5F | 5F CONTRACTUAL OBLIGATIONS | | | | | | | | | | | | | PAYMENTSDUEBYPERIODIN $MILLIONS
| CONTRACTUAL OBLIGATIONS
| | Total
| | LESS THAN 1 YEAR
| | 1-3 YEARS
| | 3-5 YEARS
| | MORE THAN 5 YEARS
| Long-Term Debt Obligations | | 331.0 | | — | | 115.9 | | 215.1 | | — | Interest on Debt Obligations(1) | | 59.0 | | 17.5 | | 26.8 | | 14.7 | | — | Operating Lease Obligations | | 46.0 | | 9.5 | | 16.4 | | 10.6 | | 9.5 | Purchase Obligations | | 0.9 | | 0.9 | | — | | — | | — | Defined Benefit Plan Contributions(2) | | 5.2 | | 5.2 | | — | | — | | — | Other Long-Term Liabilities | | 39.3 | | — | | 9.9 | | 9.1 | | 20.3 | | |
| |
| |
| |
| |
| Total | | 481.4 | | 33.1 | | 169.0 | | 249.5 | | 29.8 | | |
| |
| |
| |
| |
|
(1) | These amounts are the Company’s best estimates based on current conditions however may vary due to potential variations in the mix of the debt portfolio between fixed and floating interest rates. |
(2) | The Company is not in possession of and does not believe that it can reasonably estimate amounts that it will be required to contribute to its defined benefit plans beyond the next twelve months. However the Company does not anticipate that such amounts will be material on an annual basis. |
| | | | | | | | | | | | | 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 | | |
| |
| |
| |
| |
|
Refer to Note 28 to the Consolidated Financial Statements contained within Item 18 for detailed information in respect of the derivative financial instruments used by the Company such as foreign exchange and interest rate swaps and the Company’s exposure to interest rate risk. Amounts due under foreign currency contracts in respect of contracted obligations are included within Current Liabilities on the Statement of Financial Position. 5G SAFE HARBOUR Not applicable 5H | CRITICAL ACCOUNTING POLICIES |
5H CRITICAL 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. Long-Lived Assets – Valuation Fixed assets, goodwill and brand names are assessed to ensure carrying values do not exceed estimated recoverable amounts. 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. PART I Item 5 : Operating and Financial Review and Prospects 5H CRITICAL ACCOUNTING POLICIES(continued) 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 virtually certain that they will be recovered. 26
PART I
Item 5 : Operating and Financial Review and Prospects
5H | CRITICAL 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. The Group has no significant long 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 6A | DIRECTORSAND SENIOR MANAGEMENT |
6A DIRECTORSAND 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 the date of this report there are sixseven Directors in office, of whichwhom Mr D. Tough is Chief Executive OfficerR. Bell was appointed a Non-executive Director in August 2005 and Managing Director. Mr. H. Boon resigned on 30 June 2004 andMr G. Barnes was replaced as Chief Executive Officer and Managingappointed a Non-executive Director by Mr. D. Tough effective 1 July 2004.in September 2005. 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 20042005 the Directors of Ansell Limited were as follows: | | | | | | | | | | Name
| | Age
| | Position
| | Year of Initial Appointment
| | Expiration of Current Term(1)
| | Edward Tweddell | | 63 | | Chairman | | 2001 | | 2005 | | Peter L. Barnes(2) | | 61 | | Director | | 2001 | | 2004 | | L. Dale Crandall | | 63 | | Director | | 2002 | | 2005 | (3) | Herbert J. Elliott | | 66 | | Director | | 2001 | | 2004 | | Michael J. McConnell(4)(5) | | 38 | | Director | | 2004 | | 2007 | |
| | | | | | | | | Name
| | Age
| | Position
| | Year of Initial Appointment
| | Expiration of Current Term (1)
| Edward Tweddell(2) | | 64 | | Chairman | | 2001 | | 2005 | Peter L. Barnes(2) | | 62 | | Director | | 2001 | | 2004 | L. Dale Crandall | | 64 | | Director | | 2002 | | 2005 | Herbert J. Elliott | | 67 | | Director | | 2001 | | 2004 | Michael J. McConnell(3) | | 39 | | Director | | 2004 | | 2007 | Douglas D. Tough | | 56 | | Chief Executive Officer | | 2004 | | — |
(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 who have served the longest since last being re-elected) retire each year and may offer themselves for re-election by the shareholders. |
(2) | Dr Edward Tweddell passed away on 4 August 2005. Mr Peter L. Barnes was re-electedunanimously elected by a vote of shareholders at the Annual General Meeting held in October 2004.Board to succeed Dr Tweddell as Chairman. |
(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. |
(4) | Mr. Michael J. McConnell was appointed to the Board on 16 April 2004 having actively served as alternate to Mr. Stanley P. Gold since October 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 servedserves as alternate to Mr. Michael J. McConnell since 16 April 2004.McConnell. |
As of 30 June 20042005 the Executive Officers(1) who were not Directors were: | | | | | | | Name
| | Position
| | Year of Initial Appointment
| | Commenced employment with Ansell Limited
| Phil Corke | | Senior Vice President, Human Resources & Communications | | 1998 | | 1998 | Werner Heintz | | Senior Vice President & Regional Director – Europe | | 2001 | | 1999 | Rustom Jilla | | Senior Vice President & Chief Financial Officer | | 2002 | | 2002 | Neil O’Donnell | | Senior Vice President & Regional Director – Asia Pacific | | 2001 | | 1988 | William Reed | | Senior Vice President & Regional Director – Americas | | 2001 | | 1989 | William G Reilly, Jr. | | Senior Vice President & General Counsel | | 2000 | | 2000 |
| | | | | | | Name
| | Position
| | Year of Initial Appointment
| | Commenced employment with Ansell Limited
| Phil Corke | | Senior Vice President, Human Resources & Communications | | 1998 | | 1998 | Werner Heintz | | Senior Vice President & Regional Director – Europe, Middle East and Africa | | 2001 | | 1999 | Rustom Jilla | | Senior Vice President & Chief Financial Officer | | 2002 | | 2002 | William Reed | | Senior Vice President & Regional Director – Americas | | 2001 | | 1989 | 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 :6: Directors, Senior Management and Employees 6A | DIRECTORSAND SENIOR MANAGEMENT(continued) |
6A DIRECTORSAND SENIOR MANAGEMENT (continued) The following is a brief biography of each of the Directors and Executive Officers of Ansell Limited as at 30 June 20042005 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 Australia Post and CSIRO, he is also Chairman of the Nepenthe Group Pty Ltd. Dr Tweddell’s experience includes 10 years with a multi-national pharmaceutical company primarily involved2001 until his death 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 63August 2005.
Peter L Barnes,B.COM, (HONS.)MBAMELB Appointed Non-executive Director in October 2001. He2001 and Chairman in August 2005. Chairman of the Nomination, Remuneration and Evaluation Committee and member of the Audit Committee. Peter Barnes is a Director of News Corporation and Metcash Limited and is Chairman of Samuel Smith & Son Pty Limited and a Director of The News Corporation Limited and Metcash Trading Limited. He is also President of the Winemakers Federation of Australia and a Member of the National Food Industry Council. MrPeter Barnes hasbrings to the Board 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 organisationPhilip Morris International Inc. where he held several senior management positions in USA, Europe,Australia and overseas, including Managing Director, Lindeman Holdings Ltd, and President, Asia and Australia.Region, based in Hong Kong.
The Board considers Peter Barnes to be an independent Director. Resident Sydney. Age 6162 DougDouglas D Tough,MBA,BBA
Managing Director and Chief Executive Officer since 1 July 2004. Prior to joining Ansell, Mr.Mr Tough spent 17 years with Cadbury Schweppes plc in a number of international and domestic leadership roles, most recently asincluding President and Chief Executive Officer of its largest division world wide,worldwide, Dr Pepper/Seven Up, North America. Mr Tough has also had 12 years’ experience with Procter & Gamble in various sales and marketing assignments. He holds an MBA from the University of Western Ontario, Canada, and a BBA from the University of Kentucky, USA. As an Executive Director, Douglas Tough is not independent. Resident USA. Age 56 Glenn L L Barnes,B.AG.SCI (MELB),CPM,FAMI,FAIM,FAICD,FAIBF,FRSA Appointed Non-executive Director in September 2005. Glenn Barnes is Chairman of Baycorp Advantage Limited and a Director of Lion Nathan Limited. He also serves as Chairman, Director and council member of a number of not-for-profit and private interest organisations. He was formerly a Director of Repco Corporation Limited, National Foods Limited and Banksia Wines Limited. Glenn Barnes commenced his management career with Unilever Limited and has been involved in banking and financial services for over 30 years in Australia and internationally, including the UK and USA. Since retiring from executive roles in 2002, Mr Barnes has focused on governance and consulting. The Board considers Glenn Barnes to be an independent Director. Resident Melbourne. Age 58 Ronald J S Bell BA (STRATHCLYDE) Appointed Non-executive Director in August 2005. Member of the Nomination, Remuneration and Evaluation Committee. Mr Bell is a Director of Gallaher Group Plc and Northern Foods Plc and is Chairman of the Milk Link Co-Operative. Mr Bell is an experienced international consumer industry executive with a background of over 30 years in highly competitive global branded products. He is a former President of Kraft Foods, Europe and served as Executive Vice President of Kraft Foods Inc. Mr Bell brings to the Board broad general management and marketing skills particularly in the European and North American markets. The Board considers Ronald Bell to be an independent Director. Resident U.K. Age 55 PART I Item 6: Directors, Senior Management and Employees 6A DIRECTORSAND SENIOR MANAGEMENT (continued) L. Dale Crandall,MBAUC BBERKELEYERKELEY,CPA Appointed Non-executive Director in November 2002. Chairman of the Audit Committee. Non-executive Director since November 2002.Mr Crandall is a Director of Union Bank of California, Covad Communications Group, and BEA Systems Inc. and Coventry Health Care Inc. He is also a 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.USA. The Board considers Dale Crandall to be an independent Director. Resident USA. Age 6364 Herbert J Elliott,AC,MBE,MA (CANTAB) Appointed Non-executive Director in February 2001. Member of the Audit and Nomination, Remuneration and Evaluation Committees. Non-executiveMr Elliott was appointed Deputy Chairman of Fortescue Metals Group Limited in May 2005, having served as a Director of that company since February 2001.October 2003. He is Chairman of the Telstra Foundation Limited and Directora member of Fortescue Metals Group Limited andthe Board member of Athletics Australia.
Mr ElliotElliott has experience in marketing and general management, including an appointment as President and Chief Executive of North America for Puma, the sporting goods company. The Board considers Herb Elliott to be an independent Director. Resident Perth. Age 6667 Michael J McConnellAB,MBA (HONS) VVIRGINIAIRGINIA Appointed Non-executive Director in April 2004. A member of the Nomination, Remuneration and Evaluation Committee until September 2005. Mr McConnell is Managing Director of Shamrock Capital Advisors Inc. and Shamrock Holdings Inc. and Chairman of Shamrock’s Investment Committee. He is alsoserves as a Director of Neo Technology Ventures. Mr. McConnell was appointed to the Board in April 2004 having actively served as AlternateVentures and La Canada Educational Foundation. He is a former Director to Mr. Stanley Gold since October 2002.of Nuplex Industries Limited and Force Corporation.
Mr McConnell has an investment banking background having served with Kidder Peabody and Merrill Lynch. He received The Board considers that Michael McConnell is not an AB from Harvard University in Economics, and an MBA with honours from The Darden School of The University of Virginia.independent Director. Resident USA. Age 38 29
PART I39
Item 6 : Directors, Senior Management and Employees
6A | DIRECTORSSTANLEYAND SENIOR MANAGEMENT(Continued) |
Stanley P Gold,GOLD,AB,JD (Alternate to Mr. Michael J McConnell since April 2004)
Non-executive Director sincefrom October 2001.2001 to April 2004. Mr Gold is President and Chief Executive Officer of Shamrock Holdings Inc. and, President of Shamrock Capital Advisors Inc., Chairman of Tadiran Communications Ltd, a Director of Trefoil International III SPRL and a former Director of the Walt Disney Company. Mr Gold is a former Managing Partner of a prominent Los Angeles law firm and has specialised in corporate acquisitions, sales and financing. He has served as President and Chairman of a number of companies in the USA and Israel. The Board considers that Stanley Gold is not an independent Director. Resident USA. Age 6163 PART I Item 6: Directors, Senior Management and Employees 6A DIRECTORSAND SENIOR MANAGEMENT (continued) 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. Werner Heintz Senior Vice President and Regional Director – Europe, Middle East and Africa 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 in 2002. Mr Jilla has extensive experience in financial roles with global companies and prior to joining Ansell was Vice President Financial Operations of Perkin Elmer Inc. This followed a successful career with BOC Group Plc from 1988-2000, in the United States and New Zealand, in planning, product management and 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 Mr 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. 30
PART I Item 6 :6: Directors, Senior Management and Employees 6B COMPENSATION The aggregate amount of remuneration paid or accrued by the Company on a worldwide basis during 2003-20042004-2005 as compensation to its Directors and its executive officers named below as a group was $10,543,867.$8,449,191. 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. NON-EXECUTIVE DIRECTORS’ REMUNERATION Directors’ Fees Non-executive Directors’ fees, including committee fees, are set by the Board within the maximum annual aggregate amount of $750,000, which was approved by shareholders in 1989. The following table sets outfees paid to Directors are set at levels which reflect both the responsibilities of, and the time commitments required from, each Director to discharge their duties. The remuneration providedof the Non-executive Directors is not linked to the performance of the Company in order to maintain their independence and impartiality. In setting fee levels, the Nomination, Remuneration and Evaluation Committee, which makes recommendations to the Board, takes into account: the Company’s existing remuneration policies; fees paid by comparable benchmark companies; independent advice from Remuneration consultants and other external advisers; the time commitment expected of Directors and the most highly remunerated officersrisks connected with discharging the duties attaching to the role of director; and the level of remuneration necessary to attract and retain suitable Directors. Until 30 June 2005, Non-executive Directors received a fee of $75,000 per annum in relation to their services as a Director. The Chairman, taking into account the greater time commitment required, received a fee of $225,000 per annum. In addition, Directors participating on the Board’s committees received an additional fee of $7,500 per annum. The Chairs of those committees received a fee of $9,375 per annum. Superannuation contributions are also made on behalf of the Non-executive Directors at a rate of 9% of gross fees to satisfy the Company’s statutory superannuation obligations. In accordance with rule 35 of the Constitution, Non-executive Directors are also permitted to be paid additional fees for special duties or exertions. Such fees are not included in the aggregate remuneration cap approved by shareholders. No such fees were paid during the year. Directors are also entitled to be reimbursed for all business related expenses, including travel, as may be incurred in the discharge of their duties. The Board periodically reviews its approach to Non-executive Director remuneration to ensure it remains in line with general industry practice and best practice principles of corporate governance. Consequent upon a review by the Nomination, Remuneration and Evaluation Committee after it had taken independent advice, the Board approved and implemented an adjustment to fees subsequent to 30 June 2005. Board fees for Non-executive Directors were increased to $82,500 per annum, however the fee for the new Chairman was reset at $206,250 per annum to be comparable with a relevant peer group. Board committee fees were increased to $8,250 per annum and the Chairs’ fees increased to $16,500 per annum for the Audit Committee and $10,312 per annum for the Nomination, Remuneration and Evaluation Committee. PART I Item 6: Directors, Senior Management and Employees 6B COMPENSATION (continued) Non-executive Directors’ Share Plan In recognising that ownership of Company shares aligns Directors’ interests with those of shareholders, the Company has adopted a Non-executive Directors’ Share Plan. Shareholders approved the participation by Non-executive Directors in the Plan in October 2000 and April 2002 (on amended terms). Under the terms of the Plan, a copy of which is available on the Company’s website atwww.ansell.com, Non-executive Directors are required to reinvest a minimum of 10% of their gross annual fees in acquiring shares in the Company until their shareholding is equal to at least one year’s fees. The Plan rules permit Non-executive Directors to elect to apply up to 100% of their fees towards acquiring shares. The fees contributed by the Non-executive Directors are used to purchase shares on the ASX at the prevailing market price. These shares are subject to a restriction on dealing until each Director ceases to hold office and are held in the name of the Director during the restriction period. The Non-executive Directors’ Share Plan is not a performance-based share plan, nor is it intended as an incentive component of Non-executive Director remuneration. Retirement Benefits Consistent with best practice, the Company does not pay Non-executive Directors retirement benefits in addition to statutorily prescribed superannuation contributions. Details of Non-executive Directors’ remuneration for the 2005 financial year are set out in the following table. | | | | | | | | | NON EXECUTIVE DIRECTORS
| | Fees A$
| | Non-Monetary Benefits(1) A$
| | Superannuation Contributions (2) A$
| | Total A$
| P L Barnes | | 91,875 | | 1,287 | | 8,269 | | 101,431 | L D Crandall | | 82,500 | | 17,690 | | 7,425 | | 107,615 | H J Elliott | | 82,500 | | — | | 7,425 | | 89,925 | M J McConnell (g) | | 82,500 | | 16,034 | | 7,425 | | 105,959 | E D Tweddell | | 234,375 | | 1,044 | | 21,094 | | 256,513 |
(1) | Includes spouse travel incurred in accompanying the Director while on Company business. |
(2) | Contributions are made on a notional basis upon the advice of the Trustee, as the Company’s superannuation fund is currently in surplus. |
EXECUTIVE DIRECTORANDSENIOREXECUTIVEREMUNERATION The Nomination, Remuneration and Evaluation Committee of the Board has recommended, and the Board has adopted, a policy that ensures remuneration will: (a) align management rewards with the creation of value for shareholders in order to create a common interest between executives and shareholders; (b) support the short- and long-term objectives of the Company as set out in the strategic business plans endorsed by the Board; and (c) be competitive in the markets in which the Company operates in order to attract, motivate and retain high calibre executives. The policy recognises that it is necessary for remuneration packages of senior executives (including Executive Directors and the Group (including thoseCompany Secretary) to include both a fixed component and an incentive or performance related component. Accordingly, the Board aims to achieve a balance between fixed and performance related components of remuneration that reflect market conditions at each job and seniority level. PART I Item 6: Directors, Senior Management and Employees 6B COMPENSATION (continued) In general, between 50% and 70% of the total remuneration packages for Executive Directors and senior management is performance based. Fixed Remuneration The terms of employment for all executive management contain a fixed remuneration component, which is expressed in local currency. This fixed component is set at the mid point of the market rate for a comparable role by reference to appropriate benchmark information and having regard to an individual’s responsibilities, performance, qualifications, experience and location. Executive management salaries are also benchmarked against global salary and grade data supplied by Watson Wyatt, and internal equity is monitored using a global broad band grading system. Fixed remuneration includes contributions to superannuation and pension plans in accordance with relevant legislation or as contractually required. At-Risk Remuneration Annual Cash Incentive The annual short-term incentive program (STI) is a cash-based plan that involves linking specific targets (predominantly financial) with the opportunity to earn incentives based overseas)on a percentage of fixed salary. In relation to members of the senior executive team, this generally comprises an amount equal to between 30% and 45% (75% for the CEO) of their fixed annual remuneration for target performance and up to an amount equal to between 60% and 90% (150% for the CEO) of their fixed annual remuneration for performance that is well in excess of target performance. In general, the performance measures for 2005 were based on annual growth in sales and Segment EBITA, weighted equally. The Board considers these performance measures to be appropriate in respect to delivering profitable growth for the organisation and improving shareholder return. Executives have a clear line of sight to the targets and are able to affect results through their actions. While also a performance measure for the long-term incentive plan, Segment EBITA was adopted as one of the performance measures for the STI to ensure that the executive team was continually focused on achievement of the 10% year-on-year improvement in profitability required in order for the Company to deliver, by the end of the 2005 financial year, the long-term commitment of 50% cumulative improvement in Segment EBITA made to shareholders in 2002. The hurdles for the STI in the 2005 financial year were set so that achievement of the internal business plan sales and Segment EBITA objectives would result in 100% of the award being earned. Additional incentive payments would be made for performance exceeding target objectives. Incentives would start to be earned at 50% of the target level once performance measures exceeded levels achieved in the preceding financial year. | | | | | | | | | | | | | | | 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 |
