President and General CounselAnsell Healthcare Products LLC.
D. Tough

Appointed as an executive effective 11 May 2004

and as Group Managing Director and Chief Executive

Officer 1 July 2004

Ansell Healthcare Products LLC.

Remuneration of specified directors and specified executives:

Principles used to determine the nature and amount of remuneration

The Board’s Nomination, Remuneration and Evaluation Committee is responsible for reviewing the remuneration policies and practices of the Company, including the compensation arrangements for the Managing Director and senior management and, within the aggregate amount approved by shareholders, the fees for Non-executive Directors. The fees of the Chairman and Non-executive Directors are set within the aggregate amount approved by shareholders, at levels which represent the responsibilities of, and the time commitments provided by, those Directors in discharging their duties. The fees paid to Directors take into account what is paid by comparable companies, and what is necessary to attract high-calibre people to consider Board appointment. The Board will continue to review its remuneration strategies in relation to Non-Executive Directors from time to time, in line with general industry practice.

Non-executive Directors

The total annual amount of fees payable to the Chairman and Non-executive Directors is $750,000, which was set in 1989. This is the maximum aggregate amount, and the Company does not, at this time, intend distributing the full amount by way of fees. The Board, prior to setting annual fees for the 2004 financial year, obtained independent expert advice and undertook a review of comparable companies. The fees payable to the Non-executive Directors for this year were adjusted to reflect the termination of the retirement payment arrangements as at 30 June 2003. Each Non-executive Director is required to reinvest a minimum of 10 per cent of their gross fee in acquiring shares in the Company until their shareholding is equal to at least one year’s fees, pursuant to the Non-executive Directors’ Share Plan. The Plan enables Non-executive Directors to elect to apply up to 100 per cent of their fees in acquiring shares in the Company. The Non-executive Directors’ Share Plan is not a performance-based share plan and is not intended as an incentive component of a Non-executive Director’s remuneration. Shareholders approved the participation by Non-executive Directors in the Plan in October 2000 and April 2002 (on amended terms). This Plan essentially involves each Non-executive Director using his or her own after-tax money to buy shares on ASX at market price (i.e. involving no discount) to increase his or her direct holding in the Company. Accordingly, no performance conditions were proposed to attach as a precondition for purchase of the shares. Each Director is, however, generally required to retain shares acquired under the Plan for the period he or she holds office as a Director.

110


PART III

 

Items 17 &Item 18 : Consolidated Financial Statements


28.DIRECTORAND EXECUTIVE DISCLOSURES (CONTINUED)

 

NotesSenior Executives

Executive compensation is composed of several elements that need to be combined as an integrated whole for the Company to receive the best return from its expenditure. The compensation approach is based on there being consistency between countries but with cost related to market practice in each location.

Executive compensation is composed of fixed (salary and benefits) and variable (short and long term incentives) components. The weighting of fixed and variable aims to provide a strong focus on performance. The balance between short and long term incentives recognises that senior executives are responsible, along with the Board, for the sustainable health and success of the company. Its purpose is to provide compensation which allows the Company to secure the services of high calibre executives and focus them towards a common vision and achievement of goals. As part of this purpose it should foster teamwork, innovation and calculated risk taking aimed at achieving sustainable business improvements and maximising shareholder value.

Participants in the senior executive compensation program are as follows:

CEO

Executives in Ansell Grades E1-E3 and other key management talent as designated by the CEO and or the Compensation Committee.

Compensation of participants is composed of four regular elements as follows:

Base salary

Benefits

Short term incentive

Long term incentive

Other components such as special retention programs may be used from time to time as needed.

Base salary

The terms of employment of all executive management contain a fixed remuneration component, or base salary. In general, base salary is dependent upon the level and scope of an executive’s position, is targeted at a norm within benchmarked industries, and takes into account individual performance.

Benefits

Executives receive benefits such as motor vehicle allowances, home office expenses, contributions to Superannuation/Pension plans and executive insurance.

Short term incentive (STI)

An annual cash-based incentive program operates to reward individual performance against agreed performance targets. This target based STI plan is used to reinforce business plans by focusing on Key Performance Indicators (KPI’s) which are reviewed with the Remuneration Committee each year. By including company performance as a significantly weighted measure of performance, payouts will be directly linked to overall Company performance. Each executive has a target STI Opportunity (STIO) depending on the accountabilities of the role, impact on the organisation and geographic location. For Senior executives the maximum target bonus opportunity is 45% of base salary.

Each year the Remuneration Committee considers appropriate targets and KPI’s to link the STI and the level of payout if targets are met. For the year ended 30 June 2004 the KPI’s linked to STIO were based on functional/individual, regional and total Company objectives. The KPI’s required performance in growing revenue, improving EBITA and reducing Working Capital. The remuneration committee set a threshold level at which STI payouts are triggered and this will usually represent 50% of the target award. A stretch goal is also established for each KPI allowing up to 200% of the target award to be earned.

Long term incentive

In 2002, the Company established the Ansell Limited Stock Incentive Plan (the Plan). Under the Plan, Ansell may make grants of options or Performance Share Rights (PSR’s), which are subject to the achievement of performance targets set by the Board. Refer to Note 25 Ownership-Based Remuneration Schemes for details on options and PSRs.

111


PART III

Item 18 : Consolidated Financial Statements

 

28.Directors’ and Executives’ remunerationDIRECTORAND EXECUTIVE DISCLOSURES (CONTINUED)(continued)

 

The numberDetails of Directorsremuneration

Details of the remuneration of all directors of Ansell Limited and Senior Executives whose total remuneration fell withineach of the specified executives of the consolidated entity are set out in the following bands (a)(b)(e)(f).tables.

 

      Executives

  Directors

      Consolidated

  The Company

  Consolidated

  The Company

Dollars


     2003(d)

  2002(c)

  2001(c)

  2003(d)

  2002(c)

  2001(c)

  2003(d) (h)

  2003(d)

  2002(c)

  2001(c)

0

  10,000                          1   

10,001

  20,000                    1  1  1   

20,001

  30,000                             2

40,001

  50,000                          3   

60,001

  70,000                    3  3  2  1

70,001

  80,000                             2

80,001

  90,000                          1  1

110,001

  120,000                    1  1      

120,001

  130,000  1                           

200,001

  210,000        1        1            

210,001

  220,000                             1

230,001

  240,000     1        1               

260,001

  270,000                             1

270,001

  280,000  1        1                  

280,001

  290,000                          1   

320,001

  330,000        1        1            

330,001

  340,000  1        1        1  1      

340,001

  350,000  1                           

370,001

  380,000     1        1               

380,001

  390,000        1        1            

420,001

  430,000  1  2        2               

430,001

  440,000(e)    1        1           1   

440,001

  450,000        1        1            

460,001

  470,000(e)       1        1            

490,001

  500,000  1                           

510,001

  520,000     1                        

520,001

  530,000(e)    1  1     1  1            

540,001

  550,000(e)    1                        

550,001

  560,000     1                        

560,001

  570,000        1        1            

570,001

  580,000  1                           

580,001

  590,000  2                           

590,001

  600,000  1                           

620,001

  630,000  1                           

680,001

  690,000  1                           

850,001

  860,000  1                           

920,001

  930,000(e)       1        1            

950,001

  960,000     1        1               

1,380,001

  1,390,000        1                     

1,510,001

  1,520,000(g)    1                    1   

1,530,001

  1,540,000(e)    1        1               

1,640,001

  1,650,000(e)    1        1               

2,380,001

  2,390,000  1                 1         

3,250,001

  3,260,000        1                     

3,380,001

  3,390,000(e)       1        1           1
   

 
  
  
  
  
  
  
  
  
  

Total no. of Dir & Execs

     14  13  11  2  9  9  7  6  11  9
   

 
  
  
  
  
  
  
  
  
  

Specified Directors of Ansell Limited

2004

   Primary

  Post-employment

  Equity

  Other

   

Name


  

Cash salary
and fees

$


  

Cash bonus

$


  

Super-
annuation
contribution
(a)

$


  

Retirement
benefits

$


  

Notional
value of
equity
compensation
(b)

$


  

Termination
benefits

$


  

Other

(c)

$


  

Total

$


Non-executive

                        

E. D. Tweddell (Chairman)

  234,375     21,094              255,469

P. L. Barnes

  91,875     8,287              100,162

L. D. Crandall

  82,500     7,425              89,925

H. J. Elliott

  82,500     7,425              89,925

S. P. Gold (resigned 16 April 2004)

  65,625     5,906              71,531

M. J. McConnell (appointed

16 April 2004)

  17,187     1,547              18,734

Executive

                        

H. Boon (CEO and Managing Director) (retired 30 June 2004)(d)(f)

  966,981  419,545  356,636     537,500  2,204,960  714,893  5,200,515
   
  
  
     
  
  
  

Total all specified Directors

  1,541,043  419,545  408,320     537,500  2,204,960  714,893  5,826,261
   
  
  
     
  
  
  

Specified executives of the consolidated entity

2004

   Primary

  Post-employment

  Equity

  Other

   

Name


  

Cash salary
and fees

$


  

Cash
bonus

$


  

Super-
annuation
contribution
(a)

$


  

Retirement
benefits

$


  

Notional
value of
equity
compensation
(b)

$


  

Termination
benefits

$


  

Other

(c)

$


  

Total

$


W. Heintz(e)(h)

  386,845  190,824  125,926     152,988     259,624  1,116,207

R. Jilla(d)(g)(h)

  398,978  190,009  29,162     407,732     51,223  1,077,104

N. O’Donnell(h)

  196,000  61,985  39,004     99,176     32,160  428,325

W. Reed(d)(h)

  363,401  122,118  19,605     142,945     58,032  706,101

W. Reilly(d)(h)

  334,866  159,351  19,092     97,572     22,139  633,020

D. Tough (appointed as an executive 11 May 2004 and CEO and Managing Director 1 July 2004)(d)

  124,715                 1,021  125,736
   
  
  
     
     
  

Total all specified executives

  1,804,805  724,287  232,789     900,413     424,199  4,086,493
   
  
  
     
     
  

 

(a)The above values forFor Directors and Executives includeincludes notional contributions at the rate that satisfies Australian Superannuation Guarantee requirements. No amounts actuallywere required to be paid to superannuation fundsthe Australian Superannuation fund in respect of their retirement.the year ended 30 June 2004 upon advice of the Trustee. For US based specified executives, includes contributions to US benefit or non-qualified pension plans as applicable and to a European pension plan for Mr Heintz. For Messrs Boon and O’Donnell it also includes an imputed notional contribution to the Australian superannuation fund calculated at an actuarial rate.

 

(b)Includes Executive DirectorsIn accordance with the requirements of Accounting Standards, remuneration includes a proportion of the Company disclosed withinnotional value of options or PSRs granted or outstanding during the year. The notional value is determined as at grant date and is progressively allocated over the ‘vesting period’ or these securities. The amount included as remuneration is not related to, nor indicative of Directors.the benefit (if any) that individual executives may ultimately realise should the options or PSRs vest.

 

(c)Any benefit arising from the grant of options to the Managing Director or other Executives which may subsequently be derived is not quantifiedIncludes cash benefits such as motor vehicle allowances, home office expenses, executive insurance, housing allowances and accordingly, has not been included in remuneration for the year.statutory amounts paid on termination including accumulated annual leave and long service leave.

 

(d)Includes a valueUS-based Executives are paid in respect of options and performance share rights granted to the Managing Director and other Executives in accordance with the Company’s Stock Incentive PlanUS$. The average exchange rate for June 2004 is US$0.7016 = A$1.00.

 

(e)Includes retirement and/or statutory benefitsEurope-based Executive paid to Directors and Executives.in Euros. The average exchange rate for June 2004 is Euros 0.5775 = A$1.00.

112


PART III

Item 18 : Consolidated Financial Statements

28.DIRECTORAND EXECUTIVE DISCLOSURES (CONTINUED)

 

(f)ExecutivesNotional value of Equity Compensation includes the notional value of 500,000 options granted in April 2002. The options, which have an exercise price of $6.32 for this disclosure include only those persons who, duringeach share acquired, vested upon achievement of performance conditions applicable to the year, had the greatest authority for managing the group. These executives numbered up to fourteen at any one time in 2003, seven in 2002 and eleven in 2001. The disclosure includes twelve permanently overseas-based Executives whose total remuneration in 2003 was $8.3 million (four in 2002 - $3.1 million, two in 2001 - $4.6 million).2004 financial year.

 

(g)Executive was appointed a Director on 30 AprilNotional value of Equity Compensation includes the notional value of 100,000 options granted in September 2002. Includes total remuneration receivedThe options, which have an exercise price of $6.97 for each share acquired, vested upon achievement of performance conditions applicable to the full2004 financial year.

 

(h)The Managing DirectorNotional value of Equity Compensation includes the notional vale of PSRs granted in 2002 and Chief Executive Officer resides in Red Bank, New Jersey and is remunerated by an overseas subsidiary.2003 that vested upon achievement of performance conditions applicable to the 2004 financial year.

Service agreements

Remuneration and other terms of employment for executives are specified in Letters of Appointment. Specified US based executives are considered to be employed ‘at will’. Terms regarding the termination of employment are covered under the Company’s Severance Policy. It is Company policy that specified US executives employed for more than 12 months will, in general, receive termination payments equal to 12 months’ base salary plus certain other benefits. The Letters of Appointment provide the framework for the provision of other benefits including participation in the Short Term Incentive Plan, Long Term Incentive Plan, Medical Health Plans, Superannuation and Retirement plans where eligible.

Specified executives based in Europe and Australia are employed according to the terms and conditions of employment as specified in each jurisdiction.

W. Heintz

At will employment

Base salary for the year ended 30 June 2004 EURO 223,403 to be reviewed annually by the remuneration committee.

Payment of termination benefit on early termination by Ansell other than for gross misconduct equal to one times annual base salary.

R. Jilla

At will employment

Base salary for the year ended 30 June 2004 US$279,923 to be reviewed annually by the remuneration committee.

Payment of termination benefit on early termination by Ansell other than for gross misconduct equal to one times annual base salary.

N. O’Donnell

Employed under Australian federal employment law and common law legislation

Base salary for the year ended 30 June 2004 A$196,000 to be reviewed annually by the remuneration committee.

Payment of termination benefit on early termination by Ansell other than for gross misconduct equal to a maximum of one times total annual remuneration package.

W. Reed

At will employment

Base salary for the year ended 30 June 2004 US$254,962 to be reviewed annually by the remuneration committee.

Payment of termination benefit on early termination by Ansell other than for gross misconduct equal to one times annual base salary.

W. Reilly

At will employment

Base salary for the year ended 30 June 2004 US$234,942 to be reviewed annually by the remuneration committee.

Payment of termination benefit on early termination by Ansell other than for gross misconduct equal to one times annual base salary.

D. Tough

At will employment

Base salary for the period between his appointment on 11 May 2004 and 30 June 2004 US$650,000 per annum, which will also apply to the 2005 financial year. Mr Tough upon his appointment also received a grant of 525,000 options, exercisable at $7.40, and 150,000 PSRs, which are subject to performance conditions related to financial years 2005, 2006 and 2007.

Payment of termination benefit on early termination by Ansell other than for gross misconduct equal to one and a half times annual base salary if termination occurs within the first three years of his employment, and one times annual base salary if termination occurs after the third anniversary of his commencement date. In certain circumstances, such as a substantial diminution of responsibility, the Company may be deemed to have terminated employment and will be liable to make payments equivalent to 18 months’ remuneration.

113


PART III

 

Items 17 &Item 18 : Consolidated Financial Statements


28.DIRECTORAND EXECUTIVE DISCLOSURES (CONTINUED)

 

NotesEquity Instruments

Refer to Note 25 Ownership-Based Remuneration Schemes for details on options and PSRs.

Options over equity instruments granted as remuneration

Option Holdings:

Options held by specified directors and specified executives as at balance date and the movements during the year are as follows:

   Held at
1 July 2003


  Granted as
Remuneration


  Held at
30 June 2004


  Vested and
exercisable at
30 June 2004


Specified directors

            

H. Boon(a)

  1,000,000  —    1,000,000  500,000

Specified executives

            

R. Jilla(b)

  300,000  —    300,000  100,000

D. Tough(c)

  —    525,000  525,000  —  

(a)Options were granted on 12 April 2002, have an exercise price of $6.32, an expiry date of 30 June 2006 and a fair value as at 30 June 2004 of $2.15.

(b)Options were granted on 23 September 2002, have an exercise price of $6.97 and an expiry date of 23 September 2012. Tranches 1 & 2 have a fair value as at 30 June 2004 of $2.66 and Tranche 3 has a fair value of $2.70.

(c)Options were granted on 11 May 2004, have an exercise price of $7.40 and an expiry date of 30 June 2014. Tranche 1 has a fair value at 30 June 2004 of $2.35, Tranche 2 $2.36 and Tranche 3 $2.38. The vesting period for these options commenced 1 July 2004.

Performance Share Rights (PSRs) granted as remuneration

PSR Holdings:

PSRs held by specified executives as at balance date and the movements during the year are as follows:

   Held at
1 July 2003


  Granted as
Remuneration


  Vested and
converted


  Held at
30 June 2004


Specified executives

            

W. Heintz(a)

  25,000  30,000  8,333  46,667

R. Jilla(a)

  —    50,000  —    50,000

N. O’Donnell(a)

  15,000  20,000  5,000  30,000

W. Reed(a)

  30,000  25,000  10,000  45,000

W. Reilly(a)

  25,000  15,000  8,333  31,667

D. Tough(b)

  —    150,000  —    150,000

(a)Grants of PSRs during the year were made on 18 December 2003 in three tranches with tranche 1 being applicable to the 2004 financial year.

(b)Grant of PSRs during the year was made on 11 May 2004 in three tranches. The vesting period for these PSRs commenced 1 July 2004.

PSRs, when vested, are converted into fully-paid ordinary shares and issued at no cost to the executive.

114


PART III

Item 18 : Consolidated Financial Statements

28.DIRECTORAND EXECUTIVE DISCLOSURES (CONTINUED)

Equity Instruments (continued)

Equity holdings and transactions

The movement during the reporting period in the number of ordinary shares of Ansell Limited held directly, indirectly or beneficially, by each specified director and specified executive, including their personally-related entities is as follows:

   Held at
1 July 2003


  Purchases (a)

  Received
on
vesting
of PSRs


  Sales

  Held at
30 June
2004


Specified directors

               

E. D. Tweddell

  30,872  3,348  —    —    34,220

P. L. Barnes

  10,370  1,315  —    —    11,685

H. Boon

  56,701  —    —    —    56,701

L. D. Crandall

  3,828  4,280  —    —    8,108

H. J. Elliott

  7,798  1,178  —    —    8,976

S. P. Gold(b)

  24,437,905  6,174  —    8,000,000  16,444,079

M. J. McConnell

  20,000  6,406  —    —    26,406

Specified executives

               

W. Heintz

  —    —    8,333  —    8,333

R. Jilla

  6,000  —    —    —    6,000

N. O’Donnell

  —    —    5,000  —    5,000

W. Reed

  100  —    10,000  6,498  3,602

W. Reilly

  —    —    8,333  2,788  5,545

D. Tough

  —    —    —    —    —  

(a)Includes shares purchased on market pursuant to the Non-executive Directors’ Share Plan.

(b)Mr Gold has an indirect non-beneficial interest in 16,428,840 shares by virtue of a 10 per cent limited partnership interest in Trefoil International III, L.P., which is a related body corporate of Shamrock Holdings of California Inc (June 2003: 24,428,840 shares).

Other Transactions with specified directors and specified executives

From time to time, specified directors and specified executives of the Company or its controlled entities, or their personally-related entities, may purchase goods from the consolidated entity. These purchases are on terms and conditions no more favourable than those entered into by unrelated customers and are trivial or domestic in nature.

 

29.Service AgreementsSERVICE AGREEMENTS

 

The Company hadhas no service agreements with each of the Non-executive Directors which provided for benefits upon termination. The full extent of the liabilities of the Company under these agreements has been undertaken either by the Company or by a superannuation fund of which the Company is employer sponsor. These agreements have been terminated as at 30 June 2003.Directors.

115


PART III

Item 18 : Consolidated Financial Statements

 

30.Notes to the Industry Segments ReportNOTESTOTHE INDUSTRY SEGMENTS REPORT

 

(a) Operating Revenue

 

The Operating Revenue of Discontinued Businesses represents the external sales to the date of disposal and the cash received/receivable from the sale of such businesses (net of disposal costs).

 

(b) Unallocated Revenue and Costs

 

Represents costs of Statutory Head Office, part of the costs of Ansell Healthcare’s Corporate Head Office and non-sales revenue.

 

(c) Non Recurring Items

The result for the 2004 financial year includes write-downs of property, plant and equipment of $8.8 million relating to the closure of certain manufacturing facilities, expenses and provisions relating to transitional issues carried over from discontinued businesses and the previous company structure of $9.7 million, the majority of which arose from the sale of the GNB battery business to Exide Technologies Inc and the latter’s involvement in, and exit during the year, from Chapter 11 proceedings. Offsetting these charges were refunds of sales tax of $17.8million relating to discontinued businesses in Australia.

(d) Tax

 

June 2002 includes the write off of tax balances attributable to Australian operations of $15.2 million and tax attributable to Discontinued Businesses.

 

(d)(e) Cash

 

Cash also includes Accufix Pacing Leads restricted deposits.

 

(e)(f) Inter-Segment Transactions

 

Significant inter-segment sales were made by Asia Pacific - $216.3 million (2003 - $258.2 million (2002million; 2002 - $304.9 million; 2001 - $303.8 million) and AmericaAmericas - $254.7million (2002$233.0 million (2003 - $188.3$254.7 million; 20012002 - $220.6$188.3 million). Inter-segment sales are predominantly made at the same prices as sales to major customers. Operating revenue is shown net of inter-segment values. Accordingly, the Operating revenues shown in each segment reflect only the external sales made by that segment.

 

(f)(g) Industry Segments

 

The consolidated entity comprises the following main business segments:

 

Occupational Healthcare - manufacture and sale of occupational health and safety gloves.

 

Professional Healthcare- manufacture and sale of medical, surgical and examination gloves for hand barrier protection and infection control.

 

Consumer Healthcare - manufacture and sale of condoms, household gloves and other personal productsproducts.

 

Discontinued Businesses - represents former Industry Segment businesses which have been sold or abandoned.

 

(g)(h) Regions

 

The allocation of Operating Revenue and Operating Results reflect the geographical regions in which the products are sold to external customers. Assets Employed are allocated to the geographical regions in which the assets are located.

 

Asia Pacific - manufacturing facilities in 4 countries and sales.

 

Americas - manufacturing facilities in USA and Mexico and significant sales activity.

 

Europe - principally a sales region with one manufacturing facility in the UK.

 

   

2003

$m


  

2002

$m


  

2001

$m


      

(h) Segment Capital Expenditure

         

Occupational Healthcare

  3.2  6.7  9.0

Professional Healthcare

  8.6  12.7  7.7

Consumer Healthcare

  3.4  1.5  4.4

Discontinued Businesses

  —    12.0  38.8

(i) Region Capital Expenditure

         

Asia Pacific

  10.1  13.6  12.6

Americas

  4.2  5.3  7.1

Europe

  0.9  2.0  1.4

(j) Segment Depreciation

         

Occupational Healthcare

  11.0  15.7  16.7

Professional Healthcare

  15.5  18.8  18.9

Consumer Healthcare

  4.8  5.6  5.7

Discontinued Businesses

  —    11.1  52.1

(k) Segment Other Non Cash Expenses (excluding Provision for Rationalisation and Write-down of Assets separately disclosed)

         

Occupational Healthcare

  8.3  8.9  7.9

Professional Healthcare

  0.7  1.9  6.4

Consumer Healthcare

  2.9  5.1  1.9

Discontinued Businesses

  —    14.8  49.7

Sales revenue in Australia for the Healthcare operations during 2004 were $108.3 million (2003 - $86.0 million; 2002 $76.8 million). The only material foreign country in terms of sales revenue from continuing operations is United States of America with revenue of $472.8 million in 2004 (2003 - $582.0 million; 2002 $723.3 million).

116


PART III

 

Items 17 &Item 18 : Consolidated Financial Statements

30.NOTESTOTHE INDUSTRY SEGMENTS REPORT (CONTINUED)

   

2004

$m


  

2003

$m


  

2002

$m


(i) Segment Capital Expenditure

         

Occupational Healthcare

  5.4  3.2  6.7

Professional Healthcare

  4.4  8.6  12.7

Consumer Healthcare

  3.3  3.4  1.5

Discontinued Businesses

  —    —    12.0

(j) Region Capital Expenditure

         

Asia Pacific

  8.7  10.1  13.6

Americas

  3.4  4.2  5.3

Europe

  1.0  0.9  2.0

(k) Segment Depreciation

         

Occupational Healthcare

  8.7  11.0  15.7

Professional Healthcare

  11.5  15.5  18.8

Consumer Healthcare

  5.1  4.8  5.6

Discontinued Businesses

  —    —    11.1

(l) Segment Other Non Cash Expenses (excluding Provision for Rationalisation and Write-down of Assets separately disclosed)

         

Occupational Healthcare

  6.9  8.3  8.9

Professional Healthcare

  1.5  0.7  1.9

Consumer Healthcare

  4.9  2.9  5.1

Discontinued Businesses

  —    —    14.8

117


PART III

 

Notes to theItem 18 : Consolidated Financial Statements

 

31.Notes to the Statements of Cash FlowsNOTESTOTHE STATEMENTSOF CASH FLOWS

 

(a) Reconciliation of Net Cash Provided by Operating Activities to Net

Profit/(Loss) after Income Tax

 

   Consolidated

  The Company

 

$ in Millions


  2003

  2002

  2001

  2003

  2002

  2001

 

Net profit/(loss) after income tax

  52.5  (113.0) (135.8) 164.8  71.6  (755.9)

Add/(less) non-cash items:

                   

Depreciation

  29.5  50.3  90.2  0.1  7.9  16.7 

Amortisation

  27.0  32.0  49.6  —    0.5  5.8 

Goodwill written off

     —    —    —    —    5.7 

Provision for doubtful debts - trade

  (2.5) (2.9) 7.9  0.1  1.0  0.1 

Write off of FITB attributable to Australian tax losses

  —    15.2  158.5  —    17.3  88.4 

Provision for doubtful debts - wholly owned controlled entities

  —    —    —    —    (16.3) 644.7 

Write down of assets and investments in wholly owned controlled entities

  6.1  75.2  97.7  —    96.6  240.3 

Write down of property, plant and equipment

  —    69.3  —    —    2.2  —   

Share of net loss/(gain) of associate and joint venture entities

  (0.3) (1.9) 44.3  —    —    —   

Add/(less) items classified as investing/financing activities:

                   

Interest revenue

  (8.0) (15.5) (44.9) (139.9) (38.2) (130.3)

Borrowing costs

  37.8  70.2  144.3  36.1  67.0  129.5 

Loss/(gain) on sale of investments, properties, plant and equipment

  (5.6) 5.6  4.6  (6.4) 1.0  4.2 

Loss/(gain) on sale of controlled entities and businesses(1)

  —    (25.7) (154.7) (32.4) (7.0) (178.6)
   

 

 

 

 

 

Net cash provided by operating activities before change in assets and liabilities

  136.5  158.8  261.7  22.4  203.6  70.6 

Change in assets and liabilities net of effect from acquisitions and disposals of controlled entities and businesses:

                   

(Increase)/Decrease in debtors

  34.5  (0.3) (176.5) (7.1) (26.5) (20.3)

(Increase)/Decrease in inventories

  47.2  39.4  (13.8) 1.2  (10.9) 16.9 

Decrease/(Increase) in prepaid expenses

  4.9  (2.4) 19.2  (0.6) 4.5  16.1 

(Increase)/Decrease in deferred expenses

  —    4.3  (4.2) —    13.6  2.8 

Increase/(Decrease) in creditors and bills payable

  (36.5) 78.3  52.2  (3.6) 5.3  (2.5)

(Decrease)/Increase in provisions and other liabilities

  (31.9) (203.1) (128.4) (5.5) (38.8) (230.7)

Increase/(Decrease) in provision for deferred income tax

  (2.9) 2.3  1.0  —    —    —   

(Increase)/Decrease in future income tax benefit

  17.7  24.7  (6.0) —    (0.7) 27.1 

(Decrease)/Increase in provision for income tax

  1.2  (8.5) 1.2  —    —    —   

(Increase)/Decrease in GNB net operating assets held for sale

  —    —    182.3  —    —    20.7 

Other non-cash items (including foreign currency impact)

  (9.1) 19.6  37.9  (12.0) (0.2) (0.8)
   

 

 

 

 

 

Net cash provided by operating activities

  161.6  113.1  226.6  (5.2) 149.9  (100.1)
   

 

 

 

 

 

(1)Refer to Note 4(b) for further details on the Company 2001.
   Consolidated

 

$ in Millions


  2004

  2003

  2002

 

Net profit/(loss) after income tax

  72.6  52.5  (113.0)

Add/(less) non-cash items:

          

Depreciation

  23.8  29.5  50.3 

Amortisation

  22.9  27.0  32.0 

Provision for doubtful debts - trade

  1.2  (2.5) (2.9)

Write off of FITB attributable to Australian tax losses

  —    —    15.2 

Write down of assets

  1.0  6.1  75.2 

Write down of property, plant and equipment

  8.8  —    69.3 

Share of net gain of associate and joint venture entities

  —    (0.3) (1.9)

Add/(less) items classified as investing/financing activities:

          

Interest revenue

  (9.0) (8.0) (15.5)

Borrowing costs

  29.4  37.8  70.2 

Loss/(gain) on sale of investments, properties, plant and equipment

  (0.8) (5.6) 5.6 

Gain on sale of controlled entities and businesses

  —    —    (25.7)
   

 

 

Net cash provided by operating activities before change in assets and liabilities

  149.9  136.5  158.8 

Change in assets and liabilities net of effect from acquisitions and disposals of controlled entities and businesses:

          

(Increase)/Decrease in debtors

  24.9  34.5  (0.3)

(Increase)/Decrease in inventories

  (2.6) 47.2  39.4 

Decrease/(Increase) in prepaid expenses

  (0.8) 4.9  (2.4)

(Increase)/Decrease in deferred expenses

  —    —    4.3 

Increase/(Decrease) in creditors and bills payable

  (6.0) (36.5) 78.3 

(Decrease)/Increase in provisions and other liabilities

  7.8  (31.9) (203.1)

Increase/(Decrease) in provision for deferred income tax

  (1.3) (2.9) 2.3 

(Increase)/Decrease in future income tax benefit

  7.8  17.7  24.7 

(Decrease)/Increase in provision for income tax

  (0.5) 1.2  (8.5)

Other non-cash items

  —    (9.1) 19.6 
   

 

 

Net cash provided by operating activities

  179.2  161.6  113.1 
   

 

 

 

(b) Components of Cash

 

For the purposes of the Statements of Cash Flows, cash includes cash on hand and at banks and investments in money market instruments, net of outstanding bank overdrafts. Cash, at the end of the financial year, as shown in the Statements of Cash Flows, comprises:

 

     Consolidated

  The Company

   Note

  Consolidated

 

$ in Millions


     2003

  2002

  2001

  2003

  2002

  2001

   2004

 2003

 2002

 

Cash on hand

  11  0.6  0.2  0.6  —    —    0.1   11  0.9  0.6  0.2 

Cash at bank

  11  60.8  72.0  115.7  1.4  4.2  21.0   11  69.8  60.8  72.0 

Short-term deposits

  11  224.6  186.3  194.6  —    —    7.2   11  237.1  224.6  186.3 

Restricted deposits*

  11  13.8  18.4  27.0  —    —    —     11  10.3  13.8  18.4 

Bank overdrafts

  19  (2.6) (14.6) (9.5) —    (0.9) (1.0)  19  (3.3) (2.6) (14.6)
  
  

 

 

 
  

 

     

 

 

     297.2  262.3  328.4  1.4  3.3  27.3      314.8  297.2  262.3 
  
  

 

 

 
  

 

     

 

 

 

*Refer to note 11 for further details on these amounts.

 

(c) Net Loans to Controlled Entities

In the Statements of Cash Flows of the Company, loan movements with controlled entities are disclosed as a net movement due to such transactions being large in number and rapid in turnover.118


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

32.Acquisition of Controlled Entities and Material BusinessesACQUISITIONOF CONTROLLED ENTITIESAND MATERIAL BUSINESSES

 

During the year the
following businesses
were acquired:


 

Date of
Acquisition


 

Voting

Shares

Acquired

%


  

Cost of

Acquisition
$ million


  Net Tangible Assets
Assets Acquired
$ million


  Description of
Purchase
Consideration


No material acquisitions were made during the year.

 

33.Disposal of Controlled Entities and Material BusinessesDISPOSALOF CONTROLLED ENTITIESAND MATERIAL BUSINESSES

 

During the year the
following material
businesses were

disposed of:


 

Date of
Disposal


 

Voting

Shares

Disposed

%


  

Consideration
(Cash)

$ million


  

Net Tangible

Assets Disposed
$ million


  Profit/Profit / (Loss) on
on Disposal
$ million


No material disposals were made during the year.

 

34.Related Party DisclosuresNON-DIRECTOR RELATED PARTY DISCLOSURES

 

Ansell Limited is the parent entity of all entities detailed in Note 37 and from time to time has dealings on normal commercial terms and conditions with those related entities, the effects of which are eliminated in the consolidated financial statements.

 

Disclosures in respect of certain transactions with controlled entities and related parties and amounts paid to or received therefrom are as set out in the details below. Other transactions with related entities, which are eliminated on consolidation, include the lease of certain properties, the supply of materials and labour and the provision of both short and long term finance in the form of varying financial instruments, all of which are conducted on normal commercial terms and conditions. The Directors of the Company during the year were:

Edward D Tweddell

Peter L Barnes

Harry Boon

L Dale Crandall

Herbert J Elliott

Stanley P Gold

S Carolyn H Kay

Details of transactions with these Directors or other Directors of other related entities (including entities deemed to be related to such Directors) and details of other related party transactions and amounts are set out in:

Note 3as to interest and dividends received from controlled entities.

Note 4as to interest paid to controlled entities.

Note 12as to amounts receivable from controlled entities and loans to Directors of entities in the consolidated entity.

Note 18as to amounts payable to controlled entities.

Note 28as to remuneration paid or payable to Directors of the Company and the allocation of those amounts to individual directors within the bands of $10,000.

Note 29as to agreements with certain Non-executive Directors.

 

(a) Transactions with AssociatedAssociates and Other Related Companies

 

During the year the Company and the consolidated entity disposed of its interests in associated companies. Effective 1 July 2001, the consolidated entity discontinued equity accounting for its interest in South Pacific Tyres N.Z. Ltd. During the course of the year, the consolidated entity received royalties from South Pacific Tyres NZ Ltd. In prior years the Company and the consolidated entity conducted financial transactions with these associated companies, while still having an ownership interest, on normal commercial terms and conditions. The nature and amounts of these transactions are detailed as follows:

 

  Consolidated

  The Company

  2003  2002  2001  2003  2002  2001  Consolidated

  $m

  $m

  $m

  $m

  $m

  $m

  

2004

$m


  

2003

$m


  

2002

$m


Sale of goods and services

                           

Car Parts Distribution Pty Ltd

  —    7.5  97.3  —    —    —    —    —    7.5

South Pacific Tyres N.Z. Ltd.

  —    —    0.5  —    —    —  
  
  
  
  
  
  
  —    7.5  97.8  —    —    —  

Royalty revenue

                           

South Pacific Tyres N.Z. Ltd.

  —    0.4  1.9  —    —    —    1.3  —    0.4

Dividend revenue

                           

Pacific Marine Batteries Pty. Ltd.

  —    —    —    2.6  1.3  1.0  —    —    —  

Aggregate current amounts receivable(a)

                  

Car Parts Distribution Pty Ltd

  —    —    5.4  —    —    —  

 

(a)Amounts included within Trade debtors and Other Amounts Receivable (Note 12).

119


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

34.Related Party DisclosuresNON-DIRECTOR RELATED PARTY DISCLOSURES (CONTINUED)(continued)

 

(b) Transactions with Partnerships

 

The consolidated entity carries on a partnership with Goodyear in Australia under the name of South Pacific Tyres. In addition the consolidated entity carried on a partnership with Accenture in Australia and New Zealand under the name Novare Asia Pacific until 31 August 2001, at which time the consolidated entity acquired Accenture'sAccenture’s share of Novare Asia Pacific. During the course of the year the Company and the consolidated entity conducted financial transactions with South Pacific Tyres (and last year with Novare Asia Pacific until 31 August 2001) on normal commercial terms and conditions being:

 

  Consolidated

  The Company

  Consolidated

$ in Millions


  2003

  2002

  2001

  2003

  2002

  2001

  2004

  2003

  2002

Sales of goods and services

                           

Novare Asia Pacific

  —    —    1.1  —    —    1.1

South Pacific Tyres

  —    1.3  6.6  —    —    6.6  —    —    1.3
  
  
  
  
  
  
  
  
  
  —    1.3  7.7  —    —    7.7  —    —    1.3
  
  
  
  
  
  
  
  
  

Purchases of goods and services

                           

Novare Asia Pacific

  —    5.5  54.2  —    3.4  52.7  —    —    5.5

South Pacific Tyres

  —    —    1.1  —    —    0.9
  
  
  
  
  
  
  
  
  
  —    5.5  55.3  —    3.4  53.6  —    —    5.5
  
  
  
  
  
  
  
  
  

Other revenue

                           

South Pacific Tyres

  3.3  2.5  0.8  0.8  2.0  0.8  3.5  3.3  2.5
  
  
  
  
  
  
  
  
  

Aggregate current amounts receivable(a)

                           

South Pacific Tyres

  7.6  —    —    7.2  —    —    0.5  7.6  —  
  
  
  
  
  
  
  
  
  

Aggregate non-current amounts receivable

                  

Novare Asia Pacific

  —    —    3.0  —    —    3.0

South Pacific Tyres(a)

  55.1  59.4  25.8  —    27.6  25.8

Aggregate non-current amounts receivable
South Pacific Tyres
(a)

  62.3  55.1  59.4
  
  
  
  
  
  
  
  
  
  55.1  59.4  28.8  —    27.6  28.8  62.3  55.1  59.4
  
  
  
  
  
  
  
  
  

Aggregate current amounts payable(b)

                  

Novare Asia Pacific

  —    —    4.7  —    —    4.5

South Pacific Tyres

  —    —    0.4  —    —    0.4
  
  
  
  
  
  
  —    —    5.1  —    —    4.9
  
  
  
  
  
  

 

(a)Amount included within Other Amounts Receivable (Note 12)

(b)Amount included within Other creditors (Note 18)

 

Loans

 

On 20 December 2000, the Company agreed to make available to the South Pacific Tyres partnership a loan for $56.3 million for a period of two years.years pending South Pacific Tyres receipt of this amount from Goodyear. The loan was drawn down in two tranches, $31.3 million on 20 December 2000 and $25.0 million on 5 January 2001.

 

On 20 December 2000, the Company was assigned a South Pacific Tyres receivable due from Goodyear of $31.3 million as partial settlement of the above loan.

 

During the previous year ended 30 June 2002 Goodyear repaid $30.0 million of its loan which was in turn on-lentthe loans. In October 2001, the Company through a controlled entity agreed to lend South Pacific Tyres by a controlled entity. The balance of $1.3 million was repaid by Goodyear in the current year and on-lentup to South Pacific Tyres by a controlled entity.$56.3 million.

 

During the year the Company assigned $21.2 million of the $25.0 million loan to a controlled entity.

Under theThe terms of the agreementfurther agreements of October 2001 with Goodyear containing put and call options providing(which enables Ansell to put its investment to Goodyear during the 12 month period commencing 15 August 2005 or for Goodyear to exercise its call option over Ansell’s investment during the 6 month period from 15 August 2006) provide the consolidated entity an actionable exit strategy in respect of its investment in the South Pacific Tyres partnership,partnership.

The loans mature at the termsearlier of :

the Company exercising the put option (no earlier than August 2005)

the tenth anniversary of the loans were extended for a periodagreement (October 2011); and

the dissolution of four to five years.

the partnership (not expected).

 

Interest is charged at marketthe 90 day bank bill rate plus a margin of 0.6% per annum, and is payable quarterly in arrears.capitalised to the principal balance quarterly.

 

Interest brought to account by the Company in relation to this loan during the year:

 

$ in Millions


  Consolidated
2003


  The Company
2003


Interest revenue

  3.3  0.8

$ in Millions


Consolidated
2004


Interest revenue

3.5

 

In addition, under the partnership agreement, South Pacific Tyres leases certain properties on a basis of equitable rentals mutually agreed by the partners. Lease payments of $0.2 million (2002(2003 - $0.2 million; 20012002 - $0.2 million) were made by South Pacific Tyres to the consolidated entity. The Company, through its corporate treasury operations, also provided on the basis of normal commercial terms and conditions, forward exchange cover on behalf of the partnership.

120


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to the Financial Statements

34.Related Party Disclosures(continued)

(c) Transactions of Directors and Director-Related Entities Concerning Shares or Share Options

The aggregate number of shares acquired(1) by Directors of the Company and their director-related entities in entities in the consolidated entity during the year ended 30 June 2003 was:

The Company - 45,917 fully paid ordinary shares (2002 - 6,160; 2001 - 5,515).

The aggregate number of shares and share options disposed of by Directors of the Company and their director-related entities in the Company was Nil (2002 - Nil; 2001 - Nil).

The aggregate number of shares and share options held directly, indirectly or beneficially by the Directors of the Company and their director-related entities in the Company as at balance date were:

24,567,475(2) fully paid ordinary shares (2002 - 24,478,677; 2001 - 132,808)

Nil ordinary plan shares paid to five cents (2002 - Nil; 2001 - Nil)

1,000,000 share options (2002 - 120,000; 2001 - Nil).

(1)The above reflects the position in the financial statements of the Company and upon consolidation of the controlled entities. It only includes shares acquired from or disposed to an entity in the consolidated entity.