Performance against these objectives was determined and incentives paid following the completion of the audit of the financial accounts. In general, the performance measures attaching to the STI were satisfied beyond the target level by 26.4%. The STI performance measures for the 2006 financial year will, in general, be based on a mix of improvement in sales revenues, Segment EBITA, manufacturing profitability and Profit Attributable, with the proportions applicable to each component determined according to the respective executive’s level and area of responsibility. Stock Incentive Plan The Company’s long-term incentive (LTI) arrangements are designed to link executive reward through the grant of equity securities with the key performance drivers which underpin sustainable growth in shareholder value, which comprises both share price and returns to shareholders. Participation in the Company’s Stock Incentive Plan (the Plan) is only offered to executives who are able or have the potential to influence the generation of shareholder wealth and thus have a direct impact on the Company’s performance against the relevant performance hurdles. In general, these executives are offered a grant under the PART I Item 6: Directors, Senior Management and Employees 6B COMPENSATION (continued) Plan which is designed to be the equivalent of approximately 30% of their total remuneration (on an annualised basis). The Plan provides for senior executives to be granted: performance share rights (PSRs); or options. Participants in the Plan are granted PSRs that vest in three annual tranches. PSRs vest immediately upon satisfaction of the performance conditions applicable to the performance period. One fully-paid ordinary share is allocated to the holder of a PSR automatically upon that PSR vesting, at no cost to the executive. The Chief Executive Officer and Chief Financial Officer were granted options under the Plan upon joining the Company. The options were granted at no cost to the participants and vest upon satisfaction of the performance conditions. Vested options may be exercised at a price based on the average of the Company’s share price on the five days preceding the date of grant. The relevant exercise price is $7.40 for the Chief Executive Officer and $6.97 for the Chief Financial Officer. Vested options may not be exercised until 12 months after the date of vesting. Options, if not exercised, will lapse on the tenth anniversary of their issue. Any PSRs or options that do not vest in a financial year will be added to the PSRs or options otherwise available in the next vesting year and tested against the performance condition applicable to that subsequent year. However, any PSRs or options that have not vested within three years of being granted may not be carried forward, and will lapse. Participants are entitled to vote their shares and to receive any dividend, bonus issue, return of capital or other distribution made in respect of their shares from the date of allocation of the shares following vesting of the PSRs. In general, executives are permitted to sell shares allocated on vesting of PSRs to the extent necessary to provide sufficient cash to meet any taxation liabilities arising from the grant or vesting, plus 50% of the balance of the shares from that tranche. The remainder of the shares from that tranche may not be sold within 12 months of their allotment. Performance measures applicable to the Stock Incentive Plan In relation to the 2005 financial year, the performance measure applicable to PSRs and options previously granted was for the Segment EBITA for the Ansell Healthcare business to meet or exceed US$115 million. This measure reflected the commitment in relation to the 2005 financial year that was made to shareholders in 2002. It applied equally to all participating management team members, was met and all PSRs and relevant options vested. The Board is of the view that the achievement of that commitment is directly linked to the creation of shareholder value, as evidenced by the increase in the Company’s share price. The LTI performance measures for the 2006 financial year will be based on improvement in sales revenues (with the target payout level set at a level above that applicable for the STI) and growth in EPS (with earnings adjusted to remove possible distortion due to significant non-recurring items (if any), and the number of shares on issue adjusted to eliminate the effect of any significant share issues or buy-backs). Service Agreements The remuneration and other terms of employment for the Managing Director and the executive management team are covered in formal agreements or letters of offer. Each of these agreements makes provision for performance-related cash incentives (as disclosed above), other benefits and participation, where eligible, in the Company’s Stock Incentive Plan (as described above). The base salary and incentive components of remuneration for the Managing Director and each of the executive management team are reviewed and determined annually by the Nomination, Remuneration and Evaluation Committee. PART I Item 6: Directors, Senior Management and Employees 6B COMPENSATION (continued) Details of the duration of executive employment, applicable notice periods and payments on termination provided for under the agreements are summarised below: Managing Director The Managing Director, D Tough, is employed under the terms of an Employment Agreement that provides for termination payments to be made in certain circumstances. In particular, the Company may terminate his employment within the first three years of service upon giving 18 months’ notice or payment in lieu, and at any time thereafter upon giving 12 months’ notice or payment in lieu. In certain circumstances, such as a substantial diminution of responsibility, the Company may be deemed to have terminated his employment and would be liable to make a termination payment equivalent to 18 months’ base salary and target annual incentive. In general, the Managing Director must give the Company at least six months’ notice of resignation. Upon termination of employment for any reason, the Managing Director is prohibited from engaging in any activity that would compete with the Company for a period of 18 months if he terminates his employment within the first three years, and 12 months thereafter, in order to protect the Company’s business interests. Other Senior Executives Each of P Corke, R Jilla, W Reed, and W Reilly, all of whom are USA-based, is employed ‘at will’. These executives, once employed for more than 12 months, would, in general, receive payments upon early termination (other than for gross misconduct) equal to 12 months’ base salary plus certain other benefits. These executives would typically be expected to give the Company four weeks’ notice of resignation. In certain circumstances, such as a diminution of responsibility, the Company may be deemed to have terminated Mr Jilla’s appointment and would be liable to make a termination payment equivalent to 12 months’ base salary and target annual incentive. W Heintz is a Europe-based executive and in the event of his termination without cause, he would receive severance calculated by taking into account: notice period in months; seniority in fractions of years; age in years and fractions of years; total annual remuneration; total bonus received in the year prior to termination; and the value of non-monetary benefits. Details of the remuneration paid to the Managing Director and Senior Executives, being those with the most authority during the 2005 financial year, are set out in the following table. MANAGING DIRECTOR AND SENIOR EXECUTIVES(1) OF THE COMPANY AND THE GROUP | | | | | | | | | | | | | | | Fixed Salary A$
| | Annual Cash Incentive A$
| | Non-Salary Benefits(2) A$
| | Superannuation Contributions (3) A$
| | Options/Rights (4) A$
| | Total A$
| D Tough(5) Group Managing Director and Chief Executive Officer | | 854,139 | | 705,283 | | 70,637 | | 114,260 | | 1,409,968 | | 3,154,287 | P Corke(5) | | 315,147 | | 179,385 | | 60,080 | | 59,193 | | 133,886 | | 747,691 | W Heintz(6) | | 365,737 | | 129,230 | | 220,903 | | 117,218 | | 181,757 | | 1,014,845 | R Jilla(5) | | 442,181 | | 261,603 | | 35,593 | | 94,540 | | 403,242 | | 1,237,159 | W Reed(5) | | 348,074 | | 126,380 | | 161,811 | | 83,260 | | 176,855 | | 896,380 | W Reilly(5) | | 321,794 | | 183,122 | | 36,255 | | 62,329 | | 133,886 | | 737,386 |
(a)(1) | ComprisesThe Executives 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. |
(2) | Includes the cost to the Company of cash salary, non-cash benefits expatriate assignment costssuch as motor vehicle and associated taxes.travel allowances, telephone expenses, cost of living and relocation allowances and executive insurance. |
(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) | For Directors includes notional contributions at the rate that satisfies Australian Superannuation Guarantee requirements. No amounts were required to be paid to the Australian Superannuation fund in respect of the year ended 30 June 2004 upon advice of the Trustee. For 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 to the Australian superannuation fund calculated at an actuarial rate. |
31
PART I Item 6 :6: Directors, Senior Management and Employees 6B | COMPENSATION(continued) |
6B COMPENSATION (continued) (e)(3) | In accordance with the requirements of Accounting Standards, remuneration includesIncludes contributions to USA benefit or non-qualified pension plans or European pension plan, as applicable. |
(4) | Includes a proportion of the fair value of options or Performance Share Rights (PSRs)PSRs granted or outstanding during the year pursuant to the Company’s equity-based long term incentive plan.year. The fair value is determined as at grant date and is progressively allocated over the 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 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 or PSRs is calculated at the date of the grant using binomial tree techniques. The fair values and the factors and assumptions used in determining the fair values of the tranches of options and PSRs applicable for the 20042005 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
| | | Number Issued
| | Grant Date
| | Expiry Date
| | Fair Value per Option/PSR
| | Exercise Price
| | Share Price on Grant Date
| | 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 | % | | 300,000 | | 23/9/2002 | | 23/9/2012 | | $ | 2.66- $2.70 | | $ | 6.97 | | $ | 6.88 | | 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 | % | | 525,000 | | 30/6/2004 | | 30/6/2014 | | $ | 2.35 - $2.38 | | $ | 7.40 | | $ | 7.74 | | 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 | % | | 437,500 | | 19/2/2003 | | 30/6/2005 | | $ | 6.07 | | | N/A | | $ | 6.07 | | 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 | % | | 515,000 | | 18/12/2003 | | 30/6/2006 | | $ | 5.89 - $6.12 | | | N/A | | $ | 6.19 | | 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 | % | | 150,000 | | 30/6/2004 | | 30/6/2007 | | $ | 6.94 - $7.22 | | | N/A | | $ | 7.74 | | N/A | | | 2.0 | % | PSRs | | | 391,000 | | 8/8/2005 | | 30/6/2007 | | $ | 7.34 - $7.64 | | | N/A | | $ | 7.78 | | N/A | | | 2.0 | % |
EstimatedAn estimated volatility factor of up to 20% has been applied in the above valuations and is based on an analysis of historical share price data.
(f) | Includes cash benefits such as motor vehicle allowances, home office expenses, executive insurance, housing allowances and statutory amounts paid on termination of including accumulated annual leave and long service leave. |
(g) | Mr M J McConnell was appointed as a director on 16 April 2004. |
(h) | Mr S P Gold retired as a director and was appointed alternate director for Mr McConnell on 16 April 2004. |
(j) | Notional value of Equity Compensation includes the notional value of 500,000 options granted in April 2002. The options, which have an exercise price of $6.32 for each share acquired, vested upon achievement of performance conditions applicable to the 2004 year. |
(k) | European-based Officer. |
(l) | US-based Officers areExecutives paid in US$. The average exchange rate for the period, as set out in the Financial Statements,2005 financial year is US$0.70160.7610 = A$1.00. |
(m)(6) | Europe-based OfficerExecutive paid in €. The average exchange rate for the period2005 financial year is €0.5775€0.6204 = A$1.00. |
(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. |
The Company had agreements with each of the Non-executive Directors, which provided for benefits upon termination. These agreements were terminated at 30 June 2003.Discontinued Executive and Employee Share Plans
The Company has(when it was Pacific Dunlop Limited) historically operated two share plans for employees and Directors. the Pacific Dunlop Executive Share Plan (“Executive Plan”); - discontinued in 1996, and the Pacific Dunlop Employee Share Plan (“Employee Plan”). – discontinued in 1994. 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
6B | COMPENSATION(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).period. 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) 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. 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 20042005 was 738,000377,800 and as of 31 October 20042005 was 387,000361,500 shares. During the fiscal year, the amounts outstanding on 184,100360,200 existing Executive Plan Shares were fully paid. From the end of the fiscal year through 31 October 2004,2005, the amounts outstanding on an additional 351,00016,300 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 2004.2005. In addition to the Executive Plan, the Company maintainsmaintained an Employee Plan under which 149,763135,614 fully paid Ordinary Shares were held as of 30 June 20042005 by employees of the Company and 145,102133,716 shares (including Ordinary Shares issued as bonus shares) were held as of 31 October 2004.2005. The Employee Plan permits full-time and part-timepermitted eligible 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 ordinarya number of shares in the capital of the Company for each completed year of service.Company. The shares arewere 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. The US GAAP compensation cost component of this plan 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). As of 30 June 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. PART I 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 shareItem 6: Directors, Senior Management 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.Employees
6B COMPENSATION(continued) During the 2003-20042004-2005 fiscal year, the loan liability of members in respect of 60,91614,149 fully paid ordinary shares was discharged. From the end of the fiscal year through 31 October 20042005 the loan liability in respect of an additional 4,6611,898 fully paid shares was discharged. No new shares were issued during 2003-2004 under the Employee Plan. 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 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. A loss of $4,366$13,801 pre tax in respect of the Employee Share Plan was recognised for the year 2003-2004,2004-2005, compared to a loss of $13,288$4,366 pre tax for the year 2002-20032003-2004 and in 2001-20022002-2003 a loss pre tax of $535,381. 33$13,288.
PART I Item 6 :6: Directors, Senior Management and Employees 6B | COMPENSATION(continued) |
The Company 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.
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 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 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 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 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 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 300,000 options in three equal tranches of 100,000 options, each with an exercise price of $6.97 and subject to certain performance targets 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 targets 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 2005 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 current year (with the exception of those
granted to Mr Tough) have been achieved and these PSRs have vested. The second and third tranches are subject to the achievement of performance targets for the 2005 and 2006 financial years respectively.
In relation to the 2005 financial year the performance condition applicable to options and PSR’s issued to executives other than Mr Tough is that the EBITA for the Ansell Healthcare business meets or exceeds US$115 million. Performance targets for periods beyond 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.
34
PART I6C BOARD PRACTICES
Item 6 : Directors, Senior Management and Employees
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, 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 annualperiodic review of corporate governance practices. The corporate governance section of the Company’s website,www.ansell.com. contains various materialsmaterial relating to corporate governance, including Board charter,Charter, Committee charters,Charters, Code of Conduct, Social Accountability Policy, core policies regarding dealing in securities and disclosures and other information. The link to the corporate governance section of the Ansell website iswww.ansell.com. Board Responsibilities The Board has ultimate responsibility to setfor setting policy regarding the business and affairs of the Company and its subsidiaries for the benefit of the shareholders and other stakeholders of the Company.stakeholders. 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,share buy-backs, 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 Managementsenior 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 to ensure social accountability.practices. In carrying out its duties, the Board meets formally over one or two days at least sixfive 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 numbersome of the Company’s facilities in each year. During the 20042005 financial year, Board meetings were held in conjunction with visitsa visit to Ansell facilities in Europe and South-east Asia.North America. 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 6C | BOARDPRACTICES(continued) |
6CBOARDPRACTICES(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, and 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 and the Corporations Act. TheIn accordance with this system of internal sign-offs, the Chief Executive Officer and Chief Financial Officer also providehave provided assurances to the Board as tothat, having made appropriate enquiries, they have formed the integrityopinion that: the financial records of the Company’sCompany and its controlled entities are maintained in accordance with the Corporations Act; the Financial Report for the year ended 30 June 2005 has been prepared in accordance with the relevant accounting standards and gives a true and fair view, in all material respects, of the financial position and performance of the Company and its controlled entities; and the risk management and internal compliance and control systems of the Company and financial reports.its controlled entities are, in all material respects: consistent with the policies adopted by the Board; and operating effectively and efficiently. Code of Conduct AnsellThe Company is committed to upholding the highest legal, moral and ethical standards in all of its corporate activities and has adopted a Code of Conduct consisting of both a Statement of Guiding Principles and Policies on Business Conduct, which aimsaim 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 keyguiding principles whereby Ansell:the Company: strives to uphold high ethical standards in all corporate activities; is committed to competing lawfully, fairly and ethically in the marketplace, consistent with its aim of providing quality products to its customers; is committed to pursuing sound growth and earnings goals, by operating in the best interests of the Company and shareholders; strives to treat all employees and applicants with fairness, honesty and respect; expects all employees to work together for the common good and to avoid placing themselves in a position that is in conflict with the interests of the Company; is committed to good corporate citizenship and participating actively in and improving the communities in which the Company does business; and expects all employees to conduct themselves in accordance with the guiding principles. It is the Company’s policy of Ansell to comply with the letter and spirit of all applicable laws, including those relating to employment, discrimination, health, safety, medical device,devices, consumer protection, privacy, intellectual property, PART I Item 6: Directors, Senior Management and Employees 6CBOARDPRACTICES(continued) Code of Conduct (continued) 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 of the 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
6C | BOARDPRACTICES(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. In keeping with the Company’s commitment to a strong culture opf ethics, a computer-based Code of Conduct training program was introduced during the year and implemented across the organisation globally. Employees and Directors are encouragedrequired to participate in Company sponsoredthe compliance training 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. 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 directorDirector 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’sDirector’s ability to act in the best interests of the Company. The Company currently has 6seven Directors, 1one of whom is an Executive Director (the Chief Executive Officer who is also Managing Director). The remaining 5Five of the Non-executive Directors, are Non-executive, 4 of whom, including the Chairman, are considered to be “independent.” The Board considers that, in addition to the Managing Director, Mr M J McConnell is not independent by virtue of his position as an officer of Shamrock Capital Advisors Inc., a related body corporate of Shamrock Holdings of California Inc. which had been a substantial shareholder.shareholder until 22 October 2004. Mr McConnell will retire aat the conclusion of the 2005 Annual General Meeting. In addition Mr S P Gold, who retired as a Director in April 2004, has been appointed as an alternate to Director to represent Mr McConnell. This allows the Board to continue to benefit from the experience and insight of Mr Gold from time to time. For the purpose of completeness Mr GoldMcConnell, also does not meet the Board’s definition of independence due to his financial interestsinterest in Trefoil International III L.P., a related body corporate of Shamrock Holdings of California Inc.
1 | Corporate Governance, A Guide for Fund Managers and Corporations – Blue Book, Investment and Financial Services Association, December 2002 (copy available atwww.ifsa.com.au). |
PART I Item 6: Directors, Senior Management and Employees 6CBOARDPRACTICES (continued) 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.
1 | Corporate Governance, A Guide for Fund Managers and Corporations –Blue 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
6C | BOARDPRACTICES(continued) |
Board Review and Election Processes The Board periodically conducts a formal review of its performance in meeting shareholder and stakeholder expectations.performance. 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 shareholdersstand for election 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. Remuneration
In June 2003, the Board resolved to discontinue the practice of paying retirement benefits to Non-executive Directors (notwithstanding that the payment of retirement benefits had previously been approved by shareholders). The retirement benefits of existing Non-executive Directors were quantified and paid as at 30 June 2003 as detailed in the Annual Review 2003. The Company has no ongoing liability regarding those amounts. In addition to their fees, Non-executive Directors now only receive Company sponsored 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.comwww.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 periodsperiod immediately following any price-sensitive announcements, including the half-year and full year results and the Annual General Meeting. At other times, Directors dealing in Ansell shares must obtain prior approval from the Chairman. 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 :6: Directors, Senior Management and Employees 6C | BOARDPRACTICES(continued) |
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. These charters are publicly available on the Company’s websitewww.ansell.com. 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” Non-executive Directors and comprised: Mr L D Crandall (Chair from 9 August 2005); Mr P L Barnes (Chair)(Chair until 8 August 2005); and Mr L D Crandall; and
Mr H J 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 Independent Registered Public Accounting Firm, reviews the scope of their activities, reviews the 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 Independent Registered Public Accounting Firm that is based on the principle that work that may detract from the Independent Registered Public Accounting Firm’s independence and impartiality, or be perceived as doing so, should not be carried out by the 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 atin meetings of the Committee. 39
PART I Item 6 :6: Directors, Senior Management and Employees 6C | BOARDPRACTICES(continued) |
6CBOARDPRACTICES(continued) Nomination, Remuneration and Evaluation Committee The members of the Nomination, Remuneration and Evaluation Committee during the year and at the date of this Report were all Non-executive Directors and comprised: P L Barnes (Chair from 9 August 2005); Dr E D Tweddell (Chair)(Chair until 4 August 2005); Mr P L Barnes;R J Bell (from 9 August 2005);
M J McConnell (until 5 September 2005), and Mr S P Gold (until 16 April 2004); and
Mr MH J McConnellElliott (from 16 April 2004)5 September 2005),
a majorityall of whom, with the exception of Mr McConnell, 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 to 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 compensationremuneration policy, including shortshort- 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 attendattends 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 :6: Directors, Senior Management and Employees 6C | BOARDPRACTICES(continued) |
6CBOARDPRACTICES(continued) ATTENDANCEAT BOARDAND BOARD COMMITTEE MEETINGSDURINGTHE YEAR ENDED 30 JUNE 20042005 | | | Board
| | Audit
| | Nomination, Remuneration and Evaluation
| | | Board
| | Audit
| | Nomination, Remuneration and Evaluation
| | | Held
| | Attd
| | Held
| | Attd
| | Held
| | Attd
| | | Directors – Continuing | | | | | | | | | | | | Directors
| | | Held
| | Attd
| | Held
| | Attd
| | Held
| | Attd
| E D Tweddell | | 7 | | 7 | | | — | | — | | 4 | | 4 | | | 7 | | 7 | | | | | | 4 | | 4 | P L Barnes | | 7 | | 7 | | | 5 | | 5 | | 4 | | 3 | | | 7 | | 6 | | 4 | | 4 | | 4 | | 4 | H Boon | | 6 | | 6 | | | — | | — | | — | | — | | | L D Crandall | | 7 | | 7 | | | 5 | | 5 | | — | | — | | | 7 | | 7 | | 4 | | 4 | | | | | H J Elliott | | 7 | | 7 | | | 5 | | 5 | | — | | — | | | 7 | | 7 | | 4 | | 4 | | | | | M J McConnell | | 2 | | 2 | | | — | | — | | — | | — | | | 7 | | 7 | | | | | | 4 | | 4 | S P Gold | | 5 | | 5 | * | | — | | — | | 4 | | 3 | * | | D D Tough | | | 7 | | 7 | | | | | | | | |
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. Mr S P Gold retired on 16 April 2004. Mr M J McConnell was appointed on 16 April 2004.6D EMPLOYEES
Mr 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. |
As of 30 June 20042005 Ansell Limited employed 11,53011,059 full time equivalent employees (12,013(11,530 as at 30 June 20032004 and 12,16012,013 as at 30 June 2002)2003) . 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
| | 2005
| | 2004
| | 2003
| Americas | | | | | | | | | | | | | USA (including Mexico) | | 1,943 | | 1,935 | | 2,120 | | 1,844 | | 1,943 | | 1,935 | Canada | | 44 | | 44 | | 44 | | 49 | | 44 | | 44 | Asia Pacific | | | | | | | | | | | | | Australia | | 87 | | 87 | | 104 | | 93 | | 87 | | 87 | India | | 1,540 | | 1,847 | | 1,774 | | 1,442 | | 1,540 | | 1,847 | Malaysia | | 3,543 | | 3,679 | | 3,711 | | 3,426 | | 3,543 | | 3,679 | Sri Lanka | | 1,919 | | 1,959 | | 1,861 | | 1,863 | | 1,919 | | 1,959 | Thailand | | 2,033 | | 2,030 | | 2,089 | | 1,962 | | 2,033 | | 2,030 | Rest of Asia | | 6 | | 9 | | 12 | | 6 | | 6 | | 9 | Europe | | | | | | | | | | | | | Belgium | | 171 | | 125 | | 124 | | 145 | | 171 | | 125 | United Kingdom | | 157 | | 172 | | 197 | | 133 | | 157 | | 172 | France | | 51 | | 66 | | 54 | | 47 | | 51 | | 66 | Rest of Europe | | 36 | | 60 | | 70 | | 49 | | 36 | | 60 | | |
| |
| |
| |
| |
| |
| Total | | 11,530 | | 12,013 | | 12,160 | | 11,059 | | 11,530 | | 12,013 | | |
| |
| |
| |
| |
| |
|
41
PART I Item 6 :6: Directors, Senior Management and Employees 6E SHARE 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
| E D Tweddell | | 34,220 | | — | | — | P L Barnes | | 11,685 | | — | | — | D D Tough | | — | | 675,000 | | — | L D Crandall | | 8,108 | | — | | — | H J Elliott | | 8,976 | | — | | — | M J McConnell | | 26,406 | | — | | — | S P Gold (alternate to M J McConnell) | | 15,239 | | — | | 16,428,840 |
| | | | | | | 1
| | 2
| P L Barnes | | 13,024 | | | G L L Barnes | | 5,000 | | | R J S Bell | | 116 | | | L D Crandall | | 9,174 | | | H J Elliott | | 10,032 | | | M J McConnell | | 6,314 | | | D D Tough | | 20,000 | | 640,041 | S P Gold (alternate to M J McConnell) | | — | | |
1. | Beneficially held in own name, or in the name of a trust, nominee company or private company. |
2. | Beneficial Executive Share Options (525,000) and Performance Share Rights (PSRs) (150,000)(115,041). These were granted upon Mr Tough’s appointment in May 2004. |
3. | Non-beneficial. Mr Gold has an indirect interest in these shares by virtue of a 10% limited partnership interest in Trefoil International III, LP which is a related body corporate of Shamrock Holdings of California Inc. |
Note: In addition, Mr H Boon who retired on 30 June 2004, held, as at the date of his 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 one percent of the Company’s ordinary shares beneficially or of 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.
Details of securities acquired on ASX on behalf of Non-executive Directors underpursuant to the Ansell Non-executive Directors Share Plan at prevailing market prices 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 | | |
| |
| |
|
|
| | | | | | | | Director
| | Number of shares acquired
| | Date of Acquisition
| | Acquisition Price A$
| Mr P L Barnes | | 262 246 222 224 | | 17/09/2004 17/12/2004 16/03/2005 23/06/2005 | | $ $ $ $ | 8.68 9.26 10.24 10.14 | Mr L D Crandall | | 234 221 199 201 | | 17/09/2004 17/12/2004 16/03/2005 23/06/2005 | | $ $ $ $ | 8.68 9.26 10.24 10.14 | Mr H J Elliott | | 235 220 199 201 | | 17/09/2004 17/12/2004 16/03/2005 23/06/2005 | | $ $ $ $ | 8.68 9.26 10.24 10.14 | Mr M J McConnell | | 1,557 1,460 1,327 1,334 | | 17/09/2004 17/12/2004 16/03/2005 23/06/2005 | | $ $ $ $ | 8.68 9.26 10.24 10.14 | Dr E D Tweddell | | 670 629 570 575 | | 17/09/2004 17/12/2004 16/03/2005 23/06/2005 | | $ $ $ $ | 8.68 9.26 10.24 10.14 |
42
PART I ITEM 6 :Item 6: Directors, Senior Management and Employees
6E | 6ESHAREOWNERSHIP(continued) |
Non-executive Directors’ Share Plan(continued)
In addition, Mr S P Gold participated in the Plan prior to his retirement as a Director of the Company, acquiring:
1,943 shares on 19/09/2003 at $6.84 per 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
| Mr P. Corke | | 2,772 | | — | | 31,667 | Mr W. Heintz | | 8,333 | | — | | 46,667 | Mr R. Jilla | | 6,000 | | 300,000 | | 50,000 | Mr N. O’Donnell | | 5,000 | | — | | 30,000 | Mr W. Reed | | 3,602 | | — | | 45,000 | Mr W. Reilly | | 5,545 | | — | | 31,667 |
| | | | | | | | | 1
| | 2
| | 3
| Mr P. Corke | | 2,772 | | — | | 18,334 | Mr W. Heintz | | 8,333 | | — | | 26,667 | Mr R. Jilla | | 6,000 | | 300,000 | | 50,001 | Mr W. Reed | | 3,602 | | — | | 25,001 | Mr W. Reilly | | 5,545 | | — | | 18,334 |
1. | Beneficially held in own name, or in the name of a trust, nominee company or private company. |
2. | Beneficial Executive Share Options. 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 at 30 June 2004 of $2.66 and 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 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 7A MAJOR SHAREHOLDERS To the best of its knowledge, Ansell Limited is not directly, or indirectly, controlled by any corporation, by any foreign 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 February30 September 2005 are as follows: | | | No. of Fully Paid Shares
| | % of Issued Capital
| | | No. of Fully Paid Shares
| | % of Issued Capital
| | Perpetual Investments | | 23,209,414 | | 14.55 | % | | 20,287,040 | | 12.64 | % | Barclays Global Investors (Group) | | 13,183,909 | | 8.27 | % | | Barclays Group | | | 13,457,040 | | 8.39 | % | Maple-Brown Abbott Ltd. | | 12,710,924 | | 7.97 | % | | 11,229,237 | | 7.00 | % | CDC IXIS Asset Mgt (Group) | | 7,672,861 | | 4.81 | % | | Schroder Investment Management Australia Limited | | | 8,476,446 | | 5.28 | % |
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 2004, 285,2342005, 322,501 ADSs (equivalent to 1,140,9361,290,004 Ordinary Shares, which represents approximately 0.6%0.8% of the Ordinary Shares then outstanding) were outstanding and held by 135126 registered holders with addresses in the United States. 7B | RELATED PARTY TRANSACTIONS |
7B RELATED PARTY TRANSACTIONS Refer to Notes 2829 and 34 to the Financial Statements included in Item 18 for additional details of Related Party Transactions. 7C | INTERESTSOF EXPERTSAND COUNSEL |
7C INTERESTSOF EXPERTSAND COUNSEL Not Applicable 44
PART I Item 8 : Financial Information 8A | CONSOLIDATED STATEMENTSANDOTHER FINANCIAL INFORMATION |
8A CONSOLIDATED STATEMENTSANDOTHER FINANCIAL INFORMATION The Consolidated Financial Statements are included herein as Item 18. Refer to Note 2627 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. 8B SIGNIFICANT CHANGES There have been no significant events 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 $7.9 million in respect of the Company’s US pension plans has been recorded in Other Comprehensive Income in 2003.
45
PART I Item 9 :9: The Offer and Listing 9A | OFFERAND LISTING DETAILS |
9A OFFERAND LISTING DETAILS The following table sets out for the periods indicated ($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)
| Period
| | High
| | Low
| | High
| | Low
| Last 5 Financial Years | | | | | | | | | Fiscal Year 2004 | | 7.900 | | 5.840 | | 22.810 | | 15.500 | Fiscal Year 2003 | | 7.690 | | 4.960 | | 17.900 | | 12.100 | Fiscal Year 2002 | | 7.010 | | 3.400 | | 15.310 | | 6.550 | Fiscal Year 2001 | | 8.400 | | 4.000 | | 19.375 | | 8.205 | Fiscal Year 2000 | | 12.400 | | 6.850 | | 31.875 | | 14.220 | 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 | | | | | | | | | First Quarter | | 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 | | | | | | | | | First Quarter | | 7.150 | | 6.450 | | 15.480 | | 13.800 | Second Quarter | | 7.690 | | 6.670 | | 17.200 | | 14.500 | Third Quarter | | 7.650 | | 4.960 | | 17.900 | | 12.100 | Fourth Quarter | | 6.370 | | 5.250 | | 16.220 | | 12.200 | Last 6 Months | | | | | | | | | 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 |
| | | | | | | | | | | $A Ordinary Shares
| | US$ Per ADS(1)
| Period
| | High
| | Low
| | High
| | Low
| Last 5 Financial Years | | | | | | | | | Fiscal Year 2005 | | 10.450 | | 7.580 | | 33.000 | | 21.711 | Fiscal Year 2004 | | 7.900 | | 5.840 | | 22.810 | | 15.500 | Fiscal Year 2003 | | 7.690 | | 4.960 | | 17.900 | | 12.100 | Fiscal Year 2002 | | 7.010 | | 3.400 | | 15.310 | | 6.550 | Fiscal Year 2001 | | 8.400 | | 4.000 | | 19.375 | | 8.205 | | | | | | By Quarter 2005-2006 | | | | | | | | | First Quarter | | 11.350 | | 9.960 | | 34.081 | | 29.900 | | | | | | By Quarter 2004-2005 | | | | | | | | | First Quarter | | 8.840 | | 7.580 | | 25.700 | | 21.711 | Second Quarter | | 9.300 | | 8.740 | | 28.880 | | 25.510 | Third Quarter | | 10.450 | | 8.860 | | 33.000 | | 26.810 | Fourth Quarter | | 10.270 | | 9.000 | | 32.180 | | 27.150 | | | | | | By Quarter 2003-2004 | | | | | | | | | First Quarter | | 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 | | | | | | Last 6 Months | | | | | | | | | October 2005 | | 11.590 | | 10.050 | | 34.700 | | 31.321 | September 2005 | | 11.350 | | 10.770 | | 34.081 | | 32.900 | August 2005 | | 10.980 | | 9.740 | | 32.800 | | 29.900 | July 2005 | | 10.420 | | 9.960 | | 31.150 | | 29.900 | June 2005 | | 10.270 | | 9.260 | | 32.180 | | 27.850 | May 2005 | | 9.570 | | 9.000 | | 28.850 | | 28.250 |
(1) | Each ADS represents four Ordinary Shares. |
The total market capitalisation of Ansell Limited at 30 June 20042005 was $1,362$1,606 million. The total market capitalisation of Ansell Limited at 28 February31 October 2005, was $1,617$1,683 million and the closing price for Ansell Limited ordinary shares on the ASX on that date was $10.11.$10.52. 9B PLANOF DISTRIBUTION Not Applicable 46
PART I Item 9 :9: The Offer and Listing 9C MARKETS 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. 9D SELLING SHAREHOLDERS Not Applicable
Not Applicable
Not Applicable 479E DILUTION
Not Applicable 9F EXPENSESOFTHE ISSUE Not Applicable
PART I Item 10 :10: Additional Information 10A SHARE CAPITAL Not Applicable 10B CONSTITUTION 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’s constitution does not contain an objects 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. It is currently proposed to insert a preference share article in the Constitution at the Company’s 2005 Annual General Meeting, which would permit the Directors to issue preference shares (including convertible or redeemable preference shares) without further reference to shareholders. 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 PART I Item 10: Additional Information 10B | CONSTITUTION (continued) |
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 : Additional Information
10B | CONSTITUTION(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, as noted above, shareholder approval will be sought at the Corporations Act requires2005 Annual General Meeting to insert a new article in the approval of shareholdersConstitution permitting the Company to the issue of preference shares withwhich could include a right of redemption (or authorisation of the Boardor obligation to issue such shares).be redeemed. 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. The rights attaching to a class of shares nor does it contain any provisions pertaining tomay only be altered if shareholder approval is obtained in accordance with the changingprocedure set out in rule 9 of the rights of shareholders.Constitution. 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. |
PART I Item 10: Additional Information 10B | CONSTITUTION (continued) |
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 I10C MATERIAL CONTRACTS
Item 10 : Additional Information
There have been no material contracts entered into by the Company over the last two years. 50
PART I10D EXCHANGE CONTROLS
Item 10 : Additional Information
Except for restrictions on foreign exchange transactions with ministers and senior officials of the Government of Zimbabwe, the former Iraqi regime 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 175,962,865159,989,869 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 2004.2005. 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 or where the acquisition proposal values the business at over $50 million, will require approval. Pursuant to the recent Free Trade Agreement between Australia and the US, an increased threshold for notification and approval of $800 million applies for US investors, except for investments in prescribed sensitive sectors, including the media, telecommunications, transport, and the supply or training of humans resources. The Corporations Act also regulates acquisitions giving rise to ownership of substantial amounts of a company’s shares. 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 PART I Item 10: Additional Information 10DEXCHANGECONTROLS(continued) 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, 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, 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
10D | EXCHANGECONTROLS (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. 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 therefore; and, |
PART I Item 10: Additional Information 10DEXCHANGECONTROLS(continued) DEPOSIT, TRANSFERAND WITHDRAWAL(continued) (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
10D | EXCHANGECONTROLS (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. |
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. ��
PART I Item 10: Additional Information 10DEXCHANGECONTROLS(continued) DEPOSIT, TRANSFERAND WITHDRAWAL(continued) 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: 53
PART I
Item 10 : Additional Information
10D | EXCHANGECONTROLS (CONTINUED) |
DISTRIBUTIONSON DEPOSITED SECURITIES(continued)
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. |
| (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. |
| (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 |
PART I Item 10: Additional Information 10DEXCHANGECONTROLS(continued) DISTRIBUTIONSON DEPOSITED SECURITIES(continued) | (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 |
| (iv) | 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 |
| (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. |
54
PART I
Item 10 : Additional Information
10D | EXCHANGECONTROLS (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. 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; |
PART I Item 10: Additional Information 10DEXCHANGECONTROLS(continued) VOTINGOF DEPOSITED SECURITIES(continued) (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. 55
PART I
Item 10 : Additional Information
10D | EXCHANGECONTROLS (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. 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. PART I Item 10: Additional Information 10DEXCHANGECONTROLS(continued) 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. 56
PART I
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10D | EXCHANGECONTROLS (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. 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), |
PART I Item 10: Additional Information 10DEXCHANGECONTROLS(continued) CHARGESOF DEPOSITARY(continued) | (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). |
57
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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. 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: | (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 |
58
PART I Item 10 :10: Additional Information 10D | EXCHANGECONTROLS (CONTINUED) |
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 |
| (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. 59
PART I Item 10 :10: Additional Information 10E AUSTRALIAN 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 below is based upon existing Australian tax law and established interpretations of that law as at the date of this report and is subject to change in Australian law, as well as any further changes to the double taxation convention between the United 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. 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 Treaty, dividends paid to a shareholder of Ansell Limited who is a resident of the United States within the meaning of the 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. The Protocol to the 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. 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 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. 60
PART I Item 10 :10: Additional Information 10E | AUSTRALIAN TAXATION (CONTINUED) |
10E AUSTRALIAN 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 and to the extent to which non-resident withholding tax is not payable because the dividend consists of an FDA amount. The Protocol to 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. During the year Ansell Limited declared anpaid a final unfranked dividend for the year ended 30 June 2004 of 117 cents aper share in March 2004. Theon 14 October 2004 and an interim dividend is unfranked duefor the year ended 30 June 2005 of 7 cents per share, franked to the increase in profit contributed by the overseas operations relative to the Australian operations (only57% for Australian tax paid creates franking credits) and the existence of tax losses in Australia.purposes, on 8 April 2005. TAXATIONOFFUTURESHAREDISPOSALS 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. Shares Held on Revenue Account 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. 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 :10: Additional Information 10E | AUSTRALIAN TAXATION (CONTINUED) |
10E AUSTRALIAN 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 Treaty 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 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 examineannounced in the feasibility of a more targetedFederal Budget in May 2005 that the capital gains tax exemption forprovisions are to be amended to provide conduit capital gains on the disposal bytax relief for non-resident inbound investors. The proposed reform provides capital gains tax relief for non-residents disposing of some or all of their non-portfolio share interests in Australian companies,entities. The amendments will not extend to the extentdisposal of shares in Australian companies where the capital gainsvalue of such an interest is wholly or principally attributable to Australian real property. The change will apply to the disposal of assets occurring on or after the date of Royal Assent of the amending legislation. The Government has an underlying foreign source. At this stage, it is uncertain as to whether any such exemptionforeshadowed that the legislation will be introduced.introduced in the 2005-2006 year. To date, no legislation has been released. 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. PART I Item 10: Additional Information 10E AUSTRALIAN TAXATION(continued) 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
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10E | AUSTRALIAN 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. AUSTRALIANFOREIGNSOURCEINCOMERULES 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. 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 are 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. Otherwise, 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 legislated 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 removed 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 applies from 1 April 2004 and applies to specified capital gains tax events relating to shares in foreign companies occurring after that date. The other CFC measure applies from 1 July 2004 and applies in relation to statutory accounting periods of CFCs beginning on or after that date. PART I 10F | DIVIDENDSAND PAYING AGENTS |
Item 10: Additional Information 10F DIVIDENDSAND PAYING AGENTS Not ApplicableApplicable. 10G STATEMENTBY EXPERTS Not ApplicableApplicable. 10H DOCUMENTSON DISPLAY The documents referred to in this report can be inspected at the Company’s Head Office at 678 Victoria Street, Richmond, Victoria, Australia. 10I | SUBSIDIARY INFORMATION |
10I SUBSIDIARY INFORMATION Not Applicable 63Applicable.