(2)Includes 24,428,841 shares owned by Trefoil International III, SPRL. Mr S Gold has a non-beneficial indirect interest in these shares as he has a 10% economic interest in that entity, of which he is also a Director.

As stated at Note 5 - Contributed Equity, a 1 for 5 share consolidation was effected in 2002. The quantity of shares and share options disclosed above, for both 2002 and 2001, are stated as post-share consolidation quantities.

(d) Other Transactions of Directors and Director-Related Entities

In addition to the transactions referred to above, the consolidated entity entered into the following transactions with Directors and former Directors and their director-related entities. All transactions were on normal commercial terms and conditions except where otherwise stated:

H. Ng is a Director of PacDun (Singapore) Pte Ltd. and Pacific Dunlop Holdings (Singapore) Pte. Ltd. A director-related entity of H. Ng, Richard Oliver International Pte. Ltd. provided management services to PacDun (Singapore) Pte Ltd. and Pacific Dunlop Holdings (Singapore) Pte. Ltd.;

S. Bagaria is a Director of Ansell Kemwell Ltd. A director-related entity of S. Bagaria, North East Gas (P) Ltd. leased premises to Ansell Kemwell Ltd.

Aggregate amounts of each of the above types of other transactions with Directors and their director-related entities were as follows:

   Consolidated

  The Company

$ in millions


  2003

  2002

  2001

  2003

  2002

  2001

Transaction Type

                  

Provision of management and consulting services

  0.1  0.2  0.3  —    0.1  —  

Sales of goods to Directors and their director-related entities

  —    —    0.2  —    —    —  

Provision of legal services

  —    —    13.2  —    —    0.7

Aggregate amounts payable to Directors and their director-related entities(a)
Current

  —    —    2.1  —    —    0.2

(a)Amount included within Other Creditors (Note 18).

In addition to the transactions referred to above, transactions were entered into during the year with Directors of the Company and its controlled entities or with director-related entities which:

occurred within a normal employee customer or supplier relationship on terms and conditions no more favourable than those which it is reasonable to expect would have been adopted if dealing with the Director or director-related entity at arm's length in the same circumstances;

do not have the potential to affect adversely decisions about the allocation of scarce resources or the discharge of accountability of the Directors; and are trivial or domestic in nature;

include:

provision of company services which have been fully reimbursed;

minor purchases of goods at discount rates which are also available to other employees;

contracts of employment with relatives of Directors on either full time, casual or work experience basis on normal commercial terms and conditions.

PART III

Items 17 & 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

35.Earnings per ShareEARNINGSPER SHARE

 

  Consolidated

   Consolidated

 

$ in Millions


  2003

  2002

  2001

   2004

  2003

  2002

 

Earnings reconciliation

                 

Net profit/(loss)

  52.5  (113.0) (135.8)  72.6  52.5  (113.0)

Net profit/(loss) attributable to outside equity interests

  2.6  2.8  3.6 

Net profit attributable to outside equity interests

  1.9  2.6  2.8 
  
  

 

  
  
  

Basic earnings

  49.9  (115.8) (139.4)  70.7  49.9  (115.8)

Diluted earnings

  49.9  (115.8) (139.4)  70.7  49.9  (115.8)
  Consolidated

 
  2003

  2002

  2001

 

Weighted average number of ordinary shares used as the denominator

                 

Number for basic earnings per share

                 

Ordinary shares

  187.1  186.9  194.0   180.8  187.1  186.9 

Effect of executive share options on issue

  0.6  0.7  1.2 

Effect of partly paid Executive Plan shares, and options

  0.6  0.6  0.7 
  
  

 

  
  
  

Number for diluted earnings per share

  187.7  187.6  195.2   181.4  187.7  187.6 
  
  

 

  
  
  

 

Partly paid Executive Shares have been classified as potential ordinaryPlan shares, issued for no consideration and options have been included in diluted earnings per share.

1,300,000 Executive Share Options issued during the year have not been includedshare in the calculation of diluted EPS as they are not dilutive.accordance with accounting standards.

 

Conversion, Call, Subscription or issue after 30 June 20032004:

 

Refer to Note 5 for further information.

 

36.Environmental MattersENVIRONMENTAL MATTERS

 

The Company and various Group Companies as the occupiers of property receive, from time to time, notices from relevant authorities pursuant to various environmental legislation. On receiving such notices, the Company evaluates potential remediation options and the associated costs. At this time, the Company does not believe that the potential financial impact of such remediation upon the economic entity is material.

 

In the ordinary course of business, the Ansell Group has maintained comprehensive general liability insurance policies covering its operations and assets. Generally such policies exclude coverage for most environmental liabilities.

121


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

37.Particulars Relating to Controlled EntitiesPARTICULARS RELATINGTO CONTROLLED ENTITIES

 

  Country of
Incorporation


  Beneficial Interest

  

2003

%


  

2002

%


  

2001

%


     Beneficial Interest

Particulars Relating to Controlled Entities


    Country of
Incorporation


  2004
%


  2003
%


  2002
%


Ansell Limited

  Australia           Australia         

Ansell GmbH

  *Germany  100  100  100

Ansell Healthcare Japan Co. Ltd.

  *Japan  100  100  100  *Japan  100  100  100

Ativ Pac Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

BNG Battery Technologies Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Cliburn Investments Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Dexboy International Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Corrvas Insurance Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Dunlop Olympic Manufacturing Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Duratray Pty. Ltd.

  Australia  100  100  100

FGDP Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

H.C. Sleigh Services Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

N Harvesters Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

PSL Industries Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

International Better Brands Pty Ltd

  Australia  100  100  100  Australia  100  100  100

Licknib Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Nucleus Ltd.

  Australia  100  100  100  Australia  100  100  100

Lifetec Project Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Medical TPLC Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

N&T Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Nucleus Trading Pte. Ltd.

  *Singapore  100  100  100  *Singapore  100  100  100

THLD Ltd.

  Australia  100  100  100  Australia  100  100  100

TNC Holdings Pte. Ltd.

  *Singapore  100  100  100  *Singapore  100  100  100

TPLC Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Societe de Management Financier S.A.

  *France  100  100  100  *France  100  100  100

TPLC S.A.

  *France  100  100  100  *France  100  100  100

Olympic General Products Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Foamlite (Australia) Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Pacific Distribution Properties Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Pacific Dunlop Finance Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Pacific Dunlop Holdings (China) Co. Ltd.

  *China  100  100  100  *China  100  100  100

Pacific Dunlop Linings Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Pacific Dunlop Tyres Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

P.D. Holdings Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

P.D. International Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Ansell Belgium Holdings SPRL N.V.

  *Belgium  100  100  100  *Belgium  100  100  100

Ansell Canada Inc.

  *Canada  100  100  100  *Canada  100  100  100

Llesna Healthcare Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Ansell Italy Srl

  * Italy  100  100  100

Ansell Kemwell Ltd.

  *India  74.9  74.9  74.9  *India  74.9  74.9  74.9

Ansell Lanka (Pvt.) Ltd.

  *Sri Lanka  100  100  100  *Sri Lanka  100  100  100

Ansell S.A.

  *France  100  100  100

Ansell (Thailand) Ltd.

  *Thailand  100  100  100  *Thailand  100  100  100

Ansell Healthcare Europe N.V. (formerly Ansell Protective Products Europe N.V.)

  *Belgium  100  100  100

Medical Telectronics N.V.

  *Netherlands Ant.  100  100  100  *Netherlands Ant.  100  100  100

Medical Telectronics Holding & Finance (Holland) B.V.

  *Netherlands  100  100  100  *Netherlands  100  100  100

Mt Waverley Estates Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Pacific Dunlop (Hong Kong) Limited.

  *Hong Kong  100  100  —    *Hong Kong  100  100  100

PacDun (Singapore) Pte. Ltd.

  *Singapore  100  100  100

Corrvas Insurance (Singapore) Pte. Ltd. ( formerly PacDun (Singapore) Pte. Ltd)

  * Singapore  100  100  100

Pacific Dunlop Investments (USA) Inc.

  *USA  100  100  100  *USA  100  100  100

Ansell Brazil LTDA

  *Brazil  100  100  100  *Brazil  100  100  100

Ansell Edmont Industrial de Mexico S.A. de C.V.

  *Mexico  100  100  100  *Mexico  100  100  100

Ansell Perry de Mexico S.A. de C.V.

  *Mexico  100  100  100  *Mexico  100  100  100

Commercializadora GNK S.A de C.V.

  *Mexico  100  100  100  *Mexico  100  100  100

Golden Needles de Mexico S.A de C.V.

  *Mexico  100  100  100  *Mexico  100  100  100

Ansell Healthcare Products LLC.

  *USA  100  100  100

Ansell Protective Products Inc.

  *USA  100  100  100

Ansell Services Inc.

  *USA  100  100  100

Pacific Chloride Inc.

  *USA  100  100  100

122


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

37.Particulars Relating to Controlled EntitiesPARTICULARS RELATINGTO CONTROLLED ENTITIES (CONTINUED)(continued)

 

  Country of
Incorporation


  Beneficial Interest

  

2003

%


  

2002

%


  

2001

%


  Country of
Incorporation


  Beneficial Interest

Particulars Relating to Controlled Entities


    

2004

%


 

2003

%


 

2002

%


Pacific Dunlop Holdings (USA) Inc.

  *USA  100  100  100

Ansell Healthcare Products Inc.

  *USA  100  100  100

Ansell Protective Products Inc.

  *USA  100  100  100

Ansell Services Inc.

  *USA  100  100  100

Pacific Chloride Inc.

  *USA  100  100  100

Pacific Dunlop Holdings Inc.

  *USA  100  100  100  *USA  100 100 100

Pacific Dunlop USA Inc.

  *USA  100  100  100  *USA  100 100 100

TPLC Holdings Inc.

  *USA  100  100  100  *USA  100 100 100

Accufix Research Institute Inc.

  *USA  100  100  100  *USA  100 100 100

Cotac Corporation

  *USA  100  100  100  *USA  100 100 100

Pacific Dunlop Finance Company Inc.

  *USA  100  100  100  *USA  100 100 100

Pacific Dunlop Holdings (Europe) Ltd.

  *U.K.  100  100  100  *U.K.  100 100 100

Ansell Glove Company Ltd.

  *U.K.  100  100  100

Golden Needles Knitting & Glove Co. Ltd.

  *U.K.  100  100  100

Ansell Healthcare Europe N.V.

  *Belgium  100 100 100

Ansell GmbH

  *Germany  100 100 100

Ansell Italy Srl

  * Italy  100 100 100

Ansell S.A.

  *France  100 100 100

Ansell UK Limited

  *U.K.  100  100  100  *U.K.  100 100 100

Mates Vending Ltd.

  *U.K.  100  100  100

Pacific Dunlop Holdings (Singapore) Pte. Ltd.

  *Singapore  100  100  100  *Singapore  100 100 100

JK Ansell Ltd.

  *India  (a) 50  (a) 50  (a) 50  *India    (a) 50   (a) 50   (a) 50

P.D. Holdings (Malaysia) Sdn. Bhd.

  *Malaysia  100  100  100

Ansell Services (Asia) Sdn. Bhd. (formerly P.D. Holdings (Malaysia) Sdn. Bhd.)

  *Malaysia  100 100 100

Ansell Ambi Sdn. Bhd.

  *Malaysia  100  100  100  *Malaysia  100 100 100

Ansell (Kedah) Sdn. Bhd.

  *Malaysia  100  100  100  *Malaysia  100 100 100

Ansell (Kulim) Sdn. Bhd.

  *Malaysia  100  100  100  *Malaysia  100 100 100

Ansell Malaysia Sdn. Bhd.

  *Malaysia  75  75  75  *Malaysia  75 75 75

Ansell Medical Sdn. Bhd.

  *Malaysia  75  75  75  *Malaysia  75 75 75

Ansell N.P. Sdn. Bhd.

  *Malaysia  75  75  75  *Malaysia  75 75 75

Ansell Shah Alam Sdn. Bhd.

  *Malaysia  100  100  100  *Malaysia  100 100 100

PDOCB Pty. Ltd.

  Australia  100  100  100  Australia  100 100 100

Ansell Medical Products Pvt. Ltd.

  *India  100  100  100  *India  100 100 100

Suretex Ltd.

  *Thailand  100  100  100  *Thailand  100 100 100

Latex Investments Ltd.

  Mauritius  100  100  100  Mauritius  100 100 100

Suretex Prophylactics (India) Ltd.

  *India  100  100  100  *India  100 100 100

STX Prophylactics S.A .(Pty.) Ltd.

  *Sth Africa  100  100  100  *Sth Africa  100 100 100

PD Licensing Pty. Ltd.

  Australia  100  100  100  Australia  100 100 100

PD Shared Services Pty. Ltd.

  Australia  100  100  100  Australia  100 100 100

PD Shared Services Holdings Pty. Ltd.

  Australia  100  100  —    Australia  100 100 100

Siteprints Pty. Ltd.

  Australia  100  100  100  Australia  100 100 100

S.T.P. (Hong Kong) Ltd.

  *Hong Kong  100  100  100  *Hong Kong  100 100 100

Pacific Dunlop Holdings N.V.

  *Netherlands Ant.  100  100  100  *Netherlands Ant.  100 100 100

Pacific Dunlop (Netherlands) B.V.

  *Netherlands  100  100  100  *Netherlands  100 100 100

Textile Industrial Design & Engineering Pty. Ltd.

  Australia  100  100  100  Australia  100 100 100

The Distribution Group Holdings Pty. Ltd.

  Australia  100  100  100  Australia  100 100 100

The Distribution Group Pty. Ltd.

  Australia  (b) 100  (b) 100  (b) 100  Australia  (b) 100 (b) 100 (b) 100

Nwodhsa Enterprises (Wholesale) Pty. Ltd.

  Australia  100  100  100  Australia  100 100 100

TDG Warehousing Pty. Ltd.

  Australia  100  100  100  Australia  100 100 100

The Distribution Trust

  Australia  100  100  100  Australia  100 100 100

Union Knitting Mills Pty. Ltd.

  Australia  100  100  100  Australia  100 100 100

Xelo Pty. Ltd.

  Australia  100  100  100  Australia  100 100 100

Xelo Sacof Pty. Ltd.

  Australia  100  100  100  Australia  100 100 100

Controlled Entities Sold in Year Ended 30 June 2003


            

Pacific Dunlop Holdings (N.Z.) Ltd.

  *New Zealand  100  100  100

Controlled Entities Sold in Year Ended 30 June 2004

No controlled entities were sold during the current financial year.

123


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

37.Particulars Relating to Controlled EntitiesPARTICULARS RELATINGTO CONTROLLED ENTITIES (CONTINUED)(continued)

 

  Country of
Incorporation


  Beneficial Interest

  

2003

%


  

2002

%


  

2001

%


  

Country of

Incorporation


  Beneficial Interest

Controlled Entities in Voluntarily Liquidation at 30 June 2004


  2004
%


  2003
%


  2002
%


TPLC Ltd.

  *UK  100  100  100

TPLC Medizinprodukte GmbH.

  *Germany  100  100  100

Ansell Glove Company Ltd.

  *UK  100  100  100

Golden Needles Knitting & Glove Co. Ltd.

  *UK  100  100  100

Mates Vending Ltd.

  *UK  100  100  100
  Country of
Incorporation


  

2003

%


  

2002

%


  

2001

%


Controlled Entities in Voluntary Liquidation at 30 June 2003


  

Controlled Entities Voluntarily Liquidated During the Year


            

BNG Sub Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

F.J.’s Auto Plus Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Gardenland Frozen Food Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

General Jones Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

H.C. Sleigh Investments Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Herbert Adams Holdings Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Jetbase Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Kcilc Pty. Ltd.

  Australia  100  100  100

Lifetec R&D Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Maspas Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Novare Partnership Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Ocper Auto Parts Pty. Ltd.

  Australia  100  100  100

PA Furniture Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Pacific Distribution Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Pacific Dunlop Belting Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Project Array Pty. Ltd.

  Australia  100  100  100

Project (X92) Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Project Array Pty. Ltd.

  Australia  100  100  100

Ocper Auto Parts Pty. Ltd.

  Australia  100  100  100

Retsamttaw Ocla Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Robur Tea Company Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Slumberland (Australia) Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Softwood Towns Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Sport Australia (Export) Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Super Cycle Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

TPLC Ltd.

  *UK  100  100  100

TPLC Medizinprodukte GmbH.

  *Germany  100  100  100

Xdds Pty. Ltd.

  Australia  100  100  100  Australia  100  100  100

Kcilc Pty. Ltd.

  Australia  100  100  100

Controlled Entities Voluntarily Liquidated During the Year


            

Pacific Dunlop (U.K.) Ltd.

  *UK  100  100  100

 

*Controlled Entities incorporated outside Australia carry on business in those countries.

 

(a)Ansell Healthcare has day-to-day management control of this entity.

 

(b)The trustee of The Distribution Trust is The Distribution Group Pty. Ltd. The beneficiary of the trust is Ansell Limited.

124


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to the Financial Statements

38.Investments in Associates

   Consolidated

 

$ in Millions


  2003

  2002

  2001

 

Results of associates

          

Share of associates’ profit from ordinary activities before income tax

  0.4  2.7  5.0 

Share of associates’ income tax expense relating to profit from ordinary activities

  (0.1) (0.8) (1.7)
   

 

 

Share of associates’ net profit - as disclosed by associates

  0.3  1.9  3.3 

Share of post acquisition retained profits and reserves attributable to associates retained profits

          

Share of associates’ retained profits at the beginning of the financial year

  (0.1) 8.5  6.2 

Share of associates’ net profit

  0.3  1.9  3.3 

Dividends from associates

  (2.6) (1.3) (1.0)

Retained profits of Associates disposed of during the financial year and entity no longer equity accounted

  2.4  (9.2) —   
   

 

 

Share of associates’ retained profits at the end of the financial year

  —    (0.1) 8.5 
   

 

 

Asset revaluation reserve

          

Share of associates’ asset revaluation reserve at the beginning of the financial year

  —    0.9  0.9 

Share of asset revaluation reserve of entity no longer equity accounted

  —    (0.9) —   
   

 

 

Share of associates’ asset revaluation reserve at the end of the financial year

  —    —    0.9 
   

 

 

Foreign currency translation reserve

          

Share of associates’ foreign currency translation reserve at the beginning of the financial year

  —    2.3  2.1 

Share of foreign currency translation reserve of entity no longer equity accounted

  —    (2.3) —   

Share of exchange fluctuations on assets and liabilities held in foreign currencies

  —    —    0.2 
   

 

 

Share of associates’ foreign currency translation reserve at the end of the financial year

  —    —    2.3 
   

 

 

Movements in carrying value of investments

          

Carrying amount of investments in associates at the beginning of the financial year

  13.3  33.3  19.0 

Share of associates’ net profit

  0.3  1.9  3.3 

Dividends received from associates

  (2.6) (1.3) (1.0)
   

 

 

   11.0  33.9  21.3 
   

 

 

Share of movement in associates’ foreign currency translation reserve

  —    —    0.2 

Add carrying value of investment in associate acquired during the year

  —    —    11.8 

Less carrying value of investment in associate disposed of during the financial year

  (11.0) (0.8) —   

Less write-down and carrying value of investment no longer equity accounted

  —    (19.8) —   
   

 

 

Carrying amount of investment in associates at the end of the financial year

  —    13.3  33.3 
   

 

 

Commitments

          

Share of associates’ capital expenditure commitments contracted but not provided for and payable:

          

Within one year

  —    —    1.8 
   

 

 

   —    —    1.8 
   

 

 

Share of associates’ operating lease commitments payable:

          

Within one year

  —    0.1  5.3 

One year or later and no later than five years

  —    0.1  8.8 

Later than five years

  —    —    0.5 
   

 

 

   —    0.2  14.6 
   

 

 

PART III

Items 17 & 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

38.Investments in AssociatesINVESTMENTSIN ASSOCIATES

   Consolidated

 

$ in Millions


  2004

  2003

  2002

 

Results of associates

          

Share of associates’ profit from ordinary activities before income tax

  —    0.4  2.7 

Share of associates’ income tax expense relating to profit from ordinary activities

  —    (0.1) (0.8)
   
  

 

Share of associates’ net profit - as disclosed by associates

  —    0.3  1.9 

Share of post acquisition retained profits and reserves attributable to associates Retained profits

          

Share of associates’ retained profits at the beginning of the financial year

  —    (0.1) 8.5 

Share of associates’ net profit

  —    0.3  1.9 

Dividends from associates

  —    (2.6) (1.3)

Retained profits of Associates disposed of during the financial year and entity no longer equity accounted

  —    2.4  (9.2)
   
  

 

Share of associates’ retained profits at the end of the financial year

  —    —    (0.1)
   
  

 

Asset revaluation reserve

          

Share of associates’ asset revaluation reserve at the beginning of the financial year

  —    —    0.9 

Share of asset revaluation reserve of entity no longer equity accounted

  —       (0.9)
   
  

 

Share of associates’ asset revaluation reserve at the end of the financial year

  —    —    —   
   
  

 

Foreign currency translation reserve

          

Share of associates’ foreign currency translation reserve at the beginning of the financial year

  —    —    2.3 

Share of foreign currency translation reserve of entity no longer equity accounted

  —       (2.3)
   
  

 

Share of associates’ foreign currency translation reserve at the end of the financial year

  —    —    —   
   
  

 

Movements in carrying value of investments

          

Carrying amount of investments in associates at the beginning of the financial year

  —    13.3  33.3 

Share of associates’ net profit

  —    0.3  1.9 

Dividends received from associates

  —    (2.6) (1.3)
   
  

 

   —    11.0  33.9 

Less carrying value of investment in associate disposed of during the financial year

  —    (11.0) (0.8)

Less write-down and carrying value of investment no longer equity accounted

  —    —    (19.8)
   
  

 

Carrying amount of investment in associates at the end of the financial year

  —    —    13.3 
   
  

 

Commitments

          

Share of associates’ operating lease commitments payable:

          

Within one year

  —    —    0.1 

One year or later and no later than five years

  —    —    0.1 

Later than five years

  —    —    —   
   
  

 

   —    —    0.2 
   
  

 

125


PART III

Item 18 : Consolidated Financial Statements

38.INVESTMENTSIN ASSOCIATES (continued)

 

Details of investments in associates are as follows :

 

        

Consolidated

Ownership

Interest


  

Consolidated

Investment

Carrying Amount


  Principal
Activities


  Balance
Date


  

2004

%


  

Consolidated
Ownership

Interest

2003

%


  2002
%


  

Consolidated
Investment

Carrying Amount


Name


  Principal
Activities


  Balance
Date


  2003
%


  2002
%


  2001
%


  

2003

$m


  

2002

$m


  

2001

$m


  

2004

$m


  2003
$m


  2002
$m


South Pacific Tyres N.Z. Ltd.(1)

  Manufacturing  30 June  50  50  50  —    —    18.7

Pacific Marine Batteries Pty. Ltd.

  Manufacturing  30 June  —    50  50  —    2.7  2.0  Manufacturing  30 June  —    —    50  —    —    2.7

BT Equipment Pty. Ltd.

  Manufacturing  30 June  —    45  45  —    10.6  11.8  Manufacturing  30 June  —    —    45  —    —    10.6

Car Parts Distribution Pty. Ltd.

  Manufacturing  30 June  —    —    50  —    —    0.8
  
  
  
  
  
  
  
  
                 
  
  
                 —    13.3  33.3                 —    —    13.3
  
  
  
  
  
  
  
  
                 
  
  

 

DividendsNo dividends were received by the Company from associates forduring the year ended 30 June 2004

(2003 by the Company amounted to- $2.6 million (2002million; 2002 - $1.3 million; 2001 - $1.0 million).

(1)Effective 1 July 2001, Ansell Limited discontinued equity accounting for its interest in South Pacific Tyres N.Z. Ltd.

 

Summary of performance and financial position of associatesassociates:

 

  Consolidated

  Consolidated

$ in Millions


  2003

  2002

  2001

  2004

  2003

  2002

The consolidated entity’s share of aggregate assets, liabilities and profits of associates are as follows:

                  

Net profit - as reported by associates

  0.3  1.9  3.3  —    0.3  1.9

Current assets

  —    24.0  61.6  —    —    24.0

Non-current assets

  —    4.7  22.8  —    —    4.7
  
  
  
  
  
  

Total assets

  —    28.7  84.4  —    —    28.7
  
  
  
  
  
  

Current liabilities

  —    15.2  42.3  —    —    15.2

Non-current liabilities

  —    0.2  10.8  —    —    0.2
  
  
  
  
  
  

Total liabilities

  —    15.4  53.1  —    —    15.4
  
  
  
  
  
  

Net assets - as reported by associates

  —    13.3  31.3  —    —    13.3
  
  
  
  
  
  

Adjustments arising from equity accounting

         

Preference Share adjustment

  —    —    2.0
  
  
  

Net assets - equity adjusted

  —    13.3  33.3
  
  
  

126


PART III

Item 18 : Consolidated Financial Statements

 

39.Event after Balance Date

Since the end of the financial year, Simplot Australia Pty. Ltd. (‘Simplot’), the Company and other Group Companies have entered into an agreement to settle the claims previously instituted by Simplot in the Supreme Court of Victoria that were outstanding during, and at the end of, the financial year.

PART III

Items 17 & 18 : Financial Statements


Notes to the Financial Statements

40.Major differences between AustralianMAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP and US GAAP– RESTATED

 

Australian generally accepted accounting principles (AGAAP) vary in certain significant respects from generally accepted accounting principles in the United States (US GAAP). Application of US GAAP would have affected shareholders’ equity as at 30 June 2004, 2003, and 2002 and 2001 and operatingnet profit after income tax expense attributable to the Ansell Limited shareholders for each of the years in the three year period ended 30 June 2003,2004, to the extent quantified below.

Restatement of Prior Year US GAAP Results

As set out in the financial statements for the years ended 30 June 2001, 2002 and 2003, the Group’s interest in the South Pacific Tyres (SPT) partnership has continued to be equity accounted for US GAAP purposes. Accordingly, the previously issued financial statements have included Ansell’s equity share of SPT’s results and equity impacts in the US GAAP reconciliation.

Goodyear, a US corporation, and the other partner in SPT, undertook certain restatements of its financial statements during the past year. As part of this process, the results and transactions of the SPT partnership were fully reconsidered as to their compliance with US GAAP. The previously issued financial statements of SPT which had been filed with Ansell’s 20-F, in accordance with Regulation S-X, Rule 3.09, have now been restated.

Previously, these statements had discussed only one difference between AGAAP and US GAAP. This difference was related to Revaluations of Property, Plant and Equipment, and the consequential impacts upon depreciation. The statements indicated that other US GAAP differences existed, but that all such differences were of an immaterial nature and amount.

As a result of the further evaluation of SPT’s transactions, it has been determined that an amount of $25 million recorded as Supply Agreement revenue under AGAAP in 2001 should, more probably, have been recorded by SPT in 2002, as a Capital Contribution from Goodyear. Since this transaction did not change the structure of the partnership, this US GAAP accounting would result in an increase of $12.5 million in Ansell’s share of SPT’s losses in 2001, and a reduction in Ansell’s share of SPT’s losses in 2002, of the same amount.

In addition to the above, all other US GAAP differences, although immaterial, have been quantified. The quantification of these items, which have now been included in the reconciliation set out in these financial statements (as Note 39(n) Investments), is as follows:

   Thousands of A$

   2001

  2002

  2003

Supply Agreement – gain/(loss)

  (12,500) 12,500  —  

All Other US GAAP differences – gain/(loss)

  586  (891) 737
   

 

 

Restatement effect

  (11,914) 11,609  737
   

 

 

Impact of total restatement effect on

         

– Basic earnings per share (cents)

  (6.14) 6.21  0.37

– Diluted earnings per share (cents)

  (6.10) 6.19  0.37

The impact of all US GAAP differences on the result of SPT Australia when compared to the result determined in accordance with AGAAP for the 2004 financial year, has been to reduce the loss by $977,171 (whole dollars). Accordingly, Ansell’s equity accounted losses for the year ended 30 June 2004 have been reduced by $488,586 (whole dollars) as a result of SPT’s US GAAP differences.

Additionally, in respect of the prior years, the results of SPT were reflected by Ansell as a component of its ‘discontinued’ operations. While the ‘put’ and ‘call’ options remain in place and Ansell remains committed to its objective of exiting the tyre business, for US GAAP purposes the classification of the results of SPT has been restated – and they are now reflected in ‘continuing’ operations for all periods presented.

In addition to the restatement items set out above in respect of SPT, it has also been determined that the cumulative effect of the adoption of SFAS 142 and SFAS 143 in the year ended June 30, 2003 had been effected as a direct charge to Equity, but had not been recorded as a charge to Net Income. Accordingly, the restatement now reflects this as a charge to Net income, and Income from Continuing operations. Earnings per share amounts have been restated accordingly. There is no restatement of Shareholder’s Equity as a result of this restatement.

Further, during the consideration of the SPT restatement issues, the evaluation of the Company’s Australian Pension Plan disclosures indicated that of an accumulated Additional Minimum Liability identified for recording in accumulated Other Comprehensive Income in 2004, an amount of $7.9 million should have been recorded in 2003. Accordingly, the impact on Shareholder’s Equity and Comprehensive income has been included in the restatements.

Additional Data in respect of the restatements


  Millions of A$

 
   2003

  2002

  2001

 

Continuing Operations

          

US GAAP Net Profit/(Loss) from continuing operations as previously reported

  85.8  (75.1) (223.0)

Reclassification of previously reported SPT Equity accounted results from Discontinued operations

  (17.1) (62.0) (45.9)

Restatement of SPT Equity accounted results as above

  0.7  11.6  (11.9)
   

 

 

US GAAP Net Profit/(Loss) from continuing operations – restated

  69.4  (125.5) (280.8)
   

 

 

Basic earnings per share from continuing operations – previously reported (cents)

  46¢ (40 (115

Basic earnings per share from continuing operations – restated (cents)

  37¢ (67 (145

Net Profit/(Loss)

          

US GAAP Net Profit/(Loss) as previously reported

  55.9  (183.6) (195.0)

Cumulative effect of a change in accounting principles re SFAS 142 and 143

  (5.3) —    —   

Restatement of SPT Equity accounted results as above

  0.7  11.6  (11.9)
   

 

 

US GAAP Net Profit/(Loss) – restated

  51.3  (172.0) (206.9)
   

 

 

Basic earnings per share – previously reported (cents)

  30¢ (98 (101

Basic earnings per share – restated (cents)

  27¢ (92 (107

Comprehensive Income/(Loss)

          

Comprehensive Income/(Loss) as previously reported

  (7.2) (268.8) (264.4)

Cumulative effect of a change in accounting principles re SFAS 142 and 143 previously reflected directly in equity

  (5.3) —    —   

Additional Minimum Pension Liability not previously recorded

  (7.9) —    —   

Restatement of SPT Equity accounted results as above

  0.7  11.6  (11.9)
   

 

 

Comprehensive Income/(Loss) restated

  (19.7) (257.2) (276.3)
   

 

 

Shareholders’ Equity

          

Ansell Limited Shareholders’ Equity according to US GAAP (including Comprehensive Income) as previously reported

  874.6  876.9  1,153.6 

Cumulative restatement of SPT Equity accounted results for periods prior to 2001.

  (2.8) (2.8) (2.8)

Restatement of SPT Equity accounted results as above

  0.4  (0.3) (11.9)

Additional Minimum Pension Liability not previously recorded

  (7.9) —    —   
   

 

 

Ansell Limited Shareholders’ Equity according to US GAAP (including Comprehensive Income) restated

  864.3  873.8  1,138.9 
   

 

 

US GAAP Equity Roll-Forward

          

Opening balance US GAAP Equity Roll-Forward as previously stated

  876.9  1,153.6  1,655.8 

Cumulative restatement of SPT Equity accounted results for periods post 2001.

  (0.3) (11.9) —   

Cumulative restatement of SPT Equity accounted results for periods prior to 2001.

  (2.8) (2.8) (2.8)
   

 

 

Opening balance US GAAP Equity Roll-Forward restated

  873.8  1,138.9  1,653.0 

Increase in Additional Minimum Pension liability

  (7.9) —    —   

US GAAP Net Profit/(Loss) – restated

  51.3  (172.0) (206.9)

Proceeds from issue of shares

  1.0  1.2  2.5 

Dividends

  —    —    (77.6)

Share buy back

  (8.2) —    (165.4)

Movements in AGAAP Foreign Currency Translation Reserve

  (71.3) (69.6) (73.0)

Unrealised net gain on cash flow hedges

  1.1  (12.1) (1.6)

Movements in Loans outstanding under Employee Share Plan

  3.1  4.3  1.3 

Other (including FX on US GAAP adjustments)

  21.4  (16.9) 6.6 
   

 

 

Closing Balance US GAAP Equity Roll-Forward restated

  864.3  873.8  1,138.9 
   

 

 

A description of the material differences between AGAAP, as followed by Ansell Limited, and US GAAP are as follows:

 

(a) Property, Plant and Equipment

 

Certain property, plant and equipment has been revalued by Ansell Limited at various times in prior financial periods. Revaluation increments have increased the carrying value of the assets and accordingly the depreciation charges have been increased above those which would be required on a historical cost basis. TheseUnder US GAAP such revaluations are not permitted. Accordingly, these adjustments eliminate this effect.

 

The above policy also causes differences in reported gains and losses on the sale of property, plant and equipment. Gains and losses for Australian GAAPAGAAP are based on consideration less revalued amounts net of accumulated depreciation and amortisation. For US GAAP purposes gains and losses are determined having regard to depreciated historical cost, and revaluation reserves applicable to assets sold are reported as Income.

 

In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. The SFAS No. 144 superseded SFAS No. 121 and was adopted by the Group effective 1 July 2002. SFAS No. 144 retains the requirements of SFAS No. 121 to (a) recognise an impairment loss if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and fair value of the asset.asset lees estimated costs to sell. SFAS No. 144 also requires that a long-lived asset to be abandoned, exchanged for a similar productive asset, or distributed to owners in a spin-off be considered held and used until the asset is disposed of, exchanged or distributed.

 

On adoption of SFAS No. 121 for the Group’s 1997 fiscal year end, an adjustment of $11.5 million was made at 30 June 1998 (following an assessment of the fair values of properties at 31 December 1997) to reflect the total amount by which certain properties were written down below their depreciated historical cost. Subsequent to 30 June 1998, properties have been sold which had previously been revalued below depreciated historical cost by $7.4 million. Therefore, the adjustment has been reduced to Nil as at 30 June 2003 ($4.1 million as at 30 June 2002 and $8.0 million as at 30 June 2001). This treatment is in accordance with SFAS No. 144.

(b) Minority Interests

 

Minority interests are included as part of total Shareholders Equity under AGAAP. The reconciliation to US GAAP in Note 4140 has excluded these from Shareholders’ Equity consistent with US GAAP treatment.

 

(c) Provisions

 

The term “provisions” is used in AGAAP to designate accrued expenses with no definitive payment date. Classification between current and non-current is generally based on management assessments, as subject to audit.

In prior periods under AGAAP, dividends declared by the Company were provided for in the financial statements at year end if the declaration date was prior to the financial statements being signed. For US GAAP these amounts provided were added back to shareholders’ equity where declaration had not occurred within the financial year. During the current fiscal year the Group adopted the Australian Accounting Standard AASB 1044 “Provisions, Contingent Liabilities and Contingent Assets” effective 1 July 2002 which brought the treatment of providing for dividends into line with US GAAP.

 

Included within the result for AGAAP are amounts charged to income in respect of future costs associated with rationalisation and restructuring within existing business segments (provision for rationalisation and restructuring costs). Any plans to reorganise or exit a business are approved by the Board of Directors. Once committed to, accruals are made for the estimated costs associated with the reorganisation or exit. The US GAAP criteria for accruing costs associated with business restructure are fundamentally consistent with those of AGAAP under AASB 1044 but do contain certain very specific qualifying criteria.criteria including those set out in EITF 94–3. Where these criteria are not satisfied an adjustment to earnings is included in the reconciliation to US GAAP.

 

At 30 June 2003 theThe provision for rationalisation and restructuring includes $6.5 million in relation to the Healthcare restructuring plan instrumented during fiscal 2002. These amounts areas at 30 June 2004 predominantly represents costs and claims now expected to be fully expended during fiscal 2004. Additionally, $6.7 million of provision remainsincurred in respect of businesses sold between 1996 and 2002. These amounts have been set asideThe adoption of AASB 1044 has resulted in order to meet minor claims and costs associated with these sold businesses.no US GAAP differences in the fiscal years ended 30 June, 2003 or 2004.

127


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

40.39.Major differences between AustralianMAJORDIFFERENCESBETWEEN AUSTRALIAN GAAP andAND US GAAPGAAP—RESTATED (continued)(continued)

 

(d) Employee Loans, Executive Share Plan and Options

 

TheFor AGAAP purposes the Company has adopted, for financial years ending after 30 June 1997,applies the fair value model which is consistent with the provision of SFAS No. 123 – “Accounting for Stock Based Compensation” to determine compensation cost in respect of options and in respect of the Performance Share Rights (PSR’s) first issued in 2003.2003 under the Ansell Limited Stock Incentive Plan. No options have actually been exercised. During 2004 a $2.6 million compensation charge was recognized covering the current year costs associated with the grants of PSR’s. This treatment is consistent with US GAAP.

 

Company executives participated in an executive share plan scheme which allowed them to purchase allocated shares at $2.50 per share, or in respect of approximately 35% of the shares, at $10.00 per share. Shares issued under the planFor AGAAP purposes options are not listed, cannot be traded and do not rank for dividends untilexpensed in the above amounts have been paid. The determined compensation expenseaccounts. A further charge of $300,000 under US GAAP was made in respect of the partly paid shares hadoptions in accordance with SFAS No. 123. This charge has been fully amortised ascalculated using the fair value method whereby fair value is derived using an option pricing model that takes into consideration the stock price at 30 June 1996,grant date, the exercise price and no further shares have been issued.

Loans granted to employees in respectthe expected life of the Employee Plan are classified as a reductionaward, the expected volatility of Shareholder’s Equitythe underlying stock, the expected dividends on the stock and the risk free interest rate for US GAAP purposes. Such loans are classified asthe expected life of the option. Compensation cost is recognized over the service period, which is the vesting period, with an asset for A GAAP.corresponding credit to stockholders’ equity.

 

(e) Earnings Per Share

 

Under Australian GAAP earnings per share is calculated by dividing operating profit after tax, minority shareholders interest and any preference dividend by the weighted average number of shares on issue for the year. Methods of computing Earningsearnings per Shareshare in accordance with US GAAP are documented in SFAS No. 128.128 – “Earnings per Share”. Earnings per Shareshare computations recognise the effect of all bonus issues (stock splits) and bonus elements of rights issues made up to 30 June 2003,2004, and also give effect to the stock consolidation (reverse split) approved by shareholders in April 2002.

For the three year period 1 July 2001 to 30 June 2004 there were no differences in the calculation methodology of EPS under AGAAP and US GAAP.

 

(f) Pension Plans

 

The Group sponsors contributory and non-contributory accumulation and defined benefit pension plans covering substantially all employees. The defined benefit plans generally provide benefits based on salary in the period prior to retirement. Of the pension plans within the Group, only four plans, one in Australia and three in the US have been considered material for the year ended 30 June 2003. All defined benefit plans are funded based on actuarial advice on a regular basis.

 

Actuarial calculations have been carried out for the abovedefined benefit funds and the material fund aspects are as detailed in Note 24. The majority of assets of the funds are invested in pooled superannuation trusts in the case of the Australian funds and equity securities for other major funds.

 

Limited disclosure in respect of pension plans is presently required by AGAAP. Under AGAAP the contributions to the various pension plans are recorded as an expense in the income statement.Statement of Financial Performance. The disclosure requirements of Statement of Financial Accounting Standards No. 87 (SFAS No. 87) and No. 132 (SFAS No. 87, SFAS No. 132)132 as revised) have been included in Note 40 to these consolidated financial statements. The Group reports pension plans aggregated where allowed by SFAS No. 87.No.87. Additionally, an adjustment is made to recognise the measurement principles of SFAS No. 87 and related standards in determining net income and shareholders’ equity under US GAAP.

 

(g) Statement of Cash Flows

 

Profit from operations determined under AGAAP differs in certain respects from the amount determined in accordance with US GAAP. A reconciliation of US GAAP profits to Cash Flows from operations is provided.

 

Under AGAAP, cash is defined as cash on hand and deposits repayable on demand, less overdrafts repayable on demand. Under US GAAP, cash and cash equivalents are defined as cash and investments with original maturities of three months or less, and do not include bank overdrafts or restricted deposits. Cash and cash equivalents as of 30 June, 2004, 2003 and 2002 would have been $307.8 million, $286.0 million and $258.5 million respectively, under US GAAP.

128


PART III

Item 18 : Consolidated Financial Statements

39.MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP – RESTATED (continued)

 

(h) Income Taxes

 

Under AGAAP, future income tax benefits attributable to temporary differences are only brought to account when their realisation is assured beyond reasonable doubt. Future income tax benefits related to tax losses are only brought to account when their realisation is virtually certain.

 

Under US GAAP, all deferred tax assets are recognised, net of a valuation allowance, to the extent the likelihood of realising the tax benefit is more likely than not. Although the US GAAP standard provides for a lower threshold than AGAAP, based on the level of historical taxable income and projections for future taxable income over the periods in which the carry forward tax losses and deductible temporary differences will reverse, the only additional deferred tax asset that has been recognised under US GAAP is that provided in prior years on the hedging adjustment in the AGAAP to US GAAP reconciliation.

PART III

Items 17 & 18 : Financial Statements


Notesadjustments are considered only after having regard to the Financial Statements

40.Major differences between Australian GAAP and US GAAP(continued)

(h) Income Taxes(continued)level and jurisdiction of unbooked tax losses.

 

At 30 June 20032004 the expiry dates of gross tax losses of A$2.2 million for which future tax benefits (deferred tax assets) have been brought to account are as follows - in respect of financial years ending on 30 June;under both AGAAP and US GAAP have no expiry date.

Year


  

A$

million


2007

  0.3

2008

  3.0

2010

  3.8

No expiry date

  10.4

 

All deferred tax balances at 30 June 20032004 relate to entities operating in foreign tax jurisdictions.