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 predominantly 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.Service. |
The Company follows the same credit policies, legal processes, monitoring of market and operational risks in the area of derivative financial instruments, as they doit does 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 |
(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 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 a 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 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)(continued) DERIVATIVE FINANCIAL INSTRUMENTSHELDORISSUEDFORTRADINGPURPOSES The Company and the consolidated entity dodoes not trade in derivative financial instruments or hold them for speculative purposes. FUTURE TRANSACTIONS On a continuing basis, the Company monitors its future exposures and on some occasions hedges all or part of these exposures. The transactions that may be covered are future cash flows of overseas controlled entities and future foreign exchange requirements. These exposures are then monitored and may be modified from time to time. These transactions predominantly do notrarely 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
| | 2004
| | 2003
| | 2002
| | 2004
| | 2003
| | 2002
| | | 2005
| | 2004
| | 2003
| | 2005
| | 2004
| | 2003
| Exposures | | | | | | | | | | | | | | | | | | | Less than 1 year | | — | | — | | — | | (0.1 | ) | | 1.9 | | (0.5 | ) | | — | | | — | | — | | — | | (0.1 | ) | | 1.9 | Realized Swaps Deferred | | | | | | | | | | | | | | | | | | | Less than 1 year | | 0.7 | | 0.4 | | 0.1 | | — | | | — | | — | | | — | | | 0.7 | | 0.4 | | — | | — | | | — | 1 to 2 years | | 0.7 | | 0.8 | | 0.7 | | — | | | — | | — | | | (0.3 | ) | | 0.7 | | 0.8 | | — | | — | | | — | 2 to 5 years | | 4.9 | | 0.9 | | 2.2 | | — | | | — | | — | | | (3.6 | ) | | 4.9 | | 0.9 | | — | | — | | | — | Greater than 5 years | | — | | — | | — | | — | | | — | | — | | | — | | | — | | — | | — | | — | | | — |
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: | | | | | | | | | | | | | | | | | | | $ in millions
| | Weighted Average Effective Interest Rate
| | | Floating
| | | Interest Rate Fixed Maturities
| | Non Interest Bearing
| | Total
| | | | 1 year or less
| | | 1 to 5 years (1)
| | | Over 5 years
| | | Net Financial Assets/(Liabilities) 2004 | | | % | | | | | | | | | | | | | | | | 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 | | | | | | | | | | | | | | | | | | | Recognised | | | | | | | | | | | | | | | | | | | Cash on hand and at bank | | 1.3 | % | | 61.4 | | | — | | | — | | | — | | — | | 61.4 | Short-term deposits | | 3.9 | % | | 238.4 | | | — | | | — | | | — | | — | | 238.4 | Receivables – trade | | N/A | | | — | | | — | | | — | | | — | | 197.5 | | 197.5 | Receivables – other | | 5.4 | % | | 62.7 | | | — | | | — | | | — | | 59.2 | | 121.9 | Investments (excl. associated companies) | | N/A | | | — | | | — | | | — | | | — | | 141.4 | | 141.4 | | | | | |
|
| |
|
| |
|
| |
| |
| |
| Total Financial Assets 2003 | | | | | 362.5 | | | — | | | — | | | — | | 398.1 | | 760.6 | | | | | |
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| |
|
| |
|
| |
| |
| |
| Financial Liabilities | | | | | | | | | | | | | | | | | | | Recognised | | | | | | | | | | | | | | | | | | | Payables – trade | | N/A | | | — | | | — | | | — | | | — | | 130.1 | | 130.1 | Payables – other | | N/A | | | — | | | — | | | — | | | — | | 27.5 | | 27.5 | Bank overdraft | | 3.2 | % | | 1.3 | | | — | | | — | | | — | | 1.3 | | 2.6 | Bank and other loans | | 6.4 | % | | 370.0 | | | 24.2 | | | 75.0 | | | — | | — | | 469.2 | Provisions (including certain employee entitlements) | | N/A | | | — | | | — | | | — | | | — | | 39.4 | | 39.4 | Unrecognised | | | | | | | | | | | | | | | | | | | Net interest rate swaps | | 2.5 | % | | (319.4 | ) | | 168.8 | | | 150.6 | | | — | | — | | — | | | | | |
|
| |
|
| |
|
| |
| |
| |
| Total Financial Liabilities 2003 | | | | | 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 | | | | | |
|
| |
|
| |
|
| |
| |
| |
|
(1) | Analysis of Fixed Rate Maturities 1 to 5 years |
| $ in millions
| | | Weighted Average Effective Interest Rate
| | Floating
| | | Interest Rate
Fixed Maturities
| | Non Interest Bearing
| | Total
| | | | 1 year or less
| | 1 to 5 years (1)
| | Over 5 years
| | Net Financial Assets/(Liabilities) 2005 | | | % | | | | | | Financial Assets | | | | | | | | On-Balance Sheet | | | | | | | | Cash on hand and at bank | | | 1.6% | | 19.2 | | | 6.5 | | | — | | | — | | 43.7 | | 69.4 | Short-term deposits | | | 4.5% | | 48.8 | | | 105.4 | | | — | | | — | | 3.7 | | 157.9 | Receivables – trade | | | NA | | — | | | — | | | — | | | — | | 170.8 | | 170.8 | Receivables – other | | | 6.1% | | 66.8 | | | — | | | — | | | — | | 44.8 | | 111.6 | Investments (excl. associated companies) | | | NA | | — | | | — | | | — | | | — | | 59.0 | | 59.0 | | | | |
|
| |
|
| |
|
| |
| |
| |
| Total Financial Assets 2005 | | | | 134.8 | | | 111.9 | | | — | | | — | | 322.0 | | 568.7 | | | | |
|
| |
|
| |
|
| |
| |
| |
| Financial Liabilities | | | | | | | | Recognised | | | | | | | | Payables – trade | | | NA | | — | | | — | | | — | | | — | | 106.8 | | 106.8 | Payables – other | | | NA | | — | | | — | | | — | | | — | | 26.8 | | 26.8 | Bank overdraft | | | 4.5% | | 0.3 | | | — | | | — | | | — | | 1.1 | | 1.4 | Bank and other loans | | | 5.1% | | 6.7 | | | — | | | 357.2 | | | — | | — | | 363.9 | Provisions (including certain employee entitlements) | | | NA | | — | | | — | | | — | | | — | | 50.1 | | 50.1 | Unrecognised | | | | | | | | Net interest rate swaps | | | — | | — | | | — | | | — | | | — | | — | | — | | | | |
|
| |
|
| |
|
| |
| |
| |
| Total Financial Liabilities 2005 | | | | 7.0 | | | — | | | 357.2 | | | — | | 184.8 | | 549.0 | | | | |
|
| |
|
| |
|
| |
| |
| |
| Net Financial Assets/(Liabilities) 2005 | | | | 127.8 | | | 111.9 | | | (357.2 | ) | | — | | 137.2 | | 19.7 | | | | |
|
| |
|
| |
|
| |
| |
| |
| Net Financial Assets/(Liabilities) 2004 | | | % | | | | | | 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 | | | | |
|
| |
|
| |
|
| |
| |
| |
|
| | | | | | | | (1) Analysis of Fixed Rate Maturities 1 to 5 years | | | | | | | | | | | | 1-2 yrs
| | 2-3 yrs
| | 3-4 yrs
| | 4-5 yrs
| | Total
| 2005 | | | | | | | | Bank & Other Loans | | | | 115.9 | | | 26.2 | | | 105.0 | | 110.1 | | 357.2 | | | 1-2 yrs
| | 2-3 yrs
| | 3-4 yrs
| | 4-5 yrs
| | Total
| | |
|
| |
|
| |
| |
| |
| 2004 | | | | | | | | | | | | | | | | | Bank & Other Loans | | 101.7 | | — | | — | | — | | 101.7 | | | 101.7 | | | — | | | — | | — | | 101.7 | Net Interest Rate Swaps | | 26.3 | | — | | — | | — | | 26.3 | | | 26.3 | | | — | | | — | | — | | 26.3 | | |
| |
| |
| |
| |
| | |
|
| |
|
| |
| |
| |
| | | 128.0 | | — | | — | | — | | 128.0 | | | 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$47.4 million (2003(2004 – $64.4 million; 2002 - $86.5$57.7 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 1921 to the Financial Statements – Interest Bearing Liabilities.contained in Item 18. 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 Company considers that the carrying amount of recognised financial assets and financial liabilities approximates their net fair value. 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 $1.6$3.5 million (2003(2004 - $(11.1) million, 2002 – ($23.8)$1.6 million) if all contracts were closed out on 30 June 2004.2005. | | | | | | | | | | | | | | | | | | | | | | | | Face Value
| | Credit Risk
| | Net Fair Value
| | $ in millions
| | 2004
| | 2003
| | 2002
| | 2004
| | 2003
| | 2002
| | 2004
| | | 2003
| | | 2002
| | Foreign Exchange Contracts | | | | | | | | | | | | | | | | | | | | | | Purchase/Sale Contracts: | | | | | | | | | | | | | | | | | | | | | | -U.S. dollars | | 77.0 | | 112.0 | | 329.7 | | 0.4 | | 0.3 | | 1.6 | | 0.2 | | | (0.4 | ) | | (7.3 | ) | -Australian dollars | | 22.0 | | 47.5 | | 49.4 | | — | | 1.8 | | — | | — | | | 1.8 | | | — | | -Other currencies | | 33.4 | | 44.8 | | 216.5 | | 0.2 | | — | | 2.5 | | 0.1 | | | (0.9 | ) | | 2.4 | | Cross Currency Swaps: | | | | | | | | | | | | | | | | | | | | | | -U.S. dollars | | 53.8 | | 69.4 | | 96.5 | | 1.9 | | 2.7 | | 2.2 | | 1.9 | | | 2.7 | | | (1.5 | ) | -Other Currencies | | — | | — | | 16.5 | | — | | — | | — | | — | | | — | | | (2.1 | ) | Foreign Exchange Options | | | | | | | | | | | | | | | | | | | | | | Zero Cost Collar: | | | | | | | | | | | | | | | | | | | | | | -Euro/U.S. dollars | | 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 | | | — | | Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | Interest Rate Swaps: | | | | | | | | | | | | | | | | | | | | | | -U.S. dollars | | 141.0 | | 369.4 | | 435.1 | | 0.4 | | 0.3 | | 3.0 | | (1.2 | ) | | (10.9 | ) | | (14.5 | ) | -Australian dollars | | 50.0 | | 100.0 | | 300.0 | | — | | — | | — | | (0.1 | ) | | (1.0 | ) | | (0.8 | ) | -Other currencies | | — | | — | | 17.5 | | — | | — | | — | | — | | | — | | | — | | | |
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| |
| |
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|
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|
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|
| Total | | 570.7 | | 866.4 | | 1,461.2 | | 5.1 | | 6.1 | | 9.3 | | 1.6 | | | (11.1 | ) | | (23.8 | ) | | |
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|
| | | | | | | | | | | | | | | | | Face Value
| | Credit Risk
| | Net Fair Value
| | $ in millions
| | 2005
| | 2004
| | 2005
| | 2004
| | 2005
| | | 2004
| | Foreign Exchange Contracts | | | | | | | | | | | | | Purchase/Sale Contracts: | | | | | | | | | | | | | | | - U.S. dollars | | 78.5 | | 77.0 | | 0.5 | | 0.4 | | 0.4 | | | 0.2 | | - Australian dollars | | 5.0 | | 22.0 | | — | | — | | — | | | — | | - Euro | | 20.7 | | 19.9 | | — | | — | | (0.7 | ) | | — | | - Other currencies | | 5.3 | | 13.5 | | — | | 0.2 | | (0.1 | ) | | 0.1 | | Cross Currency Swaps: | | | | | | | | | | | | | | | - U.S. dollars | | 23.7 | | 53.8 | | 0.9 | | 1.9 | | 0.9 | | | 1.9 | | Foreign Exchange Options | | | | | | | | | | | | | Zero Cost Collar: | | | | | | | | | | | | | | | - Euro/U.S. dollars | | 99.3 | | 145.4 | | 2.6 | | 1.6 | | 3.3 | | | 0.4 | | - U.S. dollars/Thai baht | | 16.5 | | 21.5 | | 0.4 | | 0.1 | | (0.3 | ) | | (0.2 | ) | - Australian dollars/U.S. dollars | | 6.0 | | 11.3 | | — | | 0.4 | | — | | | 0.6 | | - Canadian dollars/U.S. dollars | | 29.1 | | 6.8 | | 0.2 | | 0.1 | | (0.1 | ) | | (0.1 | ) | - GBP/U.S. dollars | | 0.9 | | 8.5 | | — | | — | | — | | | — | | - U.S. dollars/Euro | | 6.6 | | — | | — | | — | | (0.2 | ) | | — | | Interest Rate Contracts | | | | | | | | | | | | | Interest Rate Swaps: | | | | | | | | | | | | | | | - U.S. dollars | | 38.0 | | 141.0 | | 0.4 | | 0.4 | | 0.3 | | | (1.2 | ) | - Australian dollars | | — | | 50.0 | | — | | — | | — | | | (0.1 | ) | | |
| |
| |
| |
| |
|
| |
|
| Total | | 329.6 | | 570.7 | | 5.0 | | 5.1 | | 3.5 | | | 1.6 | | | |
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|
From time to time in the ordinary course of business, the Company 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: |
(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; |
By: (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: |
(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
| | 2004
| | 2003
| | 2002
| | 2004
| | 2003
| | 2002
| | 2004
| | 2003
| | 2002
| | 2004
| | 2003
| | 2002
| | 2005
| | 2004
| | 2005
| | 2004
| | 2005
| | 2004
| | 2005
| | 2004
| Term | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 0 to 6 mths | | 0.6 | | 2.1 | | 4.1 | | — | | 0.3 | | — | | 1.1 | | 0.4 | | — | | 1.7 | | 2.8 | | 4.1 | | 0.5 | | 0.6 | | — | | — | | 2.1 | | 1.1 | | 2.6 | | 1.7 | 6 to 12 mths | | 0.1 | | — | | — | | — | | — | | — | | 1.1 | | 0.6 | | — | | 1.2 | | 0.6 | | — | | — | | 0.1 | | — | | — | | 1.1 | | 1.1 | | 1.1 | | 1.2 | 1 to 2 yrs | | — | | 0.2 | | — | | — | | — | | 3.0 | | — | | — | | — | | — | | 0.2 | | 3.0 | | 0.9 | | — | | — | | — | | — | | — | | 0.9 | | — | 2 to 5 yrs | | 1.8 | | 2.5 | | 2.2 | | 0.4 | | — | | — | | — | | — | | — | | 2.2 | | 2.5 | | 2.2 | | — | �� | 1.8 | | 0.4 | | 0.4 | | — | | — | | 0.4 | | 2.2 | 5 to 10 yrs | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | |
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| Total | | 2.5 | | 4.8 | | 6.3 | | 0.4 | | 0.3 | | 3.0 | | 2.2 | | 1.0 | | — | | 5.1 | | 6.1 | | 9.3 | | 1.4 | | 2.5 | | 0.4 | | 0.4 | | 3.2 | | 2.2 | | 5.0 | | 5.1 | | |
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|
(vi) | Historical Rate Rollovers: |
(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 ApplicableEvaluation of Disclosure Controls and Procedures
73The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Disclosure controls and procedures are designed to ensure that the material financial and non-financial information required to be disclosed in the Form 20-F and filed with the Securities and Exchange Commission is recorded, processed, summarized and reported in a timely manner.
Based on this evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. Internal Controls There have been no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II Item 16 16A | AUDIT COMMITTEE FINANCIAL EXPERT |
16A AUDIT COMMITTEE FINANCIAL EXPERT The Company’s Board of Directors has determined that Mr. L.D. Crandall, a memberChairman of the Company’s Audit Committee, is a financial expert and is independent as that term is defined. 16B CODE OF ETHICS The 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. 16C | PRINCIPAL ACCOUNTANT FEESAND SERVICES |
16C PRINCIPAL ACCOUNTANT FEESAND SERVICES | Audit and Review of Financial Reports ($ in Thousands)
| | Consolidated
| | The Company
| | Consolidated
| | The Company
| | 2004
| | 2003
| | 2004
| | 2003
| | 2005
| | 2004
| | 2005
| | 2004
| Auditors of Ansell Limited and Australian entities – KPMG | | 1,013 | | 1,183 | | 927 | | 983 | | 1,050 | | 1,013 | | 1,050 | | 927 | Other Member firms of KPMG | | 1,423 | | 1,661 | | — | | — | | 1,564 | | 1,423 | | — | | — | | |
| |
| |
| |
| |
| |
| |
| |
| Total | | 2,436 | | 2,844 | | 927 | | 983 | | 2,614 | | 2,436 | | 1,050 | | 927 | | |
| |
| |
| |
| |
| |
| |
| |
|
| | | | | | | | | 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 | | |
| |
| |
| |
|
| | | | | | | | | Other Audit and Assurance Services (including disposals and acquisitions) ($ in Thousands)
| | Consolidated
| | The Company
| | 2005
| | 2004
| | 2005
| | 2004
| Auditors of Ansell Limited and Australian entities – KPMG(1) | | 36 | | 131 | | 36 | | 131 | Other Member firms of KPMG(2) | | 70 | | 77 | | — | | — | | |
| |
| |
| |
| Total | | 106 | | 208 | | 36 | | 131 | | |
| |
| |
| |
|
(1) | Includes audit of local statutory accounts and Ansell’s US GAAP financial statements and audit of a warranty claim.claim in the prior year. |
(2) | Includes the audit of defined benefit pension plans in the USA and the audit of local statutory accounts of foreign subsidiaries. |
| Taxation and Other Services ($ in Thousands)
| | Consolidated
| | The Company
| | Consolidated
| | The Company
| | 2004
| | 2003
| | 2004
| | 2003
| | 2005
| | 2004
| | 2005
| | 2004
| Auditors of Ansell Limited and Australian entities – KPMG | | 40 | | 32 | | 40 | | 32 | | 30 | | 40 | | 30 | | 40 | Other Member firms of KPMG | | 150 | | 90 | | — | | — | | 43 | | 150 | | — | | — | | |
| |
| |
| |
| |
| |
| |
| |
| Total | | 190 | | 122 | | 40 | | 32 | | 73 | | 190 | | 30 | | 40 | | |
| |
| |
| |
| |
| |
| |
| |
|
Represents fees for tax compliance services in respect of statutory lodgements. | | | | | | | | | | | Consolidated
| | The Company
| ($ in Thousands)
| | 2004
| | 20032005
| | 2004
| | 20032005
| | 2004
| 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. |
74
PART II Item 16 16D | EXEMPTIONSFROMTHE LISTING STANDARDSFOR AUDIT COMMITTEES |
16D EXEMPTIONSFROMTHE LISTING STANDARDSFOR AUDIT COMMITTEES Not Applicable 16E | PURCHASES OF EQUITY SECURITIES BY THE ISSUER |
16E PURCHASES 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 | | | | |
| |
| |
| | |
| | | | | | | | | 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 December – 31 December 2004 | | 16,847,345 | | 9.20 | | 16,847,345 | | Nil | 21 July – 11 August 2005 | | 14,669 | | 10.07 | | 14,669 | | Nil |
The Company, on 30 April 2004, ceased buying back shares under the on-market 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 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. date. 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 underfor $1.47 million. No further purchases pursuant to this program. Purchase of shares under this programon-market buy-back were suspended while consideration was given to an alternative off-market buy-back proposal.made in the current year. On 10 AugustAt the Annual General Meeting held on 14 October 2004, the Company announced that the Board was considering a proposal forshareholders approved an off-market buy-back for up to $155 million, under which 16,847,345 shares were bought back during the year, and also approved a further on-market buy-back for up to 10% of 17 millionthe Company’s shares. TheNo purchases under the latter on-market buy-back have yet been made.
As a result of the off-market buy-back proposal was approved bysome shareholders were left with less than a marketable parcel of shares. To enable all shareholders with unmarketable parcels of shares to divest their shares at no transactional cost, the Company’s Annual General MeetingCompany implemented on 14 October 2004. 7521 July 2005 a minimum holding share buy-back offer. At the close of the offer on 11 August 2005, 14,669 shares had been bought back at a cost of $147,672.
PART II Item 17 : Financial Statements Not Applicable 76
PART III
Item 18 : Consolidated Financial Statements STATEMENTSOF FINANCIAL PERFORMANCE of Ansell Limited and its Controlled Entities as at 30 June 20042005 | | | | | | | | | | | | Consolidated
| | | | | Consolidated
| | | Note
| | 2005
| | 2004
| | 2003
| | | | Note
| | 2004 $m
| | 2003 $m
| | 2002 $m
| | | | $m | | $m | | $m | | Revenue | | | | | Total revenue | | 3 | | | 1,131.1 | | | 1,320.1 | | | 3,190.4 | | | 3 | | | 1,109.9 | | | 1,131.1 | | | 1,320.1 | | Expenses | | | | | Cost of goods sold | | | 662.1 | | | 830.4 | | | 1,493.3 | | | | 650.1 | | | 662.1 | | | 830.4 | | Selling, distribution and administration | | | 289.8 | | | 310.3 | | | 504.8 | | | | 277.8 | | | 289.8 | | | 310.3 | | Depreciation and amortisation | | | 46.7 | | | 56.5 | | | 82.3 | | | | 45.3 | | | 46.7 | | | 56.5 | | Write-down of assets | | | 9.8 | | | 6.1 | | | 176.5 | | | | 80.0 | | | 9.8 | | | 6.1 | | Net assets of businesses disposed | | | — | | | — | | | 922.4 | | | Other | | 4 | (b) | | — | | | — | | | — | | | | | |
|
| |
|
| |
|
| | |
|
| |
|
| |
|
| Total expenses, excluding borrowing costs | | | 1,008.4 | | | 1,203.3 | | | 3,179.3 | | | | 1,053.2 | | | 1,008.4 | | | 1,203.3 | | Borrowing costs | | 4 | (a) | | 29.4 | | | 37.8 | | | 70.2 | | | 4 | (a) | | 21.9 | | | 29.4 | | | 37.8 | | 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 | | | Profit from ordinary activities before income tax expense | | | | 34.8 | | | 93.3 | | | 79.3 | | Income tax expense attributable to ordinary activities | | | 8 | | | 21.7 | | | 20.7 | | | 26.8 | | | | |
|
| |
|
| |
|
| | |
|
| |
|
| |
|
| Net profit/(loss) from ordinary activities after income tax expense | | | 72.6 | | | 52.5 | | | (113.0 | ) | | Net profit from ordinary activities after income tax expense | | | | 13.1 | | | 72.6 | | | 52.5 | | Outside equity interests in net profit after income tax | | 10 | | | 1.9 | | | 2.6 | | | 2.8 | | | 10 | | | 1.8 | | | 1.9 | | | 2.6 | | | | |
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| |
|
| |
|
| | |
|
| |
|
| |
|
| Net profit/(loss) after income tax attributable to Ansell Limited shareholders | | 6 | | | 70.7 | | | 49.9 | | | (115.8 | ) | | Net profit after income tax attributable to Ansell Limited shareholders | | | 6 | | | 11.3 | | | 70.7 | | | 49.9 | | | | |
|
| |
|
| |
|
| | |
|
| |
|
| |
|
| 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 | ) | | 6 | | | (44.5 | ) | | (7.4 | ) | | (71.3 | ) | | | |
|
| |
|
| |
|
| | |
|
| |
|
| |
|
| Total valuation adjustments attributable to Ansell Limited shareholders recognised directly in equity | | | (7.4 | ) | | (71.3 | ) | | (69.6 | ) | | | (44.5 | ) | | (7.4 | ) | | (71.3 | ) | | | |
|
| |
|
| |
|
| | |
|
| |
|
| |
|
| Total changes in equity from non-owner related transactions attributable to Ansell Limited shareholders | | 7 | | | 63.3 | | | (21.4 | ) | | (185.4 | ) | | 7 | | | (33.2 | ) | | 63.3 | | | (21.4 | ) | | | |
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|
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|
| | |
|
| |
|
| |
|
| Earnings/(loss) per share is based on net profit/(loss) after income tax attributable to Ansell Limited shareholders | | | | | | | | | | | cents
| | cents
| | cents
| | | Basic earnings per share | | 35 | | | 39.1 | | | 26.7 | | | (61.9 | ) | | Earnings per share is based on net profit after income tax attributable to Ansell Limited shareholders | | | | | | | | cents
| | cents
| | cents
| | Basic earnings per share* | | | 35 | | | 6.7 | | | 39.1 | | | 26.7 | | Diluted earnings per share | | 35 | | | 39.0 | | | 26.6 | | | (61.7 | ) | | 35 | | | 6.7 | | | 38.8 | | | 26.6 | |
* | Basic earnings per share in the current period is 54.5 cents excluding the effect of the write-down of the investment in the South Pacific Tyres Partnership. |
The above statements of financial performance should be read in conjunction with the accompanying notes. 77
PART III
Item 18 : Consolidated Financial Statements STATEMENTSOF FINANCIAL POSITION of Ansell Limited and its Controlled Entities as at 30 June 20042005 | | | | | | | | | | | | | Consolidated
| | | | | | Consolidated
| | | Note
| | 2005
| | 2004
| | 2003
| | | | Note
| | 2004 $m
| | 2003 $m
| | 2002 $m
| | | | | $m | | $m | | $m | | Current Assets | | | | | | | | | Cash assets | | 11 | | 307.8 | | | 286.0 | | | 258.5 | | | Cash on hand | | | 11 | | 0.2 | | | 0.9 | | | 0.6 | | Cash at bank and on deposit | | | 11 | | 218.7 | | | 306.9 | | | 285.4 | | Cash assets - restricted deposits | | 11 | | 10.3 | | | 13.8 | | | 18.4 | | | 11 | | 8.4 | | | 10.3 | | | 13.8 | | Receivables | | 12 | | 228.7 | | | 262.4 | | | 293.7 | | | 12 | | 214.1 | | | 228.7 | | | 262.4 | | Inventories | | 13 | | 190.5 | | | 187.9 | | | 235.1 | | | 13 | | 157.3 | | | 185.8 | | | 183.8 | | Prepayments | | | | 11.7 | | | 10.9 | | | 15.8 | | | Other | | | 14 | | 14.4 | | | 16.4 | | | 15.0 | | | | | |
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| |
|
| |
|
| | | |
|
| |
|
| |
|
| Total Current Assets | | | | 749.0 | | | 761.0 | | | 821.5 | | | | | 613.1 | | | 749.0 | | | 761.0 | | | | | |
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| |
|
| Non-Current Assets | | | | | | | | | Receivables | | 12 | | 63.6 | | | 57.0 | | | 66.7 | | | 12 | | 68.3 | | | 63.6 | | | 57.0 | | Investments accounted for using the equity method | | 14 | | — | | | — | | | 13.3 | | | Other financial assets | | 14 | | 141.4 | | | 141.4 | | | 145.8 | | | 15 | | 59.0 | | | 141.4 | | | 141.4 | | Property, plant and equipment | | 15 | | 227.8 | | | 262.9 | | | 332.5 | | | 16 | | 195.4 | | | 227.8 | | | 262.9 | | Intangible assets | | 16 | | 293.4 | | | 324.5 | | | 403.2 | | | 17 | | 246.2 | | | 293.4 | | | 324.5 | | Deferred tax assets | | 17 | | 24.2 | | | 32.0 | | | 49.7 | | | 18 | | 15.1 | | | 24.2 | | | 32.0 | | Other | | | | — | | | — | | | — | | | 19 | | 2.1 | | | — | | | — | | | | | |
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| | | |
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| |
|
| Total Non-Current Assets | | | | 750.4 | | | 817.8 | | | 1,011.2 | | | | | 586.1 | | | 750.4 | | | 817.8 | | | | | |
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|
| |
|
| | | |
|
| |
|
| |
|
| Total Assets | | | | 1,499.4 | | | 1,578.8 | | | 1,832.7 | | | | | 1,199.2 | | | 1,499.4 | | | 1,578.8 | | | | | |
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| |
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| | | |
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|
| Current Liabilities | | | | | | | | | Payables | | 18 | | 159.4 | | | 154.4 | | | 192.7 | | | 20 | | 132.8 | | | 159.4 | | | 155.5 | | Interest bearing liabilities | | 19 | | 190.2 | | | 151.8 | | | 107.6 | | | 21 | | 34.3 | | | 190.2 | | | 151.8 | | Provisions | | 20 | | 52.0 | | | 57.5 | | | 85.4 | | | 22 | | 56.7 | | | 52.0 | | | 57.5 | | Current tax liabilities | | 20 | | 2.6 | | | 3.1 | | | 1.9 | | | 22 | | 2.3 | | | 2.6 | | | 3.1 | | Other | | 21 | | — | | | 1.1 | | | 1.2 | | | | | | |
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|
| |
|
| | | |
|
| |
|
| |
|
| Total Current Liabilities | | | | 404.2 | | | 367.9 | | | 388.8 | | | | | 226.1 | | | 404.2 | | | 367.9 | | | | | |
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|
| Non-Current Liabilities | | | | | | | | | Payables | | 18 | | 3.3 | | | 3.2 | | | 3.7 | | | 20 | | 0.8 | | | 3.3 | | | 3.2 | | Interest bearing liabilities | | 19 | | 236.0 | | | 320.0 | | | 516.5 | | | 21 | | 331.0 | | | 236.0 | | | 320.0 | | Provisions | | 20 | | 23.9 | | | 21.7 | | | 23.3 | | | 22 | | 23.7 | | | 23.9 | | | 21.7 | | Deferred tax liabilities | | 20 | | 20.2 | | | 21.5 | | | 24.4 | | | 22 | | 14.8 | | | 20.2 | | | 21.5 | | | | | |
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|
| |
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| | | |
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|
| |
|
| Total Non-Current Liabilities | | | | 283.4 | | | 366.4 | | | 567.9 | | | | | 370.3 | | | 283.4 | | | 366.4 | | | | | |
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|
| |
|
| | | |
|
| |
|
| |
|
| Total Liabilities | | | | 687.6 | | | 734.3 | | | 956.7 | | | | | 596.4 | | | 687.6 | | | 734.3 | | | | | |
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| |
|
| |
|
| | | |
|
| |
|
| |
|
| Net Assets | | | | 811.8 | | | 844.5 | | | 876.0 | | | | | 602.8 | | | 811.8 | | | 844.5 | | | | | |
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|
| Equity | | | | | | | | | Contributed equity | | 5 | | 1,383.9 | | | 1,448.3 | | | 1,455.5 | | | 5 | | 1,232.8 | | | 1,383.9 | | | 1,448.3 | | Reserves | | 6 | | (275.6 | ) | | (268.9 | ) | | (176.2 | ) | | 6 | | (296.6 | ) | | (275.6 | ) | | (268.9 | ) | Accumulated losses | | 6 | | (306.7 | ) | | (345.7 | ) | | (417.0 | ) | | 6 | | (342.5 | ) | | (306.7 | ) | | (345.7 | ) | | | | |
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|
| |
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| | | |
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| |
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| |
|
| Total equity attributable to Ansell Limited shareholders | | | | 801.6 | | | 833.7 | | | 862.3 | | | | | 593.7 | | | 801.6 | | | 833.7 | | Outside equity interests | | 10 | | 10.2 | | | 10.8 | | | 13.7 | | | 10 | | 9.1 | | | 10.2 | | | 10.8 | | | | | |
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| |
|
| |
|
| | | |
|
| |
|
| |
|
| Total Equity | | | | 811.8 | | | 844.5 | | | 876.0 | | | | | 602.8 | | | 811.8 | | | 844.5 | | | | | |
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|
The above statements of financial position should be read in conjunction with the accompanying notes. 78
PART III
Item 18 : Consolidated Financial Statements STATEMENTSOF CASH FLOWS of Ansell Limited and its Controlled Entities for the year ended 30 June 20042005 | | | | | | | | | | | | Consolidated
| | | | | Consolidated
| | | Note
| | 2005
| | 2004
| | 2003
| | | | Note
| | 2004 $m
| | 2003 $m
| | 2002 $m
| | | | $m | | $m | | $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 | | | | 1,128.6 | | | 1,155.9 | | | 1,357.0 | | Payments to suppliers and employees (excluding non-recurring and Accufix Research Institute) | | | (950.6 | ) | | (1,159.9 | ) | | (2,124.8 | ) | | | (955.8 | ) | | (950.6 | ) | | (1,159.9 | ) | | | |
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| |
|
| | |
|
| |
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| |
|
| Net receipts from customers (excluding non-recurring and Accufix Research Institute) | | | 205.3 | | | 197.1 | | | 231.7 | | | | 172.8 | | | 205.3 | | | 197.1 | | Income taxes paid | | | (15.9 | ) | | (8.6 | ) | | (25.5 | ) | | | (16.1 | ) | | (15.9 | ) | | (8.6 | ) | Dividends received | | | — | | | 2.6 | | | 0.3 | | | | — | | | — | | | 2.6 | | | | |
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| |
|
| | |
|
| |
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| |
|
| Net cash provided by Operating Activities (excluding non-recurring and Accufix Research Institute) | | | 189.4 | | | 191.1 | | | 206.5 | | | Net cash provided by operating activities (excluding non-recurring and Accufix Research Institute) | | | | 156.7 | | | 189.4 | | | 191.1 | | Non-recurring payments to suppliers and employees | | | (7.1 | ) | | (26.8 | ) | | (82.7 | ) | | | — | | | (7.1 | ) | | (26.8 | ) | Payments to suppliers and employees net of customer receipts | | | | (Accufix Research Institute) | | | (3.1 | ) | | (2.7 | ) | | (10.7 | ) | | Payments to suppliers and employees net of customer receipts (Accufix Research Institute) | | | | (3.9 | ) | | (3.1 | ) | | (2.7 | ) | | | |
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| Net Cash (Used in)/Provided by Operating Activities | | 31 | (a) | | 179.2 | | | 161.6 | | | 113.1 | | | Net Cash Provided by Operating Activities | | | 31 | (a) | | 152.8 | | | 179.2 | | | 161.6 | | | | |
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| 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 | ) | | | (14.1 | ) | | (13.8 | ) | | (15.4 | ) | Proceeds from sale of businesses, net of cash disposed | | | — | | | — | | | 936.4 | | | Payments for brand names | | | | — | | | — | | | Proceeds from sale of plant and equipment in the ordinary course of business | | | 5.3 | | | 6.1 | | | 12.1 | | | | — | | | 5.3 | | | 6.1 | | Loans repaid | | | 3.4 | | | 4.2 | | | 1.2 | | | | — | | | 3.4 | | | 4.2 | | Net loans to controlled entities | | | 31 | (c) | | — | | | — | | | — | | Proceeds from sale of other investments | | | — | | | 9.1 | | | — | | | | 1.4 | | | — | | | 9.1 | | Payments for other investments | | | (1.3 | ) | | — | | | — | | | | — | | | (1.3 | ) | | — | | | | |
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| Net Cash (Used in)/Provided by Investing Activities | | | (6.4 | ) | | 4.0 | | | 874.5 | | | | (12.7 | ) | | (6.4 | ) | | 4.0 | | | | |
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| Cash Flows Related to Financing Activities | | | | | Proceeds from borrowings | | | 104.3 | | | 7.8 | | | 737.0 | | | | 145.1 | | | 104.3 | | | 7.8 | | Repayments of borrowings | | | (140.9 | ) | | (86.9 | ) | | (1,673.9 | ) | | | (171.5 | ) | | (140.9 | ) | | (86.9 | ) | | | |
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| Net repayments of borrowings | | | (36.6 | ) | | (79.1 | ) | | (936.9 | ) | | | (26.4 | ) | | (36.6 | ) | | (79.1 | ) | Proceeds from issues of shares | | | 1.0 | | | 1.0 | | | 1.2 | | | | 5.0 | | | 1.0 | | | 1.0 | | Payments for share buy-back | | | (65.4 | ) | | (8.2 | ) | | — | | | | (156.1 | ) | | (65.4 | ) | | (8.2 | ) | Dividends paid | | | (32.7 | ) | | (1.7 | ) | | (48.3 | ) | | | (24.7 | ) | | (32.7 | ) | | (1.7 | ) | Interest received | | | 9.0 | | | 8.0 | | | 13.1 | | | | 8.5 | | | 9.0 | | | 8.0 | | Interest and borrowing costs paid | | | (28.7 | ) | | (37.8 | ) | | (70.2 | ) | | | (23.3 | ) | | (28.7 | ) | | (37.8 | ) | | | |
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| Net Cash (Used in)/Provided by Financing Activities | | | (153.4 | ) | | (117.8 | ) | | (1,041.1 | ) | | Net Cash Used in Financing Activities | | | | (217.0 | ) | | (153.4 | ) | | (117.8 | ) | | | |
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| Net (Decrease)/Increase in Cash Held | | | 19.4 | | | 47.8 | | | (53.5 | ) | | | (76.9 | ) | | 19.4 | | | 47.8 | | Cash at the beginning of the financial year | | | 297.2 | | | 262.3 | | | 328.4 | | | | 314.8 | | | 297.2 | | | 262.3 | | 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 | ) | | | (12.0 | ) | | (1.8 | ) | | (12.9 | ) | | | |
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| Cash at the End of the Financial Year | | 31 | (b) | | 314.8 | | | 297.2 | | | 262.3 | | | 31 | (b) | | 225.9 | | | 314.8 | | | 297.2 | | | | |
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The above statements of cash flows should be read in conjunction with the accompanying notes. 79
PART III
Item 18 : Consolidated Financial Statements INDUSTRY SEGMENTS of Ansell Limited and its Controlled Entities for the year ended 30 June 20042005 | | | | | | | | | | | | | | | Operating Revenue
| | Operating Result
| | | | Operating Revenue
| | Operating Result
| | | 2005
| | 2004
| | 2003
| | 2005
| | 2004
| | 2003
| | | | 2004 $m
| | 2003 $m
| | 2002 $m
| | 2004 $m
| | 2003 $m
| | 2002 $m
| | | $m | | $m | | $m | | $m | | $m | | $m | | INDUSTRY | | | | | | | | | | | | | | | | | Ansell Healthcare | | | | | | | | | | | | | | | | | Occupational Healthcare | | 545.2 | | 624.9 | | 640.2 | | 74.2 | | | 62.9 | | | 37.0 | | | 551.6 | | 545.2 | | 624.9 | | 81.3 | | | 74.2 | | | 62.9 | | Professional Healthcare | | 381.8 | | 452.6 | | 546.9 | | 40.5 | | | 53.9 | | | 92.7 | | | 371.4 | | 381.8 | | 452.6 | | 43.3 | | | 40.5 | | | 53.9 | | Consumer Healthcare | | 186.3 | | 216.1 | | 227.1 | | 31.6 | | | 42.8 | | | 32.6 | | | 173.2 | | 186.3 | | 216.1 | | 29.1 | | | 31.6 | | | 42.8 | | | |
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| Total Ansell Healthcare | | 1,113.3 | | 1,293.6 | | 1,414.2 | | 146.3 | | | 159.6 | | | 162.3 | | | 1,096.2 | | 1,113.3 | | 1,293.6 | | 153.7 | | | 146.3 | | | 159.6 | | Unallocated Items | | 17.8 | | 26.5 | | 27.9 | | (13.1 | ) | | (22.4 | ) | | (27.7 | ) | | | | | | | | | |
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| | | | | | | | | | 133.2 | | | 137.2 | | | 134.6 | | | Discontinued Businesses | | | | | | | | | | Trading | | | | | | 808.6 | | | 61.0 | | | Unallocated items | | | 13.7 | | 17.8 | | 26.5 | | (8.8 | ) | | (13.1 | ) | | (22.4 | ) | | | | | | | | |
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| Operating EBITA | | | | | | | | 133.2 | | | 137.2 | | | 195.6 | | | | | | | | | 144.9 | | | 133.2 | | | 137.2 | | Write-down of investment in South Pacific Tyres | | | | | | | | | (80.0 | ) | | Write-down of Ansell Healthcare assets/Discontinued | | | | | | | | | | Businesses adjustments | | Businesses adjustments | | | | �� | | (1.7 | ) | | (6.1 | ) | | | | | | | | | | |
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| 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 | ) | | | | | | | | | |
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| | | | | | | | | | 131.5 | | | 131.1 | | | 26.7 | | | EBITA | | | | | | | | | 64.9 | | | 131.5 | | | 131.1 | | Goodwill amortisation | | | | | | | | (21.4 | ) | | (25.3 | ) | | (29.2 | ) | | | | | | | | (20.5 | ) | | (21.4 | ) | | (25.3 | ) | | | | | | | | |
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| Earnings before Net Interest and Tax (EBIT) | | | | | | | | 110.1 | | | 105.8 | | | (2.5 | ) | | | | | | | | 44.4 | | | 110.1 | | | 105.8 | | Borrowing Costs net of Interest Revenue | | | | | | | | (16.8 | ) | | (26.5 | ) | | (54.7 | ) | | Borrowing costs net of interest revenue | | | | | | | | | (9.6 | ) | | (16.8 | ) | | (26.5 | ) | | | | | | | | |
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| Operating Profit before Tax | | | | | | | | 93.3 | | | 79.3 | | | (57.2 | ) | | | | | | | | 34.8 | | | 93.3 | | | 79.3 | | Tax | | | | | | | | (20.7 | ) | | (26.8 | ) | | (55.8 | ) | | | | | | | | (21.7 | ) | | (20.7 | ) | | (26.8 | ) | Outside Equity Interests | | | | | | | | (1.9 | ) | | (2.6 | ) | | (2.8 | ) | | Outside equity interests | | | | | | | | | (1.8 | ) | | (1.9 | ) | | (2.6 | ) | | |
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| Total Consolidated | | 1,131.1 | | 1,320.1 | | 3,190.4 | | 70.7 | | | 49.9 | | | (115.8 | ) | | 1,109.9 | | 1,131.1 | | 1,320.1 | | 11.3 | | | 70.7 | | | 49.9 | | | |
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| REGIONS | | | | | | | | | | | | | | | | | Asia Pacific | | 168.2 | | 173.7 | | 170.7 | | 41.4 | | | 35.9 | | | 32.9 | | | 162.9 | | 168.2 | | 173.7 | | 38.9 | | | 41.4 | | | 35.9 | | Americas | | 544.7 | | 656.0 | | 799.5 | | 65.0 | | | 80.2 | | | 99.1 | | | 527.0 | | 544.7 | | 656.0 | | 68.2 | | | 65.0 | | | 80.2 | | Europe | | 400.4 | | 463.9 | | 444.0 | | 39.9 | | | 43.5 | | | 30.3 | | | 406.3 | | 400.4 | | 463.9 | | 46.6 | | | 39.9 | | | 43.5 | | | |
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| Total Ansell Healthcare | | 1,113.3 | | 1,293.6 | | 1,414.2 | | 146.3 | | | 159.6 | | | 162.3 | | | 1,096.2 | | 1,113.3 | | 1,293.6 | | 153.7 | | | 146.3 | | | 159.6 | | | |
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| | | | Assets Employed
| | Liabilities
| | | Assets Employed
| | Liabilities
| | | | 2004 $m
| | 2003 $m
| | 2002 $m
| | 2004 $m
| | 2003 $m
| | 2002 $m
| | | 2005
| | 2004
| | 2003
| | 2005
| | 2004
| | 2003
| | | | | $m | | $m | | $m | | $m | | $m | | $m | | INDUSTRY | | | | | | | | | | | | | | | | | Ansell Healthcare | | | | | | | | | | | | | | | | | Occupational Healthcare | | 274.8 | | 284.4 | | 353.8 | | 96.1 | | | 90.0 | | | 105.2 | | | 250.8 | | 274.8 | | 284.4 | | 83.5 | | | 96.1 | | | 90.0 | | Professional Healthcare | | 277.4 | | 310.8 | | 376.6 | | 68.1 | | | 63.9 | | | 81.5 | | | 230.9 | | 277.4 | | 310.8 | | 62.6 | | | 68.1 | | | 63.9 | | Consumer Healthcare | | 110.4 | | 111.5 | | 135.3 | | 37.2 | | | 39.4 | | | 44.3 | | | 88.5 | | 110.4 | | 111.5 | | 21.1 | | | 37.2 | | | 39.4 | | | |
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| Total Ansell Healthcare | | 662.6 | | 706.7 | | 865.7 | | 201.4 | | | 193.3 | | | 231.0 | | | 570.2 | | 662.6 | | 706.7 | | 167.2 | | | 201.4 | | | 193.3 | | 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 | | | Corporate Assets/Liabilities | | | 155.5 | | 225.3 | | 247.8 | | 429.2 | | | 486.2 | | | 541.0 | | Goodwill and Brand names | | 293.4 | | 324.5 | | 403.2 | | | | 246.2 | | 293.4 | | 324.5 | | | Cash | | 318.1 | | 299.8 | | 276.9 | | | | 227.3 | | 318.1 | | 299.8 | | | | |
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| Total Consolidated | | 1,499.4 | | 1,578.8 | | 1,832.7 | | 687.6 | | | 734.3 | | | 956.7 | | | 1,199.2 | | 1,499.4 | | 1,578.8 | | 596.4 | | | 687.6 | | | 734.3 | | | |
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| REGIONS | | | | | | | | | | | | | | | | | Asia Pacific | | 268.3 | | 269.5 | | 318.4 | | 75.3 | | | 78.6 | | | 83.0 | | | 230.4 | | 268.3 | | 269.5 | | 60.0 | | | 75.3 | | | 78.6 | | Americas | | 227.5 | | 256.1 | | 343.2 | | 90.6 | | | 86.6 | | | 119.3 | | | 196.8 | | 227.5 | | 256.1 | | 73.6 | | | 90.6 | | | 86.6 | | Europe | | 166.8 | | 181.1 | | 204.1 | | 35.5 | | | 28.1 | | | 28.7 | | | 143.0 | | 166.8 | | 181.1 | | 33.6 | | | 35.5 | | | 28.1 | | | |
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| Total Ansell Healthcare | | 662.6 | | 706.7 | | 865.7 | | 201.4 | | | 193.3 | | | 231.0 | | | 570.2 | | 662.6 | | 706.7 | | 167.2 | | | 201.4 | | | 193.3 | | | |
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The above industry segments report should be read in conjunction with the accompanying notes, including Note 30. 80
PART III
Item 18 : Consolidated Financial Statements 1. | SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES |
1. SUMMARYOF 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,the Americas, 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. TheThese accounting policies adopted in preparing the financial report have been consistently applied by each entity in the consolidated entity and are consistent with those of the previous year.year with the exception of accounting for research and development costs - see Note 2.
Comparative information is reclassified where appropriate to enhance comparability.
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, rebatesdiscounts and allowancesrebates 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. AncillaryMaterial ancillary costs incurred in connection with the arrangement of term borrowings are capitalised and amortised over the life of the borrowings. 81
PART III
Item 18 : Consolidated Financial Statements 1. | 1. SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (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. 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. Item 18 : Consolidated Financial Statements 1. SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investments 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. Subsequent to 2002 theThe consolidated entity has no investments that meet the criteria for recognition as an associated 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 partnershipPartnership is carried as an investment at cost.investment. 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 | | - 20 -40- 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 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. Item 18 : Consolidated Financial Statements 1. SUMMARYOF 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.
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 24.25. Employer contributions to these funds are charged against the operating profit as they are made. The Company and the controlled entities have no legal or constructive obligation to fund any deficit. Item 18 : Consolidated Financial Statements 1. SUMMARYOF 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. A further Plan, the Pacific Dunlop Executive Share Plan, was discontinued in 1996. Further information on these plans is set out in Note 25.26. The consolidated entity has recorded a charge to the profit and loss for the current year of approximately $2.6$3.7 million based on the expected vesting of Performance Share Rights issued to executives pursuant to the Ansell Limited Stock Incentive Plan over the past two years.Plan. 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 towardsrequirement for the recognition of such compensation under Exposure Draft 108 Equity Based Compensation.the Australian equivalents of International Financial Reporting Standards (AIFRS) which become effective from 1 July 2005. 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 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; |
(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 |
(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. |
(iii) the consolidated entity predominantly does not deal with counter-parties rated lower than A- by Standard and Poor’s or A3 by Moody’s Investors Service. Item 18 : Consolidated Financial Statements 1. SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Derivatives (continued) 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. Derivative Financial Instruments Held or Issued for Purposes Other Than Trading On a continuing basis, the consolidated entity monitors its future exposures and on some occasions hedges all or part of these exposures. The transactions which may be covered are future net cash flows of overseas controlled entities, future foreign exchange requirements and interest rate positions. These exposures are then monitored and may be modified from time to time. The foreign exchange transactions predominantly do notrarely exceed 12 months duration and hedge transactions the consolidated entity expects to occur in this time frame. From time to time minor mismatches occur in the forward book, however these mismatches are managed under strict guidelines, limits and internal controls with stop loss parameters. Interest rate derivative instruments can be for periods up to 57 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 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 a 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 exposure is immediately taken to the Statement of Financial Performance. Derivative Financial Instruments Held or Issued for Trading Purposes The Company and the consolidated entity dodoes not trade in derivative financial instruments or hold them for 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
Item 18 : Consolidated Financial Statements 2. | IMPACTOF ADOPTING AUSTRALIAN EQUIVALENTSTO INTERNATIONAL FINANCIAL REPORTING STANDARDS2. CHANGEIN ACCOUNTING POLICY |
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 in compliance with IFRS when the results for the half-year ending 31 December 2005 are released.