 

At 30 June 20032004 the expiry dates of gross tax losses for which future tax benefits (deferred tax assets) have not been brought to account under AGAAP and US GAAP are as follows - in respect of financial years ending on 30 June;

 

Revenue Losses


Revenue Losses


  

Capital Losses


Revenue Losses


  

Capital Losses


Year


  A$
million


  

Year


  

A$

million


  

A$
million


  

Year


  

A$
million


2005

  139.1  

2005

     82.9  2005   

2006

  67.6  

2006

  488.6  65.8  2006  473.0

2007

  55.5  

2007

  10.4  53.8  2007  10.0

2008

  3.2  

2008

     3.2  2008   

2009

  0.2  

2009

     2.9  2009  52.7

2010

  1.5  

2010

     1.9  2010   

2011

  111.5  

2011

     108.0  2011   

2012

  71.5  

2012

     69.2  2012   

2019

  27.6  

2019

     26.6  2019   

2022

  10.0  

2022

     9.7  2022   

No expiry date

  697.9  No expiry date  312.0  712.0  No expiry date  624.9

 

The reductionincrease in the tax effect of unrecognised capital tax losses during the year of $63.4$107.0 million was primarily due to a reassessment of capital losses available in Australia following the partial recoupmentcompletion of suchthe first income tax return under the tax consolidation regime. Additional capital losses were also incurred in the USA during the year and the impactperiod.

The future tax benefit of the stronger A$ on the conversion of US capital losses. Gross revenue losses not recognised fell by $13.2$16.5 million with the recoupment of revenue losses in the USA, partially offset by additional revenue losses being recordedincurred in AustraliaAustralia.

Inclusive of the $24.2 million (2003 $32.0 million) set out in Note 17 to the consolidated financial statements, the total deferred tax assets amounting to $763.0 million (June 2003 $680.3 million) are offset by the impact on the conversion to A$valuation adjustments of US revenue losses.

During the year ended$738.8 million as at 30 June 2004 (June 2003 a pretax loss$648.3 million) and total deferred tax liabilities amount to $20.2 million (June 2003 $21.5 million). The adequacy of $28.4 million was made in Australia (2001/2002 a pretax lossthe valuation allowance is regularly assessed and none of $22.3 million.)the deferred tax assets relate to amounts which, if realised, would impact the carrying values of goodwill or any other intangible assets.

 

The Company elected to enter the tax consolidation regime in Australia effective 1 July 2002. There was no impact on the Financial Statementsconsolidated financial statements of the Company or the Group as a result of this election.election as all tax balances of the Company and all Australian wholly owned subsidiaries were written off in a prior period.

Analysis of Pre Tax Profit/(Loss)

   2004

  2003

  2002

 
   A$m

  A$m

  A$m

 

Australian Operations

  (4.0) (29.2) (17.8)

Foreign Operations

  97.3  108.5  (39.4)
   

 

 

Total Group

  93.3  79.3  (57.2)
   

 

 

Total tax expense for 2004 and 2003 was comprised of foreign tax expense (of which $1.3 million is deferred, 2003—$24.8 million), as the Australian operations are in a significant tax loss position. For 2002 $41.4 million of the tax expense for the year was comprised of foreign tax expense and $14.4 million domestic with $47.6 million being deferred.

129


PART III

Item 18 : Consolidated Financial Statements

39.MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP—RESTATED (continued)

(h) Income Taxes (continued)

 

Notwithstanding the level of accumulated losses in certain jurisdictions, the Group has unremitted profits arising from operating activities which are held in foreign tax jurisdictions. In the event that all of these profits do not remain permanently reinvested in those jurisdictions and are distributed by way of dividend, additional taxes amounting to approximately $12 million may become payable.payable on a total amount of $39.7 million of unremitted earnings.

 

(i) Accounting for Goodwill

 

Shares in controlled entities are valuedrecorded on acquisition at the holding company’s cost. Any difference between the fair value of net assets acquired and cost is recognised as an asset.goodwill. Under AGAAP, goodwill is amortised on a straight line basis over varying periods not exceeding 20 years. Although the benefits from the goodwill acquired may exceed 20 years the goodwill is written off over periods not exceeding 20 years to comply with AGAAP.

 

In 1989 and prior years, for AGAAP, goodwill was written off in the year of acquisition. For US GAAP purposes, such goodwill has been reinstated.

 

In June 2001, the FASB issued SFAS No. 141, Business Combinations,“Business Combinations”, and SFAS No. 142, Goodwill“Goodwill and Intangible Assets.Assets”. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations completed after 30 June 2002 which is consistent with AGAAP. SFAS No. 141 also specifies the types of acquired intangible assets that are required to be recognised and reported separately from goodwill and those acquired intangible assets that are required to be included in goodwill. SFAS No. 142 requires that goodwill no longer be amortised, but instead tested for impairment at least annually. This requirement creates a difference between AGAAP and US GAAP. SFAS No. 142 also requires recognised intangible assets to be amortised over

PART III

Items 17 & 18 : Financial Statements


Notes to the Financial Statements

40.Major differences between Australian GAAP and US GAAP(continued)

their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, Accounting“Accounting for the Impairment or Disposal of Long-Lived Assets.Assets”. SFAS No. 142 also permits indefinite useful lives to be assigned to recognised intangibles. Any recognised intangible assets determined to have an indefinite useful life will not be amortised, but instead tested for impairment in accordance with the Standard until its life is determined to no longer be indefinite.

 

The Group adopted SFAS No. 141 and SFAS No. 142 effective 1 July 2002 at which time the valuevalues of goodwill and brand names capitalised under US GAAP was reviewed.were reviewed for impairment. This review resulted in a write down of the value of goodwill of $5.0 million. This write down related to goodwill capitalised under US GAAP that had previously been written off under AGAAP. In accordance with the provisionsUnder US GAAP this adjustment would be presented as a cumulative effect of SFAS No. 142 this write down was taken against opening retained earnings and has not been charged toa change in accounting principles in US GAAP income for the period.year ended 30 June 2003 and is reflected as an adjustment in arriving at net income pursuant to US GAAP.

 

SFAS No. 142 requires goodwill and other intangible assets to be tested for impairment at the reporting unit level. A reporting unit is the same as, or one below, an operating segment as defined by SFAS No. 131 “Disclosure about Segments of an Enterprise and Related Information”.

Ansell has traditionally managed its business by product type within three business units – Occupational, Professional and Consumer. Each of these three business units comprise both manufacturing and sales and marketing with most manufacturing facilities being principally a supplier to one of the business units only (certain factories can produce product for more than one business unit, however, production for a particular unit does dominate).

Although the manufacturing facilities are predominantly product specific they do supply product to multiple marketing regions. The carrying valueprimary focus of the manufacturing facilities is to manufacture product as cost effectively as possible and to form an important component of an integrated supply chain, notwithstanding that due to taxation issues an appropriate manufacturing margin is retained by the manufacturing facilities.

Accordingly, the Group has allocated to, and conducts impairment testing of goodwill is reviewedand brand names semi-annually based on the three business units, which are considered to be the cash generating units and anythe same as the Company’s business segments. Any material diminution in value is charged to the Profit and Loss Statement of Financial Position for US GAAP purposes.

 

For US GAAP purposes no goodwill amortisation has been charged against income forsince 1 July 2002, the current period.effective date of SFAS No. 142. In prior years the Group adopted the method of straight-line amortisation over 40 years for US GAAP where the useful life was considered to exceed 20 years. Goodwill amortisation of $21.4 million under AGAAP in 2004 and $25.3 million in 2003 has also been added back to income in the Profit and Loss Statement of Financial Performance for US GAAP purposes.

 

Goodwill attributable to sold businesses is brought to account in determining the gain or loss on sale.

130


PART III

Item 18 : Consolidated Financial Statements

39.MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP—RESTATED (CONTINUED)

 

(j) Brand names

 

Brand names acquired since 1 July 1990, are recorded in the accounts at cost based on independent valuation. No amortisation has been charged on these assets under Australian GAAPAGAAP as no event has occurred to cause a reduction in the values or limit their useful lives.

 

For US GAAP purposes and for purposes of this reconciliation, brand names were, effective 1 July 1994 amortised over a period of 40 years using the straight line method. Upon the adoption of SFAS No. 142 effective 1 July 2002, such amortisation ceased for US GAAP purposes as indefinite useful lives have been assigned to brand names. No adjustment to retained earnings was required in respect of brand names on the adoption of SFAS No. 142. The carrying value of brand names is reviewed semi annually and any material diminution in value is charged to the Statement of Financial Performance for AGAAP and US GAAP purposes.

 

Brand names attributable to sold businesses are brought to account in determining the gain or loss on sale.

PART III

Items 17 & 18 : Financial Statements


Notes to the Financial Statements

40.Major differences between Australian GAAP and US GAAP(continued)

 

(k) Hedging of Anticipated TransactionsDerivatives not designated as hedges

 

Included within Note 27 to the Financial Statements is detailDerivatives not designated as hedges primarily consist of amounts deferred related to hedging of anticipated exposures. For US GAAP purposes certain of these transactions (primarily related tointerest rate swaps and forward exchange contracts)contracts which, while mitigating economic risks to which the economic entity is exposed, do not qualify as hedgesfor hedge accounting under SFAS 133 as they relate to hedging of anticipated transactions. These amounts are adjusted in determining US GAAP income. The amount adjusted, by increasingdecreasing US GAAP net income by $2.0 million (2003 - $2.4 million (2002increase; 2002 - $1.3 million decrease; 2001 - $1.1$1.9 million decrease), is in respect of forward contracts hedging future foreign currency sales of product. The contracts are related to budgeted sales and are not in relation to firm commitments.

 

(l) Discontinued Operation

 

Under AGAAP a business or segment is includedpresented as a discontinued operation upon completion of the transaction, whereas under US GAAP presentation as discontinued is determined in accordance with either APB 30 or SFAS No. 144 which basically requires presentation as discontinued at the relevant measurement date, which will generallymay pre-date completion.

 

Sales revenue under US GAAP as disclosed in Note 4140 to the Financial Statementsconsolidated financial statements represents the sales revenue for the periods shown of the continuing Ansell Healthcare operations.

Certain retained liabilities relating to Accufix Pacing Lead related expenses are reported in Note 20 to the Financial Statementsconsolidated financial statements as a current provision of $14.5$11.2 million. As set out in Note 26 to the Financial Statementsconsolidated financial statements the expected outcomeoutcomes of the material litigation actions outstanding in respect of the Medical Products Group and retained by Ansell following the sale of the operation in 1996 have been provided for.

 

Certain deferred tax assets previously reported in respect of the results of the Medical Products Group were written offsubject to a valuation allowance in 1996, and income tax benefits attributable to the losses from operations and loss from sale have not been brought to account as recovery is not, at this time, considered to be more likely than not.

 

(m) Derivative Instruments and Hedging Activities

 

The FASB issued, then subsequently amended, SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which became effective for Ansell Limited on 1 July 2000. Under SFAS No. 133, as amended, all derivative instruments are recognised in the balance sheet at their fair values and changes in fair value are recognised immediately in earnings, unless the derivatives qualify as hedges of future cash flows. For derivatives qualifying as hedges of future cash flows, the effective portion of changes in fair value is recorded temporarily in equity, then recognised in earnings along with the related effects of the hedged items. Any ineffective portion of hedges is reported in operating earnings as it occurs.

The nature of Ansell Limited’s business activities necessarily involves the management of various financial and market risks, including those related to changes in interest rates, currency exchange rates and commodity prices. Ansell Limited uses derivative financial instruments to mitigate or eliminate certain of those risks. Allrisks, as a component of its risk management strategy. The Company does not use derivate instruments for trading purposes.

Under Australian GAAP, derivative financial instruments may have hedge accounting treatment applied if the hedging derivatives are effective in reducing the exposure being hedged and are designated as a hedge at the inception of the contract. Hedging derivatives are accounted for in a manner consistent with the accounting treatment of the hedged items as disclosed in Note 1 to the consolidated financial statements.

The FASB issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended, which became effective for Ansell Limited on 1 July 2000. Under SFAS No. 133, as amended, all derivative instruments are recognised in the Statement of Financial Position at their fair values. The accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation.

ŸFor a derivative designated as hedging the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (referred to as a fair value hedge), the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect of that accounting is to reflect in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value.

ŸFor a derivative designated as hedging the exposure to variable cash flows of a forecasted transaction (referred to as a cash flow hedge), the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately.

ŸFor a derivative designated as hedging the foreign currency exposure of a net investment in a foreign operation, the gain or loss is reported in other comprehensive income (outside earnings) as part of the cumulative translation adjustment. The accounting for a fair value hedge described above applies to a derivative designated as a hedge of the foreign currency exposure of an unrecognized firm commitment or an available-for-sale security. Similarly, the accounting for a cash flow hedge described above applies to a derivative designated as a hedge of the foreign currency exposure of a foreign-currency-denominated forecasted transaction.

ŸFor a derivative not designated as a hedging instrument, the gain or loss is recognized in earnings in the period of change.

Under US GAAP, all derivatives are recognised on the balance sheetStatement of Financial Position at their fair value. On the date the derivative is entered into, Ansell Limited designates the derivative as either a hedge of the fair value ofhedge or a recognised asset or liability or firm commitment (fair value hedge) or of the variability of cash flows to be paid or received related to a recognised asset, liability or forecasted transaction (cash flow hedge).hedge.

131


PART III

 

Hedges of future cash flowsItem 18 : Consolidated Financial Statements

39.MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP—RESTATED (CONTINUED)

(m) Derivative Instruments and Hedging Activities (continued)

 

Ansell Limited is exposed to interest rate risk and foreign exchange risk associated with underlying assets and liabilities. To hedge these exposures, which relate primarily to long term borrowings in United States Dollars and to assets held by self sustaining foreign affiliates, Ansell Limited uses derivative financial instruments to mitigate or eliminate those risks. The ineffective portiondifference between the accounting treatment under AGAAP and US GAAP detailed above affects only the pattern and timing of the changes in cash flow valuesnon-cash accounting recognition of hedge positions reported in the current period amounts to nil (2002 - nil; 2001 - loss of $0.3 million before income taxes). There is no portion of anygains and losses on derivative instruments excluded fromand does not change the assessmenteconomic benefits of hedge effectiveness.

Amounts classified in Other Comprehensive Income (OCI) during the period relateusing these instruments to cash flow hedges and will be released to earnings as the hedged items mature. During the period, no amount was reclassified from OCI and realised in earnings due to the discontinuation of cash flow hedges. During the next 12 month period ending 30 June 2004, a loss of $4.4 million will be reclassified to earnings as a result of hedged items maturing.

At 30 June 2003, the maximum term of derivative instruments that hedge forecasted transactions was 37 months.manage risk.

 

Hedges of recognised assets, liabilities and firm commitments (fair value hedges)

 

All fair value hedges have been assessed for their effectiveness in accordance with SFAS No. 133 guidelines. AThe ineffective portion of changes in fair values of hedged positions, reported in earnings, amount to a gain of $1.8 million (2003 - gain of $1.3 million (2002million: 2002 - gain of $1.8 million: 2001 - loss of $2.7$2.6 million), before income taxes,taxes. There were no amounts excluded from the measure of effectiveness.

Hedges of future cash flows (cash flow hedges)

Amounts classified in Other Comprehensive Income (OCI) during the period relate to cash flow hedges, which will be reclassified to earnings when the forecasted transaction affects earnings. During the next 12 month period ending 30 June 2005, a loss of $0.4 million is expected to be reclassified to earnings. At 30 June 2004, the maximum term of cash flow hedges that hedge forecasted transactions was recognised in other expenses related to the change in value of fair value hedges and its associated hedged item.38 months.

 

A reconciliation of current period changes in Other Comprehensive Income within equity is as follows:

 

   $ millions

 

Opening balance of accumulated net lossgain/(loss) on cash flow hedges

  (13.712.6)

Net gain / (loss) on cash flow hedges - recognized in OCI – net of nil tax

  1.117.3 

Add reclassification adjustments to earnings

  —   
   

Closing balance of accumulated net lossgain/(loss) on cash flow hedges

  (12.64.7)
   

PART III

Items 17 & 18 : Financial Statements


Notes to the Financial Statements

40.Major differences between Australian GAAP and US GAAP(continued)

 

(n) Investments

 

For AGAAP purposes investments held in publicly listed companies at 30 June 2003 have been marked to market and the charge included in AGAAP profit for the year. This compliesTo comply with SFAS No 115 “Accounting for Certain Investments in Debt and Equity Securities” this charge has been reclassified to accumulated other comprehensive income as the decline in fair value is determinedCompany has designated such securities as “available for sale” pursuant to be other than temporary.SFAS No. 115.

 

Accounting for the Investment in South Pacific Tyres (SPT)

 

The accounting for the investment in SPT is detailed in Note 1 to the Financial Statements.

 

For US GAAP purposes the existing provisions contained within the amended partnership agreement - notwithstanding the substance of the revised arrangements and actual process in respect of the operational control of SPT, which has ultimately determined the AGAAP treatment - continue to provide the company with the legal ability to significantly influence the partnership.

 

Accordingly, equity accounting continues to be applied for the purpose of reporting in accordance with the requirements under US GAAP.

 

(o) Revenue Recognition

 

Under AGAAP, interest revenueincome and proceeds from the sale of non current assets are recorded as other revenues from ordinary activities and the book basis of the assets and businesses sold is included in expenses. Under US GAAP, interest revenueincome is classified as other income and the difference between the sale proceeds and the book basis of the assets and business sold would be presented as a gain or loss and included in the determination of operating income.income or income from discontinued operations.

132


PART III

Item 18 : Consolidated Financial Statements

39.MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP—RESTATED (CONTINUED)

 

(p) Asset Retirement Obligations

 

In August 2001, the FASB issued SFAS No. 143 “Accounting for Asset Retirement Obligations” which was adopted by the GroupCompany effective 1 July 2002. The Statement addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and for the associated asset retirement costs. The adoption of SFAS No. 143 resulted in the recognition of a net retirement obligation of $0.3 million as at 1 July 2002. In accordance with the provisions of SFAS No. 143 this net retirement obligation was taken against opening retained earnings and has not been charged to US GAAP income forwould be presented as a cumulative effect of a change in accounting principle in the period.period of adoption of the standard. A charge of $0.1 million was made against US GAAP income forrecorded during 2003 and 2004 reflecting the current period as a resultamortisation of complying with SFAS No. 143.the asset retirement obligation.

 

(q) Recent Changes in US GAAP

 

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 is based on the general principle that a liability for a cost associated with an exit or disposal activity should be recorded when it is incurred and initially measured at fair value. SFAS No. 146 applies to costs associated with (1) an exit activity that does not involve an entity newly acquired in a business combination or (2) disposal activity within the scope of SFAS No. 144. These costs include certain termination benefits, costs to terminate a contract that is not a capital lease, and other associated costs to consolidate facilities or relocate employees. The Group adopted SFAS No. 146 during the year. The adoption of this standard had no impactthose current changes in US GAAP which are not yet effective is not expected to have any material effects on the consolidated financial statements.statements of the Company.

 

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees of Indebtedness of Others”. FIN 45 elaborates on the disclosure requirements of guarantees, as well as requiring the recording of certain guarantees issued or modified after 31 December, 2002. We do not believe that the adoption of FIN 45 requires any material change in our required guarantee disclosures. The Group has not entered into any recordable guarantees since 31 December, 2002.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation - - Transition and Disclosure.” SFAS No. 148 provides companies with alternative methods of transition to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation and requires disclosure about those effects in future interim financial information. As the Group had previously been applying the fair value based method of accounting for stock-based employee compensation, the adoption of SFAS No. 148 during the year had no additional impact on the financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities” . The objective of FIN 46 is to improve financial reporting by companies involved with variable interest entities. A variable interest entity is a corporation partnership, trust or any other legal structure used to conduct activities or hold assets in which either (a) the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (b) the equity investors lack (i) the ability to make decisions about the entity’s activities, (ii) the obligation to absorb the losses of the entity if they occur, and (iii) the right to receive the expected residual returns of the entity if they occur. Historically, entities generally were not consolidated unless the entity was controlled through voting interests. FIN 46 changes that by requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable entity’s activities or entitled to receive a majority of the entity’s residual returns or both. A company that consolidates a variable interest entity is called the “primary beneficiary” of that entity.133


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to the Financial Statements

40.Major differences between Australian GAAP and US GAAP(continued)

(q) Recent Changes in US GAAP(continued)

FIN 46 also requires disclosures about variable interest entities that a company is not required to consolidate but in which it has a significant variable interest. The requirements of FIN 46 apply immediately to variable interest entities created after 31 January 2003 and to variable interest entities in which an enterprise obtains an interest after that date. The requirements of FIN 46 apply in the first fiscal year or interim period beginning after 15 June 2003 to entities in which an enterprise holds a variable interest that it acquired before 1 February 2003. The Group is currently reviewing FIN 46 to determine what impact, if any, that its implementation will have on its financial statements, however, the Group does not expect the adoption of FIN 46 will have a material effect on its financial position or results from operation.

In April 2003, the FASB issued SFAS No. 149, Amendment of SFAS No. 133 on “Derivative Instruments and Hedging Activities”. This statement amends SFAS No. 133 to provide clarification on the financial accounting and reporting of derivative instruments and hedging activities and requires contracts with similar characteristics to be accounted for on a comparable basis. In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. SFAS No. 150 establishes standards on the classification and measurement of financial instruments. The application date of SFAS No. 149 and SFAS No. 150 for the Group is 1 July 2003. We are in the process of assessing the effect of these standards and do not expect their implementation to have a material effect on our financial condition or results of operation.

PART III

Items 17 & 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

41.40.Reconciliation to United States Generally Accepted Accounting Principles (U.S.RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP)

 

  Consolidated

   Consolidated

 

$ in millions


$ in millions


  2003

  2002

  2001

   2004

 2003

 2002

 

Profit and Loss Statement (for years ended 30th June)

       

Statement of Financial Performance (for years ended 30th June)

   Restated  Restated 

Net profit/(loss) of the consolidated entity per Australian GAAP

Net profit/(loss) of the consolidated entity per Australian GAAP

  52.5  (113.0) (135.8)  72.6  52.5  (113.0)

Less interest of outside equity holders

  2.6  2.8  3.6 

Less interest of outside equity holders after income tax

  1.9  2.6  2.8 
  

 

 

  

 

 

Net loss attributable to members

  49.9  (115.8) (139.4)

Net profit/(loss) attributable to Ansell Limited shareholders

  70.7  49.9  (115.8)

Adjustments required to accord with US GAAP:

Adjustments required to accord with US GAAP:

          

add/(deduct);

  6.0  (67.8) (55.6)

add/(deduct)

  19.7  1.4  (56.2)
  

 

 

  

 

 

Profit/(Loss) according to U.S. GAAP

  55.9  (183.6) (195.0)

Net Profit/(Loss) according to US GAAP(2)

  90.4  51.3  (172.0)
  

 

 

  

 

 

Weighted average number of shares per basic EPS calculations (millions)

Weighted average number of shares per basic EPS calculations (millions)

  187.1  186.9  194.0   180.8  187.1  186.9 

Weighted average number of Executive shares (millions)

  0.3  0.6  0.5 

Weighted average number of shares/options (millions)

  0.6  0.6  0.7 
  

 

 

  

 

 

Weighted average number of shares per diluted EPS calculations (millions)

Weighted average number of shares per diluted EPS calculations (millions)

  187.4  187.5  194.5   181.4  187.7  187.6 

Continuing Operations

Continuing Operations

          

Income/(loss) from continuing operations

Income/(loss) from continuing operations

          

Before income tax

Before income tax

  112.6  (48.2) (75.8)  104.0  96.2  (98.6)

Income tax expense

Income tax expense

  (26.8) (26.9) (147.2)  (20.7) (26.8) (26.9)

Income/(loss) from continuing operations

  83.3  69.4  (125.5)

Discontinued Operations

Discontinued Operations

          

Income/(loss) from discontinued operations

Income/(loss) from discontinued operations

          

Before income tax(1)

Before income tax(1)

  (29.9) (89.0) 63.1   7.1  (12.8) (27.0)

Income tax expense

Income tax expense

  —    (19.5) (35.1)  —    —    (19.5)

Income/(loss) from discontinued operations

  7.1  (12.8) (46.5)

Cumulative effect of a change in accounting principles—goodwill and asset retirement obligations (nil tax)

  —    (5.3) —   
  

 

 

  

 

 

Net profit/(loss) per US GAAP

Net profit/(loss) per US GAAP

  55.9  (183.6) (195.0)  90.4  51.3  (172.0)
  

 

 

  

 

 

Earnings per share - basic and diluted (Australian Cents)

Earnings per share - basic and diluted (Australian Cents)

          

Continuing operations

 

- basic

  46¢ (40 (115

Continuing operations - basic

  46¢ 37¢ (67

- diluted

  46¢ 37¢ (67

Discontinued operations - basic

  4¢ (7 (25

- diluted

  4¢ (7 (25

Cumulative effect of a change in accounting principle - basic

  —    (3 —   

- diluted

  —    (3 —   
 

- diluted

  46¢ (40 (115  

 

 

Discontinued operations

 

- basic

  (16 (58 14¢

Net Profit/(Loss)(3) - basic

  50¢ 27¢ (92

- diluted

  50¢ 27¢ (92
 

- diluted

  (16 (58 14¢  

 

 

Condensed US GAAP Consolidated Statement of Income Data excluding Discontinued Operations

Condensed US GAAP Consolidated Statement of Income Data excluding Discontinued Operations

          

Revenues

Revenues

  1,293.6  1,414.2  1,472.8   1,113.3  1,293.6  1,414.2 

Total costs and expenses

Total costs and expenses

  1,154.5  1,407.7  1,449.2   992.5  1,170.9  1,458.1 

Interest expense

Interest expense

  26.5  54.7  99.4   16.8  26.5  54.7 

Tax expense

Tax expense

  26.8  26.9  147.2   20.7  26.8  26.9 
  

 

 

  

 

 

Profit/(Loss) from continuing operations

Profit/(Loss) from continuing operations

  85.8  (75.1) (223.0)  83.3  69.4  (125.5)
  

 

 

  

 

 

(1) Includes net gain/(loss) on disposal/liquidation of businesses and controlled entities

(1) Includes net gain/(loss) on disposal/liquidation of businesses and controlled entities

  (7.0) 25.7  155.2   —    (7.0) 25.7 

(2)(3) Proforma earnings and EPS for 2002 inclusive of the adoption of SFAS No. 142 would be:

   
Reported Net Profit/(Loss)  90.4  51.3  (172.0)

Goodwill and brand name amortisation added back

   22.1 
  

 

 

Adjusted Net Profit/(Loss)

  90.4  51.3  (149.9)
  

 

 

Basic Earnings per share (Australian cents)   

Reported Net Profit/(Loss)

  50¢ 27¢ (92

Goodwill and brand name amortisation

   12¢
  

 

 

Adjusted Net Profit/(Loss)

  50¢ 27¢ (80
  

 

 

134


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

40. RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED)

   Consolidated

 

$ in Millions


  2004

  2003

  2002

 
      Restated  Restated 

Reconciliation of Net Cash Provided by Operating Activities per Australian GAAP

          

financial statements to Net Profit/(Loss) after Tax Under US GAAP

          

Net Cash Provided by Operating Activities per AGAAP

  179.2  161.6  113.1 

Items classified as financing activities: (1)

          

Interest received

  9.0  8.0  15.5 

Interest paid

  (29.4) (37.8) (70.2)

Net Cash Provided by Operating Activities per US GAAP

  158.8  131.8  58.4 

Write-down of non-current assets

  (1.0) (6.1) (144.5)

Depreciation

  (23.8) (29.4) (50.1)

Amortisation

  (1.9) (2.5) (24.3)

Provision for doubtful debts - trade

  (1.2) 2.5  2.9 

Write off of Deferred Tax Assets attributable to Australian tax losses

  —    —    (15.2)

Write down of property, plant and equipment

  (8.8) —    —   

Share of net loss of associate and joint venture entities

  (7.7) (16.1) (48.5)

Change in assets and liabilities net of effect from acquisitions and disposals of subsidiaries and businesses:

          

(Decrease)/Increase in debtors

  (24.9) (34.5) 0.3 

(Decrease)/Increase in inventories

  2.6  (47.2) (39.4)

(Decrease)/Increase in prepaids

  0.8  (4.9) 2.4 

(Decrease)/Increase in deferred expenses

  —    —    (4.3)

(Increase)/Decrease in creditors and bills payable

  6.0  36.5  (78.3)

Decrease in lease liabilities, provisions and other liabilities

  (2.2) 37.4  187.9 

(Increase)/Decrease in provision for deferred income tax

  1.3  2.9  (2.3)

Increase/(Decrease) in future income tax benefit

  (7.8) (17.7) (24.7)

(Increase)/Decrease in provision for income tax

  0.5  (1.2) 8.5 

(Loss)/Gain on sale of investments, properties, plant and equipment

  1.6  5.6  (5.6)

Gain/(loss) on sale/liquidation of subsidiaries and businesses

  —    (7.0) 27.2 

Outside equity interest in profit for the year

  (1.9) (2.6) (2.8)

Other

  —    3.8  (19.6)
   

 

 

Net Profit/(Loss) after tax

  90.4  51.3  (172.0)
   

 

 

41.(1)Reconciliation to United States Generally Accepted Accounting Principles (U.S. GAAP)(continued)Interest is classified as a financing activity under AGAAP.

 

   Consolidated

 

$ in Millions


  2003

  2002

  2001

 

Reconciliation of Net Cash Provided by Operating Activities per Australian GAAP financial statements to Profit after Tax Under US GAAP

          

Net Cash Provided by Operating Activities

  161.6  113.1  226.6 

Write-down of non-current assets

  (6.1) (144.5) —   

Depreciation

  (29.4) (50.1) (89.9)

Amortisation

  (2.5) (24.3) (40.1)

Provision for doubtful debts

  2.5  2.9  (7.9)

Write down of FITB

  —    (15.2) (158.5)

Repco goodwill and brandnames written off

  —    —    (97.7)

Share of net (loss)/gain of associate and joint venture entities

  (16.8) (60.1) (44.3)

Items classified as financing activities:

          

Interest received

  8.0  15.5  44.9 

Interest paid

  (37.8) (70.2) (144.3)

Change in assets and liabilities net of effect from acquisitions and disposals of subsidiaries and businesses:

          

(Decrease)/Increase in trade debtors

  (34.5) 0.3  176.5 

(Decrease)/Increase in inventories

  (47.2) (39.4) 13.8 

(Decrease)/Increase in prepaid expenses

  (4.9) 2.4  (19.2)

(Decrease)/Increase in deferred expenditure

  —    (4.3) 4.2 

(Increase)/Decrease in creditors and bills payable

  36.5  (78.3) (52.2)

Decrease in lease liabilities, provisions and other liabilities

  37.4  187.9  98.3 

(Increase)/Decrease in provision for deferred income tax

  2.9  (2.3) (1.0)

Increase/(Decrease) in future income tax benefit

  (17.7) (24.7) 6.0 

(Increase)/Decrease in provision for income tax

  (1.2) 8.5  (1.2)

(Decrease)/Increase in GNB net operating assets held for sale

  —    —    (182.3)

(Loss)/Gain on sale of investments, properties, plant and equipment

  5.6  (5.6) (4.6)

Gain/(loss) on sale/liquidation of subsidiaries and businesses

  (7.0) 27.2  154.7 

Outside equity interest in loss/(profit) for the year

  (2.6) (2.8) (3.6)

Goodwill written-off

  —    —    (35.3)

Other

  9.1  (19.6) (37.9)
   

 

 

Profit/(Loss) after tax

  55.9  (183.6) (195.0)
   

 

 

135


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

41.Reconciliation to United States Generally Accepted Accounting Principles (U.S. GAAP)(continued)

40. RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED)

 

  Consolidated

    Consolidated

 

$ in Millions


  Note

  2003

  2002

  2001

   Note

 2004

 2003

 2002

 

Adjustments to reflect U.S. GAAP

            Restated  Restated 

Add/(Deduct): Amortisation of goodwill for AGAAP purposes only

  40(i) 25.3  —    —     39(i) 21.4  25.3  —   

Reduced goodwill amortisation charge as a result of differences in useful lives

  40(i) —    12.7  18.5   39(i) —    —    12.7 

Amortisation of goodwill capitalised for US GAAP purposes only

  40(i) —    (2.4) (3.7)  39(i) —    —    (2.4)

Write-down of US GAAP goodwill on adoption of SFAS No. 142

  39(i) —    (5.0) —   

Amortisation of brand names capitalised

  40(j) —    (4.5) (5.3)  39(j) —    —    (4.5)

Amortisation of compensation component of executive share plan and options

  40(d) (0.7) 1.9  —   

Amortisation of compensation component of options

  39(d) (0.3) (0.7) 1.9 

Creation of asset retirement obligation on adoption of SFAS No. 143

  39(p) —    (0.3) —   

Amortisation of asset retirement obligation

  40(p) (0.1) —    —     39(p) (0.1) (0.1) —   

Pension Plans(1)

  40(f) 1.9  5.4  (12.3)  39(f) 5.8  1.9  5.4 

Income tax (expense)/benefit

    (0.6) (1.9) 4.3 

Depreciation of asset increment included in depreciation charge

  40(a) —    0.2  0.3 

Income tax expense

   (1.8) (0.6) (1.9)

Depreciation of asset revaluation included in depreciation charge

  39(a) —    —    0.2 

Net realisation of asset revaluation reserve and related depreciation adjustment on sale/liquidation of controlled entities, businesses and assets

  40(a) (7.0) 20.5  —     39(a) 0.8  (7.0) 20.5 

Net hedge (losses)/gains (brought to account)/ deferred for AGAAP

  40(k) 2.4  (1.9) (1.7)  39(k) (2.0) 2.4  (1.9)

Income tax benefit/(expense)

    (0.7) 0.6  0.6 

Income tax (expense)/benefit

   0.6  (0.7) 0.6 

Rationalisation and restructuring provision

  40(c) —    (30.0) (17.8)  39(c) —    —    (30.0)

Income tax benefit

    —    8.1  6.0    —    —    8.1 

Goodwill capitalised for US GAAP purposes written off on sale of controlled entities and businesses

  40(i) —    (34.5) (41.7)  39(i) —    —    (34.5)

Write back of US GAAP amortisation of brandnames on sale of controlled entities and businesses

  40(j) —    15.5  6.4 

Net change in fair value hedges, hedged items and cash flow hedges

  40(m) 1.3  2.6  (4.9)

Income tax (expense)/benefit

    (0.4) (0.8) 1.7 

Equity accounted loss of South Pacific Tyres

  40(n) (17.1) (62.0) —   

Incremental gain on sale of controlled entities and businesses due to lower carrying value of amortised brand names

  39(j) —    —    15.5 

Net change in fair value hedges

  39(m) 1.8  1.3  2.6 

Income tax expense

   (0.5) (0.4) (0.8)

Equity share in loss of South Pacific Tyres

  39(n) (7.7) (16.4) (50.4)

Income tax benefit

    5.1  14.6  —      2.3  4.9  11.1 

Valuation adjustment for above income tax (benefit)/expense amounts

    (3.4) (11.9) (6.0)   (0.6) (3.2) (8.4)
    

 

 

   

 

 

Total Adjustments

   19.7  1.4  (56.2)
    6.0  (67.8) (55.6)   

 

 

    

 

 

Shareholders’ Equity of the Group

         

As at 30th June

    844.5  876.0  1,066.2 

Shareholders’ Equity of the Group as at 30th June

   811.8  844.5  876.0 

Deduct: Outside equity interests

  40(b) (10.8) (13.7) (19.8)  39(b) (10.2) (10.8) (13.7)
    

 

 

   

 

 

Shareholders’ equity attributable to Ansell Limited

    833.7  862.3  1,046.4    801.6  833.7  862.3 
    

 

 

   

 

 

Adjustments required to accord with U.S. GAAP:

            

Add / (Deduct): Goodwill not capitalised for Australian GAAP - net of amortisation and amortisation adjustments on Australian GAAP goodwill

  40(i) 148.6  123.7  155.6 

Amortisation of brand names - cumulative

  40(j) (22.2) (26.1) (40.1)

Add / (Deduct): Goodwill not capitalised for Australian GAAP - net of amortisation and amortisation adjustments on Australian GAAP goodwill (including fx impact)

  39(i) 184.4  148.6  123.7 

Amortisation of brand names – cumulative (including fx impact)

  39(j) (21.5) (22.2) (26.1)

Amortisation of asset retirement obligations

  40(p) (0.4) —    —     39(p) (0.5) (0.4) —   

Pension Plans

  40(f) 8.1  6.2  0.8   39(f) 13.9  8.1  6.2 

Hedging adjustments - after tax

  40(k) 2.1  (0.3) 1.0 

Hedging adjustments net of nil tax

  39(k) 0.1  2.1  (0.3)

Reserves attributable to Asset Revaluation

  40(a) (1.5) (20.2) (29.3)  39(a) (0.7) (1.5) (20.2)

Rationalisation and Restructuring provisions

  40(c) —    —    21.9 

Depreciation charged on Revaluation increments

  40(a) 0.1  12.6  12.4   39(a) 0.1  0.1  12.6 

Loans outstanding under ownership based remuneration scheme

  40(d) (1.2) (4.3) (8.6)  39(d) (0.8) (1.2) (4.3)

Net change in fair value hedges, hedged items and cash flow hedges

  40(m) (1.0) (2.3) (4.9)  39(m) 0.8  (1.0) (2.3)

Net gains/(losses) on cash flow hedges residing in Comprehensive Income

  40(m) (12.6) (13.7) (1.6)  39(m) 4.7  (12.6) (13.7)

Additional minimum pension liability residing in Comprehensive Income

  39(f) (13.2) (7.9) —   

Gain on equity securities residing in Comprehensive Income

  40(n) —    1.0  —     39(n) —    —    1.0 

Equity accounted loss of South Pacific Tyres

  40(n) (79.1) (62.0) —   

Equity share of South Pacific Tyres

  39(n) (89.2) (81.5) (65.1)
    

 

 

   

 

 

Total Adjustments

    40.9  14.6  107.2    78.1  30.6  11.5 
    

 

 

   

 

 

Ansell Limited Shareholders’ Equity according to U.S. GAAP (including Comprehensive Income)

    874.6  876.9  1,153.6    879.7  864.3  873.8 
    

 

 

   

 

 

Note: All US GAAP adjustments are in respect of 100% owned operations

            

Statement of Comprehensive Income:

            

Net profit/(loss) per U.S. GAAP

    55.9  (183.6) (195.0)   90.4  51.3  (172.0)

Foreign Currency Translation Reserve:

         

Movement per A GAAP

    (71.3) (69.6) (73.0)

Movement per U.S. GAAP

    8.1  (4.5) 5.2 

Net gain/(loss) on cash flow hedges

    1.1  (12.1) (1.6)

Gain/(loss) on equity securities

    (1.0) 1.0  —   

Foreign Currency Translation Reserve net of nil tax

   (6.3) (63.2) (74.1)

Unrealised net gain/(loss) on cash flow hedges net of nil tax

   17.3  1.1  (12.1)

Additional minimum pension liability net of nil tax

   (5.3) (7.9) —   

Unrealised gain/(loss) on available for sale equity securities net of nil tax

   —    (1.0) 1.0 
    

 

 

   

 

 

Comprehensive Income

    (7.2) (268.8) (264.4)

Comprehensive Income/(Loss)

   96.1  (19.7) (257.2)
    

 

 

   

 

 

 

(1)Pension Plans - includes curtailment gains of $6.1 million and $3.3 million for 2002 and 2001 respectively, resulting from the sale of businesses.

136


PART III

 

Items 17 &Item 18 : Consolidated Financial Statements

40. RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED)

   2004

  2003

 

$ in Millions


  Australian
Fund


  US Funds

  Australian
Fund


  US Funds

 

Pension Plan data supporting Note 39(f)

             

Plan’s funded status at 30 June is summarised as follows:

             

Actuarial present value of accumulated obligations:

             

- Vested

  19.9  54.9  63.3  57.6 

- Non-vested

  —    1.2  0.7  1.3 

Total accumulated benefit obligation

  19.9  56.1  64.0  58.9 

Projected benefit obligation

  20.6  56.7  64.4  59.8 

Plan assets at fair value

  41.7  40.8  79.6  36.1 

Excess/(deficiency) of assets over benefit obligations

  21.1  (15.9) 15.2  (23.7)

Unrecognised net gain/(loss)

  (5.6) 15.1  (16.4) 24.2 

Unrecognised prior service costs

  —    (0.8) —    (1.4)

Unrecognised net transition obligation/(asset) and other deferrals

  —    —    (1.0) —   

Net Pension (Liability)/Asset

  15.5  (1.6) (2.2) (0.9)

NET PENSION COST

             

Defined Benefit Plans:

             

- Service cost-benefits earned during the year

  0.9  2.5  1.9  3.1 

- Interest cost on projected benefit obligation

  1.0  3.3  4.3  4.2 

- Expected return on plan assets

  (2.7) (3.7) (5.5) (4.7)

- Net amortisation and settlement and curtailment (gain)/loss

  (5.9) 3.1  (1.1) 0.8 

Net Pension Cost of Defined Benefit Plans

  (6.7) 5.2  (0.4) 3.4 

ASSUMPTIONS (used to determine net pension cost)

             

Weighted average discount rate

  5.0% 5.8% 5.0% 5.8%

Rate of increase in compensation level

  4.0% 4.3% 3.5% 4.3%

Expected long term rate of return

  7.0% 8.0% 7.0% 8.0%

The expected long term rate of return on pension assets is based on a strategic asset allocation. The real rate of return (net of inflation) is expected to average 5% over the long term and the long term average rate of inflation is expected to be 3%.