IFRS requires that entities reporting their financial statements for the first time under IFRS must also restate their comparatives using all IFRS with the exception of IAS 32 Financial Instruments: DisclosureResearch and PresentationDevelopment Costs
Expenditure on research 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 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,development is written off in the financial statementsperiod in which it is incurred, except for development expenditure on new products or substantially improved existing products which is capitalised only when future recoverability is reasonably assured. Amortisation of the half-year ending 31 December 2005.capitalised expenditure commences in the half year period following the product’s commercialisation and continues for a three year period. Capitalised costs are regularly reviewed and when the criterion for capitalisation is no longer met, such costs are written off. Ansell has establishedThis is a project team to planchange in policy from prior years when all research and implementdevelopment costs were written off in 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.period in which they were incurred. The impact study addressed key differencesof this change in accounting policiespolicy on the current year’s results was to increase consolidated operating profit before income tax and disclosures, business issues associated with Australian equivalents to IFRS and key milestones for IFRS implementation including a high-level project plan.non-current assets by $2.1 million.
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 instruments 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 transition to Australian equivalents to IFRS, as some decisions have not yet been made where choices of 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.
| | | | | | | | | Consolidated
| $ in millions
| | 2004
| | 2003
| | 2002
| Revenue from the Sale of Goods | | 1,113.3 | | 1,293.6 | | 2,222.8 | Revenues From Other Operating Activities | | | | | | | Dividend income | | | | | | | From shares in other companies | | — | | — | | 0.3 | Interest Received or Due and Receivable | | | | | | | From related parties | | 3.5 | | 3.3 | | 2.5 | From others | | 9.0 | | 8.0 | | 13.0 | | |
| |
| |
| Total revenue from other operating activities | | 12.5 | | 11.3 | | 15.8 | | |
| |
| |
| Revenue from Outside Operating Activities | | | | | | | Proceeds from the Sale of Non-Current Assets | | 5.3 | | 15.2 | | 12.1 | Proceeds Received from the Sale of Businesses | | — | | — | | 939.7 | | |
| |
| |
| Total revenue from outside operating activities | | 5.3 | | 15.2 | | 951.8 | | |
| |
| |
| Total Revenue | | 1,131.1 | | 1,320.1 | | 3,190.4 | | |
| |
| |
|
88
PART III
| | | | | | | | | Consolidated
| $ in millions
| | 2005
| | 2004
| | 2003
| Revenue from the Sale of Goods | | 1,096.2 | | 1,113.3 | | 1,293.6 | Revenues From Other Operating Activities | | | | | | | Interest Received or Due and Receivable | | | | | | | From related parties | | 4.0 | | 3.5 | | 3.3 | From others | | 8.3 | | 9.0 | | 8.0 | | |
| |
| |
| Total revenue from other operating activities | | 12.3 | | 12.5 | | 11.3 | | |
| |
| |
| Revenue from Outside Operating Activities | | | | | | | Proceeds from the Sale of Non-Current Assets | | 1.4 | | 5.3 | | 15.2 | | |
| |
| |
| Total Revenue | | 1,109.9 | | 1,131.1 | | 1,320.1 | | |
| |
| |
|
Item 18 : Consolidated Financial Statements 4. | PROFIT/(LOSS)FROM ORDINARY ACTIVITIES BEFORE INCOME TAX4. PROFITFROMORDINARYACTIVITIESBEFOREINCOMETAX |
| | | | | | | | | | | | Consolidated
| | $ in millions
| | 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 | | 25.4 | | | 33.9 | | | 61.8 | | Other Borrowing Costs | | 4.0 | | | 3.9 | | | 8.4 | | | |
|
| |
|
| |
|
| Total Borrowing Costs | | 29.4 | | | 37.8 | | | 70.2 | | Depreciation | | | | | | | | | | Buildings | | 1.1 | | | 1.8 | | | 3.9 | | Plant & equipment | | 22.7 | | | 27.7 | | | 46.4 | | Amortisation | | | | | | | | | | Leasehold land and buildings | | 1.5 | | | 1.7 | | | 2.8 | | Goodwill | | 21.4 | | | 25.3 | | | 29.2 | | Research and Development Costs Expensed as Incurred | | 12.6 | | | 12.8 | | | 17.0 | | Net Bad Debts Expense | | 0.4 | | | (0.6 | ) | | 0.8 | | Amounts Set Aside to Provision for: | | | | | | | | | | Doubtful trade debts | | 1.2 | | | (2.5 | ) | | (2.9 | ) | Employee entitlements | | 13.0 | | | 10.8 | | | 29.2 | | Rationalisation and restructuring costs | | 9.7 | | | 10.1 | | | 20.3 | | Rebates, allowances and warranty claims | | 9.6 | | | 11.5 | | | 7.2 | | Net foreign exchange loss/(gain) | | 1.0 | | | 4.0 | | | (0.4 | ) | Profits Arising from the Sale of Property, Plant and Equipment | | (0.8 | ) | | (0.3 | ) | | (7.6 | ) | Losses Arising from Sale of Property, Plant and Equipment | | — | | | 0.2 | | | 13.2 | | Operating Lease Rentals | | 20.0 | | | 24.1 | | | 37.5 | | Write-down in Value of Inventories | | 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 | ) | 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 | | 1,013 | | | 1,183 | | | 1,653 | | Other member firms of KPMG | | 1,423 | | | 1,661 | | | 1,891 | | | |
|
| |
|
| |
|
| | | 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 | | 131 | | | 259 | | | 4,944 | | Other member firms of KPMG | | 77 | | | 78 | | | 25 | | Taxation and other services | | | | | | | | | | Auditors of Ansell Limited and Australian entities - KPMG | | 40 | | | 32 | | | 439 | | Other member firms of KPMG | | 150 | | | 90 | | | 66 | | | |
|
| |
|
| |
|
| Total other services | | 398 | | | 459 | | | 5,474 | | | |
|
| |
|
| |
|
| Total auditors remuneration | | 2,834 | | | 3,303 | | | 9,018 | | | |
|
| |
|
| |
|
|
89
PART III
| | | | | | | | | | | | Consolidated
| | $ in millions
| | 2005
| | | 2004
| | | 2003
| | (a) Profit 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 | | 20.3 | | | 25.4 | | | 33.9 | | Other Borrowing Costs | | 1.6 | | | 4.0 | | | 3.9 | | | |
|
| |
|
| |
|
| Total Borrowing Costs | | 21.9 | | | 29.4 | | | 37.8 | | Depreciation | | | | | | | | | | Buildings | | 1.5 | | | 1.1 | | | 1.8 | | Plant & equipment | | 21.9 | | | 22.7 | | | 27.7 | | Amortisation | | | | | | | | | | Leasehold land and buildings | | 1.4 | | | 1.5 | | | 1.7 | | Goodwill | | 20.5 | | | 21.4 | | | 25.3 | | Research and Development Costs | | | | | | | | 12.8 | | Expensed as incurred | | 12.8 | | | 12.6 | | | 12.8 | | Net Bad Debts Expense | | 0.2 | | | 0.4 | | | (0.6 | ) | Amounts Set Aside to Provision for: | | | | | | | | | | Doubtful trade debts | | (0.1 | ) | | 1.2 | | | (2.5 | ) | Employee entitlements | | 16.3 | | | 13.0 | | | 10.8 | | Rationalisation and restructuring costs | | 2.0 | | | 9.7 | | | 10.1 | | Accufix Pacing Lead related expenses | | 2.3 | | | — | | | — | | Rebates, allowances and warranty claims | | 6.9 | | | 9.6 | | | 11.5 | | Net foreign exchange loss | | 0.4 | | | 1.0 | | | 4.0 | | Profits Arising from the Sale of Property, Plant and Equipment | | — | | | (0.8 | ) | | (0.3 | ) | Losses Arising from Sale of Property, Plant and Equipment | | 0.1 | | | — | | | 0.2 | | Operating Lease Rentals | | 21.5 | | | 20.0 | | | 24.1 | | Write-down in Value of Inventories | | (0.7 | ) | | 3.7 | | | 5.9 | | | | | | (b) Individually significant items included in profit from ordinary activities before income tax expense | | | | | | | | | | Write-down of investment in South Pacific Tyres partnership | | (80.0 | ) | | — | | | — | | Refund of sales tax | | — | | | 17.8 | | | — | | Write-down of Ansell Healthcare fixed assets | | — | | | (8.8 | ) | | — | | GNB Workers Compensation costs | | — | | | (7.5 | ) | | — | | | | | | (c) Auditors’ Remuneration ($ in Thousands) | | | | | | | | | | Audit and review of the financial reports: | | | | | | | | | | Auditors of Ansell Limited and Australian entities - KPMG | | 1,050 | | | 1,013 | | | 1,183 | | Other member firms of KPMG | | 1,564 | | | 1,423 | | | 1,661 | | | |
|
| |
|
| |
|
| | | 2,614 | | | 2,436 | | | 2,844 | | | |
|
| |
|
| |
|
| Other services: | | | | | | | | | | Other audit and assurance services (including disposals and acquisitions) | | | | | | | | | | Auditors of Ansell Limited and Australian entities - KPMG | | 36 | | | 131 | | | 259 | | Other member firms of KPMG | | 70 | | | 77 | | | 78 | | Taxation and other services | | | | | | | | | | Auditors of Ansell Limited and Australian entities - KPMG | | 30 | | | 40 | | | 32 | | Other member firms of KPMG | | 43 | | | 150 | | | 90 | | | |
|
| |
|
| |
|
| Total other services | | 179 | | | 398 | | | 459 | | | |
|
| |
|
| |
|
| Total auditors’ remuneration | | 2,793 | | | 2,834 | | | 3,303 | | | |
|
| |
|
| |
|
|
Item 18 : Consolidated Financial Statements 5. CONTRIBUTED EQUITY | | | | | | | | | | | | Consolidated
| | $ in millions
| | 2005
| | | 2004
| | | 2003
| | Issued and Paid up Capital | | | | | | | | | | 160,125,483 (2004 - 176,310,916, 2003 - 185,917,580) ordinary shares, fully paid * | | 1,232.7 | | | 1,383.8 | | | 1,448.2 | | 377,800 (2004 - 738,000, 2003 - 922,100) ordinary plan shares, paid to 5 cents | | 0.1 | | | 0.1 | | | 0.1 | | | |
|
| |
|
| |
|
| Total Issued and Paid up Capital | | 1,232.8 | | | 1,383.9 | | | 1,448.3 | | | |
|
| |
|
| |
|
|
* includes 135,614 (2004 - 149,763; 2003 - 210,679) shares issued in accordance with the Employee Share Plan. | | | | | | | | | Ordinary Shares Reconciliation | | | | | | | | | | Balance at the beginning of the financial year | | 1,383.9 | | | 1,448.3 | | | 1,455.5 | | Increase in Contributed Equity: | | | | | | | | | | Additional capital issued | | 5.0 | | | 1.0 | | | 1.0 | | Decrease in Contributed Equity: | | | | | | | | | | Share buy-back(i) | | (156.1 | ) | | (65.4 | ) | | (8.2 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 1,232.8 | | | 1,383.9 | | | 1,448.3 | | | |
|
| |
|
| |
|
|
| | | | | | | | | 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 | | |
| |
| |
|
* | Current year includes 149,763 (2003 - 210,679 ; 2002 - 678,300) shares issued in accordancecosts associated with the Employeeshare buy-back of $1.1 million. |
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 providesRefer to Section 2C of the Remuneration Report for details of shares subject to options and Performance Share Rights granted under the Ansell Limited Stock Incentive Plan. Share Buy-Back The Company, on 30 April 2004, ceased buying back shares under the on-market 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 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 for $1.47 million. No further purchases pursuant to this on-market buy-back were made in the current year. At the Annual General Meeting held on 14 October 2004, shareholders approved an off-market buy-back for up to $155 million, under which 16,847,345 shares were bought back during the year, and also approved a further on-market buy-back for up to 10% of the Company’s shares. No purchases under the latter on-market buy-back have yet been made. 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 184,100360,200 existing Executive Plan shares were fully paid. Since the end of the financial year, the amounts outstanding on a further 23,8002,000 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 2526 ‘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 60,91614,149 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
Item 18 : Consolidated Financial Statements 6. | ACCUMULATED LOSSESAND RESERVES |
5. CONTRIBUTED EQUITY (CONTINUED) | | | | | | | | | | | | Consolidated | | $ in millions
| | 2004
| | | 2003
| | | 2002
| | Asset revaluation reserve | | 0.7 | | | 1.5 | | | 14.7 | | General reserve | | 3.3 | | | 1.8 | | | 2.7 | | Foreign currency translation reserve | | (279.6 | ) | | (272.2 | ) | | (193.6 | ) | | |
|
| |
|
| |
|
| Total Reserves | | (275.6 | ) | | (268.9 | ) | | (176.2 | ) | Accumulated losses | | (306.7 | ) | | (345.7 | ) | | (417.0 | ) | | |
|
| |
|
| |
|
| 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 | | 1.5 | | | 14.7 | | | 6.2 | | Transfer from/(to) retained profits | | (0.8 | ) | | (13.2 | ) | | 8.5 | | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 0.7 | | | 1.5 | | | 14.7 | | | |
|
| |
|
| |
|
| General Reserve | | | | | | | | | | Balance at beginning of the financial year | | 1.8 | | | 2.7 | | | 3.0 | | Transfer from/(to) retained profits | | 1.5 | | | (0.9 | ) | | (0.3 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 3.3 | | | 1.8 | | | 2.7 | | | |
|
| |
|
| |
|
| Foreign Currency Translation Reserve | | | | | | | | | | Balance at the beginning of the financial year | | (272.2 | ) | | (193.6 | ) | | (127.2 | ) | Transfers to retained profits | | — | | | (7.3 | ) | | 3.2 | | Exchange fluctuations on assets and liabilities held in foreign currencies | | | | | | | | | | 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 | | (279.6 | ) | | (272.2 | ) | | (193.6 | ) | | |
|
| |
|
| |
|
| Accumulated Losses | | | | | | | | | | Balance at the beginning of the financial year | | (345.7 | ) | | (417.0 | ) | | (289.9 | ) | Transfer (to)/from reserves | | (0.7 | ) | | 21.4 | | | (11.4 | ) | Net profit/(loss) after income tax attributable to Ansell Limited shareholders | | 70.7 | | | 49.9 | | | (115.8 | ) | Dividends provided for or paid * | | (31.0 | ) | | — | | | 0.1 | | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | (306.7 | ) | | (345.7 | ) | | (417.0 | ) | | |
|
| |
|
| |
|
|
Options * | 2002 dividends represents an overprovision in the prior year. |
During the financial year 500,000 ordinary shares fully paid at $6.32 were issued to satisfy the exercising of 500,000 options granted to the previous Managing Director under the Ansell Limited Stock Incentive Plan. Since the end of the financial year a further 500,000 ordinary shares fully paid at $6.32 were issued to satisfy the exercising of the previous Managing Director’s remaining options. As at the date of this report 825,000 unissued shares in the Company remain under option. 6. ACCUMULATED LOSSESAND RESERVES | | | | | | | | | | | | Consolidated
| | $ in millions
| | 2005
| | | 2004
| | | 2003
| | Asset revaluation reserve | | — | | | 0.7 | | | 1.5 | | General reserve | | 4.1 | | | 3.3 | | | 1.8 | | Foreign currency translation reserve | | (300.7 | ) | | (279.6 | ) | | (272.2 | ) | | |
|
| |
|
| |
|
| Total Reserves | | (296.6 | ) | | (275.6 | ) | | (268.9 | ) | Accumulated losses | | (342.5 | ) | | (306.7 | ) | | (345.7 | ) | | |
|
| |
|
| |
|
| Total Accumulated Losses and Reserves | | (639.1 | ) | | (582.3 | ) | | (614.6 | ) | | |
|
| |
|
| |
|
| Movements during the year: | | | | | | | | | | | | | | Asset Revaluation Reserve | | | | | | | | | | | | | | Balance at beginning of the financial year | | 0.7 | | | 1.5 | | | 14.7 | | Transfer to retained profits | | (0.7 | ) | | (0.8 | ) | | (13.2 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | — | | | 0.7 | | | 1.5 | | | |
|
| |
|
| |
|
| General Reserve | | | | | | | | | | | | | | Balance at beginning of the financial year | | 3.3 | | | 1.8 | | | 2.7 | | Transfer from/(to) retained profits | | 0.8 | | | 1.5 | | | (0.9 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 4.1 | | | 3.3 | | | 1.8 | | | |
|
| |
|
| |
|
| Foreign Currency Translation Reserve | | | | | | | | | | Balance at the beginning of the financial year | | (279.6 | ) | | (272.2 | ) | | (193.6 | ) | Transfers to retained profits | | 23.4 | | | — | | | (7.3 | ) | Exchange fluctuations on assets and liabilities held in foreign currencies | | | | | | | | | | net loss on translation of net assets | | (63.7 | ) | | (16.8 | ) | | (121.1 | ) | net gain on hedge borrowings | | 19.2 | | | 9.4 | | | 49.8 | | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | (300.7 | ) | | (279.6 | ) | | (272.2 | ) | | |
|
| |
|
| |
|
| Accumulated Losses | | | | | | | | | | Balance at the beginning of the financial year | | (306.7 | ) | | (345.7 | ) | | (417.0 | ) | Transfer to/from reserves | | (23.5 | ) | | (0.7 | ) | | 21.4 | | Net profit after income tax attributable to Ansell Limited shareholders | | 11.3 | | | 70.7 | | | 49.9 | | Dividends provided for or paid | | (23.6 | ) | | (31.0 | ) | | — | | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | (342.5 | ) | | (306.7 | ) | | (345.7 | ) | | |
|
| |
|
| |
|
|
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 $0.7 million 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 Summary of Significant Accounting PolicyPolicies Note 1. 91
PART III
Item 18 : Consolidated Financial Statements 7. | TOTAL EQUITY RECONCILIATION |
7. TOTAL EQUITY RECONCILIATION | | | Consolidated
| | | Consolidated
| | $ in millions
| | 2004
| | 2003
| | 2002
| | | 2005
| | 2004
| | 2003
| | Total equity at the beginning of the financial year | | 844.5 | | | 876.0 | | | 1,066.2 | | | 811.8 | | | 844.5 | | | 876.0 | | | Total changes in equity from non-owner related transactions attributable to Ansell Limited shareholders | | 63.3 | | | (21.4 | ) | | (185.4 | ) | | (33.2 | ) | | 63.3 | | | (21.4 | ) | Transactions with owners as owners: | | | | | Contributions of equity | | 1.0 | | | 1.0 | | | 1.2 | | | 5.0 | | | 1.0 | | | 1.0 | | Share buy-back | | (65.4 | ) | | (8.2 | ) | | — | | | (156.1 | ) | | (65.4 | ) | | (8.2 | ) | Dividends | | (31.0 | ) | | — | | | 0.1 | | | (23.6 | ) | | (31.0 | ) | | — | | Total changes in outside equity interest | | (0.6 | ) | | (2.9 | ) | | (6.1 | ) | | (1.1 | ) | | (0.6 | ) | | (2.9 | ) | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Total equity at the end of the financial year | | 811.8 | | | 844.5 | | | 876.0 | | | 602.8 | | | 811.8 | | | 844.5 | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
8. INCOME TAX | | | | | | | | | | | | 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 | | | |
|
| |
|
| |
|
|
| | | | | | | | | | | | Consolidated
| | $ in millions
| | 2005
| | | 2004
| | | 2003
| | Prima facie income tax expense calculated at 30% (2004: 30%) on profit from ordinary activities | | 10.4 | | | 28.0 | | | 23.8 | | | | | | Increased taxation arising from: | | | | | | | | | | Write down of assets | | 24.0 | | | 2.9 | | | 2.3 | | Net restructuring costs | | — | | | 2.9 | | | 1.4 | | Write down of intergroup investments and intercompany balances | | — | | | — | | | — | | Goodwill amortisation | | 0.8 | | | 0.9 | | | 1.1 | | Income tax under provided in prior years | | — | | | 2.2 | | | 1.3 | | Net higher overseas tax rates | | 3.9 | | | — | | | 8.3 | | | | | | Reduced taxation arising from: | | | | | | | | | | Net loss on sale of businesses and controlled entities | | — | | | — | | | — | | Income tax over provided in previous years | | (1.6 | ) | | — | | | — | | Investment and export incentive allowances | | (3.5 | ) | | (6.8 | ) | | (6.7 | ) | Net lower overseas tax rates | | — | | | (0.9 | ) | | — | | Other permanent differences* | | (12.3 | ) | | (8.5 | ) | | (4.6 | ) | | |