             

MEASUREMENT DATE

  30 June 04  31 March 04  30 June 03  31 March 03 

CHANGE IN BENEFIT OBLIGATION

             

Projected Benefit Obligation at beginning of year

  64.4  59.8  82.6  67.9 

Service cost

  0.9  2.5  1.9  3.1 

Interest cost

  1.0  3.3  4.3  4.2 

Transfers from/(to) other funds*

  (42.5) —    1.2  —   

Member contributions

  0.3  —    2.2  —   

Actuarial (gain)/loss

  1.5  0.3  (7.4) 6.3 

Benefits, administrative expenses and tax paid

  (5.0) (7.2) (20.4) (11.5)

Foreign currency exchange rate changes

  —    (2.0) —    (10.2)

Projected Benefit Obligation at end of year

  20.6  56.7  64.4  59.8 

ASSUMPTIONS (used to determine end of year benefit obligations)

             

Weighted average discount rate

  5.0% 5.8% 5.0% 5.8%

Rate of increase in compensation level

  4.0% 4.3% 3.5% 4.3%

CHANGE IN PLAN ASSETS

             

Market value of assets at beginning of year

  79.6  36.1  84.9  54.5 

Adjustment to fair value at beginning of the year

  2.6  —    —    —   

Member/Employer Contributions

  —    4.3  2.3  4.8 

Transfers from/(to) other funds*

  (42.5) —    1.2  —   

Benefits, administrative expenses and tax paid

  (5.0) (7.2) (20.4) (11.5)

Actual return on plan assets

  7.0  8.7  11.6  (5.2)

Foreign currency exchange rate changes

  —    (1.1) —    (6.5)

Market value of assets at end of year

  41.7  40.8  79.6  36.1 

*Current year represents removal of assets and liabilities relating to Ansell accumulation members from disclosures.

137


Notes to thePART III

Item 18 : Consolidated Financial Statements

 

41.40.Reconciliation to United States Generally Accepted Accounting Principles (U.S.RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED)(continued)

 

   2003

  2002

 

$ in Millions


  Major
Australian
Funds


  Major US
Funds


  Major
Australian
Funds


  Major US
Funds


 

Pension Plan data supporting Note 40 (f)

             

Plan’s funded status at 30 June is summarised as follows:

             

Actuarial present value of accumulated obligations:

             

- Vested

  184.0  57.6  222.5  65.3 

- Non-vested

  0.7  1.3  0.8  1.6 

Total accumulated benefit obligation

  184.7  58.9  223.3  66.9 

Projected benefit obligation

  186.2  59.8  225.1  67.9 

Plan assets at fair value

  200.9  36.1  237.6  54.5 

Excess of assets over benefit obligations

  14.7  (23.7) 12.5  (13.4)

Unrecognised net (gain)

  (4.7) 24.2  (4.1) 11.1 

Unrecognised prior service costs

  —    (1.4) —    (1.8)

Unrecognised net transition obligation/(asset) and other deferrals

  (1.0) —    (2.3) —   

Net Pension (Liability)/Asset

  9.0  (0.9) 6.1  (4.1)

NET PENSION COST

             

Defined Benefit Plans:

             

- Service cost-benefits earned during the year

  15.8  3.1  22.8  4.4 

- Interest cost on projected benefit obligation

  11.4  4.2  26.0  5.1 

- Expected return on plan assets

  (15.6) (4.7) (35.4) (5.5)

- Net amortisation and settlement and curtailment (gain)/loss

  (1.1) 0.8  (2.2) 0.1 

Net Pension Cost of Defined Benefit Plans

  10.5  3.4  11.2  4.1 

ASSUMPTIONS

             

Weighted average discount rate

  5.0% 5.8% 6.0% 7.3%

Rate of increase in compensation level

  3.5% 4.3% 3.5% 5.0%

Expected long term rate of return

  7.0% 8.0% 7.0% 9.0%

CHANGE IN BENEFIT OBLIGATION

             

Projected Benefit Obligation at beginning of year

  225.1  67.9  464.1  74.9 

Service cost

  15.8  3.1  22.8  4.4 

Interest cost

  11.4  4.2  26.0  5.1 

Transfers from/(to) other funds

  1.2  —    4.2  —   

Member contributions

  2.2  —    5.4  —   

Actuarial (gain)/loss

  (22.4) 6.3  (27.8) 2.7 

Plan Amendments

  —    —    —    —   

Benefits paid

  (44.1) (11.5) (266.4) (11.3)

Expenses and tax paid

  (3.0) —    (3.2) —   

Foreign currency exchange rate changes

  —    (10.2) —    (7.9)

Projected Benefit Obligation at end of year

  186.2  59.8  225.1  67.9 

CHANGE IN PLAN ASSETS

             

Market value of assets at beginning of year

  237.6  54.5  506.0  65.4 

Adjustment to fair value at beginning of the year

  —    —    (10.6) —   

Member/Employer Contributions

  14.8  6.5  15.8  5.9 

Transfers from other funds

  1.2  —    4.3  —   

Benefits paid

  (44.1) (11.5) (266.4) (11.3)

Expenses and tax paid

  (3.0) —    (3.2) —   

Actual return on plan assets

  (5.6) (5.2) (8.3) 1.4 

Foreign currency exchange rate changes

  —    (8.2) —    (6.9)

Market value of assets at end of year

  200.9  36.1  237.6  54.5 

$ in Millions

Pension Plan data supporting Note 39(f) (continued)

CONTRIBUTIONS

Employer contributions to the Australian fund during the fiscal year ending 30 June 2005 are expected to be nil. In respect of its US plans the Company expects to contribute $4.6 million to the plans in 2005.

ADDITIONAL INFORMATION - AUSTRALIAN FUND

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

2005    2.7
2006    1.6
2007    1.7
2008    1.9
2009    2.4
2010 -2014    11.4

Plan Assets

The allocation of the Fund’s assets by asset category is as follows:

Asset Category


  Target
Allocation


  Plan assets at 30 June

 
   2004

  2003

 

Equity securities

  64% 64% 73%

Fixed Interest

  22% 21% 15%

Real estate

  9% 9% 10%

Other

  5% 6% 2%

The primary investment objective of the Ansell Employer Benefit Account is to achieve a rate of return (after tax and investment expenses) that exceeds inflation (CPI) increases by at least 4.0% per annum over rolling three year periods.

ADDITIONAL INFORMATION - USA FUNDS

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

2005    4.2
2006    2.4
2007    3.1
2008    3.5
2009    3.7
2010 -2014    27.7

Plan Assets

The allocation of the funded US pension plans’ weighted-average assets by asset category are as follows:

   

Target

Allocation


  Plan assets at 31 March

 

Asset Category


   2004

  2003

 

Equity securities

  62% 64% 56%

Debt securities

  32% 32% 41%

Real estate

  3% 3% —   

Other

  3% 1% 3%

The target allocation currently is 62% equity (47% US, 15% International), 3% real estate, 32% debt and 3% cash. Over the past 5 years the allocation to equities has ranged from 55% to 65% depending on market conditions and the expected ability of the Plan to meet an 8% earnings assumption. The asset allocation is reviewed at least annually and adjusted based on past and future assumptions for market returns. Recent low level interest rates have necessitated a rise in the equity allocation to increase the probability of achieving an 8% return. The investment approach dictated in the IPS is to maintain sufficient diversification by asset class and economic sectors. The IPS mandates that each manager be diversified and that significant sector deviations to the benchmark be explained and approved.

138


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

41.40.Reconciliation to United States Generally Accepted Accounting Principles (U.S.RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED)(continued)

 

Information for United States Investors

 

   Consolidated

 

$ in Millions


  2003

  2002

  2001

 

Proceeds Received from the sale of businesses per Note 3

          

- Pacific Automotive business

  —    238.7  —   

- Pacific Brands business

  —    701.0  —   

- GNB Battery business

  —    —    692.0 

- Electrical Distribution business

  —    —    341.6 

- Other minor businesses

  —    —    16.3 
   

 

 

   —    939.7  1,049.9 
   

 

 

Material Write-down of assets

          

- Ambri Investment

          

The Group’s investment in Ambri Ltd has been written down to market value as at 30 June 2003 in accordance with SFAS No. 115.

  (6.1) —    —   

- Exide Receivable/Investment(i)

  —    (99.9) —   

As a result of Exide Inc filing for chapter 11 bankruptcy protection and subsequent demise of Exide Inc’s share price the company fully wrote off its investment in and all amounts receivable from Exide Inc.

          

- Ansell Healthcare fixed assets(ii)

  —    (63.1) —   

Following the announcement to close Ansell Healthcare’s manufacturing facility in Troy, Alabama the company wrote down the value of plant and equipment at the site to estimated recoverable value. In addition, certain other values attributed to land and buildings within the USA were written down to independently appraised values.

          

- Other(iii)

  —    (13.5) —   

Represents the write-down of various assets to recoverable amount as determined by the company.

          

- Automotive Distribution business

  —    —    (97.7)

Following the announcement to sell the Automotive Distribution business the assets were written down to the estimated sales proceeds.

          

(i)         Included within Income/Loss from discontinued operations

          

(ii)        Included within Income/(Loss) from continuing operations

          

(iii)       Of this amount $3.6 million is included within Income/(Loss) from continuing operations and $9.9 million included within Income/Loss from discontinued operations.

          

US GAAP Equity Roll-forward

          

Opening Balance US GAAP equity

  876.9  1,153.6  1,655.8 

US GAAP Profit/(Loss)

  61.3  (183.6) (195.0)

Write-down of US GAAP goodwill on adoption of SFAS No. 142

  (5.0) —    —   

Creation of asset retirement obligation on adoption of SFAS No. 143

  (0.3) —    —   

Proceeds from issue of shares

  1.0  1.2  2.5 

Dividends

  —    —    (77.6)

Share buy back

  (8.2) —    (165.4)

Movement in AGAAP FCTR

  (71.3) (69.6) (73.0)

Net gain/(loss) on cash flow hedges in OCI

  1.1  (12.1) (1.6)

Movements in Loans outstanding under Employee Share Plan

  3.1  4.3  1.3 

Other (including FX on US GAAP adjustments)

  16.0  (16.9) 6.6 
   

 

 

Closing balance US GAAP equity

  874.6  876.9  1,153.6 
   

 

 

   Consolidated

 

$ in Millions


  2004

  2003

  2002

 

Proceeds Received from the sale of businesses and investments per Note 3

          

Pacific Automotive business

  —    —    238.7 

Pacific Brands business

  —    —    701.0 
   

 

 

   —    —    939.7 
   

 

 

Material Write-down of assets

          

Ambri Investment

          

The Group’s investment in Ambri Ltd has been written down to recoverable amount.

  (1.0) (6.1) —   

Exide Receivable/Investment(i)

  —    —    (99.9)

As a result of Exide Inc filing for chapter 11 bankruptcy protection and subsequent demise of Exide Inc’s share price the company fully wrote off its investment in and all amounts receivable from Exide Inc.

          

Ansell Healthcare fixed assets(ii)

  —    —    (63.1)

Following the announcement to close Ansell Healthcare’s manufacturing facility in Troy, Alabama the company wrote down the value of plant and equipment at the site to estimated recoverable value. In addition, certain other values attributed to land and buildings within the USA were written down to independently appraised values.

          

Other(iii)

  —    —    (13.5)

Represents the write-down of various assets to recoverable amount as determined by the

          

company.

          

(i)Included within Income/Loss from discontinued operations

(ii)Included within Income/Loss from continuing operations

(iii)Of this amount $3.6 million is included within Income/(Loss) from continuing operations and $9.9 million included within Income/Loss from discontinued operations.

      Restated

  Restated

 

US GAAP Equity Roll-forward

          

Opening Balance US GAAP equity

  864.3  873.8  1,138.9 

US GAAP Profit/(Loss)

  90.4  51.3  (172.0)

Proceeds from issue of shares

  1.0  1.0  1.2 

Dividends

  (31.0) —    —   

Share buy back

  (65.4) (8.2) —   

Movement in AGAAP Foreign Currency Translation Reserve

  (7.4) (71.3) (69.6)

Unrealised net gain/(loss) on cash flow hedges in OCI

  17.3  1.1  (12.1)

Additional minimum pension liability in OCI

  (5.3) (7.9) —   

Movements in Loans outstanding under Employee Share Plan

  0.4  3.1  4.3 

Other (including FX on US GAAP adjustments)

  15.4  21.4  (16.9)
   

 

 

Closing balance US GAAP equity

  879.7  864.3  873.8 
   

 

 

139


PART III

 

Items 17 &Item 18 : Financial Statements


Notes to theConsolidated Financial Statements

 

41.40.Reconciliation toRECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED)

Informationfor United States Generally Accepted Accounting Principles (U.S. GAAP)Investors (continued)

 

   Consolidated

 

$ in Millions


  2004

  2003

  2002

 

Goodwill:

          

AGAAP goodwill - written down value 30 June

  176.0  203.3  260.7 

Add: Amortisation for AGAAP only from 1 July 2002

  46.7  25.3  —   

Add: Net Goodwill recognised for US GAAP only

  33.3  33.3  38.3 

Add :Adjustment for different amortisation basis on AGAAP goodwill

  104.4  90.0  85.4 
   

 

 

US GAAP goodwill - written down value 30 June

  360.4  351.9  384.4 
   

 

 

US GAAP Goodwill Comprises:

          

Gross Goodwill

  438.2  448.6  516.7 

Accumulated Amortisation

  (77.8) (96.7) (132.3)
   

 

 

Written down value

  360.4  351.9  384.4 
   

 

 

Brand names

          

AGAAP brand names - 30 June

  117.4  121.2  142.5 

(Deduct): US GAAP accumulated amortisation

  (21.5) (22.2) (26.1)
   

 

 

US GAAP Brand names - 30 June

  95.9  99.0  116.4 
   

 

 

Property, plant & equipment

          

Property, plant & equipment at cost and valuation (net of accumulated depreciation)

  227.8  262.9  332.5 

(Deduct): Asset revaluation reserves applicable

  (0.7) (1.5) (20.2)

Add: Adjustment to add back depreciation charged on the revaluation increments (cumulative)

  0.1  0.1  12.6 
   

 

 

Property, plant & equipment at cost (net of accumulated depreciation)

  227.2  261.5  324.9 
   

 

 

Analysis of long-lived assets by Country

          

- Australia

  53.4  62.8  72.5 

- USA

  293.4  338.1  430.4 

- Malaysia

  77.5  83.2  98.6 

- Thailand

  56.0  61.9  80.2 

- Sri Lanka

  43.7  49.3  61.0 

- Other Countries

  51.2  54.6  85.2 
   

 

 

   575.2  649.9  827.9 
   

 

 

Asset Retirement Obligations

          

Asset retirement obligations relate to future legal obligations to restore certain leased facilities

          

to their original conditions as at the commencement of the lease.

          

Asset retirement obligation

          

Balance at beginning of period

  0.8  —    —   

Initial balance on adoption of SFAS No. 143

  —    0.7  —   

Liabilities incurred in current period

  0.1  0.1  —   
   

 

 

Balance at end of period

  0.9  0.8  —   
   

 

 

Accumulated Other Comprehensive Income

          

Foreign Currency Translation Reserve net of nil tax

  (138.2) (131.9) (68.7)

Unrealised net gain/(loss) on cash flow hedges net of nil tax

  4.7  (12.6) (13.7)

Additional minimum pension liability net of nil tax

  (13.2) (7.9) —   

Unrealised gain on available for sale equity securities net of nil tax

  —    —    1.0 
   

 

 

   (146.7) (144.5) (81.4)
   

 

 

140


Information for United States Investors(continued)PART III

 

   Consolidated

 

$ in Millions


  2003

  2002

  2001

 

Goodwill:

          

AGAAP goodwill - written down value 30 June

  203.3  260.7  339.1 

Add: Amortisation for AGAAP only

  25.3  —    —   

Add: Net Goodwill recognised for US GAAP only

  33.3  38.3  75.2 

Add: Adjustment for different amortisation basis on AGAAP goodwill

  90.0  85.4  80.4 
   

 

 

US GAAP goodwill - written down value 30 June

  351.9  384.4  494.7 
   

 

 

US GAAP Goodwill Comprises:

          

Gross Goodwill

  448.6  516.7  666.2 

Accumulated Amortisation

  (96.7) (132.3) (171.5)
   

 

 

Written down value

  351.9  384.4  494.7 
   

 

 

Brand names

          

AGAAP brand names - 30 June

  121.2  142.5  217.7 

(Deduct): US GAAP amortisation

  (22.2) (26.1) (40.1)
   

 

 

US GAAP Brand names - 30 June

  99.0  116.4  177.6 
   

 

 

Property, plant & equipment

          

Property, plant & equipment at cost and valuation (net of accumulated depreciation)

  262.9  332.5  669.9 

(Deduct): Asset revaluation reserves applicable

  (3.9) (20.2) (29.3)

Add: Adjustment to add back depreciation charged on the revaluation increments (cumulative)

  12.7  12.6  12.4 
   

 

 

Property, plant & equipment at cost (net of accumulated depreciation)

  271.7  324.9  653.0 
   

 

 

Analysis of long-lived assets by Country

          

- Australia

  62.8  72.5  385.7 

- USA

  338.1  430.4  672.8 

- Malaysia

  83.2  98.6  117.2 

- Thailand

  61.9  80.2  89.1 

- Sri Lanka

  49.3  61.0  71.4 

- Other Countries

  54.6  85.2  116.8 
   

 

 

   649.9  827.9  1,453.0 
   

 

 

Asset Retirement Obligations

          

Asset retirement obligations relate to future legal obligations to restore certain leased facilities to their original conditions as at the commencement of the lease.

          

Asset retirement obligation

          

Initial balance on adoption of SFAS No. 143

  0.7  —    —   

Liabilities incurred in current period

  0.1  —    —   
   

 

 

Balance at end of period

  0.8  —    —   
   

 

 

Item 18 : Consolidated Financial Statements

40.RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED)

Informationfor United States Investors (continued)

 

Executive Share Option Data Supporting Note 40(d)Notes 39(d), 25 and Note 2528

 

SFAS 123 “Accounting for Stock Based Compensation” encourages the adoption of a fair value based method of determining compensation costs. For US GAAP purposes, the company has adopted the fair value provision of SFAS 123.

 

The compensation fair value of all options which are outstanding has been calculated at $ 1.0$1.0 million. In respect of the options granted to Mr D.Tough (on his appointment as Chief Executive Officer on 1 July 2004) the performance hurdles that must be met before vesting can occur have not as yet been finalised. The compensation fair value will be determined in order to allow for the amortisation over the vesting period which commences 1 July 2004.

141


PART III

 

Directors’ DeclarationREPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


In the opinion of the directors of Ansell Limited:

(a)the financial statements and notes, set out on pages 74 to 128 are in accordance with the Corporations Act 2001, including:

(i)giving a true and fair view of the financial position of the Company and consolidated entity as at 30 June 2003 and of their performance, as represented by the results of their operations and their cash flows, for the year ended on that date; and

(ii)complying with Accounting Standards in Australia and the Corporations Regulations 2001; and

(b)there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors:

/s/    EDWARD D. TWEDDELL        /s/    HARRY BOON        


Edward D Tweddell

Director

Harry Boon

Director

Dated in Melbourne this 1st day of September 2003

PART III

 

Independent Audit Report


The BoardTo the members of Directors and Shareholders

Ansell Limited:

 

We have audited the accompanying consolidated statementsStatements of financial positionFinancial Position of Ansell Limited and its controlled entities (Ansell Limited)subsidiaries as of 30 June, 30,2004, 2003 2002 and 2001,2002, and the related consolidated statementsStatements of financial performanceFinancial Performance, and cash flowsof Cash Flows for each of the years in the three-yearthree year period ended 30 June, 30, 2003 as set out on pages 74 to 128.2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with auditingthe standards generally accepted in Australia andof the United States of America.Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ansell Limited as ofand its subsidiaries at 30 June, 30,2004, 2003 2002 and 2001,2002, and the results of itstheir operations and itstheir cash flows for each of the years in the three-yearthree year period ended 30 June, 30, 2003,2004 in conformity with accounting principles generally accepted accounting principles in Australia.

 

Accounting principles generally accepted in Australia vary in certain significant respects from accounting principles generally accepted in the United States of America.States. Information relating to the nature and effect of such differences as it relates to Ansell Limited is presented in NoteNotes 39 and 40 to the consolidated financial statements. The application of accounting principles generally accepted in the United States of America would have affected consolidated results of operationsfinancial performance for each of the years in the three-yearthree year period ended June 30, 20032004 and shareholders’the determination of Shareholder’s equity as of June 30, 2004, 2003 2002 and 2001,2002, to the extent summarized in Note 41Notes 39 and 40 to the consolidated financial statements.

 

As discussed in Note 39 to the consolidated financial statements, the company has restated the effects of certain differences between generally accepted accounting principles in Australia and generally accepted accounting principles in the United States and their effects on financial performance and shareholders equity for each of the years in the two year period ended June 30, 2003.

/s/ KPMG

 

Dated in Melbourne Australia this 1st day of September, 2003

31 August, 2004 except for Notes 39 and 40, for which the date is 15 March, 2005.

142


PART III

 

Item 19 :  Exhibits


See Exhibit Index

143


PART III

 

Signature


The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

Ansell Limited Registrant

/s/ RUSTOM JILLA        


Rustom Jilla

Rustom Jilla

Chief Financial Officer

 

Dated: December 23, 200328 March 2005

144


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

 

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


 

Statements filed in accordance with Rule 309 and Item 17.3.09.

 

DIRECTORS REPORTSTATEMENT OF FINANCIAL PERFORMANCE

 

The directors of South Pacific Tyres (a partnership between Pacific Dunlop Tyres Pty. Ltd. and Goodyear Tyres Pty. Ltd.) present their report together with the financial report of South Pacific Tyres (“the partnership”) and the consolidated financial report of the consolidated entity, being the partnership and its controlled entities, forFor the year ended 30th June 2003 and the auditor’s report thereon.2004

 

(a)The names of the directors, appointed pursuant to the Partnership Agreement dated 30th March 1987, at any time during or since the end of the financial year are:
   Notes

  

2004

$


  

2003

$


  

2002

$


 
              

Revenue from sale of goods

  3  763,609,409  737,027,575  769,790,943 

Revenue from rendering services

  3  55,127,229  56,569,421  59,595,043 

Other revenues from ordinary activities

  3  6,503,245  6,407,910  7,615,697 
      

 

 

Total revenue from ordinary activities

     825,239,883  800,004,906  837,001,683 

Cost of goods sold

     591,739,184  587,501,675  647,665,319 

Selling, Administrative and General Expenses

     218,086,061  219,985,037  225,688,548 

Significant items

  4(b) 11,790,923  9,752,650  93,108,359 

Borrowing costs

  4(b) 21,937,942  17,834,103  13,660,548 

Other expenses from ordinary activities

     297,389  287,389  485,062 
      

 

 

Expenses from ordinary activities

     843,851,499  835,360,854  980,607,836 
      

 

 

Loss from ordinary activities before related income tax expense

     (18,611,616) (35,355,948) (143,606,153)
      

 

 

Income tax expense/(benefit) relating to ordinary activities

  6(a) 3,869,684  4,207,837  (13,579,453)
      

 

 

Loss from ordinary activities after related income tax expense

     (22,481,300) (39,563,785) (130,026,700)

Net loss attributable to outside equity interests

  21  —    —    (470)
      

 

 

Net Loss after income tax attributable to the consolidated entity

     (22,481,300) (39,563,785) (130,027,170)
      

 

 

See accompanying notes to financial statements.

             

 

Names

145


Experience, Special Responsibilities


Mr. Samir G. GibaraChairman & Chief Executive Officer of The Goodyear
Masters -Tire & Rubber Company.
International Bus & Finance - Harvard39 years service with the Company.
Appointed as director 1995
Resigned June 30th 2003.
Mr. Robert W. TiekenExecutive Vice President & Chief Financial Officer
Graduate Illinois Wesleyan Universityof The Goodyear Tire & Rubber Company
9 years service with the Company.
Appointed director 1995
Mr. Hugh D. PacePresident Asia Region of The Goodyear Tire & Rubber Company.
Masters in International Management28 years service with the Company.
Appointed as director December 1st 1998
Mr. Clark E. SprangSenior Vice President for Business Development
Graduate Ohio State University& Integration of The Goodyear Tire & Rubber Company.
37 years service with the Company.
Appointed as director October 1st 2001.
Mr. David GrahamGeneral Manager, Finance & Treasury with Ansell Ltd.
B. Bus., CA, FCPA.21 years service with the company.
Appointed as director October 31st 2001.
Dr Edward TweddellExecutive Chairman of Ansell Ltd.
BSc., MBBS. (Hons), FRACGP, FAICD.2 years service with the company.
Director of National Australia Bank, Australia Post and CSIRO.
Appointed director December 14th 2001
Mr. Herbert J. ElliottNon Executive Director of Ansell Ltd.
AC, MBE, MA. (Cantab.)Chairman of the Telstra Foundation Limited and Director
of Sydney Olympic Parks Authority.
Appointed as director April 30th 2001
Mr. Harry BoonManaging Director & Chief Executive Officer of Ansell Ltd.
LLB. (Hons), B.Com18 years service with the Company.
Appointed as director October 18th 2002
Mr. Paul DevereuxGeneral Manager Business Development
B. Bus.Appointed as director December 14th 2001
Resigned October 18th 2002.


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 2003


DIRECTORS REPORT(continued)

(b)The number of directors’ meetings and number of meetings attended by each director of the partnership during the financial year are:

Director


  

Directors

A


  

Meetings

B


Mr. Samir G. Gibara

  0  4

Mr. Robert W. Tieken

  1  4

Mr. Hugh D. Pace

  3  4

Mr. Clark E. Sprang

  3  4

Mr. David Graham

  4  4

Dr Edward Tweddell

  4  4

Mr. Herbert J. Elliott

  3  4

Mr. Harry Boon

  2  3

Mr. Paul Devereux

  1  1

A = Number of meetings attended2004

 

BSTATEMENTOF FINANCIAL POSITION = Number

As at 30th June 2004

   Notes

  

2004

$


  

2003

$


  

2002

$


 

CURRENT ASSETS

             

Cash assets

  7  56,435,875  15,229,939  37,100,672 

Receivables

  8  130,174,880  137,441,630  141,657,657 

Inventories

  9  147,411,193  162,032,137  160,741,965 

Prepayments

  10  3,219,753  3,323,269  2,258,575 
      

 

 

TOTAL CURRENT ASSETS

     337,241,701  318,026,975  341,758,869 
      

 

 

NON-CURRENT ASSETS

             

Receivables

  8  1,651,270  9,546,303  30,384,952 

Property, plant and equipment

  12  197,823,676  218,425,028  202,827,093 

Intangible assets

  13  4,498,952  4,916,874  5,204,262 

Deferred tax assets

  6(c) 14,516,753  18,231,572  22,441,327 
      

 

 

TOTAL NON-CURRENT ASSETS

     218,490,651  251,119,777  260,857,634 
      

 

 

TOTAL ASSETS

     555,732,352  569,146,752  602,616,503 
      

 

 

CURRENT LIABILITIES

             

Payables

  14  144,028,406  159,953,830  161,782,718 

Interest bearing liabilities

  15  188,484,663  171,413,834  142,395,212 

Current tax liabilities

  6(b) 290,809  135,944  58,887 

Provisions

  16  54,318,272  53,365,690  102,837,858 
      

 

 

TOTAL CURRENT LIABILITIES

     387,122,150  384,869,298  407,074,675 
      

 

 

NON-CURRENT LIABILITIES

             

Payables

  14  704,179  7,986,959  28,491,815 

Interest bearing liabilities

  15  125,707,508  111,097,444  61,095,014 

Provisions

  16  6,357,177  6,883,413  7,978,203 
      

 

 

TOTAL NON-CURRENT LIABILITIES

     132,768,864  125,967,816  97,565,032 
      

 

 

TOTAL LIABLITIES

     519,891,014  510,837,114  504,639,707 
      

 

 

PARTNERS’ EQUITY

             

Contributed equity

  18  317,688,138  317,675,138  317,675,138 

Reserves

  19  12,374,551  12,570,229  12,570,229 

Accumulated losses

  20  (294,221,351) (271,935,729) (232,268,571)
      

 

 

TOTAL PARTNERS’ EQUITY

     35,841,338  58,309,638  97,976,796 

Outside equity interest

  21  —    —    —   
      

 

 

TOTAL PARTNERS’ EQUITY

     35,841,338  58,309,638  97,976,796 
      

 

 

TOTAL LIABILITIES AND PARTNERS’ EQUITY

     555,732,352  569,146,752  602,616,503 
      

 

 

See accompanying notes to financial statements.

146


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

STATEMENTOF PARTNERS’ EQUITY

   Contributed
Equity


  Outside
Equity
Interest


  Accumulated
Losses


  Reserves

  Total
Partners’
Equity


 

Balance at June 30, 2001

  317,675,137  485,688  (98,587,215) 9,220,023  228,793,633 

Net loss

        (130,027,170)    (130,027,170)

Foreign currency translation

           (303,980) (303,980)

Foreign Currency Translation Reserve - disposal

        (3,645,848) 3,645,848    

Asset Revaluation Reserve - disposal

        (8,338) 8,338    

Outside equity interest reduction

     (485,688)       (485,688)

Additional contributed equity

  1           1 
   
  

 

 

 

Balance at June 30, 2002

  317,675,138  —    (232,268,571) 12,570,229  97,976,796 

Net loss

        (39,563,785)    (39,563,785)

Initial adoption of AASB1028

        (103,373)    (103,373)
   
  

 

 

 

Balance at June 30, 2003

  317,675,138  —    (271,935,729) 12,570,229  58,309,638 

Net loss

        (22,481,300)    (22,481,300)

Asset Revaluation Reserve - disposal

        195,678  (195,678)   

Additional contributed equity

  13,000           13,000 
   
  

 

 

 

Balance at June 30, 2004

  317,688,138  —    (294,221,351) 12,374,551  35,841,338 
   
  

 

 

 

See accompanying notes to financial statements.

147


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

STATEMENTSOF CASH FLOWS

   Notes

  2004
$
Inflows
(Outflows)


  2003
$
Inflows
(Outflows)


  2002
$
Inflows
(Outflows)


 

Cash flows from operating activities

             

Cash receipts in the course of operations

     941,655,101  836,176,622  856,792,111 

Cash payments in the course of operations

     (908,776,962) (882,305,840) (870,905,731)

Interest received

     1,160,246  1,935,297  3,689,606 

Borrowing costs paid

     (13,589,472) (12,737,555) (13,368,875)

Income taxes (paid)/refunded

  6(b) —    79,774  (112,184)
      

 

 

Net cash provided by/(used in) operating activities

  30(c) 20,448,913  (56,851,702) (23,905,073)
      

 

 

Cash flows from investing activities

             

Proceeds on disposal of controlled entities

     —    —    1,983,805 

Proceeds on disposal of property, plant and equipment

     5,342,999  4,472,613  2,919,839 

Payments for businesses, (net of cash acquired)

  30(b) —    —    (1,246,831)

Payments for property, plant and equipment

     (16,279,869) (48,512,695) (14,750,236)
      

 

 

Net cash used in investing activities

     (10,936,870) (44,040,082) (11,093,423)
      

 

 

Cash flows from financing activities

             

Proceeds from partner contributions

     13,000  —    —   

Proceeds from borrowings

     49,782,954  79,333,371  136,589,773 

Repayment of borrowings

     (18,195,000) —    (79,935,051)

Dividends paid

     —    —    (2,146)
      

 

 

Net cash provided by financing activities

     31,600,954  79,333,371  56,652,576 
      

 

 

Net increase/(decrease) in cash held

     41,112,997  (21,558,413) 21,654,080 

Cash at the beginning of the financial year

     14,539,451  36,097,864  14,170,702 

Effects of exchange rate fluctuations on the balances of cash held

             

in foreign currencies

     —    —    273,082 
      

 

 

Cash at the end of the financial year

  30(a) 55,652,448  14,539,451  36,097,864 
      

 

 

See accompanying notes to financial statements.

148


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS

Note 1 Statement of meetings heldsignificant accounting policies

General

The principal activities of the consolidated entity during the time the director held office during the year.period were:

(c)The principal activities of the consolidated entity during the period were:

 

Manufacture of tyres for vehicles

 

Wholesaling and retailing of vehicle and aircraft tyres;tyres.

 

There were no significant changes in the nature of the principal activities of the consolidated entity during the year.

(d)The net loss of the consolidated entity for the year after deducting outside equity interests and after providing for income tax was $39,563,785. The comparative figure for the previous year ended 30th June 2002, was a net loss of $130,027,170. The contribution to profits by each entity in the consolidated entity is set out in Note 28 to the financial statements.

The directors have apportioned the loss to the partners in accordance with the Partnership Agreement.

(e)For the year ended 30th June 2003, South Pacific Tyres paid nil (2002 : $nil) to the partners by way of a distribution of profits.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


DIRECTORS REPORT(continued)

(f)The directors’ review of the operations of the consolidated entity during the year, and the results of those operations is as follows:

With the improved operating cost structure resulting from plant closures and the consolidation of the remaining manufacturing facilities, South Pacific Tyres returned to more stability in the July 2002 to June 2003 financial year.

South Pacific Tyres returned an operating loss before tax of $35,355,948 compared with the previous year’s operating loss of $143,606,153.

Sales were slightly below prior year despite an improved mix of product and channel. Car tyre units were down 6.9% and light truck units down 7.7% reflecting a withdrawal from export markets.

The higher mix of retail and wholesale versus export, assisted margins. Compared to the previous year, gross margins significantly improved reflecting the impact of restructuring and improved pricing.

Expenses were down on the previous year and include an additional superannuation expense of $4,100,000.

Borrowing costs increased over prior year reflecting additional borrowings from the partners to fund the restructuring and higher margin from lenders.

(g)In the opinion of the directors, other than referred to in this report, there were no significant changes in the state of affairs of the consolidated entity that occurred during the year.

(h)There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the partnership to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future financial years.

(i)The operations of the partnership are subject to various environmental regulations under both Commonwealth and State legislation. The partnership has an Environmental Specialist who monitors compliance with environmental regulations. The directors are not aware of any breaches of the legislation during the financial year which are material in nature.

(j)Information about likely developments in the operations of the consolidated entity and the expected results of those operations in future financial years, has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the consolidated entity.

(k)No director of the partnership, since the end of the previous financial year, has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of remuneration received or due and receivable by directors shown in the financial statements or the fixed salary of a full time employee of the partnership or of a related corporation) by reason of a contract made by the partnership or a related corporation with the director or with a firm of which he is a member, or with an entity in which the director has a financial interest.

(l)This special purpose financial report has been drawn up in accordance with Section 11 of the Partnership Agreement. As required by that section, the financial report has been prepared as if the partnership were a public company under the provisions of the Corporations Act 2001. The financial report complies with the Corporations Act 2001, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board, and, except as stated below, applicable Accounting Standards. The directors do not consider the partnership to be a reporting entity and the matters required to be disclosed by AASB 1017 - Related Party Disclosures, and AASB 1029 - Accounting for Employee Entitlements (disclosure requirements only), have not been included in the financial report, as the directors do not consider those matters to be relevant.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


DIRECTORS REPORT(continued)

(m)Indemnification and insurance of officers and auditors

Since the end of the previous financial year, the partnership has not indemnified or made a relevant agreement for indemnifying against a liability any person who is or has been an officer or auditor of the partnership.

During the financial year the partnership has paid premiums in respect of directors’ and officers’ liability and legal expenses insurance contracts for the year ended 30th June 2003. Such insurance contracts insure against certain liability (subject to specific exclusions) for persons who are or have been directors or executive officers of the partnership. The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ and officers’ liability and legal expenses’ insurance contracts, as such disclosure is prohibited under the terms of the contract.

Dated at Melbourne, this 8th day of October 2003

Signed in accordance with a resolution of the directors:

/s/    HUGH D. PACE        

Director

/s/    DAVID GRAHAM        

Director

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


Statement of financial performance

For the year ended 30th June 2003

      CONSOLIDATED

  PARTNERSHIP

 
   Notes

  2003

  2002

  2001

  2003

  2002

  2001

 
      $  $  $  $  $  $ 

Revenue from sale of goods

  3  737,027,575  769,790,943  774,668,166  423,990,636  489,234,884  483,486,879 

Revenue from rendering services

  3  56,569,421  59,595,043  59,426,109  —    —    —   

Other revenues from ordinary activities

  3  6,407,910  7,615,697  60,935,622  8,200,452  9,467,600  61,824,135 
      

 

 

 

 

 

Total revenue from ordinary activities

     800,004,906  837,001,683  895,029,897  432,191,088  498,702,484  545,311,014 

Changes in inventories of finished goods and work in progress

     11,926  7,833,830  (9,386,419) 3,678,685  209,099  (5,306,693)

Raw materials and consumables used

     99,274,784  124,780,654  145,679,698  79,092,128  108,531,527  129,514,359 

Employee expenses

     195,424,085  218,153,093  243,283,796  77,274,155  100,506,921  130,898,250 

Depreciation and amortisation expenses

  4(b)  21,008,307  28,533,334  36,599,361  12,753,584  18,771,037  25,929,707 

Borrowing costs

  4(b)  17,834,103  13,660,548  16,340,214  17,218,817  12,811,968  15,381,376 

Other expenses from ordinary activities

     501,807,649  587,646,377  559,362,396  286,675,287  354,668,727  326,295,632 

Expenses from ordinary activities

     835,360,854  980,607,836  991,879,046  476,692,656  595,499,279  622,712,631 
      

 

 

 

 

 

Loss from ordinary activities before related income tax expense

     (35,355,948) (143,606,153) (96,849,149) (44,501,568) (96,796,795) (77,401,617)

Income tax expense/(benefit) relating to ordinary activities

  6(a)  4,207,837  (13,579,453) (4,793,040) —    —    —   
      

 

 

 

 

 

Loss from ordinary activities after related income tax expense

     (39,563,785) (130,026,700) (92,056,109) (44,501,568) (96,796,795) (77,401,617)

Net profit/(loss) attributable to outside equity interests

  21  —    470  (285) —    —    —   
      

 

 

 

 

 

Net Loss after income tax attributable to the partnership

     (39,563,785) (130,027,170) (92,056,394) (44,501,568) (96,796,795) (77,401,617)
      

 

 

 

 

 

The statements of financial performance are to be read in conjunction with the accompanying notes.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


Statement of Financial Position

For the year ended 30th June 2003

     CONSOLIDATED

  PARTNERSHIP

 
   Notes

 2003

  2002

  2003

  2002

 
     $  $  $  $ 

CURRENT ASSETS

               

Cash assets

  7 15,229,939  37,100,672  10,584,176  29,798,257 

Receivables

  8 131,860,811  134,679,141  86,487,130  85,484,047 

Inventories

  9 162,032,137  160,741,965  127,096,281  130,215,751 

Other

  10 3,323,269  2,258,575  896,954  857,597 
     

 

 

 

TOTAL CURRENT ASSETS

    312,446,156  334,780,353  225,064,541  246,355,652 
     

 

 

 

NON-CURRENT ASSETS

               

Receivables

  8 9,546,303  30,384,952  75,831,634  97,765,964 

Other financial assets

  11 —    —    21,496,245  21,496,245 

Property, plant and equipment

  12 218,425,028  202,827,093  181,120,524  164,649,685 

Intangible assets

  13 4,916,874  5,204,262  —    —   

Deferred tax assets

  6(c) 18,231,572  22,441,327  —    —   
     

 

 

 

TOTAL NON-CURRENT ASSETS

    251,119,777  260,857,634  278,448,403  283,911,894 
     

 

 

 

TOTAL ASSETS

    563,565,933  595,637,987  503,512,944  530,267,546 
     

 

 

 

CURRENT LIABILITIES

               

Payables

  14 159,953,830  161,782,718  140,619,515  135,897,172 

Interest bearing liabilities

  15 171,413,834  142,395,212  90,383,584  60,285,370 

Current tax liabilities

  6(b) 135,944  58,887  —    —   

Provisions

  16 47,784,871  95,859,342  32,231,577  78,054,372 
     

 

 

 

TOTAL CURRENT LIABILITIES

    379,288,479  400,096,159  263,234,676  274,236,914 
     

 

 

 

NON-CURRENT LIABILITIES

               

Payables

  14 7,986,959  28,491,815  7,594,447  28,062,524 

Interest bearing liabilities

  15 111,097,444  61,095,014  111,097,444  61,095,014 

Provisions

  16 6,883,413  7,978,203  3,277,891  4,025,842 
     

 

 

 

TOTAL NON-CURRENT LIABILITIES

    125,967,816  97,565,032  121,969,782  93,183,380 
     

 

 

 

TOTAL LIABILITIES

    505,256,295  497,661,191  385,204,458  367,420,294 
     

 

 

 

NET ASSETS

    58,309,638  97,976,796  118,308,486  162,847,252 
     

 

 

 

PARTNERS’ EQUITY

               

Contributed equity

  18 317,675,138  317,675,138  317,675,138  317,675,138 

Reserves

  19 12,570,229  12,570,229  11,409,810  11,409,810 

Retained profits/(accumulated losses)

  20 (271,935,729) (232,268,571) (210,776,462) (166,237,696)
     

 

 

 

TOTAL PARTNERS’ EQUITY

    58,309,638  97,976,796  118,308,486  162,847,252 

Outside equity interest

  21 —    —    —    —   
     

 

 

 

TOTAL PARTNERS’ EQUITY

    58,309,638  97,976,796  118,308,486  162,847,252 
     

 

 

 

The statements of financial position are to be read in conjunction with the accompanying notes.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


Statement of Cash Flow

For the year ended 30th June 2003

     CONSOLIDATED

  PARTNERSHIP

 
   Notes

 2003
$
Inflows
(Outflows)


  2002
$
Inflows
(Outflows)


  2003
$
Inflows
(Outflows)


  2002
$
Inflows
(Outflows)


 

Cash flows from operating activities

               

Cash receipts in the course of operations

    836,176,622  856,792,111  447,987,180  470,996,064 

Cash payments in the course of operations

    (882,305,840) (870,905,731) (501,013,962) (421,039,134)

Interest received

    1,935,297  3,689,606  5,437,068  6,871,624 

Borrowing costs paid

    (12,737,555) (13,368,875) (12,122,269) (12,520,295)

Income taxes (paid)/refunded

  6(b) 79,774  (112,184) —    —   
     

 

 

 

Net cash provided by/(used in) operating activities

  30(c) (56,851,702) (23,905,073) (59,711,983) 44,308,259 
     

 

 

 

Cash flows from investing activities

               

Proceeds on disposal of controlled entities

    —    1,983,805.00  —    —   

Proceeds on disposal of property, plant and equipment

    4,472,613  2,919,839.00  2,763,384  2,595,976 

Payments for businesses, (net of cash acquired)

  30(b) —    (1,246,831) —    —   

Payments for property, plant and equipment

    (48,512,695) (14,750,236) (42,366,125) (10,740,966)
     

 

 

 

Net cash provided by/(used in) investing activities

    (44,040,082) (11,093,423) (39,602,741) (8,144,990)
     

 

 

 

Cash flows from financing activities

               

Proceeds from partner contributions

    —    —    —    —   

Proceeds from borrowings

    68,064,391  136,589,773.00  —    61,095,014 

Repayment of borrowings

    11,268,980  (79,935,051) 80,100,643  (74,470,749)

Dividends paid

    —    (2,146) —    —   
     

 

 

 

Net cash provided by/(used) in financing activities

    79,333,371  56,652,576  80,100,643  (13,375,735)
     

 

 

 

Net increase/(decrease) in cash held

    (21,558,413) 21,654,080  (19,214,081) 22,787,534 

Cash at the beginning of the financial year

    36,097,864  14,170,702  29,798,257  7,010,723 

Effects of exchange rate fluctuations on the balances of cash held in foreign currencies

    0  273,082  —    —   
     

 

 

 

Cash at the end of the financial year

  30(a) 14,539,451  36,097,864  10,584,176  29,798,257 
     

 

 

 

The statements of cash flows are to be read in conjunction with the accompanying notes.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS

Note 1 Statement of significant accounting policies

 

The significant policies which have been adopted in the preparation of this financial report are:

 

(a) Basis of preparation

 

In accordance with Section 11 of the Partnership Agreement, South Pacific Tyres (“the partnership”consolidated entity”) is required to prepare a financial report as if it were a public company under the provisions of the Corporations Act 2001.