|
| |
|
| |
|
| Income tax expense attributable to profit from ordinary activities | | 21.7 | | | 20.7 | | | 26.8 | | | |
|
| |
|
| |
|
| Income tax expense attributable to operating profit is made up of: | | | | | | | | | | Provision attributable to current year | | 21.0 | | | 17.2 | | | 0.7 | | (Over)/Under provision in respect of previous years | | (1.6 | ) | | 2.2 | | | 1.3 | | Provision attributable to future years | | | | | | | | | | Deferred income tax liability | | 0.2 | | | (1.5 | ) | | 0.3 | | Future income tax benefit | | 2.1 | | | 2.8 | | | 24.5 | | | |
|
| |
|
| |
|
| | | 21.7 | | | 20.7 | | | 26.8 | | | |
|
| |
|
| |
|
|
* | Includes tax benefit on loss from Australian trading operations not brought toaccount/recovery of tax losses not previously brought to account. |
92
PART III
Item 18 : Consolidated Financial Statements 9. | DIVIDENDS PAIDOR DECLARED |
9. DIVIDENDS PAIDOR DECLARED | | | | | | | | | 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). | | | | | | |
| | | | | | | | | Consolidated
| $ in millions
| | 2005
| | 2004
| | 2003
| Dividends paid | | | | | | | The following dividends were paid during the year to Ansell Limited shareholders: | | | | | | | A final unfranked dividend of 7 cents per share for the year ended 30 June 2004 (June 2003 - 11 cents unfranked; June 2002 – nil) was paid on 14 October 2004 (2003 - 9 October 2003) | | 12.4 | | 20.4 | | — | An interim dividend of 7 cents per share franked to 57% for the year ended 30 June 2005 (June 2004 - 6 cents unfranked; June 2003 - nil) was paid on 8 April 2005 (2004 - 8 April 2004) | | 11.2 | | 10.6 | | — | | |
| |
| |
| | | 23.6 | | 31.0 | | — | | |
| |
| |
|
10. | OUTSIDE EQUITY INTERESTS |
Dividends Declared | | | | | | | | | | | | Consolidated
| | $ in millions
| | 2004
| | | 2003
| | | 2002
| | Outside equity interests comprise: | | | | | | | | | | Contributed equity | | 2.1 | | | 2.1 | | | 4.5 | | Reserves | | (3.0 | ) | | (2.2 | ) | | 2.4 | | Retained profits at the beginning of the financial year | | 10.9 | | | 6.8 | | | 3.6 | | Profits for the year | | 1.9 | | | 2.6 | | | 2.8 | | Dividends paid/provided for during the year | | (1.7 | ) | | (1.7 | ) | | (1.8 | ) | Outside equity interests disposed/acquired during the year | | — | | | 3.2 | | | 2.2 | | Retained profits at the end of the financial year | | 11.1 | | | 10.9 | | | 6.8 | | | |
|
| |
|
| |
|
| Total Outside Equity Interests | | 10.2 | | | 10.8 | | | 13.7 | | | |
|
| |
|
| |
|
|
Since the end of the financial year the Directors have declared a final dividend of 10 cents per share unfranked, for the year ended 30 June 2005. The financial effect of this dividend has not been brought to account in the financial statements for the year ended 30 June 2005 and will be recognised in subsequent financial reports. | | | | | | | | | Consolidated
| $ in millions
| | 2004
| | 2003
| | 2002
| Cash on hand | | 0.9 | | 0.6 | | 0.2 | Cash at bank | | 69.8 | | 60.8 | | 72.0 | Short-term deposits | | 237.1 | | 224.6 | | 186.3 | | |
| |
| |
| | | 307.8 | | 286.0 | | 258.5 | Restricted deposits | | 10.3 | | 13.8 | | 18.4 | | |
| |
| |
| Total Cash Assets | | 318.1 | | 299.8 | | 276.9 | | |
| |
| |
|
Dividend Franking Account Following the payment of the interim dividend in April 2005 the balance of available franking credits in the franking account as at 30 June 2005 was nil (2004 - $2.7 million; 2003 - nil). 10. OUTSIDE EQUITY INTEREST | | | | | | | | | | | | Consolidated
| | $ in millions
| | 2005
| | | 2004
| | | 2003
| | Outside equity interests comprise: | | | | | | | | | | Contributed equity | | 2.1 | | | 2.1 | | | 2.1 | | Reserves | | (4.8 | ) | | (3.0 | ) | | (2.2 | ) | Retained profits at the beginning of the financial year | | 11.1 | | | 10.9 | | | 6.8 | | Profits for the year | | 1.8 | | | 1.9 | | | 2.6 | | Dividends paid/provided for during the year | | (1.1 | ) | | (1.7 | ) | | (1.7 | ) | Retained profits at the end of the financial year | | 11.8 | | | 11.1 | | | 10.9 | | | |
|
| |
|
| |
|
| Total Outside Equity Interests | | 9.1 | | | 10.2 | | | 10.8 | | | |
|
| |
|
| |
|
|
11. CASH ASSETS | | | | | | | | | Consolidated
| $ in millions
| | 2005
| | 2004
| | 2003
| Cash on hand | | 0.2 | | 0.9 | | 0.6 | Cash at bank | | 69.2 | | 69.8 | | 60.8 | Short-term deposits | | 149.5 | | 237.1 | | 224.6 | | |
| |
| |
| | | 218.9 | | 307.8 | | 286.0 | Restricted deposits | | 8.4 | | 10.3 | | 13.8 | | |
| |
| |
| Total Cash Assets | | 227.3 | | 318.1 | | 299.8 | | |
| |
| |
|
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
Item 18 : Consolidated Financial Statements | | | | | | | | | | | | Consolidated
| | $ in millions
| | 2004
| | | 2003
| | | 2002
| | Current | | | | | | | | | | Trade debtors | | 204.7 | | | 218.2 | | | 264.8 | | Less provision for doubtful debts | | 6.7 | | | 6.9 | | | 17.5 | | Less provision for rebates, allowances and warranty claims | | 15.0 | | | 13.8 | | | 14.8 | | | |
|
| |
|
| |
|
| | | 183.0 | | | 197.5 | | | 232.5 | | Amounts owing by South Pacific Tyres partnership | | 0.5 | | | 7.6 | | | — | | Other amounts receivable | | 45.2 | | | 57.3 | | | 61.2 | | | |
|
| |
|
| |
|
| Total Current | | 228.7 | | | 262.4 | | | 293.7 | | | |
|
| |
|
| |
|
| Non-Current | | | | | | | | | | Interest bearing amount owing by South Pacific Tyres partnership | | 62.3 | | | 55.1 | | | 59.4 | | Amounts owing by other related parties | | — | | | — | | | 0.2 | | Interest bearing amount owing by external entities | | — | | | — | | | 2.5 | | Other amounts receivable | | 1.6 | | | 2.4 | | | 6.8 | | Less provision for doubtful debts | | 0.3 | | | 0.5 | | | 2.2 | | | |
|
| |
|
| |
|
| Total Non Current | | 63.6 | | | 57.0 | | | 66.7 | | | |
|
| |
|
| |
|
| Total Receivables | | 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 | | 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 | | Repayments received | | — | | | 0.2 | | | 0.2 | | | | | | The reconciliations of provision for doubtful debts - trade are presented below: | | | | | | | | | | | | Consolidated
| | $ in millions
| | 2004
| | | 2003
| | | 2002
| | Balance at the beginning of the financial year | | 6.9 | | | 17.5 | | | 33.1 | | Acquisitions/(disposals) of entities | | — | | | — | | | (8.2 | ) | Amounts charged/(released) to profit/(loss) from operating activities | | 1.2 | | | (2.5 | ) | | (2.9 | ) | Amounts utilised for intended purposes | | (1.3 | ) | | (7.4 | ) | | (4.0 | ) | Net foreign currency differences on translation of self-sustaining | | | | | | | | | | operations | | (0.1 | ) | | (0.7 | ) | | (0.5 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 6.7 | | | 6.9 | | | 17.5 | | | |
|
| |
|
| |
|
|
| | | | | | | | | 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
| | | | | | | | | | | | Consolidated
| | $ in millions
| | 2005
| | | 2004
| | | 2003
| | Current | | | | | | | | | | Trade debtors | | 191.8 | | | 204.7 | | | 218.2 | | Less provision for doubtful debts | | 5.8 | | | 6.7 | | | 6.9 | | Less provision for rebates, allowances and warranty claims | | 15.2 | | | 15.0 | | | 13.8 | | | |
|
| |
|
| |
|
| | | 170.8 | | | 183.0 | | | 197.5 | | Amounts owing by South Pacific Tyres partnership | | 0.6 | | | 0.5 | | | 7.6 | | Other amounts receivable | | 42.7 | | | 45.2 | | | 57.3 | | | |
|
| |
|
| |
|
| Total Current | | 214.1 | | | 228.7 | | | 262.4 | | | |
|
| |
|
| |
|
| Non-Current | | | | | | | | | | Interest bearing amount owing by South Pacific Tyres partnership | | 66.2 | | | 62.3 | | | 55.1 | | Other amounts receivable | | 2.1 | | | 1.6 | | | 2.4 | | Less provision for doubtful debts | | — | | | 0.3 | | | 0.5 | | | |
|
| |
|
| |
|
| Total Non-Current | | 68.3 | | | 63.6 | | | 57.0 | | | |
|
| |
|
| |
|
| Total Receivables | | 282.4 | | | 292.3 | | | 319.4 | | | |
|
| |
|
| |
|
| Included in other amounts receivable are: | | | | | | | | | | Loans to employees in relation to the employee share plan | | | | | | | | | | - non-current | | 1.4 | | | 0.8 | | | 1.2 | | | | The reconciliations of provision for doubtful debts - trade are presented below: | | | | | | | | | Consolidated
| | $ in millions
| | 2005
| | | 2004
| | | 2003
| | Balance at the beginning of the financial year | | 6.7 | | | 6.9 | | | 17.5 | | Amounts charged/(released) to profit from operating activities | | (0.1 | ) | | 1.2 | | | (2.5 | ) | Amounts utilised for intended purposes | | (0.1 | ) | | (1.3 | ) | | (7.4 | ) | Net foreign currency differences on translation of self-sustaining operations | | (0.7 | ) | | (0.1 | ) | | (0.7 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 5.8 | | | 6.7 | | | 6.9 | | | |
|
| |
|
| |
|
|
13. INVENTORIES | | | | | | | | | Consolidated
| $ in millions
| | 2005
| | 2004
| | 2003
| At Cost | | | | | | | Raw materials | | 22.2 | | 20.1 | | 21.6 | Work in progress | | 9.1 | | 13.6 | | 13.1 | Finished goods | | 113.9 | | 112.0 | | 137.2 | Other stock | | 1.4 | | 2.2 | | 1.4 | | |
| |
| |
| Total Inventory at Cost | | 146.6 | | 147.9 | | 173.3 | | |
| |
| |
| Net Realisable Value | | | | | | | | | | | Finished goods | | 10.7 | | 37.9 | | 10.5 | | |
| |
| |
| Total Inventory at Net Realisable Value | | 10.7 | | 37.9 | | 10.5 | | |
| |
| |
| Total Inventories | | 157.3 | | 185.8 | | 183.8 | | |
| |
| |
|
Item 18 : Consolidated Financial Statements 14. | OTHER FINANCIAL ASSETS (INVESTMENTS) |
14. CURRENT ASSETS – OTHER | | | | | | | | | | | | | Consolidated
| $ in millions
| | Notes
| | 2004
| | 2003
| | 2002
| Other financial assets | | | | | | | | | Quoted on a prescribed stock exchange: | | | | | | | | | At cost | | | | — | | — | | 9.3 | At market value | | | | 2.1 | | 3.1 | | — | Not quoted on a prescribed stock exchange: | | | | | | | | | At cost | | | | 1.3 | | — | | — | South Pacific Tyres N.Z. Ltd | | | | 21.6 | | 21.9 | | 20.1 | Investment in Partnership | | | | | | | | | South Pacific Tyres | | | | 116.4 | | 116.4 | | 116.4 | | | | |
| |
| |
| Total Other Financial Assets | | | | 141.4 | | 141.4 | | 145.8 | | | | |
| |
| |
| (b) Investments accounted for using the equity method | | | | | | | | | Shares in Unlisted Associated Companies | | | | | | | | | Equity Accounted | | 38 | | — | | — | | 13.3 | | | | |
| |
| |
| Total Investments accounted for using the equity method | | | | — | | — | | 13.3 | | | | |
| |
| |
|
(1) | The Directors have adopted the cost basis of valuation in accordance with AASB 1041 ‘Revaluation of Non-Current Assets’. |
15. | PROPERTY, PLANTAND EQUIPMENT |
| | | | Consolidated
| $ in millions
| | | 2005
| | 2004
| | 2003
| Prepayments | | | 10.2 | | 11.7 | | 10.9 | Engineering Spares | | | 4.2 | | 4.7 | | 4.1 | | | |
| |
| |
| Total Current Assets - Other | | | 14.4 | | 16.4 | | 15.0 | | | |
| |
| |
| | 15. OTHER FINANCIAL ASSETS (INVESTMENTS) | | | | | | | | | | | | Consolidated
| $ in millions
| | | 2005
| | 2004
| | 2003
| Other financial assets | | | | | | | | Quoted on a prescribed stock exchange: | | | | | | | | At market value | | | — | | 2.1 | | 3.1 | Not quoted on a prescribed stock exchange: | | | | | | | | At cost | | | 1.2 | | 1.3 | | — | South Pacific Tyres N.Z. Ltd | | | 21.4 | | 21.6 | | 21.9 | Investment in Partnership | | | | | | | | South Pacific Tyres | | | 116.4 | | 116.4 | | 116.4 | Less Provision for diminution in value | | | 80.0 | | — | | | | | |
| |
| |
| Total Other Financial Assets | | | 59.0 | | 141.4 | | 141.4 | | | |
| |
| |
|
| | | | | | | | (1) The Directors have adopted the cost basis of valuation in accordance with AASB 1041 ‘Revaluation of Non-Current Assets’ | | (1) The Directors have adopted the cost basis of valuation in accordance with AASB 1041 ‘Revaluation of Non-Current Assets’ | | 16. PROPERTY, PLANTAND EQUIPMENT | | | | | | | | | | | Consolidated
| | Consolidated
| $ in millions
| | 2004
| | 2003
| | 2002
| | 2005
| | 2004
| | 2003
| (a) Freehold Land | | | | | | | | | | | | | At cost | | 12.6 | | 13.4 | | 16.3 | | 11.4 | | 12.6 | | 13.4 | (b) Freehold Buildings | | | | | | | | | | | | | At cost | | 37.7 | | 39.8 | | 45.6 | | 35.6 | | 37.7 | | 39.8 | Less provision for depreciation | | 11.7 | | 11.9 | | 7.6 | | 12.0 | | 11.7 | | 11.9 | | |
| |
| |
| |
| |
| |
| | | 26.0 | | 27.9 | | 38.0 | | 23.6 | | 26.0 | | 27.9 | | |
| |
| |
| |
| |
| |
| (c) Leasehold Land and Buildings | | | | | | | | | | | | | At cost | | 52.2 | | 53.4 | | 62.6 | | 47.9 | | 52.2 | | 53.4 | Less provision for amortisation | | 12.2 | | 11.1 | | 12.1 | | 11.9 | | 12.2 | | 11.1 | | |
| |
| |
| |
| |
| |
| | | 40.0 | | 42.3 | | 50.5 | | 36.0 | | 40.0 | | 42.3 | | |
| |
| |
| |
| |
| |
| (d) Plant and Equipment | | | | | | | | | | | | | At cost | | 400.6 | | 436.3 | | 502.5 | | 373.6 | | 400.6 | | 436.3 | Less provision for depreciation | | 260.2 | | 266.1 | | 286.7 | | 254.8 | | 260.2 | | 266.1 | | |
| |
| |
| |
| |
| |
| | | 140.4 | | 170.2 | | 215.8 | | 118.8 | | 140.4 | | 170.2 | | |
| |
| |
| |
| |
| |
| (e) Buildings and Plant under construction | | | | | | | | | | | | | At cost | | 8.8 | | 9.1 | | 11.9 | | 5.6 | | 8.8 | | 9.1 | | |
| |
| |
| |
| |
| |
| Total property, plant and equipment | | 227.8 | | 262.9 | | 332.5 | | 195.4 | | 227.8 | | 262.9 | | |
| |
| |
| |
| |
| |
|
In accordance with the consolidated entity’s policy of obtaining an independent valuation of land and buildings every three years, a valuation was carried out as at 31 December 2003 by 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 2004,2005, this resulted in a valuation of freehold land of $33,527,961and$33,527,961 and a valuation of freehold buildings of $52,227,266. As land and buildings are recorded at cost, the valuation has not been brought to account. 95
PART III
Item 18 : Consolidated Financial Statements 15. | PROPERTY,PLANTANDEQUIPMENT (continued) |
Reconciliations16. PROPERTY, PLANTAND EQUIPMENT (CONTINUED)
Reconciliations of the balances for each class of property, plant and equipment are set out below: | | | | | | | | | | Reconciliations | | | | | | Reconciliations of the balances for each class of property, plant and equipment are set out below: | | | | | | | | | | | | | | Consolidated
| | $ in millions
| | 2005
| | | 2004
| | | 2003
| | Freehold Land | | | | | | | | | | Balance at the beginning of the financial year | | 12.6 | | | 13.4 | | | 16.3 | | Disposals/Write-downs | | — | | | (1.5 | ) | | (0.6 | ) | Net foreign currency differences on translation of self-sustaining operations | | (1.2 | ) | | 0.7 | | | (2.3 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 11.4 | | | 12.6 | | | 13.4 | | Freehold Buildings | | | | | | | | | | Balance at the beginning of the financial year | | 26.0 | | | 27.9 | | | 38.0 | | Additions | | 0.1 | | | 0.1 | | | 0.1 | | Disposals/Write-downs | | — | | | (2.0 | ) | | (3.4 | ) | Transfer from capital works in progress | | 1.5 | | | 0.2 | | | 0.1 | | Depreciation | | (1.5 | ) | | (1.1 | ) | | (1.8 | ) | Net foreign currency differences on translation of self-sustaining operations | | (2.5 | ) | | 0.9 | | | (5.1 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 23.6 | | | 26.0 | | | 27.9 | | Leasehold Land and Buildings | | | | | | | | | | Balance at the beginning of the financial year | | 40.0 | | | 42.3 | | | 50.5 | | Additions | | 0.4 | | | 0.1 | | | 0.8 | | Disposals/Write-downs | | — | | | (0.2 | ) | | — | | Transfers from capital works in progress | | 0.4 | | | 0.7 | | | 0.2 | | Amortisation | | (1.4 | ) | | (1.5 | ) | | (1.7 | ) | Net foreign currency differences on translation of self-sustaining operations | | (3.4 | ) | | (1.4 | ) | | (7.5 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 36.0 | | | 40.0 | | | 42.3 | | Plant and Equipment | | | | | | | | | | Balance at the beginning of the financial year | | 140.4 | | | 170.2 | | | 215.8 | | Additions | | 3.3 | | | 3.9 | | | 5.4 | | Disposals/Write-downs | | (0.3 | ) | | (9.7 | ) | | (3.7 | ) | Transfers from capital works in progress | | 10.3 | | | 8.3 | | | 9.5 | | Depreciation | | (21.9 | ) | | (22.7 | ) | | (27.7 | ) | Net foreign currency differences on translation of self-sustaining operations | | (13.0 | ) | | (9.6 | ) | | (29.1 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 118.8 | | | 140.4 | | | 170.2 | | Buildings and Plant under construction | | | | | | | | | | Balance at the beginning of the financial year | | 8.8 | | | 9.1 | | | 11.9 | | Additions | | 10.3 | | | 9.7 | | | 9.1 | | Transfers to property, plant & equipment | | (12.2 | ) | | (9.2 | ) | | (9.8 | ) | Net foreign currency differences on translation of self-sustaining operations | | (1.3 | ) | | (0.8 | ) | | (2.1 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 5.6 | | | 8.8 | | | 9.1 | |
| | | | | | | | | | | | Consolidated
| | $ in millions
| | 2004
| | | 2003
| | | 2002
| | Freehold Land | | | | | | | | | | Balance at the beginning of the financial year | | 13.4 | | | 16.3 | | | 43.3 | | Disposal of entities | | — | | | — | | | (20.8 | ) | Disposals/Write-downs | | (1.5 | ) | | (0.6 | ) | | (4.6 | ) | Net foreign currency differences on translation of self-sustaining operations | | 0.7 | | | (2.3 | ) | | (1.6 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 12.6 | | | 13.4 | | | 16.3 | | | | | | Freehold Buildings | | | | | | | | | | Balance at the beginning of the financial year | | 27.9 | | | 38.0 | | | 97.7 | | Additions | | 0.1 | | | 0.1 | | | 0.3 | | Disposal of entities | | — | | | — | | | (33.3 | ) | Disposals/Write-downs | | (2.0 | ) | | (3.4 | ) | | (19.4 | ) | Transfer from capital works in progress | | 0.2 | | | 0.1 | | | — | | Depreciation | | (1.1 | ) | | (1.8 | ) | | (3.9 | ) | Net foreign currency differences on translation of self-sustaining operations | | 0.9 | | | (5.1 | ) | | (3.4 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 26.0 | | | 27.9 | | | 38.0 | | | | | | Leasehold Land and Buildings | | | | | | | | | | Balance at the beginning of the financial year | | 42.3 | | | 50.5 | | | 73.2 | | Additions | | 0.1 | | | 0.8 | | | 1.1 | | Additions through entities acquired | | — | | | — | | | 1.9 | | Disposal of entities | | — | | | — | | | (14.8 | ) | Disposals/Write-downs | | (0.2 | ) | | — | | | (2.7 | ) | Transfers from capital works in progress | | 0.7 | | | 0.2 | | | 1.4 | | Amortisation | | (1.5 | ) | | (1.7 | ) | | (2.8 | ) | Net foreign currency differences on translation of self-sustaining operations | | (1.4 | ) | | (7.5 | ) | | (6.8 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 40.0 | | | 42.3 | | | 50.5 | | | | | | Plant and Equipment | | | | | | | | | | Balance at the beginning of the financial year | | 170.2 | | | 215.8 | | | 423.9 | | Additions | | 3.9 | | | 5.4 | | | 11.4 | | Additions through entities acquired | | — | | | — | | | 3.4 | | Disposal of entities | | — | | | — | | | (104.4 | ) | Disposals/Write-downs | | (9.7 | ) | | (3.7 | ) | | (74.4 | ) | Transfers from capital works in progress | | 8.3 | | | 9.5 | | | 30.5 | | Depreciation | | (22.7 | ) | | (27.7 | ) | | (46.4 | ) | Net foreign currency differences on translation of self-sustaining operations | | (9.6 | ) | | (29.1 | ) | | (28.2 | ) | | |