 

In the opinion of the directors, the partnershipconsolidated entity is not a reporting entity. The financial report of the partnershipconsolidated entity has been drawn up as a special purpose financial report for distribution to the memberspartners and for the purpose of fulfilling the requirements of the Corporations Act 2001.

 

The financial reports havereport has been prepared in accordance with the requirements of the Corporations Act 2001, the recognition and measurements aspects of all applicable accounting standards and other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) that have a material effect.

 

The financial report does not include disclosure requirements of the following pronouncements having a material effect:

(i)AASB                     1005                     Financial Reporting by Segments

(ii)AASB                     1017                     Related Party Disclosures

It has been prepared on the accrual basis of accounting as defined in AASB1001, Accounting Policies, using historical costscost convention and exceptgoing concern assumption. Except where stated, it does not take into account changing money values or fair valuescurrent valuations of non-current assets.

 

TheseThe accounting policies have been consistently applied by each entity in the consolidated entity, and except where there is a change in accounting policy, are consistent with those of the previous year.

 

(b) Principles of consolidation

 

Controlled entities

 

The financial statements of controlled entities are included from the date control commences until the date control ceases.

 

Outside interests in the equity and results of the entities that are controlled by the partnershipconsolidated entity are shown as a separate item in the consolidated financial statements.

 

Transactions eliminated on consolidation

 

Unrealised gains and losses and inter-entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

 

(c) Revenue recognition - Note 3

 

Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST) payable to the taxation authority.

 

Sale of goods

 

Revenue from the sale of goods is recognised (net of returns, discounts and allowances) when control of the goods passes to the customer.

 

Rendering of services

 

Revenue from rendering services is recognised when the service has been completed.

 

Interest revenue

 

Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.

 

Sale of non-current assets

 

The gross proceeds of non-current asset sales are included as revenue at the date control of the asset passes to the buyer, usually when an unconditional contract of sale is signed.

 

The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal (including incidental costs ).

 

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PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTESTO THE FINANCIAL STATEMENTS(continued)

Note 1 Statement of significant accounting policies (continued)

(d) Goods and services tax

 

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

Receivables and payables are stated with the amount of GST included.

 

The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or current liability in the statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

 

(e) Foreign currency

 

Transactions

 

Foreign currency transactions are translated to Australian currency at the rates of exchange ruling at the dates of the transactions. Amounts receivable and payable in foreign currencies at reporting date are translated at the rates of exchange ruling on that date.

 

Exchange differences relating to amounts payable and receivable in foreign currencies are brought to account as exchange gains or losses in the statement of financial performance in the financial year in which the exchange rates change.

 

Translation of controlled foreign entities

 

The assets and liabilities of foreign operations that are self-sustaining are translated at the rates of exchange ruling at reporting date. Equity items are translated at historical rates. The statements of financial performance are translated at a weighted average rate for the year. Exchange differences arising on translation are taken directly to the foreign currency translation reserve until the disposal, or partial disposal, of the operations.

 

The balance of the foreign currency translation reserve relating to a foreign operation that is disposed of, or partially disposed of, is transferred to retained profits in the year of disposal.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

 

(f) Derivatives

 

The consolidated entity is exposed to changes in interest rates, foreign exchange rates and commodity prices from its activities. The consolidated entity uses the following derivative financial instruments to hedge these risks: interest rate swaps and forward foreign exchange contracts. Derivative financial instruments are not held for speculative purposes.

 

Hedges

 

Anticipated transactions

 

Transactions are designated as a hedge of the anticipated specific purchase or sale of goods or services, purchase of qualifying assets, or an anticipated interest transaction, only when they are expected to reduce exposure to the risks being hedged, are designated prospectively so that it is clear when an anticipated transaction has or has not occurred and it is probable the anticipated transaction will occur as designated. Gains or losses on the hedge arising up to the date of the anticipated transaction, together with any costs or gains arising at the time of entering into the hedge, are deferred and included in the measurement of the anticipated transaction when the transaction has occurred as designated. Any gains or losses on the hedge transaction after that date are included in the statement of financial performance.

 

The net amounts receivable or payable under open swaps and forward rate agreements and the associated deferred gains or losses are not recorded in the statement of financial position until the hedge transaction occurs. When recognised the net receivables or payables are then revalued using the foreign currency and interest rates current at reporting date. Refer to Note 22.22

When the anticipated transaction is no longer expected to occur as designated, the deferred gains or losses relating to the hedged transaction are recognised immediately in the statement of financial performance.

Where a hedge transaction is terminated early and the anticipated transaction is still expected to occur as designated, the deferred gains or losses that arose on the hedge prior to its termination continue to be deferred and are included in the measurement of the purchase or sale or interest transaction when it occurs. Where a hedge transaction is terminated early because the anticipated transaction is no longer expected to occur as designated, deferred gains or losses that arose on the hedge prior to its termination are included in the statement of financial performance for the period.

Where a hedge is redesignated as a hedge of another transaction, gains or losses arising on the hedge prior to its redesignation are only deferred where the original anticipated transaction is still expected to occur as designated. When the original anticipated transaction is no longer expected to occur as designated, any gains or losses relating to the hedge instrument are included in the statement of financial performance for the period.

Gains or losses that arise prior to and upon the maturity of transactions entered into under hedge rollover strategies are deferred and included in the measurement of the hedged anticipated transaction if the transaction is still expected to occur as designated. If the anticipated transaction is no longer expected to occur as designated, the gains or losses are recognised immediately in the statement of financial performance.

 

Other hedges

 

All other hedge transactions are initially recorded at the relevant rate at the date of the transaction. Hedges outstanding at reporting date are valued at the rates ruling on that date and any gains or losses are brought to account in the statement of financial performance.

 

Cost or gains arising at the time of entering into the hedge are deferred and amortised over the life of the hedge.

 

150


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTESTOTHE FINANCIAL STATEMENTS(continued)

Note 1 Statement of significant accounting policies (continued)

(g) Borrowing costs

 

Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings and amortisation of ancillary costs incurred in connection with arrangement of borrowings.

Interest payments in respect of financial instruments classified as liabilities are included in borrowing costs.

Where interest rates are hedged or swapped, the borrowing costs are recognised net of any effect of the hedge or the swap.

 

Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the asset. Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is those incurred in relation to that borrowing, net of any interest earned on those borrowings. Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate.

 

(h) Taxation - Note 6

 

PartnershipConsolidated entity

 

Income tax is notonly provided for in the financial statements in respect of the corporate entities forming part of the consolidated entity of South Pacific Tyres, as the partnership does not pay tax. The partners are taxable in their individual capacities on their share of the net partnership income.Tyres.

 

Controlled entities

 

The controlled entities adopt the income statement liability method of tax effect accounting.

 

Income tax expense is calculated on operating profit adjusted for permanent differences between taxable and accounting income. The tax effect of timing differences, which arise from the items being brought to account in different periods for income tax and accounting purposes, is carried forward in the statement of financial position as a future income tax benefit or a provision for deferred income tax.

 

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits relating to tax losses are only brought to account when their realisation is virtually certain. The tax effects of capital losses are not recorded unless realisation is virtually certain.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

 

(i) Accounting for acquisitions

 

Acquired businesses are accounted for on the basis of the cost method. Fair values are assigned at the date of acquisition to all the identifiable underlying assets acquired and to the liabilities assumed. Specific assessment is undertaken at the date of acquisition of any additional costs to be incurred.

 

Goodwill, representing the excess of the purchase consideration plus incidental costs over the fair value of the identifiable net assets acquired on the acquisition of the business, is amortised to the statement of financial performance using the following criteria:

 

Goodwill Acquired


  

Write-Off Period


Up to $1.25m

  Written off over 5 years in equal installments,instalments, but at a rate of not less than $250,000 pa

$1.25m to $10mOver $1.25m

  Written off over 20 years on a straight line basis, but at a rate of not less than $250,000 pa

 

The unamortised balance of goodwill is reviewed at least annually. Where the balance exceeds the value of expected future benefits, the difference is charged to the statement of financial performance. For the purposes of this review process, goodwill is allocated to cash generating units (which equates to the consolidated entity’s reportable business units) upon acquisition. Acquired businesses can readily be allocated to one of the business units on the basis of product manufactured and/or marketed.

 

Research and development costsAcquisitions of assets

 

ResearchAll assets acquired, including property, plant and equipment and intangibles other than goodwill, are initially recorded at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition. Acquired in-process research and development expenditure is only recognised as a separate asset when future benefits are expected beyond any reasonable doubt to be recoverable.

Where settlement of any part of cash consideration is deferred, the amounts payable are recorded at their present value, discounted at the rate applicable to the consolidated entity if a similar borrowing were obtained from an independent financier under comparable terms and conditions. The unwinding of the discount is treated as interest expense.

The costs of assets constructed or internally generated by the consolidated entity, other than goodwill, include the cost of materials and direct labour. Directly attributable overheads and other incidental costs are also capitalised to the asset.

Borrowing costs are capitalised to qualifying assets as set out in Note 1(g).

Expenditure, including that on internally generated assets other than research and development costs, is only recognised as an asset when the entity controls future economic benefits as a result of the costs incurred that are probable and can be measured reliably. Costs attributable to feasibility and alternative approach assessments are expensed as incurred.

(i) Accounting for acquisitions (continued)

 

Subsequent additional costs

 

Costs incurred on assets subsequent to initial acquisition are capitalised when it is probable that future economic benefits in excess of the originally assessed performance of the asset will flow to the consolidated entity in future years, otherwise, expensed as incurred.

 

Research and development costs

Research and development expenditure is expensed as incurred.

151


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTESTO THE FINANCIAL STATEMENTS(continued)

Note 1 Statement of significant accounting policies (continued)

(j) RevisionsUse and revision of accounting estimates

 

The preparation of the financial report requires the making of estimates and assumptions that affect the recognised amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are viewed on an ongoing basis. Revisions ofto accounting estimates are recognised prospectively in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods only.periods.

 

(k) Receivables - Note 8

 

The collectibility of debts is assessed at reporting date and specific provision is made for any doubtful accounts.

 

Trade debtors

 

Trade debtors to be settled within agreed terms are carried at amounts due.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

 

(l) Inventories - Note 9

 

Raw materials and stores, work in progress and finished goods are carried at the lower of cost allocated and net realisable value.

 

Costs includeCost includes direct materials, direct labour, other direct variable costs and allocated production overheads necessary to bring inventories to their present location and condition, based on normal operating capacity of the production facilities.

 

Manufacturing activities

 

The cost of manufacturing inventories and work-in-progress are assigned on a first-in, first-out basis. Costs arising from exceptional wastage are expensed as incurred.

 

Net realisable value

 

Net realisable value is determined on the basis of each inventory line’s normal selling pattern. Expenses of marketing, selling and distribution to customers are estimated and are deducted to establish net realisable value.

 

(m) Investments - Note 11

 

Investments in controlled entities are carried in the financial statements of the partnershipconsolidated entity at the lower of cost and recoverable amount.

 

(n) Leased assets

Leases under which the company assumes substantially all the risks and benefits of ownership are classified as finance leases. Other leases are classified as operating leases.

 

Operating leases

 

Payments made under operating leases are expensed on a straight line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property. Also refer to Note 23.

 

(o) Recoverable amount of non-current assets valued on cost basis

 

The carrying amount of non-current assets valued on the cost basis are reviewed to determine whether they are in excess of their recoverable amount at reporting date. If the carrying amount of a non-current asset exceeds its recoverable amount, the asset is written down to the lower amount. The write-down is expensed in the reporting period in which it occurs.

 

Where a group of assets working together supports the generation of cash inflows, recoverable amount is assessed in relation to that group of assets. In assessing recoverable amounts of non-current assets, the relevant cash flows have not been discounted to their present value.

152


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


 

NOTES TO THE FINANCIAL STATEMENTS(continued)

Note 1 Statement of significant accounting policies (continued)

 

(p) Depreciation and amortisation

 

Complex assets

 

The components of major assets that have materially different useful lives, are effectively accounted for as separate assets, and are separately depreciated.

 

Useful lives

 

All non-current assets have limited useful lives and are depreciated/amortised using the straight line method over their estimated useful lives.

 

Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and held ready for use.

 

Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in current and future periods only. Depreciation and amortisation are expensed, except to the extent that they are included in the carrying amount of another asset as an allocation of production overheads.

 

The depreciation/amortisation rates used for each class of asset are as follows:

 

   2003

  2002

  2001

•     Freehold buildings

  2.50%  2.50%  2.50%

•     Leasehold buildings and improvements

  2.5%-40%  2.5%-40%  2.5%-40%

•     Plant and equipment

  6.7%-33.33%  6.7%-33.33%  6.7%-33.33%

•     Leased plant and equipment

  10%-20%  10%-20%  10%-20%
   2004

  2003

  2002

 

Freehold buildings

  2.50% 2.50% 2.50%

Leasehold buildings and improvements

  2.5%-40% 2.5%-40% 2.5%-40%

Plant and equipment

  6.7%-33.33% 6.7%-33.33% 6.7%-33.33%

Leased plant and equipment

  10%-20% 10%-20% 10%-20%

 

(q) Payables - Note 14

 

Liabilities are recognised for amounts to be paid in the future for goods or services received. Trade accounts payable are settled within agreed terms.

 

(r) Interest bearing liabilities - Note 15

 

Bank loans are recognised at their principal amount, subject to set-off arrangements. Interest expense is accrued at the contracted rate.

 

Debentures, bills of exchange and notes payable are recognised when issued at the net proceeds received, with the premium or discount on issue amortised over the period of maturity. Interest expense is recognised on an effective yield basis.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

 

(s) Employee benefits

 

Wages, salaries, annual leave, sick leave and non-monetary benefits

 

Liabilities for employee benefits for wages, salaries, annual leave and sick leave expected to be settled within 12 months of the year-end represent present obligations resulting from employees’ services provided up to the reporting date, calculated at undiscounted amounts based on remuneration wage and salary rates that the consolidated entity expects to pay as at reporting date including related on-costs. Related on-costs have been included in trade creditors.

 

Long service leave

 

The provision for employee benefits to long service leave represents the present value of the estimated future cash outflows to be made resulting from employees’ services provided to reporting date.

 

The provision is calculated using the expected future increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using the rates attaching to national government bonds at reporting date which most closely match the terms of maturity of the related liabilities. The unwinding of the discount is treated as long service leave expense.

 

Superannuation plan

 

The partnership and its controlled entities contribute to various defined benefit and accumulation superannuation plans. Contributions are recognised as an expense as they are made, asmade. Further information is set out in Note 26.

 

(t) Provisions

 

A provision is recognised when there is a legal, equitable or constructive obligation as a result of a past event and it is probable that a future sacrifice of economic benefits will be required to settle the obligation, the timing or amount of which is uncertain.

 

If the effect is material, a provision is determined by discounting the expected future cash flows (adjusted for expected future risks) required to settle the obligation at a pre tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is treated as part of the expense related to the particular provision.

 

Restructuring and employee termination benefits

 

ProvisionsA provision for restructuring areincluding termination benefits is only recognised when a detailed plan has been approved and the restructuring has either commenced or been publicly announced. Costs relatedrelating to ongoing activities are not provided for.

The liability for termination benefits are included in the provision for Rationalisation and restructure (Note 16).

153


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS(continued)

Note 1 Statement of significant accounting policies (continued)

(t) Provisions (continued)

 

Surplus leased premises

 

Provision is made for non-cancellable operating lease rentals payable on surplus leased premises when it is determined that no substantive future benefit will be obtained from its occupancy and sub-lease rentals are less.

 

The estimate is calculated based of discounted net future cash flows, using the interest rate implicit in the lease or an estimate thereof.

PART III(u) Advertising

 

Under AGGAP, Advertising is generally expensed as the service is performed. Costs incurred under the consolidated entity’s cooperative advertising program with dealers and franchisees are recorded as reductions of sales as related revenues are recognised.

(v) Environmental remediation

The consolidated entity expenses environmental expenditures related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible. South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)determines its liability on a site by site basis and records a liability at the time when it is probable and can be reasonably estimated.

 

Note 2 Change in accounting policy

 

Employee benefits

 

The partnership and its controlled entities haveconsolidated entity has applied the revised AASB 1028 “Employee Benefits” for the first time from 1 July 2002.

 

The liability for wages and salaries, annual leave and sick leave is now calculated using the remuneration rates the partnership and its controlled entitiesconsolidated entity expects to pay as at each reporting date, not wage and salary rates current at reporting date.

 

The initial adjustments to the consolidated financial report as at 1 July 2002 as a result of this change are:

 

$103,373 (the Partnership $37,198) increase in provision for employee benefits

 

$103,373 (the Partnership $37,198) decrease in opening retained profitsearnings.

 

As a result of this change in accounting policy, employee benefits expense increased by $139,957 (the Partnership $132,549) and the income tax expense decreased by $2,222 ( the Partnership $Nil ) for the current year to 30 June 2003.

 

Note 3 Revenue from ordinary activities

   

2004

$


  

2003

$


  

2002

$


Note 3 Revenue from ordinary activities

         

Sale of goods revenue from operating activities

  763,609,409  737,027,575  769,790,943

Rendering of services revenue from operating activities

  55,127,229  56,569,421  59,595,043

Other revenue from operating activities

         

Interest:

         

Associated entities

  27,693  814,052  1,828,580

Other parties

  1,132,553  1,121,245  1,861,026

Revenues from outside operating activities

         

Gross proceeds from sale of non-current assets

  5,342,999  4,472,613  3,926,091
   
  
  

Total other revenue

  6,503,245  6,407,910  7,615,697
   
  
  

Total revenue from ordinary activities

  825,239,883  800,004,906  837,001,683
   
  
  

 

   Consolidated

  Partnership

   2003
$


  2002
$


  2001
$


  2003
$


  2002
$


  2001
$


Sale of goods revenue from operating activities

  737,027,575  769,790,943  774,668,166  423,990,636  489,234,884  483,486,879

Rendering of services revenue from operating activities

  56,569,421  59,595,043  59,426,109  —    —    —  

Other revenue from operating activities

                  

Interest:

                  

Controlled entities

  —    —    —    3,875,849  3,598,712  4,141,000

Associated entities

  814,052  1,828,580  969,471  814,052  1,828,580  969,471

Other parties

  1,121,245  1,861,026  472,630  747,167  1,444,332  363,101

Revenues from outside operating activities

                  

Gross proceeds from sale of non-current assets

  4,472,613  3,926,091  34,493,521  2,763,384  2,595,976  31,350,563

Supply agreement consideration

  —    —    25,000,000  —    —    25,000,000
   
  
  
  
  
  

Total other revenue

  6,407,910  7,615,697  60,935,622  8,200,452  9,467,600  61,824,135
   
  
  
  
  
  
                   
   
  
  
  
  
  

Total revenue from ordinary activities

  800,004,906  837,001,683  895,029,897  432,191,088  498,702,484  545,311,014
   
  
  
  
  
  

154


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

Note 4 Profit from ordinary activities before income tax expense

   

2004

$


  

2003

$


  

2002

$


 

Note 4 Profit from ordinary activities before income tax expense

          
(a) Individually significant expenses/(revenues) included in profit from ordinary activities before income tax expense          

Closure of Footscray & Thomastown tyre factories

  9,458,682  3,927,911  94,900,000 

Closure of BA Hamill

  —    (1,769,227) 2,900,000 

Retail store restructure programme

  —    928,524  1,924,813 

Reverse Radial truck factory plant & equipment storage and removal provision

  (1,967,197) —    —   

Closure of radial truck tyre factory

  —    —    (3,516,017)

Norhead dispute settlement

  —    2,565,442  1,500,000 

Retreading plant closures

  513,743  —    —   

Somerton factory plant & equipment stocktake loss

  4,036,631  —    —   

Write down of Thomastown / Footscray properties to recoverable amount

  2,219,064  —    —   

Activity alignment

  —    —    (4,600,437)

Superannuation shortfall defecit / (gain) accrual

  (2,470,000) 4,100,000  —   
   

 

 

   11,790,923  9,752,650  93,108,359 
   

 

 

(b) Profit from ordinary activities before income tax expense has been arrived at after charging/(crediting) the following items:          

Cost of goods sold

  591,739,184  587,501,675  647,665,319 

Write-down of Property, Plant & Equipment to recoverable amount

  2,219,064  —    —   

Relates to Footscray and Thomastown tyre plants. Fair value determined by registered valuer, Knight Frank, in 2004.

          

Depreciation of:

          

Buildings

  251,849  175,527  104,319 

Plant and equipment

  21,894,326  19,469,383  26,628,428 
   

 

 

   22,146,175  19,644,910  26,732,747 
   

 

 

Amortisation of:

          

Leasehold land and buildings

  1,158,908  1,076,008  1,315,525 

Goodwill

  297,389  287,389  485,062 
   

 

 

   1,456,297  1,363,397  1,800,587 
   

 

 

Total depreciation and amortisation

  23,602,472  21,008,307  28,533,334 
   

 

 

Borrowing costs

          

Associated entities

  8,904,264  5,816,482  3,164,641 

Bank loans and overdrafts

  13,033,678  12,017,621  10,495,907 
   

 

 

Total borrowing costs

  21,937,942  17,834,103  13,660,548 
   

 

 

 

   Consolidated

  Partnership

 
   

2003

$


  

2002

$


  

2001

$


  

2003

$


  

2002

$


  

2001

$


 

(a) Individually significant expenses/(revenues) included in profit from ordinary activities before income tax expense

                   

Closure of Footscray & Thomastown tyre factories

  3,927,911  94,900,000  —    3,927,911  94,900,000  —   

Closure of BA Hamill

  (1,769,227) 2,900,000  —    —    —    —   

Retail store restructure programme

  928,524  1,924,813  —    —    —    —   

Closure of radial truck tyre factory

  —    (3,516,017) 51,325,856  —    (3,516,017) 51,325,856 

Norhead dispute settlement

  2,565,442  1,500,000  —    2,565,442  1,500,000  —   

Overhead reduction programme

  —    (4,600,437) 6,000,000  —    (4,600,437) 5,267,121 

Superannuation shortfall accrual

  4,100,000  —    —    4,100,000  —    —   

Supply agreement consideration

  —    —    (25,000,000) —    —    (25,000,000)
   

 

 

 
  

 

   9,752,650  93,108,359  32,325,856  10,593,353  88,283,546  31,592,977 
   

 

 

 
  

 

(b) Profit from ordinary activities before income tax expense has been arrived at after charging/(crediting) the following items:

                   

Cost of goods sold

  583,401,653  644,149,590  657,564,347  440,523,025  483,937,136  506,770,316 

Depreciation of:

                   

Buildings

  175,527  104,319  231,770  104,529  —    104,529 

Plant and equipment

  19,469,383  26,628,428  33,609,742  11,809,516  17,716,624  24,194,389 
   

 

 

 
  

 

   19,644,910  26,732,747  33,841,512  11,914,045  17,716,624  24,298,918 
   

 

 

 
  

 

Amortisation of:

                   

Leasehold land and buildings

  1,076,008  1,315,525  1,266,474  839,539  1,054,413  1,055,695 

Leased plant and equipment

  —    —    —    —    —    —   

Goodwill

  287,389  485,062  916,281  —    —    —   

Capitalised interest

  —    —    575,094  —    —    575,094 
   

 

 

 
  

 

   1,363,397  1,800,587  2,757,849  839,539  1,054,413  1,630,789 
   

 

 

 
  

 

                    
   

 

 

 
  

 

Total depreciation and amortisation

  21,008,307  28,533,334  36,599,361  12,753,584  18,771,037  25,929,707 
   

 

 

 
  

 

Borrowing costs

                   

Associated entities

  5,816,482  3,164,641  1,183,238  5,816,482  3,164,641  1,183,238 

Bank loans and overdrafts

  12,017,621  10,495,907  15,156,976  11,402,335  9,647,327  14,198,138 
   

 

 

 
  

 

Total borrowing costs

  17,834,103  13,660,548  16,340,214  17,218,817  12,811,968  15,381,376 
   

 

 

 
  

 

155


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


 

NOTES TO THE FINANCIAL STATEMENTS(continued)

 

   

2004

$


  

2003

$


  

2002

$


 

Note 4 Profit from ordinary activities before income tax expense (continued)

          

(b) Profit from ordinary activities before income tax has been arrived at after

charging/(crediting) the following items: (continued)

          

Research and development expenditure

          

Expensed as incurred

  1,573,420  2,849,443  1,938,620 

Net bad and doubtful debts expense including movements in provision for doubtful debts

  624,867  619,922  1,487,774 

Net expense for movements in provision for:

          

Employee entitlements

  23,330,487  18,361,047  83,347,032 

Rationalisation and restructuring costs

  2,162,833  2,565,422  91,183,546 

Rebates and allowances

  27,265,039  19,542,569  19,979,619 

Net foreign exchange (gain)/loss:

          

Borrowings

  165,022  (8,205) (13,907)

Net loss on disposal / writedown of non-current assets:

          

Property, plant and equipment

  6,134,607  7,721,228  13,327,002 

Investments

  —    —    625,815 

Operating lease rental expense

          

Minimum lease payments

  30,522,660  30,138,477  31,589,141 

Note 5 Auditors’ remuneration

          

Audit services

          

Auditors of the company - KPMG Australia

  312,437  330,000  388,622 

For other services

          

Auditors of the company - KPMG Australia

  3,901  —    2,550 

Note 6 Taxation

          

(a) Income tax expense

          

Prima facie income tax expense/(benefit) calculated at 30% (2003 : 30%) (2002 : 30%)

on the profit/(loss) from ordinary activities

  (5,583,485) (10,606,784) (43,081,846)

Increase in income tax expense due to:

          

Depreciation on buildings

  68,953  65,465  61,316 

Amortisation of goodwill

  89,217  86,217  145,519 

Thin Capitalisation

  1,033,514  401,549  —   

Entertainment

  322,092  213,606  196,069 

Sundry items

  412,945  84,401  219,335 

Decrease in income tax expense due to:

          

Effects of lower/higher rates of tax on overseas income

  —    —    157 

Tax at standard rate on consolidated entity profits attributed to partners

  (7,679,125) (13,350,470) (29,039,039)

Income tax expense/(benefit) on operating profit/(loss) before individually significant income tax items

  4,022,361  3,594,924  (13,420,725)

Add: Income tax under/(over) provided in prior year

  (152,677) 612,913  (158,728)
   

 

 

Income tax expense/(benefit) attributable to operating profit

  3,869,684  4,207,837  (13,579,453)
   

 

 

Income tax expense/(benefit) attributable to operating profit is made up of:

          

Current income tax provision

  4,633,950  2,057,845  (11,560,219)

Under/(over) provision in prior year

  (152,677) 612,913  (158,728)

Future income tax benefit

  (611,589) 1,537,079  (1,860,506)
   

 

 

   3,869,684  4,207,837  (13,579,453)
   

 

 

Note 4 Profit from ordinary activities before income tax expense

 

   Consolidated

  Partnership

 
   

2003

$


  

2002

$


  

2001

$


  

2003

$


  

2002

$


  

2001

$


 

(b) Profit from ordinary activities before income tax has been arrived at after charging/(crediting) the following items: (continued)

                   

Research and development expenditure

                   

Capitalised and written off

  2,849,443  1,938,620  2,771,437  2,849,443  1,938,620  2,771,437 

Net bad and doubtful debts expense including movements in provision for doubtful debts

  619,922  1,487,774  3,577,421  —    (7,248) 162,752 

Net expense for movements in provision for:

                   

Employee entitlements

  18,361,047  83,347,032  70,069,314  6,846,586  67,617,203  57,546,824 

Rationalisation and restructuring costs

  4,142,757  31,475,000  7,400,000  4,574,596  30,700,000  7,400,000 

Rebates, allowances and warranty claims

  19,542,569  19,979,619  16,554,727  —    —    —   

Net foreign exchange (gain)/loss:

                   

Borrowings

  (8,205) (13,907) (82,387) 63,374  (18,407) (82,387)

Net (gain)/loss on disposal of non-current assets:

                   

Property, plant and equipment

  7,721,228  13,327,002  4,151,257  7,847,820  13,260,833  4,583,063 

Investments

  —    625,815  —    —    —    —   

Operating lease rental expense

                   

Minimum lease payments

  30,138,477  31,589,141  30,721,754  2,024,650  2,799,403  3,455,549 

156

Note 5 Auditors’ remuneration

   Consolidated

  Partnership

   

2003

$


  

2002

$


  

2001

$


  

2003

$


  

2002

$


  

2001

$


Audit services

                  

Auditors of the company - KPMG Australia

  330,000  388,622  405,013  111,440  118,405  121,400

For other services

                  

Auditors of the company - KPMG Australia

  —    2,550  9,988  —    500  8,000


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

   

2004

$


  

2003

$


  

2002

$


 

Note  6 Taxation (continued)

          

(b) Current tax liabilities

          

Provision for current income tax

          

Movements during the year:

          

Balance at beginning of year

  135,944  58,887  167,096 

Income tax (paid)/received

  —    79,774  (112,184)

Under /(over) provision in prior year

  539  635,755  (72,516)

Current year’s income tax expense/(benefit) on operating loss

  4,633,949  2,057,845  (11,560,219)

Disposal of controlled entity

  —    —    78,048 

Tax loss transferred to FITB

  (4,479,623) (2,696,317) 11,558,662 
   

 

 

   290,809  135,944  58,887 
   

 

 

(c) Deferred tax assets

          

Future income tax benefit

          
Future income tax benefit comprises the estimated future benefit at the applicable rate of 30% (2003 : 30%, 2002 : 30%) on the following items:          

Accumulated non-allowable provisions

  5,761,608  4,979,376  6,499,991 

Accumulated tax losses

  8,755,145  13,252,196  15,941,336 
   

 

 

   14,516,753  18,231,572  22,441,327 
   

 

 

Note 6 Taxation

   Consolidated

 
   

2003

$


  

2002

$


  

2001

$


 

(a) Income tax expense

          

Prima facie income tax expense/(benefit) calculated at 30% (2002 : 30%) on the profit/(loss) from ordinary activities

  (10,606,784) (43,081,846) (32,928,711)

Increase in income tax expense due to:

          

Depreciation on buildings

  65,465  61,316  67,305 

Amortisation of goodwill

  86,217  145,519  311,536 

Sundry items

  699,556  415,404  348,130 

Decrease in income tax expense due to:

          

Tax exempt dividends from foreign companies

  —    —    (81,026)

Effects of lower/higher rates of tax on overseas income

  —    157  168 

Tax at standard rate on partnership profits attributed to partners

  (13,350,470) (29,039,039) (26,316,550)

Sundry items

  —    —    17,000 

Income tax expense/(benefit) on operating profit/(loss) before individually significant income tax items

  3,594,924  (13,420,725) (5,821,332)

Individually significant income tax items:

          

Restatement of deferred tax balances due to change in company tax rate

  —    —    1,020,693 
   

 

 

   3,594,924  (13,420,725) (4,800,639)

Add: Income tax under/(over) provided in prior year

  612,913  (158,728) 7,599 
   

 

 

Income tax expense/(benefit) attributable to operating profit

  4,207,837  (13,579,453) (4,793,040)
   

 

 

Income tax expense/(benefit) attributable to operating profit is made up of:

          

Current income tax provision

  2,057,845  (11,560,219) (4,673,630)

Under/(over) provision in prior year

  612,913  (158,728) 7,599 

Changes in tax rates

  —    —    1,020,693 

Future income tax benefit

  1,537,079  (1,860,506) (1,147,702)
   

 

 

   4,207,837  (13,579,453) (4,793,040)
   

 

 

The tax effect of temporary differences that give rise to significant portions of the future income tax benefit are presented below:

Trading stock adjustments

  166,306  36,887  30,409 

Depreciation on property, plant and equipment

  (1,586,941) (2,018,708) (2,132,392)

Provisions

  6,892,310  6,931,368  8,533,692 

Accruals

  237,699  160,408  251,990 

Accumulated tax losses

  8,755,145  13,252,196  15,941,336 

Other

  52,234  (130,579) (183,708)
   

 

 

   14,516,753  18,231,572  22,441,327 
   

 

 

An amount of $48,389,177 of taxable income must be earned to allow for the realisation of the deferred tax assets in the foreseeable future. The combined taxable income of Tyre Marketers (Australia) Limited and SACRT Trading Pty Ltd in 2004 was $16,687,301 (2003 $6,919,370) and (2002 $36,556,061 loss). In the opinion of the directors of the consolidated entity, it is virtually certain that the results of future operations will generate sufficient taxable income to realise the deferred tax assets.

The consolidated entity has unrecognised capital tax losses of $21,271,173 in 2004 (2003 $22,081,014) and (2002 $22,817,537).

As a consequence of the substantive enactment of the Tax Consolidation legislation and since the consolidated entity had not notified the Australian Tax Office at the date of signing this report of the implementation date for the tax consolidation, the consolidated entity has applied UIG39 “Effects of Proposed Tax Consolidation Legislation on Deferred Tax Balances”. There was no impact on the consolidated entity’s future income tax benefits, as at 30 June 2004.

157


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

   

2004

$


  

2003

$


  

2002

$


 

Note 7 Cash assets

          

Cash

  56,435,875  5,629,939  8,400,672 
Bank short term deposits, maturing daily and paying interest at a weighted average interest rate of 4.7 % (2003 : 4.5%) (2002 : 4.7% )  —    9,600,000  28,700,000 
   

 

 

   56,435,875  15,229,939  37,100,672 
   

 

 

Note 8 Receivables

          

Current

          

Gross debtors

  127,149,457  132,004,740  138,762,403 

Less : Provision for doubtful trade debtors

  (1,730,468) (2,655,040) (3,050,317)
   

 

 

   125,418,989  129,349,700  135,712,086 

Other debtors

  4,755,891  8,091,930  5,945,571 
   

 

 

   130,174,880  137,441,630  141,657,657 

Non-current

          

Other debtors

  1,651,270  9,546,303  30,384,952 
   

 

 

   131,826,150  146,987,933  172,042,609 
   

 

 

Other debtor amounts generally arise from transactions outside the usual operating activity of the consolidated entity. 

Note 9 Inventories

          

Current

          

Raw materials and stores at cost

  8,406,434  11,548,888  10,302,933 

Less : Provision for stock obsolescence

  (56,185) (462,697) (490,527)
   

 

 

Raw materials and stores at net realisable value

  8,350,249  11,086,191  9,812,406 
   

 

 

Work in progress at cost

  5,024,033  7,779,196  4,950,537 

Less : Provision for stock obsolescence

  —    —    (70,301)
   

 

 

Work in progress at net realisable value

  5,024,033  7,779,196  4,880,236 
   

 

 

Finished goods at cost

  132,113,591  138,819,804  142,658,001 

Less : Provision for stock obsolescence

  (853,652) (889,531) (1,816,842)
   

 

 

Finished goods at net realisable value

  131,259,939  137,930,273  140,841,159 
   

 

 

Other stocks at cost

  3,215,229  6,519,272  6,390,959 

Less : Provision for stock obsolescence

  (438,257) (1,282,795) (1,182,795)
   

 

 

Other stocks at net realisable value

  2,776,972  5,236,477  5,208,164 
   

 

 

   147,411,193  162,032,137  160,741,965 
   

 

 

Note 10 Other current assets

          

Prepayments

  3,219,753  3,323,269  2,258,575 
   

 

 

Note 11 Other financial assets

          

Non-current

          

Investments in controlled entities

          

Unlisted shares at cost

  —    —    —   
   

 

 

   —    —    —   
   

 

 

Note 6 Taxation (continued)

   Consolidated

 
   

2003

$


  

2002

$


  

2001

$


 

(b) Current tax liabilities

          

Provision for current income tax

          

Movements during the year:

          

Balance at the beginning of year

  58,887  167,096  336,975 

Other debtor tax receivable reclassified

  —    —    (3,059,756)

Income tax (paid)/received

  79,774  (112,184) 1,960,747 

Under provision in prior year

  635,755  (72,516) 659,116 

Current year’s income tax expense on operating profit

  2,057,845  (11,560,219) (4,673,630)

Disposal of controlled entity

  —    78,048  —   

Tax loss transferred to FITB

  (2,696,317) 11,558,662  4,943,644 
   

 

 

   135,944  58,887  167,096 
   

 

 

(c) Deferred tax assets

          

Future income tax benefit

          

Future income tax benefit comprises the estimated future benefit at the applicable rate of 30% (2002 : 30%) on the following items:

          

Accumulated non-allowable provisions

  4,979,376  6,499,991  4,534,967 

Accumulated tax losses

  13,252,196  15,941,336  4,362,039 
   

 

 

   18,231,572  22,441,327  8,897,006 
   

 

 

158


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

   Consolidated

  Partnership

 
   

2003

$


  

2002

$


  

2003

$


  

2002

$


 

Note 7 Cash assets

             

Cash

  5,629,939  8,400,672  984,176  1,098,257 

Bank short term deposits, maturing daily and paying interest at a weighted average interest rate of 4.7% (2002 : 4.7% )

  9,600,000  28,700,000  9,600,000  28,700,000 
   

 

 

 

   15,229,939  37,100,672  10,584,176  29,798,257 
   

 

 

 

Note 8 Receivables

             

Current

             

Gross debtors

  132,004,740  138,762,403  21,836,835  24,849,049 

Less : Securitisation

  0  0  (12,275,999) (11,365,764)
   

 

 

 

Trade debtors

  132,004,740  138,762,403  9,560,836  13,483,285 

Less : Provision for doubtful trade debtors

  (2,655,040) (3,050,317) 0  0 

Less : Provision for rebates, allowances and warranty claims

  (5,580,819) (6,978,516) (187,986) 0 
   

 

 

 

   123,768,881  128,733,570  9,372,850  13,483,285 

Amounts owing by controlled entities

  0  0  71,668,275  68,602,978 

Other debtors

  8,091,930  5,945,571  5,446,005  3,397,784 
   

 

 

 

   131,860,811  134,679,141  86,487,130  85,484,047 

Non-current

             

Other debtors

  9,546,303  30,384,952  75,831,634  97,765,964 
   

 

 

 

   141,407,114  165,064,093  162,318,764  183,250,011 
   

 

 

 

   

2004

$


  

2003

$


  

2002

$


 

Note 12 Property, plant and equipment

          

Freehold land

          

At cost

  2,508,947  3,350,000  3,350,000 
   

 

 

   2,508,947  3,350,000  3,350,000 
   

 

 

Freehold buildings

          

At cost

  10,769,845  11,886,348  11,841,455 

Accumulated depreciation

  (1,275,597) (1,184,367) (1,008,840)
   

 

 

   9,494,248  10,701,981  10,832,615 
   

 

 

Leasehold land and buildings

          

At cost

  34,438,146  57,165,525  57,096,991 

Accumulated amortisation

  (6,779,839) (7,366,006) (6,667,761)
   

 

 

   27,658,307  49,799,519  50,429,230 

Held for sale at recoverable amount

  19,104,877  —    —   
   

 

 

   46,763,184  49,799,519  50,429,230 
   

 

 

Plant and equipment

          

At cost

  346,754,924  357,168,327  369,419,397 

Accumulated depreciation

  (211,578,026) (227,312,706) (242,149,279)
   

 

 

   135,176,898  129,855,621  127,270,118 

Held for sale at recoverable amount

  145,123  —    —   
   

 

 

   135,322,021  129,855,621  127,270,118 
   

 

 

Buildings and plant under construction

          

At cost

  3,735,276  24,717,907  10,945,130 
   

 

 

Total property, plant and equipment net book value

  197,823,676  218,425,028  202,827,093 
   

 

 

Assets held for sale relate to Footscray tyre plant closed in December 2001 and Thomastown tyre plant closed in July 2002. 

Reconciliations

          
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:          

Freehold land

          

Carrying amount at the beginning of year

  3,350,000  3,350,000  3,350,000 

Disposals

  (841,053) —    —   
   

 

 

Carrying amount at the end of year

  2,508,947  3,350,000  3,350,000 
   

 

 

Buildings

          

Carrying amount at the beginning of year

  10,701,981  10,832,615  11,539,044 

Currency conversion

  —    —    (101,481)

Additions

  —    —    11,706 

Transfer from capital works in progress

  12,543  44,893  30,818 

Disposal of businesses / subsidiary (net)

  —    —    (543,153)

Disposals

  (968,427) —    —   

Depreciation

  (251,849) (175,527) (104,319)
   

 

 

Carrying amount at the end of year

  9,494,248  10,701,981  10,832,615 
   

 

 

 

Other debtor amounts generally arise from transactions outside the usual operating activity of the consolidated entity.159


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

   Consolidated

  Partnership

   

2003

$


  

2002

$


  

2003

$


  

2002

$


Note 9 Inventories

            

Current

            

Raw materials and stores

  11,548,888  10,302,933  9,067,793  8,568,591

Less : Provision for stock obsolescence

  462,697  490,527  462,697  490,527
   
  
  
  

Raw materials at cost

  11,086,191  9,812,406  8,605,096  8,078,064
   
  
  
  

Work in progress

  7,779,196  4,950,537  7,606,073  4,934,215

Less : Provision for stock obsolescence

  —    70,301  —    70,301
   
  
  
  

Work in progress at cost

  7,779,196  4,880,236  7,606,073  4,863,914
   
  
  
  

Finished goods - at cost

  138,819,804  142,658,001  106,439,455  113,780,984

Less : Provision for stock obsolescence

  889,531  1,816,842  721,991  1,642,676
   
  
  
  

Finished goods at cost

  137,930,273  140,841,159  105,717,464  112,138,308
   
  
  
  

Other stocks

  6,519,272  6,390,959  6,410,443  6,280,260

Less : Provision for stock obsolescence

  1,282,795  1,182,795  1,242,795  1,144,795
   
  
  
  

Other stocks at cost

  5,236,477  5,208,164  5,167,648  5,135,465
   
  
  
  
   162,032,137  160,741,965  127,096,281  130,215,751
   
  
  
  

Note 10 Other current assets

            

Prepayments

  3,323,269  2,258,575  896,954  857,597
   
  
  
  

Note 11 Other financial assets

            

Non-current

            

Investments in controlled entities

            

Unlisted shares at cost

  —    —    21,496,245  21,496,245
   
  
  
  
   —    —    21,496,245  21,496,245
   
  
  
  
   

2004

$


  

2003

$


  

2002

$


 

Note 12 Property, plant and equipment (continued)

          

Leasehold land and buildings

          
Carrying amount at the beginning of year  49,799,519  50,429,230  51,725,245 

Transfer from capital works in progress

  344,534  458,306  39,515 

Disposals

  (2,221,960) (12,009) (20,005)

Depreciation

  (1,158,909) (1,076,008) (1,315,525)
   

 

 

Carrying amount at the end of year

  46,763,184  49,799,519  50,429,230 
   

 

 

Plant and equipment

          
Carrying amount at the beginning of year  129,855,621  127,270,118  151,296,771 

Currency conversion

  —    —    (31,013)

Acquired businesses/subsidiaries

  —    —    458,033 

Additions

  189,115  11,306  188,971 

Transfer from capital works in progress

  36,562,647  34,225,413  15,784,417 

Disposals

  (9,391,035) (12,181,833) (13,639,725)

Disposal of businesses / subsidiary (net)

  —    —    (158,909)

Depreciation

  (21,894,327) (19,469,383) (26,628,427)
   

 

 

Carrying amount at the end of year

  135,322,021  129,855,621  127,270,118 
   

 

 

Capital works in progress

          
Carrying amount at the beginning of year  24,717,907  10,945,130  14,837,434 

Acquired businesses/subsidiaries

  —    —    458,033 

Additions

  16,090,754  48,501,389  14,549,558 

Transfer to property, plant and equipment

  (36,919,723) (34,728,612) (16,312,783)

Other disposals

  (153,662) —    (2,587,112)
   

 

 

Carrying amount at the end of year

  3,735,276  24,717,907  10,945,130 
   

 

 

Note 13 Intangibles

          
Goodwill - at cost  5,847,772  7,268,104  7,768,104 

Accumulated amortisation

  (1,348,820) (2,351,230) (2,563,842)
   

 

 

   4,498,952  4,916,874  5,204,262 
   

 

 

The consolidated entity estimates that the annual amortisation expense related to intangible assets will be $287,388 during each of the next 5 years and the weighted average remaining amortisation period is approximately 14 years.  

Note 14 Payables

          

Current

          
Trade creditors  108,050,790  115,985,030  117,076,110 

Accrued liabilities

  35,797,893  41,841,676  43,903,827 

Other creditors

  179,723  2,127,124  802,781 
   

 

 

Total Current

  144,028,406  159,953,830  161,782,718 
   

 

 

Non-current

          
Trade creditors  704,179  752,291  871,199 

Other creditors

  —    7,234,668  27,620,616 
   

 

 

Total Non Current

  704,179  7,986,959  28,491,815 
   

 

 

Total Payables

  144,732,585  167,940,789  190,274,533 
   

 

 

160


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

   

2004

$


  

2003

$


  

2002

$


Note 15 Interest bearing liabilities

         

Current

         
Bank overdrafts - secured  783,427  —    —  

Bank overdrafts - unsecured

  —    690,488  1,002,808

Bank loans - secured

  77,638,119  —    —  

Bank loans - unsecured

  —    95,833,119  65,897,645

Goodyear Australia Pty Ltd loans

  35,033,668  —    —  

Securitisation

  75,029,449  74,890,227  75,494,759
   
  
  

Total Current

  188,484,663  171,413,834  142,395,212
   
  
  

Non-current

         
Partner Loan - Pacific Dunlop Tyres Pty Ltd  62,853,754  55,548,722  30,547,507

Partner Loan - Goodyear Tyres Pty Ltd

  62,853,754  55,548,722  30,547,507
   
  
  

Total Non Current

  125,707,508  111,097,444  61,095,014
   
  
  

Total Interest bearing liabilities

  314,192,171  282,511,278  203,490,226
   
  
  

Note 12 Property, plant and equipmentPartner Loans - Pacific Dunlop Tyres Pty Ltd & Goodyear Tyres Pty Ltd

 

   Consolidated

  Partnership

 
   

2003

$


  

2002

$


  

2003

$


  

2002

$


 

Freehold land

             

At cost

  3,350,000  3,350,000  609,000  609,000 

Freehold buildings

             

At cost

  11,886,348  11,841,455  8,362,347  8,362,347 

Accumulated depreciation

  (1,184,367) (1,008,840) (731,697) (627,168)
   

 

 

 

   10,701,981  10,832,615  7,630,650  7,735,179 

Leasehold land and buildings

             

At cost

  57,165,525  57,096,991  54,960,766  54,544,116 

Accumulated amortisation

  (7,366,006) (6,667,761) (5,559,544) (4,720,005)
   

 

 

 

   49,799,519  50,429,230  49,401,222  49,824,111 

Plant and equipment

             

At cost

  357,168,327  369,419,397  250,664,822  260,033,784 

Accumulated depreciation

  (227,312,706) (242,149,279) (148,972,180) (163,111,821)
   

 

 

 

   129,855,621  127,270,118  101,692,642  96,921,963 

Buildings and plant under construction

             

At cost

  24,717,907  10,945,130  21,787,010  9,559,432 
   

 

 

 

Total property, plant and equipment net book value

  218,425,028  202,827,093  181,120,524  164,649,685 
   

 

 

 

Reconciliations

             

Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:

             

Freehold land

             

Carrying amount at the beginning of year

  3,350,000  3,350,000  609,000  609,000 

Additions

  —    —    —    —   

Disposals

  —    —    —    —   
   

 

 

 

Carrying amount at the end of year

  3,350,000  3,350,000  609,000  609,000 
   

 

 

 

On 19 October, 2001, the partners in South Pacific Tyres (SPT) signed an agreement setting forth a plan to restructure certain operations of the consolidated entity, details of which are set forth in two agreements - the Australian Deed and the Co-ordination Deed (the “Agreements.”) The Agreements require the partners to advance (in one or more tranches) up to $56.3 million to the consolidated entity. As of 30 June, 2004, the amounts due to each partner (including principal and interest) were $62.9 million compared to $55.5 million at 30 June, 2003. The increase from 30 June, 2003 is primarily due to the receipt of the final tranche of $3.8 million from each partner. Interest on the outstanding portion of the loan which is compounded and calculated at 90 day intervals based on the 90 day bank bill rate plus a margin of 0.6% per annum.

Also included in the Agreements, is a put and call option giving the partners the right to acquire from the other partner, that partner’s interest in the partnership. The earliest date this provision can be exercised is 15 August, 2005 (the “put option date”) by Pacific Dunlop Tyres Pty Ltd (“PDL.”) Beginning with the put option date, PDL has twelve months during which they may exercise their put option. At the end of this twelve month period, Goodyear Tyres Pty Ltd will have the right to exercise their call option during the subsequent six month period.

The loans mature at the earlier of:

PDL exercising the put option (no earlier than August 2005);

the tenth anniversary of the Agreements (October 2011); and

the dissolution of the partnership (not expected.)

Bank Loans

Pacific Dunlop Tyres Pty Ltd and Goodyear Tyres Pty Ltd (together comprising the SPT partnership in Australia) along with SPT’s Australian controlled entities, are borrowers under bank facilities (the “Facilities”) provided by a group of banks referred to as the “Lenders.” At 30 June, 2004, the Facilities provided for borrowings of up to $79.7 million of which, $2.4 million was unused. In August 2003, the unsecured bank facilities were renewed for one year and restructured to reduce their size and to provide security to the Lenders by way of a fixed and floating charge over certain assets. Secured bank loans and overdrafts rank ahead in priority order of other interest bearing liabilities. Also in August 2004, a guarantee was provided by The Goodyear Tire & Rubber Company (U.S.)

Interest on the facilities is calculated using the bank bill rate in effect at the time of borrowing plus a margin of up to 1.8% depending on the type of advance. The borrowers must also pay a fee equal to 3.00% per annum on the facility limit regardless of utilization.

In addition to providing cash advances, the Facilities may be used for other purposes including borrowings relating to trade finance (such as bid/performance bonds and shipping guarantees), performance and financial guarantees, leasing, business credit cards, and payroll electronic payment requirements.

Accounts Receivable Financing

During November 2001, the consolidated entity entered into an agreement with a major financial institution in relation to the securitisation of trade receivables. Under this arrangement, eligible receivables are transferred to a SPT Trust Special Purpose Vehicle (SPV) in return for cash and a “subordinated loan amount.” The SPV is managed by one of the bank facility lenders. Interest on the facility is calculated using the one month bank bill rate (determined each monthly settlement date) plus a margin. This facility must be renewed on 2 November, 2006.

161


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


 

NOTES TO THE FINANCIAL STATEMENTS(continued)

 

   

2004

$


  

2003

$


  

2002

$


 
Note 15 Interest bearing liabilities (continued)          

Financing arrangements

          

The consolidated entity has access to the following lines of credit:

          

Total facilities available:

          

Bank overdrafts

  2,000,000  6,500,000  6,500,000 

Bank loans

  71,650,000  90,000,000  105,500,000 

Trade bills

  6,000,000  6,000,000  6,000,000 
   

 

 

   79,650,000  102,500,000  118,000,000 
   

 

 

Facilities utilised at balance date:

          

Bank overdrafts

  743,773  574,845  1,012,585 

Bank loans

  71,650,000  90,000,000  63,500,000 

Trade bills

  4,859,813  5,589,308  2,247,952 
   

 

 

   77,253,586  96,164,153  66,760,537 
   

 

 

Facilities not utilised at balance date:

          

Bank overdrafts

  1,256,227  5,925,155  5,487,415 

Bank loans

  —    —    42,000,000 

Trade bills

  1,140,187  410,692  3,752,048 
   

 

 

   2,396,414  6,335,847  51,239,463 
   

 

 

Interest on bank overdrafts is charged at prevailing market rates. The effective interest rates for all overdrafts as at 30 June 2004 is 8.6 % (2003 :8.6%) (2002 : 8.6%).  
All bank loans are denominated in Australian dollars. The bank loans amount in current liabilities comprises the portion of the consolidated entitiy’s bank loan payable within one year. The effective interest rate on bank loans is 8.65% (2003 : 8.34%) (2002 : 6.56%)   
The effective interest rate on trade bills is 8.15% (2003 : 5.66%) (2002 : 5.32%). 
At 30 June 2002 the consolidated entity had committed lines of bank loans of $105,500,000 up to 1 December 2002. 
At 30 June 2002 $42,000,000 of the lines were undrawn. An annual commitment fee of 0.5% to 0.9% was paid. 
Note 16 Provisions          
Current          

Employee entitlements

  33,143,515  30,803,805  35,447,716 

Rationalisation and restructuring

  13,995,281  16,981,066  60,411,626 

Rebates

  7,179,476  5,580,819  6,978,516 
   

 

 

   54,318,272  53,365,690  102,837,858 
   

 

 

Non-current

          

Employee entitlements

  6,357,177  6,883,413  7,978,203 
   

 

 

   6,357,177  6,883,413  7,978,203 
   

 

 

Reconciliations          
Reconciliations of the carrying amounts of each class of provision, except for employee benefits are set out below. 
To maintain competitiveness, the consolidated entity has implemented rationalisation actions over the past several years for the purpose of reducing excess capacity, improving productivity and reducing costs. The net amounts of rationalisation charges to the Statement of Financial Performance were as follows:   

Rationalisation and restructuring

          

Carrying amount at beginning of year

  16,981,066  60,411,626  14,084,483 

Provisions made during the year

  2,162,833  2,565,442  91,183,546 

Provision utilised by loss on disposal / scrappings of assets

  —    (8,475,000) (13,100,000)

Payments made during the period

  (5,148,618) (37,521,002) (31,756,403)
   

 

 

Carrying amount at end of year

  13,995,281  16,981,066  60,411,626 
   

 

 

Note 12 Property, plant and equipment (continued)

   Consolidated

  Partnership

 
   

2003

$


  

2002

$


  

2003

$


  

2002

$


 

Buildings

             

Carrying amount at the beginning of year

  10,832,615  11,539,044  7,735,179  7,735,179 

Currency conversion

  —    (101,481) —    —   

Additions

  —    11,706  —    —   

Transfer from capital works in progress

  44,893  30,818  —    —   

Transfer from related companies/divisions

  —    —    —    —   

Disposal of businesses / subsidiary (net)

  —    (543,153) —    —   

Disposals

  —    —    —    —   

Depreciation

  (175,527) (104,319) (104,529) —   
   

 

 

 

Carrying amount at the end of year

  10,701,981  10,832,615  7,630,650  7,735,179 
   

 

 

 

Leasehold land and buildings

             

Carrying amount at the beginning of year

  50,429,230  51,725,245  49,824,111  50,859,548 

Additions

  —    —    —    —   

Transfer from capital works in progress

  458,306  39,515  416,650  18,976 

Disposals

  (12,009) (20,005) —    —   

Depreciation

  (1,076,008) (1,315,525) (839,539) (1,054,413)
   

 

 

 

Carrying amount at the end of year

  49,799,519  50,429,230  49,401,222  49,824,111 
   

 

 

 

Plant and equipment

             

Carrying amount at the beginning of year

  127,270,118  151,296,771  96,921,963  115,784,563 

Currency conversion

  —    (31,013) —    —   

Acquired businesses/subsidiaries

  —    458,033  —    —   

Additions

  11,306  188,971  —    —   

Transfer from leased/to fixed assets

  —    —    —    —   

Transfer from capital works in progress

  34,225,413  15,784,417  29,721,897  12,032,131 

Transfer from related companies/divisions

  —    —    (2,530,497) 91,590 

Disposals

  (12,181,833) (13,639,725) (10,611,205) (13,269,697)

Disposal of businesses / subsidiary (net)

  —    (158,909) —    —   

Depreciation

  (19,469,383) (26,628,427) (11,809,516) (17,716,624)
   

 

 

 

Carrying amount at the end of year

  129,855,621  127,270,118  101,692,642  96,921,963 
   

 

 

 

Capital works in progress

             

Carrying amount at the beginning of year

  10,945,130  14,837,434  9,559,432  13,456,677 

Acquired businesses/subsidiaries

  —    458,033  —    —   

Additions

  48,501,389  14,549,558  42,366,125  10,740,966 

Transfer to property, plant and equipment

  (34,728,612) (16,312,783) (30,138,547) (12,051,099)

Other disposals

  —    (2,587,112) —    (2,587,112)
   

 

 

 

Carrying amount at the end of year

  24,717,907  10,945,130  21,787,010  9,559,432 
   

 

 

 

162


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


 

NOTES TO THE FINANCIAL STATEMENTS(continued)

 

   Consolidated

  Partnership

   

2003

$


  

2002

$


  

2003

$


  

2002

$


Note 13 Intangibles

            

Goodwill - at cost

  7,268,104  7,768,104  —    —  

Accumulated amortisation

  (2,351,230) (2,563,842) —    —  
   

 

 
  
   4,916,874  5,204,262  —    —  
   

 

 
  

Note 14 Payables

            

Current

            

Trade creditors

  157,826,706  160,979,937  138,589,427  135,888,649

Other creditors

  2,127,124  802,781  2,030,088  8,523
   

 

 
  
   159,953,830  161,782,718  140,619,515  135,897,172

Non-current

            

Trade creditors

  752,291  871,199  359,779  441,908

Other creditors

  7,234,668  27,620,616  7,234,668  27,620,616
   

 

 
  
   7,986,959  28,491,815  7,594,447  28,062,524
   

 

 
  
   167,940,789  190,274,533  148,213,962  163,959,696
   

 

 
  
   

2004

$


  

2003

$


  

2002

$


 
Note 16 Provisions          
In fiscal year 2000 and 2001, a rationalisation program was undertaken by the consolidated entity to close the tyre plants in Thomastown and Footscray, the MRT plant in Somerton and the BA Hamill engineering workshop for the purpose of reducing excess capacity, improving productivity and reducing costs. Rationalisation expense for this plan was $50.6 million, $91.2 million, $2.6 million, and $2.2 million in 2001, 2002, 2003 and 2004 respectively and was charged to significant items in the statement of financial performance.     
The number of people planned to be terminated at the MRT site at Somerton was 525. The actual number of people terminated was 519, all of whom were manufacturing related employees. The number of people planned to be terminated at the Thomastown, Footscray and BA Hamill sites was 868. The actual number of people terminated was 871, 799 of whom were manufacturing and 72 of whom were administrative. At 30 June, 2004 there was a plan to close two tyre retreading plants at North Albury and Tamworth in July 2004. The planned number of people terminating is 6 people.     
Net Charges in 2004 of $2.2 million consisted of $3.6 million for environmental remediation of the Thomastown and Footscray tyre plants, $0.5 million for retreading plant closures and $(1.9) million reversal of provision made for storage, dismantling and packaging of plant and equipment at the MRT Plant at Somerton. In 2004, $5.1 million was incurred which comprised $3.6 million for settlement of contractual dispute with customer (Norhead) and $1.5 million for environmental remediation at Thomastown & Footscray.     
Net Charges in 2003 of $2.6 million related to settlement of contractual dispute with customer (Norhead). In 2003, $37.5 million was incurred which comprised $35.4 million of associate redundancy payments for employees at the Thomastown, Footscray and BA Hamill sites, $0.5 million for environmental remediation at Thomastown and Footscray, $0.5 million for settlement of contractual dispute with customer (Norhead) and $1.1 million for storage, dismantling and packaging costs of equipment at the MRT Plant at Somerton.     
Net Charges in 2002 of $91.2 million consisted $66.3 million for associate redundancy payments for associates at the Thomastown, Footscray and BA Hamill sites, $9.9 million for environmental remediation at the Thomastown and Footscray tyre plants, $21.6 million for plant and equipment write off at the Thomastown, Footscray and BA Hamill sites, $1.5 million for settlement of contractual dispute with customer (Norhead), $(1.5) million reversal of provision made for preparation of the land and buildings at the MRT site at Somerton for sale, $(4.0) million reversal of provision made for activity alignment redundancy plan and $(2.6) million reversal of provision of redundancy for closure of the MRT Plant at Somerton. In 2002, $31.8 million was incurred which comprised $9.3 million of associate redundancy payments for employees at the Thomastown, Footscray and BA Hamill sites, $0.2 million for the activity alignment redundancy plan, $0.4 million for associate redundancy payments at the MRT Plant at Somerton, $1.6 million for business interruption expenditure and $0.3 million for storage, dismantling and packaging of plant and equipment at the MRT Plant at Somerton.          
The provision at 30 June, 2004 was $13,995,281, which included $1,996,622 for the future costs of storage, dismantling and packaging of plant & equipment at the MRT plant in Somerton, $11,484,916 for environmental remediation and $513,743 for the closure of the North Albury and Tamworth Retreading plants.   

Rebates

          

Carrying amount at beginning of year

  5,580,819  6,978,516  6,236,155 

Provisions made during the year

  27,265,039  19,542,569  19,979,619 

Payments made during the period

  (25,666,382) (20,940,266) (19,237,258)
   

 

 

Carrying amount at end of year

  7,179,476  5,580,819  6,978,516 
   

 

 

Number of employees

  3,063  3,133  3,730 

163


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


 

NOTES TO THE FINANCIAL STATEMENTS(continued)

 

Note 15 Interest bearing liabilities

   Consolidated

  Partnership

   2003
$


  2002
$


  2003
$


  2002
$


Current

            

Bank overdrafts - unsecured

  690,488  1,002,808  —    —  

Bank loans - unsecured

  95,833,119  65,897,645  90,243,811  60,149,693

Securitisation

  74,890,227  75,494,759  139,773  135,677
   
  
  
  
   171,413,834  142,395,212  90,383,584  60,285,370

Non-current

            

Partner Loan - Pacific Dunlop Tyres Pty Ltd

  55,548,722  30,547,507  55,548,722  30,547,507

Partner Loan - Goodyear Tyres Pty Ltd

  55,548,722  30,547,507  55,548,722  30,547,507
   
  
  
  
   111,097,444  61,095,014  111,097,444  61,095,014
   
  
  
  
   282,511,278  203,490,226  201,481,028  121,380,384
   
  
  
  

Financing arrangements

            

The consolidated entity has access to the following lines of credit:

            

Total facilities available:

            

Bank overdrafts

  6,500,000  6,500,000  5,000,000  5,000,000

Bank loans

  90,000,000  105,500,000  90,000,000  100,000,000

Trade bills

  6,000,000  6,000,000  —    —  
   
  
  
  
   102,500,000  118,000,000  95,000,000  105,000,000
   
  
  
  

Facilities utilised at balance date:

            

Bank overdrafts

  574,845  1,012,585  —    —  

Bank loans

  90,000,000  63,500,000  90,000,000  60,000,000

Trade bills

  5,589,308  2,247,952  —    —  
   
  
  
  
   96,164,153  66,760,537  90,000,000  60,000,000
   
  
  
  

Facilities not utilised at balance date:

            

Bank overdrafts

  5,925,155  5,487,415  5,000,000  5,000,000

Bank loans

  —    42,000,000  —    40,000,000

Trade bills

  410,692  3,752,048  —    —  
   
  
  
  
   6,335,847  51,239,463  5,000,000  45,000,000
   
  
  
  

Interest on bank overdrafts is charged at prevailing market rates. The effective interest rates for all overdrafts as at 30 June 2003 is 8.6% (2002: 8.6%).

All bank loans are denominated in Australian dollars. The bank loans amount in current liabilities comprises the portion of the consolidated entity’s bank loan payable within one year. The effective interest rate on bank loans is 8.34% (2002: 6.56%).

The effective interest rate on trade bills is 5.66% (2002 : 5.32%).

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 16 Provisions

   Consolidated

  Partnership

   2003
$


  2002
$


  2003
$


  2002
$


Current

            

Employee entitlements

  30,803,805  72,463,386  15,250,511  55,433,416

Rationalisation and restructuring

  16,981,066  23,395,956  16,981,066  22,620,956
   

 
  

 
   47,784,871  95,859,342  32,231,577  78,054,372
   

 
  

 

Non-current

            

Employee entitlements

  6,883,413  7,978,203  3,277,891  4,025,842
   

 
  

 
   6,883,413  7,978,203  3,277,891  4,025,842
   

 
  

 

Reconciliations

            

Reconciliations of the carrying amounts of each class of provision, except for

            

employee benefits are set out below.

            

Rationalisation and restructuring

            

Carrying amount at beginning of year

  23,395,956     22,620,956   

Provisions made during the year

  4,142,757     4,574,596   

Provision utilised by loss on disposal / scrappings of assets

  (8,475,000)    (8,131,839)  

Payments made during the period

  (2,082,647)    (2,082,647)  
   

    

  

Carrying amount at end of year

  16,981,066     16,981,066   
   

    

  

Number of employees

  3,133  3,730  763  1,154

Note 17 Amounts payable/receivable in foreign currencies

            
The Australian dollar equivalents of unhedged amounts payable or receivable in foreign currencies, calculated at year-end exchange rates, are as follows:

United states dollars

            

Amounts payable :

            

Current

  872,599  1,382,011  872,599  1,366,138

Japanese Yen

            

Amounts payable :

            

Current

  —    1,432,379  —    1,432,379

Euro dollar

            

Amounts payable :

            

Current

  435,439  195,889  435,439  195,889
   

 
  

 

Total

  1,308,038  3,010,279  1,308,038  2,994,406
   

 
  

 

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 18 Contributed equity

  Consolidated

  Partnership

  

2004

$


 

2003

$


  

2002

$


 
Note 17 Amounts payable/receivable in foreign currencies      
The Australian dollar equivalents of unhedged amounts payable or receivable in foreign currencies, calculated at year-end exchange rates, are as follows:      

United states dollars

      

Amounts payable :

      

Current

  779,816  872,599  1,382,011 

Japanese Yen

      

Amounts payable :

      

Current

  —    —    1,432,379 

Euro dollar

      

Amounts payable :

      

Current

  764,127  435,439  195,889 
  

 
  

Total

  1,543,943  1,308,038  3,010,279 
  

 
  

Note 18 Contributed equity      
  2003
$


  2002
$


  2003
$


  2002
$


Goodyear Tyres Pty Ltd

                 

Contributed equity at the beginning of year

  158,837,569  158,837,569  158,837,569  158,837,569  158,837,569  158,837,569  158,837,569 

Additional contributed equity

  —    —    —    —    13,000  —    —   
  
  

 
  
  

 
  

Contributed equity at the end of year

  158,837,569  158,837,569  158,837,569  158,837,569  158,850,569  158,837,569  158,837,569 
  
  

 
  
  

 
  

Pacific Dunlop Tyres Pty Ltd

                 

Contributed equity at the beginning of year

  158,837,569  158,837,569  158,837,569  158,837,569  158,837,569  158,837,569  158,837,569 

Additional contributed equity

  —    —    —    —  
  
  

 
  
  

 
  

Contributed equity at the end of year

  158,837,569  158,837,569  158,837,569  158,837,569  158,837,569  158,837,569  158,837,569 
  
  

 
  
  317,675,138  317,675,138  317,675,138  317,675,138  

 
  

  
  

 
  
  317,688,138  317,675,138  317,675,138 
  

 
  

Note 19 Reserves

                 

Asset revaluation

  12,570,229  12,570,229  11,409,810  11,409,810  12,374,551  12,570,229  12,570,229 

Foreign currency translation

  —    —    —    —  
  

 
  

  
  

 
  
  12,374,551  12,570,229  12,570,229 
  12,570,229  12,570,229  11,409,810  11,409,810  

 
  

  
  

 
  

Movements during the year

                 

Asset revaluation reserve

                 

Balance at the beginning of year

  12,570,229  12,561,891  11,409,810  11,409,810  12,570,229  12,570,229  12,561,891 

Transferred to retained profits

  —    8,338  —    —    (195,678) —    8,338 
  
  

 
  
  

 
  

Balance at the end of year

  12,570,229  12,570,229  11,409,810  11,409,810  12,374,551  12,570,229  12,570,229 
  

 
  

  
  

 
  

Foreign currency translation reserve

                 

Balance at the beginning of year

  —    (3,341,868) —    —    —    —    (3,341,868)

Translation adjustment on assets and liabilities held in foreign currencies

  —    (303,980) —    —    —    —    (303,980)

Transferred to retained profits

  —    3,645,848  —    —    —    —    3,645,848 
  
  

 
  
  

 
  

Balance at the end of year

  —    —    —    —    —    —    —   
  
  

 
  
  

 
  

 

Nature and purpose of reserves

 

Asset revaluation

 

The asset revaluation reserve includes the net revaluation increments and decrements arising from the revaluation of non-current assets.assets measured at fair value in accordance with AASB1041.

 

Foreign currency reserve

 

The foreign currency translation reserve records the foreign currency differences arising from the translation of self-sustaining foreign operations, the translation of transactions that hedge the Entity’s net investment in a foreign operation or the translation of foreign currency monetary items forming part of the net investment in a self-sustaining operation. Refer to accounting policy Note 1(e).

164


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


NOTES TO THE FINANCIAL STATEMENTS(continued)

 

Note 20 Retained profits/(accumulated losses)

   

2004

$


  

2003

$


  

2002

$


 

Note 20 Accumulated Losses

          

Goodyear Tyres Pty Ltd

          

Accumulated losses at the beginning of year

  (136,469,457) (116,635,878) (49,795,200)

Net loss attributable to partners

  (11,240,650) (19,781,893) (65,013,585)

Amounts transferred from reserves

  97,839  —    (1,827,093)

Net effect of initial adoption of Revised AASB 1028 “Employee Benefits”

  —    (51,686) —   
   

 

 

Accumulated losses at the end of year

  (147,612,268) (136,469,457) (116,635,878)
   

 

 

Pacific Dunlop Tyres Pty Ltd

          

Accumulated losses at the beginning of year

  (135,466,272) (115,632,693) (48,792,015)

Net loss attributable to partners

  (11,240,650) (19,781,892) (65,013,585)

Amounts transferred from reserves

  97,839  —    (1,827,093)

Net effect of initial adoption of Revised AASB 1028 “Employee Benefits”

  —    (51,687) —   
   

 

 

Accumulated losses at the end of year

  (146,609,083) (135,466,272) (115,632,693)
   

 

 

   (294,221,351) (271,935,729) (232,268,571)
   

 

 

The consolidated entity’s ability to pay dividends is restricted by credit facility agreements.

          

Note 21 Outside equity interest

          

Outside equity interest in controlled entities comprise:

          

Interest in retained profits at the beginning of the financial year after adjusting for outside equity interests in entities

  —    —    1,034,550 

Interest in operating profit after income tax

  —    —    470 

Interest in dividends provided for or paid

  —    —    (2,146)

Disposal of Interest in Retained Profits

  —    —    (1,032,874)
   

 

 

Interest in retained profits at the end of the financial year

  —    —    —   

Interest in share capital

  —    —    —   

Interest in reserves

  —    —    —   
   

 

 

Total outside equity interest

  —    —    —   
   

 

 

 

   Consolidated

  Partnership

 
   2003
$


  2002
$


  2003
$


  2002
$


 

Goodyear Tyres Pty Ltd

             

Retained profits/(accumulated losses) at the beginning of year

  (116,635,878) (49,795,200) (83,620,442) (35,222,044)

Net profit/(loss) attributable to partners

  (19,781,893) (65,013,585) (22,250,784) (48,398,398)

Amounts transferred from reserves

  —    (1,827,093) —    —   

Net effect of initial adoption of Revised AASB 1028 “Employee Benefits”

  (51,686) —    (18,599) —   

Distribution of profits to partners

  —    —    —    —   

Retained profits/(accumulated losses) at the end of year

  (136,469,457) (116,635,878) (105,889,825) (83,620,442)
   

 

 

 

Pacific Dunlop Tyres Pty Ltd

             

Retained profits/(accumulated losses) at the beginning of year

  (115,632,693) (48,792,015) (82,617,254) (34,218,857)

Net profit/(loss) attributable to partners

  (19,781,892) (65,013,585) (22,250,784) (48,398,397)

Amounts transferred from reserves

  —    (1,827,093) —    —   

Net effect of initial adoption of Revised AASB 1028 “Employee Benefits”

  (51,687) —    (18,599) —   

Distribution of profits to partners

  —    —    —    —   

Retained profits/(accumulated losses) at the end of year

  (135,466,272) (115,632,693) (104,886,637) (82,617,254)
   

 

 

 

   (271,935,729) (232,268,571) (210,776,462) (166,237,696)
   

 

 

 

Note 21 Outside equity interest

             
      Consolidated

 
      2003
$


  2002
$


  2001
$


 

Outside equity interest in controlled entities comprise:

             

Interest in retained profits at the beginning of the financial year after adjusting for outside equity interests in entities

     —    1,034,550  1,065,255 

Interest in operating profit after income tax

     —    470  285 

Interest in dividends provided for or paid

     —    (2,146) (30,990)

Disposal of Interest in Retained Profits

     —    (1,032,874) —   
      

 

 

Interest in retained profits at the end of the financial year

     —    —    1,034,550 

Interest in share capital

     —    —    95,458 

Interest in reserves

     —    —    (644,320)
      

 

 

Total outside equity interest

     —    —    485,688 
      

 

 

165


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


NOTES TO THE FINANCIAL STATEMENTS(continued)

 

Note 22 Additional financial instruments disclosure

 

(a) Interest rate risk

 

The consolidated entity enters into interest rate swaps to manage cash flow risks associated with the floating interest rates on borrowings.

 

Interest rate swaps and forward rate agreements

 

Interest rate swaps allow the consolidated entity to swap floating rate borrowings into fixed rates. Maturities of swap contracts are principally between one to five years.

Each contract involves quarterly payment or receipt of the net amount of interest. At 30 June 20032004 the fixed rates varied fromwere 5.9% (2003 : 5.7% to 5.9% (2002:) (2002 : 5.5% to 5.9%) and floating rates were at bank bill rates plus the consolidated entity'sentity’s credit margin. The weighted average effective floating interest rate at 30 June 20032004 was 5.9% (2003 : 5.8%) (2002 : 5.7%).

 

Interest rate risk exposures

 

The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:

 

  Fixed interest maturity in:

2004


  Note

  

Weighted
average
interest

rate


 

Floating

interest

rate


 

1 year

or less


  

Over

1 year to

years


  

More

than

5 years


  

Non-

interest

bearing


  Total

Financial assets

                  

Cash

  7  4.74% 56,343,803          92,072  56,435,875

Receivables

  8  —            131,826,150  131,826,150
      

         
  
      56,343,803          131,918,222  188,262,025
      

         
  

Financial liabilities

                  

Bank overdrafts and loans

  15  8.65% 73,561,733             73,561,733

Securitisation

  15  5.60% 75,029,449             75,029,449

Partner Loans

  15  6.31% 160,741,176             160,741,176

Trade bills

  15  8.15% 4,859,813             4,859,813

Accounts payable

  14           144,732,585  144,732,585

Employee entitlements

  16  0.00% 33,143,515  3,378,237  2,978,940     39,500,692
      

 
  
  
  
  
      314,192,171  33,143,515  3,378,237  2,978,940  144,732,585  498,425,448
      

 
  
  
  
  

Interest rate swaps

      (20,000,000) 20,000,000            
      

 
            
  Fixed interest maturity in:

2003


  Note

  Weighted
average
interest
rate


  Floating
interest
rate


  1 year
or less


  Over
1 year to
5 years


  More
than 5
years


  Non-
  interest
bearing


  Total

                  

Financial assets

                                        

Cash

    7  4.51% 15,133,917           96,022  15,229,939  7  4.51% 15,133,917          96,022  15,229,939

Receivables

    8  —               141,407,114  141,407,114  8  —            146,987,933  146,987,933
       

 
  
  
  
  
      

         
  
       15,133,917           141,503,136  156,637,053      15,133,917          147,083,955  162,217,872
       

 
  
  
  
  
      

         
  

Financial liabilities

                                        

Bank overdrafts and loans

  15  8.27% 90,934,299              90,934,299  15  8.27% 90,934,299             90,934,299

Securitisation

  15  4.88% 74,890,227              74,890,227  15  4.88% 74,890,227             74,890,227

Partner Loans

  15  5.35% 111,097,444              111,097,444  15  5.35% 111,097,444             111,097,444

Trade bills

  15  5.66% 5,589,308              5,589,308  15  5.66% 5,589,308             5,589,308

Accounts payable

  14               167,940,789  167,940,789  14           167,940,789  167,940,789

Employee entitlements

  16  1.30%   30,803,805  3,177,964  3,705,449     37,687,218  16  1.30% 30,803,805  3,177,964  3,705,449     37,687,218
       

 
  
  
  
  
      

 
  
  
  
  
       282,511,278  30,803,805  3,177,964  3,705,449  167,940,789  488,139,285      282,511,278  30,803,805  3,177,964  3,705,449  167,940,789  488,139,285
       

 
  
  
  
  
      

 
  
  
  
  

Interest rate swaps

       (50,000,000) 30,000,000  20,000,000               (50,000,000) 30,000,000  20,000,000         
       

 
  
  
  
  
      

 
  
         

2002


  
  
  
  
  
  
  
  

Financial assets

                      

Cash

    7  4.70% 37,092,372           8,300  37,100,672

Receivables

    8               165,064,093  165,064,093
       

 
  
  
  
  
       37,092,372  —    —    —    165,072,393  202,164,765
       

 
  
  
  
  

Financial liabilities

                      

Bank overdrafts and loans

  15  6.59% 64,652,501              64,652,501

Securitisation

  15  5.06% 75,494,759              75,494,759

Partner Loans

  15  5.46% 61,095,014              61,095,014

Trade bills

  15  5.32% 2,247,952              2,247,952

Accounts payable

  14               190,274,533  190,274,533

Employee entitlements

  16  2.00
 
%
 
   72,463,386  4,278,361  3,699,842     80,441,589
       

 
  
  
  
  
       203,490,226  72,463,386  4,278,361  3,699,842  190,274,533  474,206,348
       

 
  
  
  
  

Interest rate swaps

       (50,000,000) 20,000,000  30,000,000         
       

 
  
  
  
  

166


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


NOTES TO THE FINANCIAL STATEMENTS(continued)

Note22 Additional financial instruments disclosure (continued)

(a) Interest rate risk (continued)

 

Note 22 Additional financial instruments disclosure (continued)Fixed interest maturity in:

2002


  Note

  

Weighted

average

interest

rate


  

Floating

interest

rate


  

1 year

or less


  

Over

1 year to

5 years


  

More

than 5

years


  

Non-

Interest

bearing


  Total

Financial assets

                        

Cash

  7  4.70% 37,092,372           8,300  37,100,672

Receivables

  8  —                172,042,609  172,042,609
         

          
  
         37,092,372           172,050,909  209,143,281
         

          
  

Financial liabilities

                        
                         

Bank overdrafts and loans

  15  6.59% 64,652,501              64,652,501

Securitisation

  15  5.06% 75,494,759              75,494,759

Partner Loans

  15  5.46% 61,095,014              61,095,014

Trade bills

  15  5.32% 2,247,952              2,247,952

Accounts payable

  14                 190,274,533  190,274,533

Employee entitlements

  16  2.00%    35,447,716  4,278,361  3,699,842     43,425,919
         

 
  
  
  
  
         203,490,226  35,447,716  4,278,361  3,699,842  190,274,533  437,190,678
         

 
  
  
  
  

Interest rate swaps

        (50,000,000) 20,000,000  30,000,000         
         

 
  
         

 

(b) Foreign exchange risk

 

The consolidated entity enters into forward foreign exchange contracts to hedge foreign currency purchases expected in each month within the following six months within Board approval limits. The amount of anticipated future purchases and sales are forecast in light of current conditions in foreign markets, commitments from customers and experience.

 

The following table sets out the gross value to be received under foreign currency contracts, the weighted average contracted exchange rates and the settlement periods of outstanding contracts for the consolidated entityentity.

 

  2003

  2002

  

2003

$


  

2002

$


  2004

  2003

  2002

  2004
$


  2003
$


  2002
$


  Average rate

       Average rate            

Buy US Dollars

                              

Not later than one year

  0.63  0.56  26,558,702  43,978  0.7029  0.63  0.56  17,860,867  26,558,702  43,978

Later than one year but not later than two years

        —    —             —    —    —  

Later than two years but not later than three years

        —    —  

Later than two year but not later than three years

           —    —    —  
        
  
           
  
  
        26,558,702  43,978           17,860,867  26,558,702  43,978
        
  
           
  
  

Sell US Dollars

                              

Not later than one year

  0.64  —    814,196  —    0.7155  0.64  —    1,623,900  814,196  —  

Later than one year but not later than two years

        —    —             —    —    —  

Later than two years but not later than three years

        —    —  

Later than two year but not later than three years

           —    —    —  
        
  
           
  
  
        814,196  0           1,623,900  814,196  —  
     ��  
  
           
  
  

Buy EURO dollars

                              

Not later than one year

  0.55  0.60  9,937,775  1,096,037  0.59  0.55  0.60  5,693,338  9,937,775  1,096,037

Later than one year but not later than two years

        —    —             —    —    —  

Later than two years but not later than three years

        —    —  

Later than two year but not later than three years

           —    —    —  
        
  
           
  
  
        9,937,775  1,096,037           5,693,338  9,937,775  1,096,037
        
  
           
  
  

Sell EURO dollars

                              

Not later than one year

  0.55  —    179,783  —    0.61  0.55  —    18,245  179,783  —  

Later than one year but not later than two years

        —    —             —    —    —  

Later than two years but not later than three years

        —    —  

Later than two year but not later than three years

           —    —    —  
        
  
           
  
  
        179,783  0           18,245  179,783  —  
        
  
           
  
  

Buy Japanese yen

                              

Not later than one year

  70.57  67.3  2,101,635  223,131  79.33  70.57  67.3  1,560,868  2,101,635  223,131

Later than one year but not later than two years

        —    —             —    —    —  

Later than two years but not later than three years

        —    —  

Later than two year but not later than three years

           —    —    —  
        
  
           
  
  
        2,101,635  223,131           1,560,868  2,101,635  223,131
        
  
           
  
  

Sell Japanese yen

            

Not later than one year

  73.94  —    56,934  —  

Later than one year but not later than two years

        —    —  

Later than two years but not later than three years

        —    —  
        
  
        56,934  0
        
  

Buy English pound

            

Not later than one year

  0.39  0.37  77,119  71,779

Later than one year but not later than two years

        —    —  

Later than two years but not later than three years

        —    —  
        
  
        77,119  71,779
        
  

167


PART III

 

South Pacific Tyres -and Controlled Entities – Statutory Accounts Year Ended 30 June 20032004


NOTES TO THE FINANCIAL STATEMENTS(continued)

 

Note 22 Additional financial instruments disclosure (continued)

Note22 Additional financial instruments disclosure (continued)

 

(b) Foreign exchange risk (continued)

   2004

  2003

  2002

  

2004

$


  

2003

$


  

2002

$


      Average rate            

Sell Japanese yen

                  

Not later than one year

  76.45  73.94  —    133,059  56,934  —  

Later than one year but not later than two years

           —    —    —  

Later than two year but not later than three years

           —    —    —  
            
  
  
            133,059  56,934  —  
            
  
  

Buy English pound

                  

Not later than one year

  —    0.39  0.37  —    77,119  71,779

Later than one year but not later than two years

           —    —    —  

Later than two year but not later than three years

           —    —    —  
            
  
  
            —    77,119  71,779
            
  
  

 

As these contracts are hedging anticipated purchases, any unrealised gains and losses on the contracts, together with the costs of the contracts, will be deferred and then recognisedrecognized in the financial statements at the time the underlying transaction occurs as designated. The gross deferred gains and losses on hedges of anticipated foreign currencycurrent purchases are:

 

  Consolidated
2003


  

Consolidated

2002


  2004

  2003

  2002

  Gains
$


  Losses
$


  Gains
$


  Losses
$


  

Gains

$


  

Losses

$


  

Gains

$


  

Losses

$


  

Gains

$


  

Losses

$


Not later than one year

  44,231  2,021,565  54,818  —    778,676  80,710  44,231  2,021,565  54,818  —  

Later than one year but not later than two years

  —    —    —    —    —    —    —    —    —    —  

Later than two year but not later than three years

  —    —    —    —    —    —    —    —    —    —  

 

When the underlying transaction has occurred as designated, the effect of the hedge has been recognised in the financial statements.

 

(c) Commodity price risk

 

The consolidated entity does not enter into futures contracts to hedge (or hedge a proportion of)of ) commodity purchase prices on anticipated specific purchase commitments of natural rubber.

 

(d) Credit risk exposures

 

Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.

 

Recognised Financial Instruments

 

The credit risk on financial assets, excluding investments, of the consolidated entity which have been recognised on the statement of financial position, is the carrying amount, net of any provision for doubtful debts.

 

The consolidated entity minimises concentrations of credit risk by undertaking transactions with a large number of customers and counterparties in various countries.

 

The consolidated entity is not materially exposed to any individual overseas country or individual customer. Concentrations of credit risk on trade debtors and term debtors due from customers are the motor vehicle and transport industries.

 

Unrecognised Financial Instruments

 

Credit risk on derivative contracts which have not been recognised on the statement of financial position is minimised as counterparties are recognised financial intermediaries with acceptable credit ratings determined by a recognised ratings agency.

 

Interest rate swaps and foreign exchange contracts are subject to credit risk in relation to the relevant counterparties, which are principally large banks.

 

As all future contracts are transacted through a recognised futures exchange, credit risk associated with these contracts is minimal.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 22 Additional financial instruments disclosure (continued)

 

(e) Net fair values of financial assets and liabilities

 

Valuation approach

 

Net fair value of financial assets and liabilities are determined by the consolidated entity on the following basis:

 

Recognised Financial Instruments

 

The carrying amounts of bank term deposits, trade debtors, other debtors, bank overdrafts, accounts payable, bank loans and employee entitlements approximate net fair value.

 

Unrecognised Financial Instruments

 

The valuation of financial instruments not recognised on the statement of financial position detailed in this note reflects the estimated amounts which the consolidated entity expects to pay or receive to terminate the contracts (net of transaction costs), or replace the contracts at their current market rates as at reporting date. This is based on independent market quotations and determined using standard valuation techniques.

 

168


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS(continued)

Note22 Additional financial instruments disclosure (continued)

(e) Net fair values of financial assets and liabilities (continued)

Net fair values

 

Recognised Financial Instruments

 

The carrying amounts and net fair values of financial assets and financial liabilities as at the reporting date are as follows:

 

  Consolidated

  2003

  2002

  2004

  2003

  2002

  Carrying
amount
$


  Net fair
value
$


  Carrying
amount
$


  Net fair
value
$


  

Carrying
amount

$


  

Net fair

value

$


  

Carrying
amount

$


  

Net fair

value

$


  

Carrying
amount

$


  

Net fair

value

$


Financial assets

                              

Cash assets

  15,229,939  15,229,939  37,100,672  37,100,672  56,435,875  56,435,875  15,229,939  15,229,939  37,100,672  37,100,672

Receivables

  141,407,114  141,407,114  165,064,093  165,064,093  131,826,150  131,826,150  146,987,933  146,987,933  172,042,609  172,042,609

Financial liabilities

                              

Payables

  167,940,789  167,940,789  190,274,533  190,274,533  144,732,585  144,732,585  167,940,789  167,940,789  190,274,533  190,274,533

Bank overdrafts and loans

  90,934,299  90,934,299  64,652,501  64,652,501  73,561,733  73,561,733  90,934,299  90,934,299  64,652,501  64,652,501

Securitisation

  74,890,227  74,890,227  75,494,759  75,494,759  75,029,449  75,029,449  74,890,227  74,890,227  75,494,759  75,494,759

Partner Loans

  111,097,444  111,097,444  61,095,014  61,095,014  160,741,176  160,741,176  111,097,444  111,097,444  61,095,014  61,095,014

Trade bills

  5,589,308  5,589,308  2,247,952  2,247,952  4,859,813  4,859,813  5,589,308  5,589,308  2,247,952  2,247,952

Employee entitlements

  37,687,218  37,687,218  80,441,589  80,441,589  39,500,692  39,500,692  37,687,218  37,687,218  43,425,919  43,425,919

 

Unrecognised Financial Instruments

 

The net fair value of financial instruments not recognised on the statement of financial position held as at the reporting date are:

 

   2003
$


  2002
$


Forward foreign exchange contracts gains/(losses)

  (1,977,334) 54,818

Futures commodity contracts

      
   

 
   (1,977,334) 54,818
   

 

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

   

2004

$


  

2003

$


  

2002

$


Forward foreign exchange contracts gains/(losses)

  697,966  (1,977,334) 54,818

Note 23 Commitments

   Consolidated

  Partnership

   2003
$


  2002
$


  2003
$


  2002
$


Capital expenditure commitments

            

Plant

            

Contracted but not provided for and payable within one year

  3,311,414  4,505,841  3,311,414  4,505,841
   
  
  
  
   3,311,414  4,505,841  3,311,414  4,505,841
   
  
  
  

Lease commitments

            

Operating lease expense commitments

            

Future operating lease commitments not provided for in the financial statements and payable:

            

Within one year

  23,865,262  25,799,409  —    —  

One year or later and no later than five years

  47,292,290  48,518,490  —    —  

Later than 5 years

  15,992,314  10,596,215  —    —  
   
  
  
  
   87,149,866  84,914,114  —    —  
   
  
  
  

South Pacific Tyres leases property under non-cancellable operating leases expiring from one to ten years. Leases generally provide the consolidated entity with a right of renewal at which time all terms are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based on either movements in the Consumer Price Index or operating criteria.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 24 Contingent liabilities

There were no contingent liabilities as at 30 June 2003 and 30 June 2002.

Note 25 Related party transactions

The partnership from time to time has dealings with Ansell Limited Group Companies and Goodyear Tire & Rubber Co. Group Companies.

Under the partnership agreement, South Pacific Tyres leases certain properties from Ansell Limited and Goodyear Australia Limited (a wholly owned subsidiary of Goodyear Tire & Rubber Co.) on a basis of equitable rentals between the partners.

The amounts of these transactions are detailed below:

   Consolidated

Lease payments


  2003
$


  2002
$


Ansell Limited Group Companies

  217,885  217,885

Goodyear Tire & Rubber Co. Group Companies

  75,273  75,273

During the financial year the partnership received loans from the partners that are subject to interest at market rates compounding quarterly as detailed in Note 15.

On 29/12/2000, the partnership entered into a supply agreement whereby Goodyear will be (subject to certain conditions) the exclusive supplier of certain tyres for a period of ten years commencing 01/01/2001. The partnership will receive $25.0m plus interest in consideration for this exclusivity of supply.

On 20/12/2000, the partnership received a loan of $25.0 million from Ansell Limited on which interest is charged quarterly in arrears.

   Consolidated

   2003
$


  2002
$


Interest brought to account by the partnership in relation to these loans during the year:

      

Interest expense

  814,052  1,750,000

Interest revenue

  814,052  1,750,000

The amounts included in receivables and payables in relation to these loans are:

      

Non-current receivables

      

Goodyear Tire & Rubber Co. Group Companies

  7,212,682  27,598,630

Non-current payables

      

Ansell Limited Group Companies

  7,212,682  27,598,630

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 20 Retained profits/(accumulated losses) (continued)

All other dealings with the above parties are on normal commercial terms and involve the purchase and/or supply of materials from/to both parties and the provision of forward exchange cover and commodity hedging by Ansell Limited Group Companies.

The amounts of these transactions are detailed below:

   Consolidated

   2003
$


  2002
$


Sale of goods and services

      

Ansell Limited Group Companies

  —    37,791

Goodyear Tire & Rubber Co. Group Companies

  1,357,021  4,396,011

Purchase of goods and services

      

Ansell Limited Group Companies

  4,092  1,252,256

Goodyear Tire & Rubber Co. Group Companies

  118,165,909  107,439,259

Details of interest received/paid to related parties are set out in Notes 3 and 4.

The amounts included in receivables and payables in relation to South Pacific Tyres are set out in the notes to the financial statements and the amounts relating to the other parties are:

   2003
$


  2002
$


Current receivables      

Ansell Limited Group Companies

  —    —  

Goodyear Tire & Rubber Co. Group Companies

  182,079  526,745
Current payables      

Ansell Limited Group Companies

  —    81,767

Goodyear Tire & Rubber Co. Group Companies

  21,072,760  23,663,413

The names of each person holding the position of director of the company during the year were:

Mr. Samir G. Gibara

  Dr Edward Tweddell   

Mr. Robert W. Tieken

Mr. Herbert J. Elliott

Mr. Hugh D. Pace

Mr. Harry Boon

Mr. Clark E. Sprang

Mr. Paul Devereux

Mr. David Graham

    

Capital expenditure commitments

At the time of holding the office of director of the company each director was an executive of the South Pacific Tyres partnership,Plant

Contracted but not provided for and held the office of director of the company in order to discharge, in whole or in part, the duties as an executive officer of the partnership.payable within one year

951,9353,311,4144,505,841




951,9353,311,4144,505,841




PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 26 SuperannuationLease commitments

Employer plansOperating lease expense commitments

The partnership and its controlled entities participateFuture operating lease commitments not provided for in the Pacific Dunlop Superannuation Fund for employees.

   Consolidated

 
   2003
$


  2002
$


 

Net Assets

  148,178,000  148,178,000 

Accrued benefits

  148,802,000  148,802,000 
   

 

Excess / (Deficiency)

  (624,000) (624,000)
   

 

Vested Benefits

  146,578,000  146,578,000 

Country

Australia

Benefit type

Defined benefit / Accumulation

Basis of contribution

Balance of cost / Defined contribution

Date of last actuarial valuation

6/30/2002

Actuary

Mercer Human Resource Consulting Pty Ltd

Plan net assets, accrued benefits and vested benefits have been calculated at 30 June 2002, being the date of the most recent financial statements of the plan. Accrued benefits are based on an actuarial valuation undertaken at 30 June 2002. The Partnership has accrued a superannuation expense of $4,100,000 to meet expected fund deficiency as at 30 June 2003.and payable:

Within one year

29,992,27423,865,26225,799,409

The liabilities of the superannuation fund is covered by the assets in the fundOne year or by specific provisions created by the partnership or its controlled entities.

The partnershiplater and its controlled entities are obliged to contribute to the superannuation fund as a consequence of Legislation or Trust Deed. Legal enforceability is dependent on the terms of the Legislation and the Trust Deed.no later than five years

Definitions

Balance of costThe Group’s contribution is assessed by the Actuary after taking into account the member’s contribution and the value of assets.
Defined contributionThe Group’s contribution is set out in the appropriate fund rules, usually as a fixed percentage of salary.60,779,46747,292,29048,518,490

Later than 5 years

Industry/union plans

The partnership participates in industry and union plans on behalf of certain employees. These plans operate on an accumulation basis and provide lump sum benefits for members on resignation, retirement or death.

The partnership has a legally enforceable obligation to contribute at varying rates to the plans.

Note 27 Segment reporting

The principal activity of the group during the year was the manufacture and sale of motor vehicle and aircraft tyres in Australia.

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003

6,720,24015,992,31410,596,215

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 28 Particulars relating to controlled entities

Details of controlled entities, including the extent that each contributed to the period’s result are given below:

Name of Company


  Place of
incorpor-
ation


  Beneficial
interest
held by
partnership


  Class
of
share


  Book value of
partnership’s
investment


  Dividends
received or
receivable
by
partnership


  Dividends
credited to
investment
account


  Contribution to the
consolidated profit
after tax inclusive
of abnormal items and
after deducting the
amount attributable to
Outside Equity Interest


 
       2003

  2002

  2003

  2002

  2003

  2002

  2003

   2002

 

South Pacific Tyres

                             (44,501,568)  (96,796,795)

Tyre Marketers (Australia) Limited

  Vic  100% Ordinary  21,496,245  21,496,245              4,952,958   (33,840,907)

Sacrt Trading Pty Ltd

  Vic  100% Ordinary                    158,826   365,417 

South Pacific Tyres (PNG) Pty. Ltd.

  PNG  80% Ordinary                    —     27,119 

Dunlop PNG Pty. Ltd.

  PNG  80% Ordinary                    —     (25,244)

Consolidated adjustments

                             (174,001)  243,240 
            
  
  
  
  
  
  

  

            21,496,245  21,496,245  —    —    —    —    (39,563,785)  (130,027,170)
            
  
  
  
  
  
  

  

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 29 Events subsequent to balance date

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material nature likely, in the opinion of the directors of the company, to affect significantly the operations, or the state of affairs of the company in subsequent financial years.

Note 30 Notes to the statements of cash flows

(a) Reconciliation of cash

For the purposes of the statement of cash flows, cash includes cash on hand and at bank and investments in money market instruments net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:

   Consolidated

  Partnership

   2003
$


  2002
$


  2003
$


  2002
$


Cash assets

  5,629,939  8,400,672  984,176  1,098,257

Cash on deposit

  9,600,000  28,700,000  9,600,000  28,700,000

Bank overdrafts

  (690,488) (1,002,808) —    —  
   

 

 
  
   14,539,451  36,097,864  10,584,176  29,798,257
   

 

 
  

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 30 Notes to the statements of cash flows (continued)

(b) Acquisition/disposal of businesses and entities

During both the 2002 and 2003 financial years the partnership purchased no businesses.

During the 2002 year the consolidated entity purchased 100% of businesses of which the details are as follows:

Consolidated

Acquisitions of businesses


2003

$


2002

$


Net assets acquired/disposed

Property, plant and equipment

—  458,033

Inventories

—  298,112

Receivables

—  268,685

Creditors

—  —  
97,491,98187,149,86684,914,114
   
  
—  1,024,830

Goodwill

—  222,001

Consideration



Cash paid/(received)

—  1,246,831


Outflow/(inflow) of cash



Cash consideration

—  1,246,831

 

 

Disposal of entities        

The consolidated entity leases property under non-cancellable operating leases expiring from one to ten years.

Leases generally provide the consolidated entity with a right of renewal at which time all terms are renegotiated.

Assets pledged and cash restrictions

Assets pledged to financial institutions as at 30 June 2004 ( $175,571,699 ), 2003 ( $nil ) and 2002 ( $nil ). Agreements with financial institutions place certain restrictions on the use of cash balances. These restrictions do not affect the daily operations of the consolidated entity and will not have a material adverse affect on its operations.

Note 24 Contingent liabilities

There were no contingent liabilities as at 30 June 2004, 30 June 2003 and 30 June 2004.

169


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS(continued)

Note 25 Related party transactions

The consolidated entity from time to time has dealings with Ansell Limited Group Companies and Goodyear Tire & Rubber Co. Group Companies.

Under the partnership agreement, the consolidated entity leases certain properties from Ansell Limited and Goodyear Australia Limited (a wholly owned subsidiary of Goodyear Tire & Rubber Co.) on a basis of equitable rentals between the partners.

The amounts of these transactions are detailed below:

Lease payments


  

2004

$


  

2003

$


  

2002

$


Ansell Limited Group Companies

  217,885  217,885  217,885

Goodyear Tire & Rubber Co. Group Companies

  75,273  75,273  75,273
During the financial year the consolidated entity received loans from the partners that are subject to interest at market rates compounding quarterly as detailed in Note 15.
On 29/12/2000, the consolidated entity entered into a supply agreement whereby Goodyear will be (subject to certain conditions) the exclusive supplier of certain tyres for a period of twelve years commencing 01/01/2001. The consolidated entity has received $25.0m plus interest in consideration for this supply.
On 20/12/2000, the consolidated entity received a loan of $25.0m from Ansell Limited on which interest is charged quarterly in arrears.
Interest brought to account by the consolidated entity in relation to these loans during the year:

Interest expense

  —    —    1,750,000

Interest revenue

  —    —    1,750,000
All other dealings with the above parties are on normal commercial terms and involve the purchase and/or supply of materials from/to both parties and the provision of forward exchange cover and commodity hedging by Ansell Limited Group Companies.
The amounts of these transactions are detailed below:

Sale of goods and services

         

Ansell Limited Group Companies

  —    —    37,791

Goodyear Tire & Rubber Co. Group Companies

  7,044,157  1,357,021  4,396,011

Purchase of goods and services

         

Ansell Limited Group Companies

  —    4,092  1,252,256

Goodyear Tire & Rubber Co. Group Companies

  115,062,875  118,165,909  107,439,259

Details of interest received/paid to related parties are set out in Notes 3 & 4.

 

The amounts included in receivables and payables in relation to the consolidated entity are set out in the notes to the financial statements and the amounts relating to the other parties are:

Current receivables

         

Goodyear Tire & Rubber Co. Group Companies

  588,874  182,079  526,745

Current payables

         

Ansell Limited Group Companies

  —    —    81,767

Goodyear Tire & Rubber Co. Group Companies

  20,921,867  21,072,760  23,663,413

The consolidated entity has had since 1987 a significant Research and Development arrangement with Goodyear Tire and Rubber Limited. A fee is payable as a percentage of sales of locally produced tyres. The amount of costs incurred for this contract was, for the year ended 30 June 2004 $3,528,348 ( June 2003 $4,928,422 ) and ( June 2002 $10,856,910 ).

The names of each person holding the position of director of the company during the year were:


Mr. Richard Kramer Dr Edward TweddellMr. Robert W. Tieken
Mr. Hugh D. PaceMr. Herbert J. ElliottMr. Clark E. Sprang
Ms. Janell LopusMr. Douglas ToughMr. Harry Boon
Mr. Harold SmithMr. David Graham  

During the 2002 year, the consolidated entity disposed of all of its 80% share of South Pacific Tyres PNG Ltd.

170


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS(continued)

Note 26 Superannuation commitments

Employer plans

Up until April 1st 2004 the consolidated entity participated in the Pacific Dunlop Superannuation Fund for employees.

Effective 1 April 2004 members were transferred out of the Pacific Dunlop Superannuation Fund to Equipsuper (an independent superannuation fund). the transfer of assets from the Pacific Dunlop Superannuation Fund to Equipsuper has not yet been completed.

 

Details of the disposal is as follows:

Consideration (Cash)

—  1,983,805

Net assets of entity disposed of

Property, plant and equipment

—  702,062

Inventories

—  2,174,162

Receivables

—  1,096,993

Other assets

—  60,964

Prepayments

—  82,822

Creditors

—  (952,514)

Other liabilities and provisions

—  (146,852)

Outside equity

—  (408,017)



—  2,609,620

2002

$


Net Assets

148,178,000

Accrued benefits

148,802,000 
 


Profit / (loss) on disposal

—  (625,815)

  

Deficiency

(624,000)


PART IIIVested Benefits

146,578,000

CountryAustralia
Benefit typeDefined benefit / Accumulation
Basis of contributionBalance of cost / Defined contribution
Date of last actuarial valuation30/06/2002
ActuaryMercer Human Resource Consulting Pty Ltd

Plan net assets, accrued benefits and vested benefits have been calculated at 30 June 2002, being the date of the most recent financial statements of the plan. Accrued benefits are based on an actuarial valuation undertaken at 30 June 2002.

The consolidated entity has accrued a superannuation expense of $1,630,000 to meet expected fund deficiency as at 30 June 2004.

The liabilities of the superannuation fund are covered by the assets in the fund or by specific provisions created by the consolidated entity.

The consolidated entity is obliged to contribute to the superannuation fund as a consequence of Legislation or Trust Deed. Legal enforceability is dependent on the terms of the Legislation and the Trust Deed.

Definitions

 

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003
Balance of costThe consolidated entity’s contribution is assessed by the Actuary after taking into account the member’s contribution and the value of assets.
Defined contributionThe consolidated entity’s contribution is set out in the appropriate fund rules, usually as a fixed percentage of salary.

Industry / union plans

The consolidated entity participates in industry and union plans on behalf of certain employees. These plans, which are reviewed periodically, operate on an accumulation basis and provide lump sum benefits for members on resignation, retirement or death.

The consolidated entity has a legally enforceable obligation to contribute at varying rates to the plans.

Note 27 Segment reporting

The principal activity of the group during the year was the manufacture and sale of motor vehicle and aircraft tyres in Australia.

171


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS(continued)

Note 28 Particulars relating to controlled entities

Details of controlled entities, including the extent that each contributed to the period’s result are given below:

Name of Company


  Place of
incorporation


  Beneficial
interest held
by
consolidated
entity


  

Class

of share


  

Book value of

consolidated entity’s

investment


  

Contribution to the

consolidated profit

after tax inclusive

of abnormal items and

after deducting the

amount attributable to

Outside Equity Interest


 
       2004

  2003

  2002

  2004

  2003

  2002

 

South Pacific Tyres

                    (28,982,129) (44,501,568) (96,796,795)

Tyre Marketers

                            

(Australia) Limited

  Vic  100% Ordinary  21,496,245  21,496,245  21,496,245  8,559,276  4,952,958  (33,840,907)

Sacrt Trading Pty Ltd

  Vic  100% Ordinary           491,696  158,826  365,417 

South Pacific Tyres

                            

(PNG) Pty. Ltd.

  PNG  80% Ordinary           —    —    27,119 

Dunlop PNG Pty. Ltd.

  PNG  80% Ordinary           —    —    (25,244)

Consolidation adjustments

                    (2,550,143) (174,001) 243,240 
            
  
  
  

 

 

            21,496,245  21,496,245  21,496,245  (22,481,300) (39,563,785) (130,027,170)
            
  
  
  

 

 

172


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS(continued)

Note 29 Events subsequent to balance date

This financial report has been prepared in accordance with Australian accounting standards and other financial reporting requirements (Australian GAAP). The differences between Australian GAAP and IFRS identified to date as potentially having a significant effect on the consolidated entity’s financial performance and financial position are summarised below. The summary should not be taken as an exhaustive list of all the differences between Australian GAAP and IFRS. No attempt has been made to identify all disclosure, presentation or classification differences that would affect the manner in which transactions or events are presented.

The consolidated entity has not quantified the effects of the differences discussed below. Accordingly there can be no assurances that the consolidated financial performance and financial position as disclosed in this financial report would not be significantly different if determined in accordance with IFRS.

Regulatory bodies that promulgate Australian GAAP and IFRS have significant ongoing projects that could affect the differences between Australian GAAP and IFRS described below and the impact of these differences relative to the consolidated entity’s financial reports in the future. The potential impacts on the consolidated entity’s financial performance and financial position of the adoption of IFRS, including system upgrades and other implementation costs which may be incurred, have not been quantified as at the transition date of 1 July 2004 due to the short timeframe between finalisation of the IFRS standards and the date of preparing this report. The impact of future years will depend on the particular circumstances prevailing in those years.

The board has established a formal project, monitored by a steering committee, to achieve transition to IFRS reporting.

The company’s implementation project consists of three phases as described below.

Assessment and planning phase

Design phase

Implementation phase

Except for certain training that has been given to operational staff, the company has not yet commenced the implementation phase. However, the company expects this phase to be substantially complete by 30 June 2005.

The key potential implications of the conversion to IFRS on the consolidated entity are as follows:

financial instruments must be recognised in the statement of financial position and all derivatives and most financial assets must be carried at fair value

income tax will be calculated based on the “balance sheet” approach, which may result in more deferred tax assets and liabilities and, as tax effects follow the underlying transaction, some tax effects will be recognised in equity

surpluses and deficits in the defined benefit superannuation plans sponsored by the entities within the consolidated entity will be recognised in the statement of financial position and the statement of financial performance

revaluation increments and decrements relating to revalued property, plant and equipment and intangible assets will be recognised on an individual asset basis, not a class of asset basis

intangible assets:

internally generated intangible assets will not be recognised

intangible assets can only be revalued if there is an active market

goodwill and intangible assets with indefinite useful lives will be tested for impairment annually and will not be amortised

impairment of assets will be determined on a discounted basis, with strict tests for determining whether goodwill and cash generating operations have been impaired

changes in accounting policies will be recognised by restating comparatives rather than making current year adjustments with note disclosure of prior year effects.

Other than as noted above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material nature likely, in the opinion of the directors of the consolidated entity, to affect significantly the operations, or the state of affairs of the consolidated entity in subsequent financial years.

173


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS(continued)

Note 30 Notes to the statements of cash flows

(a) Reconciliation of cash

For the purposes of the statement of cash flows, cash includes cash on hand and at bank and investments in money market instruments net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:

   

2004

$


  

2003

$


  

2002

$


 

Cash assets

  56,435,875  5,629,939  8,400,672 

Cash on deposit

  —    9,600,000  28,700,000 

Bank overdrafts

  (783,427) (690,488) (1,002,808)
   

 

 

   55,652,448  14,539,451  36,097,864 
   

 

 

 

(b) Acquisition/disposal of businesses and entities

 

 

During the 2004 and 2003 financial years the consolidated entity purchased no businesses.

 

 

During the 2002 year the consolidated entity purchased 100% of businesses of which the details are as follows: 

 

Acquisitions of businesses

 

 

   

2004

$


  

2003

$


  

2002

$


 

Net assets acquired/disposed

          

Property, plant and equipment

  —    —    458,033 

Inventories

  —    —    298,112 

Receivables

  —    —    268,685 

Creditors

  —    —    —   
   

 

 

   —    —    1,024,830 

Goodwill

  —    —    222,001 

Consideration

          
   

 

 

Cash paid/(received)

  —    —    1,246,831 
   

 

 

Outflow/(inflow) of cash

          
   

 

 

Cash consideration

  —    —    1,246,831 
   

 

 

 

Disposal of entities

          

 

During the 2002 year, the consolidated entity disposed of all of its 80% share of South Pacific Tyres PNG Ltd.

 

 

Details of the disposal is as follows:          

Consideration ( Cash )

  —    —    1,983,805 

Net assets of entity disposed of

          

Property, plant and equipment

  —    —    702,062 

Inventories

  —    —    2,174,162 

Receivables

  —    —    1,096,993 

Other assets

  —    —    60,964 

Prepayments

  —    —    82,822 

Creditors

  —    —    (952,514)

Other liabilities and provisions

  —    —    (146,852)

Outside equity

  —    —    (408,017)
   

 

 

   —    —    2,609,620 
   

 

 

Profit / (loss) on disposal

  —    —    (625,815)
   

 

 

174


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS(continued)

Note 30 Notes to the statements of cash flows (continued)

(c) Reconciliation of profit/(loss) from ordinary activities after income tax to net cash provided by operating activities

   

2004

$


  

2003

$


  

2002

$


 

Loss from ordinary activities after income tax

  (22,481,300) (39,563,785) (130,026,700)

Add /(less) items classified as investing/financing activities:

          

(Profit)/loss on sale of non-current assets

  6,134,607  7,721,228  13,327,002 

(Profit)/loss on sale of controlled entities

  —    —    625,815 

Add(less) non-cash items:

          

Amortisation

  1,456,297  1,363,397  1,800,587 

Depreciation

  22,146,175  19,644,910  26,732,747 

Write-down of Property, Plant & Equipment

  2,219,064  —    —   

Amounts set aside to provisions

  (924,572) 41,651,096  134,902,663 

(Decrease)/increase in income taxes payable

  154,865  77,057  (180,144)

Decrease/(increase) in future income tax benefit

  3,714,819  4,209,755  (13,605,285)

Write-off bad trade debts

  1,549,439  1,015,199  1,386,762 
   

 

 

Net cash provided by operating activities before change in assets and liabilitties

  13,969,394  36,118,857  34,963,447 
   

 

 

Change in assets and liabilities adjusted for effects of purchase and disposal of controlled entities during the financial year:          

(Increase)/decrease in receivables

  14,536,916  3,494,488  (13,406,489)

(Increase)/decrease in inventories

  14,620,947  (1,290,172) 4,628,518 

(Increase)/decrease in prepayments

  103,514  (1,064,694) 180,180 

(Decrease)/increase in accounts payable

  (23,186,218) (22,333,744) 20,283,451 

(Decrease)/increase in provisions

  404,360  (71,776,437) (70,029,855)

(Decrease)/increase in reserves

  —    —    (524,325)
   

 

 

   6,479,519  (92,970,559) (58,868,520)
   

 

 

Net cash provided by / (used in) operating activities

  20,448,913  (56,851,702) (23,905,073)
   

 

 

Note 31 Summary of significant differences between generally accepted accounting principles in Australia and generally accepted accounting principles in the United States - RESTATED

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Australia (AGAAP), which differ in certain significant respects with accounting principles generally accepted in the United States (US GAAP). Pursuant to certain rules and regulations of the US Securities and Exchange Commission (SEC), financial statements to be included in filings with the SEC that are prepared on a basis of accounting other than US GAAP are required to provide a description of the significant differences and their effects on net income and equity in arriving at such amounts in accordance with US GAAP.

Subsequent to the issuance of the Company’s consolidated financial statements as of 30 June, 2003 and 2002 and for each of the years in the three-year period ended 30 June, 2003, it was determined that information previously provided with respect to material differences and the effects of such differences on the determination of net loss and partners’ equity in accordance with US GAAP was inaccurate and incomplete. Those previously issued consolidated financial statements indicated (i) a reduction of $10.6 million and $10.7 million as of 30 June, 2003 and 2002, respectively, in arriving at partners’ equity pursuant to US GAAP would be required to eliminate the effects of an asset revaluation reserve recognized in partners’ equity under AGAAP; (ii) a decrease in depreciation expense of $125,000 would be required in arriving at net loss pursuant to US GAAP for each of the years in the three-year period ended 30 June, 2003 to reflect the elimination of the asset revaluation reserve described above and; (iii) that there were no further adjustments of a material nature that would be required to be included in the determination of net loss and partners’ equity pursuant to US GAAP.

Accordingly, the information set out in notes 32 and 33 provides, as at 30 June, 2004, 2003 and 2002 and for each of the years in the three-year period ended 30 June, 2004 a description of the material differences and their effects in reconciling net loss and partners’ equity as reported under AGAAP in the accompanying consolidated financial statements to such amounts pursuant to US GAAP. As indicated above, information as of, and for each of the years in the two-year period ended 30 June 2003 have been presented on a restated basis substantially in their entirety. In addition, the Company has supplementally included disclosures required pursuant to US GAAP that have not otherwise been provided in the consolidated financial statements prepared under AGAAP.

175


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS(continued)

Note 32 Major differences between Australian GAAP and USGAAP

(a) Property, plant and equipment

As permitted by AGAAP, certain property, plant and equipment has been revalued by South Pacific Tyres at various times in prior financial periods. Revaluation increments have increased the carrying value of the assets and accordingly the depreciation charges are different from those which would be required on a historical cost basis pursuant to US GAAP. As a result, a reconciliation adjustment is required to eliminate this effect for US GAAP. Additionally, US GAAP has specific criteria in regard to assets designated as ‘held for sale’ versus ‘ held for use’. Accordingly, certain impairment charges taken under AGAAP may result in reversal under US GAAP, but with ongoing accelerated depreciation charges. Furthermore, certain assets written down to ‘fair value’ under AGAAP may continue to be further depreciated under US GAAP requirements if the ‘held for sale’ classification criteria are not fully satisfied. The annual depreciation and impairment charges under US GAAP are lower than the amounts reflected in the AGAAP consolidated financial statements for the years ended 2002 and 2004 for certain assets. This results in a higher net income for US GAAP purposes of $430,414 for the year ended June 2002 and $128,000 for the year ended June 2004. For the year ended June 2003, and having regard to certain accelerated depreciation charges under US GAAP, depreciation expense would be higher than the amount reflected in the AGAAP consolidated financial statements. Consequently, USGAAP net income for the year ended June 2003 would be lower by $157,714. The above policy also causes differences in reported gains and losses on the sale of property, plant and equipment. Gains and losses for AGAAP are based on consideration less revalued amounts net of accumulated depreciation and amortisation. For US GAAP purposes gains and losses are determined having regard to depreciated historical cost, and net revaluation reserves applicable to assets sold are reported in Income. The effect of this is to decrease US GAAP net income by $8,338 in the year ended 30 June 2002. In the year ended 30 June 2004 the effect is to increase net income by $195,678.

For USGAAP purposes the Company follows the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standard (SFAS) No. 144 “Accounting for the Impairment or Disposal of Long-lived Assets”. SFAS No. 144 superseded SFAS No. 121 “Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of” and was adopted by the Company effective 1 July 2002. SFAS No. 144 retains the requirements of SFAS No. 121 to (a) recognise an impairment loss if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and fair value of the asset less estimated costs to sell and expands specific criteria relative to the classification and accounting for such assets. SFAS No. 144 also requires that long lived assets to be abandoned, exchanged for a similar productive asset, or distributed to owners in a spin-off be considered held and used until the asset is disposed of, exchanged or distributed.

(b) Minority interests

Outside Equity interests are included as part of total Equity under AGAAP. The reconciliation to US GAAP in Note 33 has excluded these from Partners’ Equity in 2002 consistent with US GAAP treatment. The entity in which the outside equity interest existed was sold in the year ended 30 June 2002.

(c) Provisions

The term “provisions” is used in AGAAP to designate accrued expenses with no definitive payment date. Classification between current and non-current is generally based on management assessments, as subject to audit.

(d) Pension plans

The consolidated entity sponsors contributory and non-contributory accumulation and defined benefit pension plans covering substantially all employees. The defined benefit plans generally provide benefits based on salary in the period prior to retirement. All defined benefit plans are funded based on actuarial determination, and contribution levels are revised, on a regular basis so as to ensure that the plans are fundamentally maintained on a fully funded basis. Actuarial calculations have been carried out for the defined benefit funds and the material provisions of the plans are as detailed in Note 26. The majority of assets of the funds are invested in pooled superannuation trusts in the case of the Australian funds and equity securities for other major funds. Limited disclosure in respect of pension plans is presently required by AGAAP. Under AGAAP the actual contributions to the various pension plans are recorded as an expense in the Statement of Financial Performance in the period they are paid or accrued. The disclosure requirements of Statement of Financial Accounting Standards No. 87 (SFAS No. 87) and No. 132 (SFAS No. 132 as revised) have been included in Note 33 to these consolidated financial statements. The consolidated entity reports pension plans aggregated where allowed by SFAS No.87. Additionally, an adjustment is made to recognize the measurement principles of SFAS No. 87 and related standards in determining net income and shareholders’ equity under US GAAP.

(e) Statement of Cash Flows

Net profit (loss) determined under AGAAP differs in certain respects from the amount determined in accordance with USGAAP. A reconciliation of net profit (loss) according to US GAAP to Cash Flows from Operating Activities under US GAAP is provided. There are no material differences between net cash provided by (used in ) financing and investing activities determined in accordance with AGAAP and such amounts determined in accordance with US GAAP. Under AGAAP, cash is defined as cash on hand and deposits repayable on demand, less overdrafts repayable on demand. Under US GAAP, cash and cash equivalents are defined as cash and investments with original maturities of three months or less, and do not include bank overdrafts or restricted deposits. Cash and cash equivalents as of 30 June, 2004, 2003 and 2002 would have been $56,435,875, $15,229,939 and $37,100,672 respectively, under US GAAP.

(f) Income Taxes

Under AGAAP, deferred tax assets (future income tax benefits) attributable to temporary differences are only brought to account when their realisation is assured beyond reasonable doubt. Future income tax benefits related to tax losses are only brought to account when their realisation is virtually certain. At each respective reporting date the value of gross tax losses for which future tax benefits have been brought to account under AGAAP totalled $29,183,817 in June 2004, (2003 $44,173,986) and (2002 $53,137,787). These losses have no expiry date. Refer Note 6( c ). According to US GAAP deferred tax assets are only brought to account when their realization is more likely that not. As US GAAP represents a lower threshold for assessing the realisability of deferred tax assets as compared to AGAAP, there is no material effect in arriving at net profit (loss) under US GAAP. The SPT operations are conducted through the Partnership (non taxable entity), and by its subsidiary – TMA. As TMA is a stand-alone taxable entity certain US GAAP adjustments related to TMA are subject to tax effects. The majority of the US GAAP adjustments are in respect of the Partnership, the results of which are taxed in the hands of the Partners. Accordingly, a substantial number of the adjustments have no tax effect in the SPT consolidated financial statement reconciliation. The consolidated entity has (gross) capital tax losses of $21,271,173 in 2004 (2003 $22,081,014) and (2002 $22,817,537). These losses have no expiry date. Total capital losses are offset by a valuation allowance. The adequacy of the valuation

176


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS(continued)

Note 32 Major differences between Australian GAAP and USGAAP (continued)

(f) Income Taxes (continued)

allowance is regularly assessed. The valuation allowance in respect of the capital losses decreased by $242,952 and $220,957 for the years ended 30 June 2004 and 2003, respectively.

Analysis of Pre tax profit / (loss):     Restated

 
   2004

  2003

  2002

 

Australian operations

  (18,611,616) (35,355,948) (143,606,153)

Foreign operations

  —    —    —   
   

 

 

Total

  (18,611,616) (35,355,948) (143,606,153)
   

 

 

Temporary differences and carryforwards giving rise to deferred tax assets and liabilities at 30 June, follows:

 

 

      Restated

 
   2004

  2003

  2002

 

Trading stock adjustments

  166,306  36,887  30,409 

Provisions

  6,892,310  6,931,368  8,533,692 

Accruals

  237,699  160,408  251,990 

Accumulated tax losses

  8,755,145  13,252,196  15,941,336 

Accumulated capital losses

  6,381,352  6,624,304  6,845,261 

Other

  52,234  —    —   
   

 

 

   22,485,046  27,005,163  31,602,688 

Less Valuation allowance

  (6,381,352) (6,624,304) (6,845,261)
   

 

 

Total deferred assets

  16,103,694  20,380,859  24,757,427 
   

 

 

Total deferred liabilities

          

Property, plant and equipment

  (1,586,941) (2,018,708) (2,132,392)

Other

  —    (130,579) (183,708)
   

 

 

Total deferred liabilities

  (1,586,941) (2,149,287) (2,316,100)
   

 

 

Total net deferred tax assets

  14,516,753  18,231,572  22,441,327 
   

 

 

As the amount of current deferred tax items are not material in nature, all deferred tax assets have been presented as non current in the Statement of Financial Position.

(g) Accounting for Goodwill

Shares in controlled entities are valued on acquisition at the holding company’s cost. Any difference between the fair value of net assets acquired and cost is recognised as goodwill. Under AGAAP, goodwill is amortised on a straight line basis over varying periods not exceeding 20 years. In accounting for business combinations, the Company follows SFAS No. 141, “Business Combinations”, and SFAS No. 142, “Goodwill and Intangible Assets”. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations completed after 30 June 2002 which is consistent with AGAAP. SFAS No. 141 also specifies the types of acquired intangible assets that are required to be recognised and reported separately from goodwill and those acquired intangible assets that are required to be included in goodwill.

SFAS No. 142 requires that goodwill no longer be amortised, but instead tested for impairment at least annually. This requirement creates a difference between the amortisation required under AGAAP and US GAAP. SFAS No. 142 also requires recognised intangible assets to be amortised over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets”. SFAS No. 142 also permits indefinite useful lives to be assigned to recognised intangibles. Any recognised intangible assets determined to have an indefinite useful life will not be amortised, but instead tested for impairment in accordance with the SFAS No. 142 until its life is determined to no longer be indefinite. The Company has determined it has one reporting unit consistent with its single operating segment. SFAS No. 142 requires goodwill and other intangible assets to be tested for impairment at the reporting unit level. A reporting unit is the same as, or one level below, an operating segment as defined by SFAS No. 131 “Disclosure about Segments of an Enterprise and Related Information”.

Accordingly, goodwill and intangible assets with indefinite useful lives are tested for impairment annually or when events or circumstances indicate that impairment may have occurred. Any material diminution in value is charged to the Statement of Financial Performance for USGAAP purposes. For USGAAP purposes no goodwill amortisation has been charged against income since 1 July 2002, the effective date of SFAS No. 142. Goodwill amortisation of $287,389 under AGAAP in 2004 and 2003 has been added back to income in the Statement of Financial Performance for US GAAP purposes.

Goodwill attributable to sold businesses is brought to account in determining the gain or loss on sale.

177


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 32 Major differences between Australian GAAP and USGAAP (continued)

(h) Derivatives not designated as hedges

Derivatives not designated as hedges primarily consist of interest rate swaps and forward exchange contracts which, while mitigating economic risks to which the economic entity is exposed, do not qualify for hedge accounting under USGAAP pursuant to SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” as they relate to hedging of anticipated transactions. These amounts are adjusted in determining net profit (loss) according to US GAAP. The fair value of the interest rate swaps as at June 2003 was an unrealized loss of $517,350. The fair value at June 2004 was an unrealized loss of $62,176. The effect of the necessary reconciling adjustment is an increase in the USGAAP loss for June 2003 of $517,350 and a decrease in the loss of $455,174 for the year ended June 2004.

(i) Derivative Instruments and Hedging Activities

The nature of South Pacific Tyres’ business activities necessarily involves the management of various financial and market risks, including those related to changes in interest rates, currency exchange rates and commodity prices. South Pacific Tyres uses derivative financial instruments to mitigate or eliminate certain of those risks, as a component of its risk management strategy. The Company does not use derivative instruments for trading purposes. Under AGAAP, derivative financial instruments may have hedge accounting treatment applied if the hedging derivatives are effective in reducing the exposure being hedged and are designated as a hedge at the inception of the contract. Hedging derivatives are accounted for in a manner consistent with the accounting treatment of the hedged items. For US GAAP purposes, the Company follows SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended, which became effective for South Pacific Tyres on 1 July 2000. Under SFAS No. 133, as amended, all derivative instruments are recognised in the Statement of Financial Position at their fair values and changes in fair value are recognised immediately in earnings, unless the derivatives qualify as hedges of future cash flows or of investments in foreign operations. For derivatives qualifying as hedges of future cash flows, the effective portion of changes in fair value is recorded temporarily in equity, then recognised in earnings along with the related effects of the hedged items. Any ineffective portion of hedges is reported in net profit (loss) as it occurs. Under US GAAP, all derivatives are recognised on the Statement of Financial Position at their fair value. On the date the derivative is entered into South Pacific Tyres designates the derivative as either a hedge of the fair value of a recognised asset or liability or firm commitment ( fair value hedge) or of the variability of cash flows to be paid or received related to a recognised asset, liability or forecasted transaction (cash flow hedge). There is no material impact on net profit/(loss) as a result of these differences as the fair value of the derivative instruments at the balance sheet date is offset by the foreign currency translation of the hedged receivables and payables recorded at the forward rate for AGAAP to the spot rate at balance date. Any net difference arising relates to the forward points spread between the spot rate and the forward rate at the balance sheet date which is not material. No US GAAP adjustment has been recognised as a consequence.

(j) Supply agreement

In December 2000, Goodyear contracted to pay SPT an amount of $28,500,000 in relation to a 10-year supply agreement commencing in 2003. The amount was to be paid on 1 January 2003. As there were no onerous conditions upon SPT as a result of the contract, and because the receipt of the contribution did not result in a change in the relative interests of the partners in the partnership, the present value of the sum was recognised as revenue under AGAAP in December 2000. SPT further recognised interest income on the determined present value on an accrual basis. Under US GAAP, SPT has recognised the amount of $25,000,000 not as revenue, but as a capital contribution. The capital contribution has been recognised in the period ended 30 June 2002, being the period in which the cash was actually received from Goodyear.

(k) Provision for Environmental remediation/Impairment

(i)Remediation

In December 2001, SPT recognized a liability to remediate its Footscray and Thomastown idled manufacturing facilities to prepare them for sale. The expenditure of $9,900,000 was authorized by the SPT Board of Directors and, under AGAAP, was recorded based on that approval. As a result of further development of the disposal plan, and not withstanding that the plan would not be completed within twelve months, $3,600,000 of additional expenditure was authorised in April 2004 and an additional liability was recorded under AGAAP.

The expenditure is to cover environmental remediation, demolition and project management. This liability is included in the provision for Rationalisation and Restructure in the AGAAP consolidated balance sheet. Refer Note 16. In addition to the actual cash outlays of $508,113 charged against the provision in the year ended 30 June, 2003 a further $1,506,970 was expended and charged against this provision in the year ended 30 June, 2004.

Under US GAAP, environmental liabilities are not recognised until a company has a legal or constructive obligation to remediate. Accordingly, because there is no such obligation to remediate, for US GAAP purposes only the actual cash outlays described above are recognised as expense when they were incurred. Accordingly, the net loss determined under US GAAP was decreased by $2,093,000 as a result of the reversal of the provision increase of $3,600,000 and the expensing of the actual cash outlays charged against the provision in 2004 of $1,506,970.

(ii)Asset Impairment

In December 2001 and as referred to in (i) above, South Pacific Tyres committed to the closedown of its Footscray and Thomastown manufacturing facilities and to prepare them for sale. Because, as a result of this decision, the plants were no longer to generate operating cash flows, the asset carrying values at the time were considered for impairment.

Under US GAAP, in accordance with the provisions of SFAS 121 and SFAS 144, a one time impairment charge of $7,800,000 was taken against property, plant and equipment in 2002 to write down the net book value of these facilities to the estimated fair values attributable to the unremediated sites. In 2004 following the further development of the plans for remediation and sale of the plants, and due to the plants not qualifying for “held for sale” classification under US GAAP, a further evaluation of impairment of the sites was undertaken. Based on the valuations obtained, a further impairment charge of $2,034,000 was required due to the reduction in the values of the unremediated sites. The further impairment charge of $2,034,000 significantly offsets the reversal of the excess Environmental remediation charge of $2,093,000 set out in (i) above. The net impact of these items is to decrese the 2004 loss determined in accordance with US GAAP by $59,030. Accordingly, the cumulative net increase in US GAAP equity at June 2004 for these items is $1,650,917.

178


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 32 Major differences between Australian GAAP and USGAAP (continued)

(l) Activity Alignment

In December 2000 South Pacific Tyres recognised under AGAAP, a $6 million provision for redundancy costs for headcount reduction. The provision was based on an external consultant’s assessment of the required headcount reduction to achieve certain identified overhead efficiencies. The project was called “Activity Alignment”. The plan was not completed and $4,046,953 was reversed in the year ended 30 June 2002 under AGAAP. The $6 million provision at June 2001 did not meet US GAAP recognition criteria and as a result, US GAAP net income in that period is higher by the unspent amount of $4,046,953. In the year ended 30 June 2002 when the unspent amount was reversed for AGAAP, the net income for US GAAP is $4,046,953 less.

(m) Manufacturing Plant – Accelerated Depreciation

In September 2001 the SPT Board of Directors authorized the closure of operations at its Footscray and Thomastown manufacturing facilities. A provision was recognized in December 2001 under AGAAP for the eventual write-off of plant and equipment. The Thomastown facility was to remain partly in operation until July 2002. Under US GAAP the plant and equipment relating to this partial operation was subject to accelerated depreciation for seven months in accordance with SFAS 121, rather than immediate write off. At June 2002 one month’s depreciation in the amount of $285,714 was still to be brought to account having the effect of decreasing US GAAP losses in the year ended June 2002 and increasing US GAAP losses in the year ended June 2003.

(n) Tyre Marketers Tax Adjustment

The Retail/Corporate restructuring provisions (see Note 4) arose in a tax paying entity, Tyre Marketers (Australia) Ltd (TMA). The provision was therefore tax effected at TMA’s effective rate of 30%. Accordingly, US GAAP adjustments relating to TMA have been tax effected.

(o) Business Interruption

In June 2002 South Pacific Tyres released $1,577,315 of the rationalisation provision to net profit (loss) on the basis that production levels and operating capacity of the tyre plant were significantly reduced as a consequence of the restructuring activities at Somerton. While AGAAP allows for costs associated with effecting restructuring activities to be charged as a component of a restructuring provision, it was not considered appropriate under US GAAP. The specific cost cannot be provided for under USGAAP as they are considered future operating costs. This has the effect of increasing the net loss according to US GAAP in the year ended June 2002 by $1,577,316 and decreasing net loss according to US GAAP by the same amount in the year ended June 2003.

(p) Advertising

Under AGAAP, advertising is generally expensed as the service is performed. Under US GAAP, advertising is expensed as incurred although there are exceptions to this, related to co-operative advertising programs and advertising related materials. Costs incurred under South Pacific Tyres’ co-operative advertising program with dealers and franchisees are initially deferred and then recorded as reductions of sales as related revenues are recognised under AGAAP. No direct response advertising is reported as an asset. The effect of this difference is that under US GAAP, Partners’ equity is lower by $840,000 after tax compared to that under AGAAP as such amounts are expensed as incurred under US GAAP. This difference relates to all periods presented as the Yellow Pages advertising cost has remained consistent.

(q) Foreign Currency Translation Reserve

In June 2002 South Pacific Tyres sold its interest in South Pacific Tyres PNG Pty Ltd. Under AGAAP the accumulated foreign currency translation reserve of $3,645,848 was transferred to retained earnings. Under US GAAP the accumulated foreign currency translation reserve included as a component of accumulated other comprehensive income for US GAAP, is reported as part of the gain or loss on sale for the period during which the sale occurs. Consequently the net loss according to US GAAP for the year ended June 2002 is greater than the loss according to AGAAP purposes by $3,645,848. However, there is no effect on partners’ equity under US GAAP.

(r) Securitisation

From November 2001 South Pacific Tyres has maintained a program for the continuous sale of substantially all its domestic trade accounts receivable to the South Pacific Tyres Trust, a bankruptcy remote qualifying special purpose vehicle (QSPV). The QSPV is consolidated for AGAAP, as well as US GAAP, because the program did not meet all the criteria for off balance sheet treatment in accordance with SFAS 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. Accordingly there is no difference between AGAAP & US GAAP treatment of the securitisation program.

The amount of the receivables securitised at June 2004 was $115,149,129 (June 2003 $112,899,035) and (June 2002 $114,957,253). The amount of interest paid by South Pacific Tyres to the QSPV for the year ended June 2004 was $3,941,622 (June 2003 $3,543,248) and (June 2002 $2,068,668). South Pacific Tyres retains the responsibility for servicing the receivables. As receivables are collected the cash proceeds are used to purchase additional receivables. The amount of service fees paid by the QSPV to South Pacific Tyres was approximately $120,000 for the year ended June 2004, $120,000 for the year ended 2003 and $80,000 for the year ended 2002.

(s) Warranties

South Pacific Tyres and its controlled entities offer warranties on the sale of certain of its products as required under the Australian Trade Practices Act. For AGAAP, warranty expense is charged as incurred. For US GAAP, a provision for warranties has been recognised based on past claims experience, sales history and other considerations. The effect of this difference is that under US GAAP, Partners’ equity is lower by $3,204,000 as compared to such amount pursuant to AGAAP. Due to the consistency in the Company’s operations, sales generated, customer base, warranty offerings and historical cost experience there has not been a material change in amount of accrued obligation at the balance sheet date since 2000.

(t) MRT Factory - Costs to Sell land and buildings

In fiscal 2001 South Pacific Tyres decided to close its medium truck radial tyre plant at Somerton. $1,500,000 was recorded as an accrued obligation under AGAAP for the costs associated with the separation and ultimate sale of the land and buildings. In October 2001 the South Pacific Tyres Board reconsidered its decision and changed the classification of the site to “held for use” and reversed the provision. Since the AGAAP provision represented “costs to sell” and the land and buildings were not considered to be impaired under the “held for use” criteria pursuant to SFAS121, the provision was reversed for US GAAP purposes. As a result, net profit according to US GAAP was increased by $1,500,000 in the year ended 30 June 2001 and reduced by the same amount for US GAAP in the year ended 30 June 2002.

179


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 32 Major differences between Australian GAAP and USGAAP (continued)

(u) Change in Accounting Policy - Employee benefits

The consolidated entity has applied the revised AASB 1028 “Employee Benefits” for the first time from 1 July 2002. The liability for wages and salaries, annual leave and sick leave is now calculated using the remuneration rates the consolidated entity expects to pay as at each reporting date, not wage and salary rates current at reporting date. Under AGAAP the initial adjustment of $103,373 to the consolidated financial report as at 1 July 2002 as a result of this change was charged directly to retained earnings. Under US GAAP, this has been accounted for as a reduction of net income of $103,373 in the year ended 30 June 2003.

(v) Revenue Recognition

Under AGAAP, interest revenue and proceeds from the sale of non current assets are recorded as other revenues from ordinary activities and the book basis of the assets and businesses sold is included in expenses. Under US GAAP, interest revenue is classified as other income and the difference between the sale proceeds and the book basis of the assets and business sold would be presented as a gain or loss and included in the determination of net profit (loss). Accordingly, revenue for the years 2004, 2003 and 2002 under US GAAP would have been $818,736,638, $793,596,996 and $829,385,986 respectively.

180


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 33 Reconciliation to United States Generally Accepted Accounting Principles (US GAAP)

         Restated

 
      2004
$


  2003
$


  2002
$


 

Statement of Financial Performance

             

Net profit/(loss) of the consolidated entity per Australian GAAP

     (22,481,300) (39,563,785) (130,026,700)

Less interest of outside equity holders

  32(b) —    —    470 
      

 

 

Net profit / (loss) attributable to the consolidated entity

     (22,481,300) (39,563,785) (130,027,170)

Adjustments required to accord with US GAAP:

             

Add / (deduct)

     977,171  1,473,930  (5,123,240)
      

 

 

Net profit/(loss) according to US GAAP

     (21,504,129) (38,089,855) (135,150,410)
      

 

 

Statement of Comprehensive Income/ (Loss)

             

Net profit/(loss) according to USGAAP

     (21,504,129) (38,089,855) (135,150,410)

Foreign currency translation reserve (net of nil tax)

     —    —    3,341,868 
      

 

 

Comprehensive Income (Loss)

     (21,504,129) (38,089,855) (131,808,542)
      

 

 

Reconciliation of net profit and loss according to US GAAP to Net Cash Provided by Operating Activities determined under US GAAP.

             

Net Cash Provided by Operating Activities according to US GAAP

     20,448,913  (56,851,702) (23,905,073)

Write-down of Property, Plant & Equipment

     (4,253,064) —    (7,800,000)

Depreciation

     (22,018,175) (19,802,624) (26,302,333)

Amortisation

     (1,168,908) (1,076,008) (1,800,587)

Amounts set aside to provisions

     4,524,572  (38,496,466) (130,626,931)

Write-of bad trade debts

     (1,549,439) (1,015,199) (1,386,762)

Gain / (loss) on sale of investments, properties, plant and equipment

     (6,134,607) (7,721,228) (13,952,817)

Outside equity interest in (profit) / loss for the year

     —    —    (470)

Change in assets and liabilities net of effects of purchase and disposal of controlled entities during the financial year:

             

Increase / (decrease) in receivables

     (14,536,916) (3,494,488) 13,406,489 

Increase / (decrease) in inventories

     (14,620,947) 1,290,172  (4,628,518)

Increase / (decrease) in prepayments

     (103,514) 1,064,694  (180,180)

(Increase) / decrease in accounts payable

     23,846,392  22,848,394  (16,683,451)

(Increase) / decrease in provisions

     (1,911,330) 69,587,636  68,529,855 

Increase / (decrease) in reserves

     195,678  —    (3,129,861)

(Increase) / decrease in income taxes payable

     (154,865) (77,057) 180,144 

Increase / (decrease) in future income tax benefit

     (4,067,919) (4,345,979) 13,130,085 
      

 

 

Net profit/(loss) according to US GAAP

     (21,504,129) (38,089,855) (135,150,410)
      

 

 

Adjustments to reflect US GAAP:

             

Add / (Deduct) :

             

Supply Agreement

  32(j) —    —    —   

Manufacturing plant accelerated depreciation

  32(m) —    (285,714) 285,714 

Depreciation difference Thomastown / Footscray

  32(a) (170,000) (170,000) —   

Fixed Asset Revaluation depreciation difference

  32(a) 298,000  298,000  144,700 

Fixed Asset Disposal Difference

  32(a) 195,678  —    (8,338)

FAS87 Pension

  32(d) 205,000  1,032,000  3,600,000 

Environmental remediation

  32(k) 59,030  (508,113) 9,900,000 

Impairment

  32(k)       (7,800,000)

Advertising

  32(p) —    —    —   

Activity Alignment

  32(l) —    —    (4,046,953)

Business Interruption

  32(o) —    1,577,315  (1,577,315)

MRT Factory - Costs to Sell

  32(t) —    —    (1,500,000)

Goodwill Amortisation

  32(g) 287,389  287,389  —   

Interest Rate Swaps

  32(h) 455,174  (517,350) —   

Disposal of PNG - Translation Reserve

  32(q) —    —    (3,645,848)

Initial Adoption of Revised AASB1028

  32(u) —    (103,373) —   

Income tax (expense) / benefit

  32(n) (353,100) (136,224) (475,200)
      

 

 

Total Adjustments

     977,171  1,473,930  (5,123,240)
      

 

 

181


PART III

South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 33 Reconciliation to United States Generally Accepted Accounting Principles (US GAAP)

         Restated

 
      2004
$


  2003
$


  2002
$


 

Partners’ equity according to AGAAP

     35,841,338  58,309,638  97,976,796 

Deduct outside equity interests

  32(b) —    —    —   
      

 

 

Partners’ equity attributable to the Partners

     35,841,338  58,309,638  97,976,796 
      

 

 

Adjustments required to reflect US GAAP:

             

Add / (Deduct) :

             

Asset Revaluation Reserve

  32(a) (12,374,551) (12,570,229) (12,570,229)

Supply Agreement

  32(j) —    —    —   

Manufacturing plant accelerated depreciation

  32(m) —    —    285,714 

Depreciation difference Thomastown / Footscray

  32(a) (340,000) (170,000) —   

Fixed Asset Revaluation depreciation difference

  32(a) 885,400  587,400  289,400 

FAS87 Pension

  32(d) (363,000) (568,000) (1,600,000)

Environmental remediation/Impairment

  32(k) 1,650,917  1,591,887  2,100,000 

Advertising

  32(p) (1,200,000) (1,200,000) (1,200,000)

Warranty

  32(s) (3,204,000) (3,204,000) (3,204,000)

Activity Alignment

  32(l) —    —    —   

Business Interruption

  32(o) —    —    (1,577,315)

MRT Factory - Costs to Sell

  32(t) —    —    —   

Goodwill Amortisation

  32(g) 574,778  287,389  —   

Interest Rate Swaps

  32(h) (62,176) (517,350) —   

Income tax (expense) / benefit

  32(n) 81,876  434,976  571,200 
      

 

 

Total Adjustments

     (14,350,756) (15,327,927) (16,905,230)
      

 

 

Partners’ equity according to US GAAP

     21,490,582  42,981,711  81,071,566 
      

 

 

182


PART III

South Pacific Tyres and Controlled Entities - Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 33 Reconciliation to United States Generally Accepted Accounting Principles ( US GAAP )

   Australian Fund

 
   

2004

$


  

2003

$


  

2002

$


 

Pension Plan data supporting Note 26

          

Plan’s funded status at 30 June is summarised as follows:

          

Actuarial present value of accumulated obligations:

          

- Vested

  135,209,000  120,700,000  141,100,000 

- Non Vested

  —    —    —   

Total accumulated benefit obligation

  135,209,000  120,700,000  141,100,000 

Projected benefit obligation

  135,957,000  121,887,000  142,532,000 

Plan assets at fair value

  138,236,000  121,360,000  152,709,000 

Excess / (deficiency) of assets over benefit obligations

  2,279,000  (527,000) 10,177,000 

Unrecognised net gain / (loss)

  (11,588,000) (11,719,000) 573,000 

Net Pension (Liability) / Asset

  13,867,000  11,192,000  9,604,000 

NET PENSION COST

          

Defined Benefit Plans:

          

- Service cost-benefits earned during the year

  10,240,000  13,914,000  10,311,000 

- Interest cost on projected benefit obligation

  7,313,000  7,131,000  10,072,000 

- Expected return on plan assets

  (8,495,000) (10,092,000) (13,084,000)

- Net amortisation and settlement and curtailment (gain) / loss

  —    —    —   

Net Pension Cost of Defined Benefit Plans

  9,058,000  10,953,000  7,299,000 

ASSUMPTIONS ( used to determine net pension cost )

          

Weighted average discount rate

  6.00% 6.00% 6.00%

Rate of increase in compensation level

  3.50% 3.50% 3.50%

Expected long term rate of return

  7.00% 7.00% 7.00%

The expected long term rate of return on pension assets is based on a strategic asset allocation. The real rate of return (net of inflation) is expected to average 4.5% over the long term and the long term average rate of inflation is expected to be 2.5%.

          

MEASUREMENT DATE

  30 June 2004  30 June 2003  30 June 2002 

CHANGE IN BENEFIT OBLIGATION

          

Projected Benefit Obligation at beginning of year

  121,887,000  142,532,000  179,926,000 

Service cost

  10,240,000  13,914,000  10,311,000 

Interest cost

  7,313,000  7,131,000  10,072,000 

Member contributions

  1,387,000  —    —   

Actuarial (gain) / loss

  8,511,000  (14,990,000) (19,177,000)

Benefits, administrative expenses and tax paid

  (13,381,000) (26,700,000) (38,600,000)

Projected Benefit Obligation at end of year

  135,957,000  121,887,000  142,532,000 

ASSUMPTIONS (used to determine end of the year benefit obligations)

          

Weighted average discount rate

  5.50% 6.00% 6.00%

Rate of increase in compensation level

  3.50% 3.50% 3.50%

CHANGE IN PLAN ASSETS

          

Market value of assets at beginning of year

  121,360,000  152,709,000  180,630,000 

Member / Employer Contributions

  13,120,000  12,541,000  10,467,000 

Benefits, administrative expenses and tax paid

  (13,381,000) (26,700,000) (38,600,000)

Actual return on plan assets

  17,137,000  (17,190,000) 212,000 

Market value of assets at end of year

  138,236,000  121,360,000  152,709,000 

183


PART III

South Pacific Tyres and Controlled Entities - Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

Note 30 Notes33 Reconciliation to the statements of cash flows (continued)

(c) Reconciliation of profit/(loss) from ordinary activities after income tax to net cash provided by operating activities

   Consolidated

  Partnership

 
   

2003

$


  

2002

$


  

2003

$


  

2002

$


 

Loss from ordinary activities after income tax

  (39,563,785) (130,026,700) (44,501,568) (96,796,795)

Add/(less) items classified as investing/financing activities:

             

(Profit)/loss on sale of non-current assets

  7,721,228  13,327,002  7,847,820  13,260,833 

(Profit)/loss on sale of controlled entities

  —    625,815  —    —   

Add/(less) non-cash items:

             

Amortisation

  1,363,397  1,800,587  839,539  1,054,413 

Depreciation

  19,644,910  26,732,747  11,914,045  17,716,624 

Amounts set aside to provisions

  41,651,096  134,902,663  11,421,182  98,309,955 

(Decrease)/increase in income taxes payable

  77,057  (180,144) —    —   

Decrease/(increase) in future income tax benefit

  4,209,755  (13,605,285) —    —   

Write-off bad trade debts

  1,015,199  1,386,762  —    —   
   

 

 

 

Net cash provided by operating activities before change in assets and liabilities

  36,118,857  34,963,447  (12,478,982) 33,545,030 
   

 

 

 

Change in assets and liabilities adjusted for effects of purchase and disposal of controlled entities during the financial year:

             

(Increase)/decrease in receivables

  3,494,488  (13,406,489) 20,931,247  34,727,376.00 

(Increase)/decrease in inventories

  (1,290,172) 4,628,518  3,119,470  (822,786)

(Increase)/decrease in prepayments

  (1,064,694) 180,180  (39,357) (710,209)

(Decrease)/increase in accounts payable

  (22,333,744) 20,283,451  (13,215,235) 35,149,537 

(Decrease)/increase in provisions

  (71,776,437) (70,029,855) (58,029,126) (57,580,689)

(Decrease)/increase in reserves

  —    (524,325) —    —   
   

 

 

 

   (92,970,559) (58,868,520) (47,233,001) 10,763,229 
   

 

 

 

Net cash provided by / (used in) operating activities

  (56,851,702) (23,905,073) (59,711,983) 44,308,259 
   

 

 

 

Note 31 Reconciliation ToUnited States Generally Accepted Accounting Principles ( US GAAP

No material adjustments are required to be made to the Financial Statements of South Pacific Tyres and Controlled Entities for the year ended 30 June 2003 to ensure compliance with US GAAP. The only adjustment, of a non material nature, which would be required would be the elimination of the Asset Revaluation Reserve recorded within equity under AGAAP, and the elimination of the impact of the incremental depreciation charge which emanated therefrom.

The annual depreciation charge under US GAAP would be $125,000 lower than the amount reflected in the AGAAP financials.

This adjustment would result in a reduction in US GAAP equity of $10.6 million at 30 June 2003 ($10.7 million at 30 June 2002)

PART III

South Pacific Tyres - Statutory Accounts Year Ended 30 June 2003


Directors’ Declaration

South Pacific Tyres and Controlled Entities

In the opinion of the directors of South Pacific Tyres (“the partnership”):

(a)the partnership is not a reporting entity;

(b)the financial statements and notes, set out on pages 133 to 172, are in accordance with the Corporations Act 2001, as required by Section 11 of the Partnership Agreement, including:

(i)giving a true and fair view of the financial position of the partnership as at 30 June 2003 and of its performance, as represented by the results of its operations and its cash flows, for the year ended on that date, in accordance with the basis of accounting described in Note 1; and

(ii)complying with Accounting Standards in Australia to the extent described in Note 1 and the Corporations Regulations 2001; and

(c)there are reasonable grounds to believe that the partnership will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors:

/s/    HUGH D. PACE        10/8/2003


DirectorDate ( continued )

 

/s/    DAVID GRAHAM10/8/2003


DirectorDate

South Pacific Tyres – Statutory Accounts Year Ended 30 June 2003


INDEPENDENT AUDIT REPORT

CONTRIBUTIONS

Employer contributions to the Australian fund during the year ending 30 June 2005 are expected to be $13,580,000.

ADDITIONAL INFORMATION

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

2005

  14,936,000

2006

  15,185,000

2007

  18,597,000

2008

  18,080,000

2009

  18,739,000

2010 - 2014

  82,616,000

Plan Assets

The allocation of the Fund’s assets by asset category is as follows:

      Plan assets

 
   

Target

Allocation


  

June

2004


  

June

2003


 

Asset Category

          

Equity securities

  64% 64% 73%

Debt securities

  22% 21% 15%

Real estate

  9% 9% 10%

Other

  5% 6% 2%

The primary investment objective of the South Pacific Tyres Fund within Equipsuper is to achieve a rate of return ( after tax and investment expenses ) that exceeds inflation (CPI) increases by at least 4.0% per annum over rolling three year periods.

The South Pacific Tyres partnership (SPT) has maintained Pension Plan benefits for its Australian employees which has comprised both Accumulation and Defined Benefit Components. Both the Defined Benefit and Accumulation components of the Plan have legally existed within a plan sponsored by its Australian partner, Ansell Limited (Ansell). SPT has maintained notional separation of the plan assets and the benefit obligations for all periods presented. Accordingly the accompanying financial information is intended to provide relevant disclosures required pursuant to SFAS 87 and SFAS 132 (revised) with respect to the defined benefit and accumulation components of the SPT plan. Effective 1 April 2004 legal separation from Ansell was achieved and members were transferred out of the Pacific Dunlop Superannuation Fund to Equipsuper (an independent superannuation fund).

         Restated

 
      

2004

$


  

2003

$


  

2002

$


 

Partners’ equity in accordance with US GAAP - Rollforward

             

Opening Balance July 1

     42,981,711  81,071,566  217,507,945 

Cumulative effect of restatement adjustments at 1st July 2001

     —    —    (29,627,838)

Net Profit (loss)

     (21,504,129) (38,089,855) (135,150,410)

Additional contributed equity - Goodyear Tyres Pty Ltd

     13,000  —    —   

Movement in Other Comprehensive Income

     —    —    3,341,869 

Additional Equity Contribution - Supply Agreement

  32(j) —    —    25,000,000 
      

 

 

Closing Balance

     21,490,582  42,981,711  81,071,566 
      

 

 

184


PART III

South Pacific Tyres and Controlled Entities - Statutory Accounts Year Ended 30 June 2004

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 33 Reconciliation to United States Generally Accepted Accounting Principles ( US GAAP ) ( continued )

Balance Sheet GAAP adjustment reconciliation

  Notes

  AGAAP

 

2004

$

Adjustment


  US GAAP

 AGAAP

 

2003

$

Adjustment


  US GAAP

 AGAAP

 

2002

$

Adjustment


  US GAAP

STATEMENT OF FINANCIAL POSITION

                        

CURRENT ASSETS

                        

Cash assets

    56,435,875    56,435,875 15,229,939    15,229,939 37,100,672    37,100,672

Receivables

    130,174,880    130,174,880 137,441,630    137,441,630 141,657,657    141,657,657

Inventories

    147,411,193    147,411,193 162,032,137    162,032,137 160,741,965    160,741,965

Prepayments

    3,219,753    3,219,753 3,323,269    3,323,269 2,258,575    2,258,575
     
    
 
 

 
 
    

TOTAL CURRENT ASSETS

    337,241,701    337,241,701 318,026,975    318,026,975 341,758,869    341,758,869
     
    
 
 

 
 
    

NON-CURRENT ASSETS

                        

Receivables

    1,651,270    1,651,270 9,546,303    9,546,303 30,384,952    30,384,952

Property, plant and equipment

 32
32
32
(a),
(m),
(k)
 197,823,676 (21,663,151) 176,160,525 218,425,028 (19,952,829) 198,472,199 202,827,093 (19,795,115) 183,031,978

Intangible assets

 32(g) 4,498,952 574,778  5,073,730 4,916,874 287,389  5,204,263 5,204,262    5,204,262

Deferred tax assets

 32(n) 14,516,753 81,876  14,598,629 18,231,572 434,976  18,666,548 22,441,327 571,200  23,012,527
     
 

 
 
 

 
 
 

 

TOTAL NON-CURRENT ASSETS

    218,490,651 (21,006,497) 197,484,154 251,119,777 (19,230,464) 231,889,313 260,857,634 (19,223,915) 241,633,719
     
 

 
 
 

 
 
 

 

TOTAL ASSETS

    555,732,352 (21,006,497) 534,725,855 569,146,752 (19,230,464) 549,916,288 602,616,503 (19,223,915) 583,392,588
     
 

 
 
 

 
 
 

 

CURRENT LIABILITIES

                        

Payables

 32
32
32
(p),
(d),
(h)
 144,028,406 1,625,176  145,653,582 159,953,830 2,285,350  162,239,180 161,782,718 2,800,000  164,582,718

Interest bearing liabilities

    188,484,663    188,484,663 171,413,834    171,413,834 142,395,212    142,395,212

Current tax liabilities

    290,809    290,809 135,944    135,944 58,887    58,887

Provisions

 32
32
32
32
32
(k),
(s),
(I),
(o),
(t)
 54,318,272 (8,280,917) 46,037,355 53,365,690 (6,187,887) 47,177,803 102,837,858 (5,118,685) 97,719,173
     
 

 
 
 

 
 
 

 

TOTAL CURRENT LIABILITIES

    387,122,150 (6,655,741) 380,466,409 384,869,298 (3,902,537) 380,966,761 407,074,675 (2,318,685) 404,755,990
     
 

 
 
 

 
 
 

 

NON-CURRENT LIABILITIES

                        

Payables

    704,179    704,179 7,986,959    7,986,959 28,491,815    28,491,815

Interest bearing liabilities

    125,707,508    125,707,508 111,097,444    111,097,444 61,095,014    61,095,014

Provisions

    6,357,177    6,357,177 6,883,413    6,883,413 7,978,203    7,978,203
     
    
 
    
 
    

TOTAL NON-CURRENT LIABILITIES

    132,768,864    132,768,864 125,967,816    125,967,816 97,565,032    97,565,032
     
 

 
 
 

 
 
 

 

TOTAL LIABLITIES

    519,891,014 (6,655,741) 513,235,273 510,837,114 (3,902,537) 506,934,577 504,639,707 (2,318,685) 502,321,022
     
 

 
 
 

 
 
 

 

PARTNERS’ EQUITY/ACCUMULATED LOSSES

    35,841,338 (14,350,756) 21,490,582 58,309,638 (15,327,927) 42,981,711 97,976,796 (16,905,230) 81,071,566
     
 

 
 
 

 
 
 

 

TOTAL LIABILITIES AND PARTNERS’ EQUITY

    555,732,352 (21,006,497) 534,725,855 569,146,752 (19,230,464) 549,916,288 602,616,503 (19,223,915) 583,392,588
     
 

 
 
 

 
 
 

 

185


Report of Independent Registered Public Accounting Firm

The Partners

South Pacific Tyres:

We have audited the accompanying consolidated statement of financial position of South Pacific Tyres (the Partnership) as of 30 June, 2004, 2003 and 2002 and the related consolidated statements of financial performance, partners’ equity and cash flows for each of the years in the three-year-period ended 30 June, 2004. These consolidated financial statements are the responsibility of the Partnerships’ management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of 30 June, 2004, 2003 and 2002, and the results of its operations and its cash flows for each of the years in the three-year period ended 30 June, 2004 in conformity with generally accepted accounting principles in Australia.

Accounting principles generally accepted in Australia vary in certain significant respects from accounting principles generally accepted in the United States. Information relating to the nature and effect of such differences as it relates to Partnership is presented in Note 31 to the consolidated financial statements. The application of accounting principles generally accepted in the United States would have affected consolidated financial performance for each of the years in the three-year period ended 30 June, 2004 and the determination of partners’ equity as of 30 June, 2004, 2003 and 2002, to the extent summarized in Note 31 to 33 to the consolidated financial statements.

As discussed in Note 31 to the consolidated financial statements, the Partnership has restated its description of significant differences between generally accepted accounting principles in Australia and generally accepted accounting principles in the United States and their effects on financial performance and partners’ equity for each of the years in the two-year period ended 30 June, 2003.

KPMG

Dated in Melbourne, Australia

13 October, 2004,

except for notes 31, 32 and 33

which are as of 15 March, 2005

186


Exhibit Index

 

The Partners

South Pacific Tyres

We have audited the accompanying consolidated statement
1.1Constitution of financial position of South Pacific Tyres Partnership (the Partnership) as of June 30, 2003 and 2002, and the related consolidated statement of financial performance and cash flows as set out on pages 133Ansell Limited (incorporated by reference to 172. These consolidated financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Australia and the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of June 30, 2003 and 2002, and the results of its operations and its cash flows, in conformity with generally accepted accounting principles in Australia.

Accounting principles generally accepted in Australia vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences as it relates to Partnership is presented in Note 31 to the consolidated financial statements. The application of accounting principles generally accepted in the United States of America would have affected consolidated results of operations for each of the years ended June 30, and partners’ equity as of June 30, 2003 and 2002, to the extent summarized in Note 31 to the consolidated financial statements.

/s/ KPMG

Dated in Melbourne, Australia this 24th day of October, 2003

PART III

Item 19 : Exhibits


EXHIBIT INDEX

    1.1*  Constitution of Ansell Limited (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.1*  Co-ordination Agreement—Sale of Pacific Brands dated November 30, 2001 made between Pacific Dunlop Limited, Textile Industrial Design and Engineering Pty Ltd, Union Knitting Mills Pty Ltd, Boydex International Pty Ltd, Foamlite (Australia) Pty Ltd, Vita Pacific Pty Ltd, Pacific Dunlop Holdings (NZ) Limited, Pacific Dunlop Holdings (Europe) Ltd, Pacific Dunlop Holdings (USA) Inc, PD International Pty Limited, Pacific Dunlop Holdings (Singapore) Pte Ltd, PD Holdings (Malaysia) Sdn Bhd, PD Licensing Pty Ltd, Niblick Pty Ltd, Cliburn Investments Pty Ltd, and PD Shared Services Holdings Pty Ltd (as sellers) and PB Holdings NV, Pacific Brands Holdings Pty Ltd, Pacific Brands Household Products Pty Ltd, Pacific Brands Footwear Pty Ltd, Pacific Brands Sport & Leisure Pty Ltd, Pacific Brands Clothing Pty Ltd and Pacific Brands Holdings (NZ) Ltd (as buyers) (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.2*  Sale of Business Agreement, Pacific Brands—Australia dated November 30, 2001 made between Pacific Dunlop Limited, Textile Industrial Design and Engineering Pty Ltd, Union Knitting Mills Pty Ltd, Boydex International Pty Ltd, Foamlite (Australia) Pty Ltd, Vita Pacific Pty Ltd, PD Licensing Pty Ltd, Niblick Pty Ltd and Cliburn Investments Pty Ltd (as sellers) and Pacific Brands Holdings Pty Ltd, Pacific Brands Footwear Pty Ltd, Pacific Brands Sport & Leisure Pty Ltd, Pacific Brands Clothing Pty Ltd, Pacific Brands Household Products Pty Ltd, and PB Holdings NV (as buyers) (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.3*  Sale of Business Agreement dated November 30, 2001 between Pacific Dunlop Limited, Pacific Dunlop Holdings (NZ) Limited, PD Licensing Pty Ltd and Pacific Brands Holdings (NZ) Ltd (as sellers) and PB Holdings NV (as buyer) (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.4*  Letter Agreement dated November 30, 2001 between PB Holdings NV (as buyer) and PD Holdings (Malaysia) Sdn Bhd (as Seller) regarding proposed sale of shares of Restonic (M) Sdn Bhd (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.5*  Share Sale Agreement, PD Shared Services LSM Pty Ltd dated November 30, 2001 between PD Shared Services Holdings Pty Ltd and Pacific Dunlop Limited (as sellers) and Pacific Brands Holdings Pty Ltd (as buyer) (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.6*  Share Sale Agreement, Pacific Brands (Fiji) Limited dated November 30, 2001 between P.D. International Pty Ltd and Pacific Dunlop Limited (as sellers) and PB Holdings NV (as buyer) (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.7*  Share Sale Agreement, Pacific Dunlop Holdings (Hong Kong) Limited dated November 30, 2001 between Pacific Dunlop Limited and P.D. International Pty Ltd (as sellers) and PB Holdings NV (as buyer) (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.8*  Share Sale Agreement, PT Barlei Indonesia dated November 30, 2001 between PD International Pty Ltd and Pacific Dunlop Holdings (Singapore) Pte Ltd (as sellers) and PB Holdings BV (as buyer) (incorporated by reference to File No. 0-15850, Form 20-F,File No. 0-15850, Form 20-F. filed by the Registrant on December 30, 2002).

Item 19 : Exhibits


EXHIBIT INDEX (continued)

    4.9*  Share Sale Agreement, Pacific Brands (UK) Ltd dated November 30, 2001 between Pacific Dunlop Holdings (Europe) Limited and Pacific Dunlop Limited (as sellers) and PB Holdings NV (as buyer) (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.10*Stock Purchase Agreement, PacBrands USA Inc dated November 30, 2001 between Pacific Dunlop Holdings (USA) Inc and Pacific Dunlop Limited (as sellers) and PB Holdings NV (as buyer) (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.11*Share Sale Agreement, Bonds Industries Limited dated November 30, 2001 between Pacific Dunlop Limited (as seller) and Pacific Brands Holdings Pty Ltd and PB Holdings NV (as buyers) (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.12*Letter Agreement dated November 30, 2001 between Pacific Dunlop Limited and PB Holdings NV relating to the Shares Agreement Australia, Shares Agreement USA and Novare Shares Agreement (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.13*Letter Agreement dated November 30, 2001 between Pacific Dunlop Limited and PB Holdings NV relating to the Shares Agreement Indonesia, Shares Agreement Fiji, Shares Agreement Hong Kong and Shares Agreement UK (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on December 30, 2002).
    4.14*Australian Deed dated October 19, 2001 made between The Goodyear Tire & Rubber Company, Goodyear Tyres Pty Ltd, Goodyear Australia Pty Ltd, Pacific Dunlop Limited, Pacific Dunlop Tyres Pty Ltd and Tyre Marketers (Australia) Limited in relation to the restructuring of the South Pacific Tyres (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on November 9, 2001).
    4.15*Co-ordination Deed dated October 19, 2001 made between The Goodyear Tire & Rubber Company, Goodyear Tyres Pty Ltd, Goodyear Australia Pty Ltd, Pacific Dunlop Limited, Pacific Dunlop Tyres Pty Ltd and Tyre Marketers (Australia) Limited, Goodyear New Zealand Limited, Pacific Dunlop Holdings (NZ) Limited and South Pacific Tyres NZ Limited in relation to the restructuring of the South Pacific Tyres (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on November 9, 2001).
    4.16*Sale of Business Agreement dated September 20, 2001, made between the following Pacific Dunlop Group Companies: Ashdown Enterprise (Wholesale) Pty Ltd, The Distribution Group Pty Limited, The Distribution Group Holdings Pty Limited, PD Licensing Pty Limited, TDG Warehousing Pty Ltd and Pacific Dunlop Limited (as sellers) and Automotive Parts Group Limited and Automotive Parts Group Holdings Limited (as buyers) in relation to the sale of Pacific Automotive in Australia (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on November 9, 2001).
    4.17*Agreement for the Sale of Australian business dated February 26, 2001, made between Sara Lee Apparel (Australasia) Pty Limited and Sara Lee Corporation (the sellers) and Pacific Dunlop Ltd (the buyer) in respect of the Sara Lee Apparel business (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on November 9, 2001).
    4.18*Form of agreement with non-Executive Directors of Pacific Dunlop Limited in relation to benefits upon retirement (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on November 9, 2001).
    7.1    Computation of the Ratio of Earnings to Fixed Charges.
12.1  Certification of Chief Executive Officer or Equivalent Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
12.2  Certification of Chief Financial Officer or Equivalent Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
13.1  Certification of Chief Executive Officer or Equivalent Pursuant to Rule 13a-14(b) or

Item 19 : Exhibits


EXHIBIT INDEX (continued)

7.1  Computation of the Ratio of Earnings to Fixed Charges.
8.1List of Subsidiaries.
12.1Certification of Chief Executive Officer or Equivalent Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
12.2Certification of Chief Financial Officer or Equivalent Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
13.1Certification of Chief Executive Officer or Equivalent Pursuant to Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code.
13.2  Certification of Chief Financial Officer or Equivalent Pursuant to Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code.

 

*Previously filed.

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187