|
| |
|
| |
|
| Balance at the end of the financial year | | 140.4 | | | 170.2 | | | 215.8 | |
96
PART III
Item 18 : Consolidated Financial Statements 15. | PROPERTY, PLANTANDEQUIPMENT (CONTINUED) |
17. INTANGIBLE ASSETS | | | | | | | | | | | | 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 | |
| | | | | | | | | Consolidated
| $ in millions
| | 2005
| | 2004
| | 2003
| Brand Names | | | | | | | At cost | | 106.0 | | 117.4 | | 121.2 | | |
| |
| |
| Goodwill | | | | | | | At cost | | 341.1 | | 375.3 | | 385.6 | Less provision for amortisation | | 200.9 | | 199.3 | | 182.3 | | |
| |
| |
| | | 140.2 | | 176.0 | | 203.3 | | |
| |
| |
| Total Intangibles | | 246.2 | | 293.4 | | 324.5 | | |
| |
| |
|
18. DEFERRED TAX 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 | | |
| |
| |
|
| | | Consolidated
| | Consolidated
| $ in millions
| | 2004
| | 2003
| | 2002
| | 2005
| | 2004
| | 2003
| Future income tax benefit arising from: | | | | | | | | | | | | | Accumulated timing differences | | 23.6 | | 26.0 | | 32.2 | | 15.1 | | 23.6 | | 26.0 | Accumulated tax losses | | 0.6 | | 6.0 | | 17.5 | | — | | 0.6 | | 6.0 | | |
| |
| |
| |
| |
| |
| | | 24.2 | | 32.0 | | 49.7 | | 15.1 | | 24.2 | | 32.0 | | |
| |
| |
| |
| |
| |
|
The Group has unrecognised capital tax losses relating to controlled entities of $342.4 million (2004 - $374.9 million (2003 - $267.9 million; 2002 - $331.32003 -$267.9 million). Future income tax benefits of $317.1 million (2004 - $363.9 million (2003million; 2003 - $380.4 million; 2002 - $393.6 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
| | 2004
| | 2003
| | 2002
| | 2005
| | 2004
| | 2003
| Trading stock tax adjustments | | 3.5 | | 4.9 | | 4.0 | | 1.6 | | 3.5 | | 4.9 | Provisions | | 17.0 | | 18.1 | | 21.4 | | 10.4 | | 17.0 | | 18.1 | Accruals | | 2.7 | | 2.3 | | 3.0 | | 1.2 | | 2.7 | | 2.3 | Unrealised foreign exchange losses | | — | | — | | 0.5 | | Accumulated tax losses | | 0.6 | | 6.0 | | 17.5 | | — | | 0.6 | | 6.0 | Other | | 0.4 | | 0.7 | | 3.3 | | 1.9 | | 0.4 | | 0.7 | | |
| |
| |
| |
| |
| |
| Total temporary differences | | 24.2 | | 32.0 | | 49.7 | | 15.1 | | 24.2 | | 32.0 | | |
| |
| |
| |
| |
| |
|
97
PART I19. NON-CURRENT ASSETS - OTHER
| | | | | | | | | Consolidated
| $ in millions
| | 2005
| | 2004
| | 2003
| Research and development costs | | | | | | | Expenditure deferred in the current period | | 2.1 | | — | | — | Provision for amortisation | | — | | — | | — | Net foreign currency differences on translation of self-sustaining operations | | — | | — | | — | | |
| |
| |
| | | 2.1 | | — | | — | | |
| |
| |
|
Item 18 : Consolidated Financial Statements 20. PAYABLES | | | Consolidated
| | Consolidated
| $ in millions
| | 2004
| | 2003
| | 2002
| | 2005
| | 2004
| | 2003
| Current | | | | | | | | | | | | | Trade creditors | | 124.1 | | 130.1 | | 166.6 | | 106.8 | | 124.1 | | 130.1 | Other creditors | | 35.3 | | 24.3 | | 26.1 | | 26.0 | | 35.3 | | 25.4 | | |
| |
| |
| |
| |
| |
| Total Current | | 159.4 | | 154.4 | | 192.7 | | 132.8 | | 159.4 | | 155.5 | | |
| |
| |
| |
| |
| |
| Non-Current | | | | | | | | | | | | | Other creditors | | 3.3 | | 3.2 | | 3.7 | | 0.8 | | 3.3 | | 3.2 | | |
| |
| |
| |
| |
| |
| Total Non-Current | | 3.3 | | 3.2 | | 3.7 | | 0.8 | | 3.3 | | 3.2 | | |
| |
| |
| |
| |
| |
| Total Payables | | 162.7 | | 157.6 | | 196.4 | | 133.6 | | 162.7 | | 158.7 | | |
| |
| |
| |
| |
| |
|
19. | INTEREST BEARING LIABILITIES |
21. INTEREST BEARING LIABILITIES | | | Consolidated
| | Consolidated
| $ in Millions
| | 2004
| | 2003
| | 2002
| | 2005
| | 2004
| | 2003
| Current | | | | | | | | | | | | | Bank overdrafts | | 3.3 | | 2.6 | | 14.6 | | 1.4 | | 3.3 | | 2.6 | Bank loans repayable in: | | | | | | | | | | | | | Canadian dollars | | — | | 5.6 | | 5.8 | | 5.3 | | — | | 5.6 | Euro dollars | | — | | — | | 14.9 | | Malaysian ringgits | | 7.0 | | 9.2 | | 5.8 | | — | | 7.0 | | 9.2 | Other currencies | | 0.8 | | 0.6 | | 0.7 | | | Indian rupees | | | 1.4 | | 0.8 | | 0.6 | Other loans repayable in: | | | | | | | | | | | | | Australian dollars | | 50.0 | | — | | — | | — | | 50.0 | | — | Sterling Pounds | | — | | — | | 16.2 | | U.S. dollars | | 129.1 | | 133.8 | | 49.6 | | 26.2 | | 129.1 | | 133.8 | | |
| |
| |
| |
| |
| |
| Total Current | | 190.2 | | 151.8 | | 107.6 | | 34.3 | | 190.2 | | 151.8 | | |
| |
| |
| |
| |
| |
| Non-Current | | | | | | | | | | | | | Bank loans repayable in: | | | | | | | | | | | | | U.S. dollars | | 101.6 | | — | | — | | 229.5 | | 101.6 | | — | Other currencies | | — | | — | | 0.2 | | Other loans repayable in: | | | | | | | | | | | | | Australian dollars | | 66.0 | | 116.0 | | 116.0 | | 66.0 | | 66.0 | | 116.0 | Euro dollars | | — | | — | | 34.0 | | U.S. dollars | | 68.4 | | 204.0 | | 366.3 | | 11.8 | | 68.4 | | 204.0 | Japanese yen | | | 23.7 | | — | | — | | |
| |
| |
| |
| |
| |
| Total Non-Current | | 236.0 | | 320.0 | | 516.5 | | 331.0 | | 236.0 | | 320.0 | | |
| |
| |
| |
| |
| |
| Total Interest Bearing Liabilities | | 426.2 | | 471.8 | | 624.1 | | 365.3 | | 426.2 | | 471.8 | | |
| |
| |
| |
| |
| |
|
At 30 June 20042005 bank overdraft and otherbank loans totalling $1.4 million (2003: $1.7 million 2002: $2.4(2004 - $1.4 million; 2003 - $1.7 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 US$250 million revolving credit bank facility on 30 April 2004 of which US$200 million hashad a five year term and US$50 million had a 364 day term. On 29 April 2005, US$150 million of the US$200 million was extended to 30 April 2010 and US$50 million to 30 April 2012. The US$50 million 364 day facility was extended to 30 April 2006. This facility can be accessed by the parent company and certain USA subsidiaries. US$70175 million of the five year term facilityfacilities had been drawn down at 30 June 2005 (June 2004 (June 2003:- US$70 million; June 2003 – Nil) leaving an unused balance of the total facilities available for immediate use at that date of US$18075 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
Item 18 : Consolidated Financial Statements 19. | 21. INTEREST BEARING LIABILITIES (CONTINUED) | | | | | | | Nature of Borrowing
| | Amount
| | Interest Rate
| | Maturity Date
| | | $m | | % p.a. | | | Bank Overdrafts | | | | | | | Indian rupees | | 0.3 | | 4.50 | | At Call | United States dollars | | 1.1 | | 4.00 | | At Call | | |
| | | | | Total Bank Overdrafts | | 1.4 | | | | | | |
| | | | | Bank Loans | | | | | | | Current | | | | | | | Canadian dollars | | 5.3 | | 3.89 | | 2006 | Indian rupees | | 1.4 | | 4.50 | | 2006 | | |
| | | | | | | 6.7 | | | | | | |
| | | | | Non-Current | | | | | | | United States dollars | | 26.2 | | 3.99 | | 2008 | United States dollars | | 105.0 | | 4.82 | | 2009 | United States dollars | | 72.1 | | 5.27 | | 2010 | United States dollars | | 26.2 | | 5.28 | | 2012 | | |
| | | | | | | 229.5 | | | | | | |
| | | | | Total Bank Loans | | 236.2 | | | | | | |
| | | | | Other Loans | | | | | | | Current | | | | | | | United States dollars | | 26.2 | | 4.03 | | 2006 | | |
| | | | | | | 26.2 | | | | | | |
| | | | | Non-Current | | | | | | | Australian dollars | | 50.0 | | 6.72 | | 2007 | Australian dollars | | 16.0 | | 7.96 | | 2007 | Japanese Yen | | 23.7 | | 3.61 | | 2007 | United States dollars | | 11.8 | | 4.26 | | 2010 | | |
| | | | | | | 101.5 | | | | | | |
| | | | | Total Other Loans | | 127.7 | | | | | | |
| | | | | Total Interest Bearing Liabilities | | 365.3 | | | | | | |
| | | | |
| | | Maturity Schedule
| | | Term to maturity: | | | Within one year | | 34.3 | One to two years | | 89.7 | Two to three years | | 26.2 | Three to four years | | 105.0 | Four to five years | | 83.9 | Greater than five years | | 26.2 | | |
| Total | | 365.3 | | |
|
The following table sets out detail in respect of the major components of Interest Bearing Liabilities at 30 June, 2004. | | | | | | | | | | | | Consolidated
| | $ in Millions
| | 2005
| | | 2004
| | | 2003
| | Net Interest Bearing Debt | | | | | | | | | | Current interest bearing liabilities | | 34.3 | | | 190.2 | | | 151.8 | | Non-current interest bearing liabilities | | 331.0 | | | 236.0 | | | 320.0 | | Cash at bank and short-term deposits | | (218.7 | ) | | (306.9 | ) | | (285.4 | ) | | |
|
| |
|
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| Net interest bearing debt | | 146.6 | | | 119.3 | | | 471.8 | | | |
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| | | | | | | Nature of Borrowing
| | Amount $m
| | Interest Rate % p.a.
| | Maturity Date
| Bank Overdrafts | | | | | | | Indian rupees | | 0.8 | | 3.80 | | At Call | Thai Baht | | 1.8 | | 1.80 | | At Call | United States dollars | | 0.7 | | 1.80 | | At Call | | |
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| Total Bank Overdrafts | | 3.3 | | | | | | |
| | | | | Bank Loans | | | | | | | Current | | | | | | | Malaysian ringgits | | 7.0 | | 3.00 | | 2005 | Other currencies | | 0.8 | | 2.50 | | 2005 | | |
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| | | 7.8 | | | | | | |
| | | | | Non-Current | | | | | | | United States dollars | | 101.6 | | 4.07 | | 2009 | | |
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| Total Bank Loans | | 109.4 | | | | | | |
| | | | | Other Loans | | | | | | | Current | | | | | | | Australian dollars | | 50.0 | | 6.77 | | 2005 | United States dollars | | 129.1 | | 6.92 | | 2005 | | |
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| | | 179.1 | | | | | | |
| | | | | Non-Current | | | | | | | Australian dollars | | 50.0 | | 6.54 | | 2007 | Australian dollars | | 16.0 | | 7.76 | | 2007 | United States dollars | | 29.0 | | 2.19 | | 2006 | United States dollars | | 26.3 | | 5.99 | | 2007 | United States dollars | | 13.1 | | 1.97 | | 2010 | | |
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| | | 134.4 | | | | | | |
| | | | | Total Other Loans | | 313.5 | | | | | | |
| | | | | Total Interest Bearing Liabilities | | 426.2 | | | | | | |
| | | | | Maturity Schedule
| | | | | | | Term to maturity: | | | | | | | Within one year | | 190.2 | | | | | One to two years | | 29.0 | | | | | Two to three years | | 92.3 | | | | | Four to five years | | 101.6 | | | | | Greater than five years | | 13.1 | | | | | | |
| | | | | Total | | 426.2 | | | | | | |
| | | | |
| | | | | | | | | Consolidated
| $ in Millions
| | 2004
| | 2003
| | 2002
| Net Interest Bearing Debt | | | | | | | Cash at bank and short-term deposits (net of restricted deposits) | | 306.9 | | 285.4 | | 258.3 | Current borrowings | | 190.2 | | 151.8 | | 107.6 | Non-current borrowings | | 236.0 | | 320.0 | | 516.5 | | |
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| Net interest bearing debt | | 119.3 | | 186.4 | | 365.8 | | |
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99
PART III
Item 18 : Consolidated Financial Statements 20. | 22. PROVISIONS | | | | | | | | | Consolidated
| $ in Millions
| | 2005
| | 2004
| | 2003
| Current | | | | | | | Provision for employee entitlements | | 26.4 | | 17.1 | | 17.7 | Provision for contingencies | | 4.1 | | 4.6 | | 4.8 | Provision for rationalisation and restructuring costs | | 12.4 | | 13.1 | | 13.5 | Provision for Accufix Pacing Lead related expenses | | 8.9 | | 11.2 | | 14.5 | Provision for claims | | 4.9 | | 6.0 | | 7.0 | | |
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| | | 56.7 | | 52.0 | | 57.5 | Provision for income tax | | 2.3 | | 2.6 | | 3.1 | | |
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| Total Current | | 59.0 | | 54.6 | | 60.6 | | |
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| Non-Current | | | | | | | Provision for employee entitlements | | 23.7 | | 23.9 | | 21.7 | Provision for deferred income tax | | 14.8 | | 20.2 | | 21.5 | | |
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| Total Non-Current | | 38.5 | | 44.1 | | 43.2 | | |
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| Total Provisions | | 97.5 | | 98.7 | | 103.8 | | |
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|
Reconciliations | of the carrying amount of each class of provision, except for employee entitlements, are set out below: |
| | | Consolidated
| | | $ in Millions
| | 2004
| | 2003
| | 2002
| | | Current | | | | Provision for employee entitlements | | 17.1 | | | 17.7 | | | 25.2 | | | Provision for contingencies | | 4.6 | | | 4.8 | | | 2.8 | | | Provision for rationalisation and restructuring costs | | 13.1 | | | 13.5 | | | 30.0 | | | Provision for Accufix Pacing Lead related expenses | | 11.2 | | | 14.5 | | | 18.6 | | | Provision for claims | | 6.0 | | | 7.0 | | | 8.8 | | | | |
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| | | | 52.0 | | | 57.5 | | | 85.4 | | | Provision for income tax | | 2.6 | | | 3.1 | | | 1.9 | | | | |
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| | Total Current | | 54.6 | | | 60.6 | | | 87.3 | | | | |
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| | Non-Current | | | | Provision for employee entitlements | | 23.9 | | | 21.7 | | | 23.3 | | | Provision for deferred income tax | | 20.2 | | | 21.5 | | | 24.4 | | | | |
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| | Total Non-Current | | 44.1 | | | 43.2 | | | 47.7 | | | | |
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| | Total Provisions | | 98.7 | | | 103.8 | | | 135.0 | | | | |
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|
| | | Reconciliations of the carrying amount of each class of provision, except for employee entitlements, are set out below: | | | | | Consolidated
| | | Consolidated
| | $ in Millions
| | 2004
| | 2003
| | 2002
| | | 2005
| | 2004
| | 2003
| | Provision for contingencies | | | | | Balance at the beginning of the financial year | | 4.8 | | | 2.8 | | | 3.2 | | | 4.6 | | | 4.8 | | | 4.8 | | Amounts charged to profit after tax from operating activities | | — | | | 2.4 | | | — | | | Net foreign currency differences on translation of self-sustaining operations | | (0.2 | ) | | (0.4 | ) | | (0.4 | ) | | (0.5 | ) | | (0.2 | ) | | (0.4 | ) | | |
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| Balance at the end of the financial year | | 4.6 | | | 4.8 | | | 2.8 | | | 4.1 | | | 4.6 | | | 4.8 | | | |
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| Provision for rationalisation and restructuring | | | | | Balance at the beginning of the financial year | | 13.5 | | | 30.0 | | | 111.9 | | | 13.1 | | | 13.5 | | | 30.0 | | Acquisitions/(disposals) of entities | | — | | | — | | | (11.5 | ) | | Amounts charged/(released) to profit/(loss) from operating activities | | 9.7 | | | 10.1 | | | 20.3 | | | Amounts charged to profit from operating activities | | | 2.0 | | | 9.7 | | | 10.1 | | Amounts utilised for intended purposes | | (10.1 | ) | | (25.7 | ) | | (88.0 | ) | | (2.7 | ) | | (10.1 | ) | | (25.7 | ) | Net foreign currency differences on translation of self-sustaining operations | | — | | | (0.9 | ) | | (2.7 | ) | | | |
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| Balance at the end of the financial year | | 13.1 | | | 13.5 | | | 30.0 | | | 12.4 | | | 13.1 | | | 13.5 | | | |
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| Provision for Accufix Pacing Lead related expenses | | | | | Balance at the beginning of the financial year | | 14.5 | | | 18.6 | | | 29.3 | | | 11.2 | | | 14.5 | | | 18.6 | | Amounts charged to profit after tax from operating activities | | | 2.3 | | | — | | | — | | Amounts utilised for intended purposes | | (3.1 | ) | | (2.7 | ) | | (10.7 | ) | | (3.9 | ) | | (3.1 | ) | | (2.7 | ) | Transfer to controlled entities | | — | | | — | | | — | | | Amounts refunded by Court/recovered from Insurers | | — | | | — | | | 1.5 | | | Net foreign currency differences on translation of self-sustaining operations | | (0.2 | ) | | (1.4 | ) | | (1.5 | ) | | (0.7 | ) | | (0.2 | ) | | (1.4 | ) | | |
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| Balance at the end of the financial year | | 11.2 | | | 14.5 | | | 18.6 | | | 8.9 | | | 11.2 | | | 14.5 | | | |
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| Provision for claims (Captive Insurance Company) | | | | | Balance at the beginning of the financial year | | 7.0 | | | 8.8 | | | 10.9 | | | 6.0 | | | 7.0 | | | 10.9 | | Amounts utilised for intended purposes | | (1.0 | ) | | (1.8 | ) | | (2.1 | ) | | (1.1 | ) | | (1.0 | ) | | (2.1 | ) | | |
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| Balance at the end of the financial year | | 6.0 | | | 7.0 | | | 8.8 | | | 4.9 | | | 6.0 | | | 8.8 | | | |
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| | 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 | | | | |
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| | Total | | 20.2 | | | 21.5 | | | 24.4 | | | | |
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100
PART IIIThe tax effect of temporary differences that give rise to significant portions of the provision for deferred income tax are presented below:
| | | | | | | | | | | Consolidated
| | $ in Millions
| | 2005
| | | 2004
| | 2003
| | Depreciation on plant adjustments | | (0.3 | ) | | 1.8 | | 9.3 | | Amortisation of Intangible Assets | | 10.2 | | | 12.4 | | 13.5 | | Other | | 4.9 | | | 6.0 | | (1.3 | ) | | |
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| Total | | 14.8 | | | 20.2 | | 21.5 | | | |
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Item 18 : Consolidated Financial Statements 20. | PROVISIONS (CONTINUED) |
22. PROVISIONS (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
| | Employee Entitlements
| | 2004
| | | 2003
| | | 2002
| | Assumed rate of increase in wage and salary rates | | 2.0 | % | | 3.4 | % | | 4.0 | % | Discount rate | | 4.1 | % | | 1.7 | % | | 2.3 | % | Settlement term (years) | | 10-15 | | | 10-15 | | | 10-15 | | Number of employees at year end | | 11,530 | | | 12,013 | | | 12,160 | | | | | | 21. OTHER LIABILITIES | | | | | | | | | | | | | | Consolidated
| | $ in Millions
| | 2004
| | | 2003
| | | 2002
| | Current | | | | | | | | | | Deferred income | | — | | | 1.1 | | | 1.2 | | | |
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| Total Current Other Liabilities | | — | | | 1.1 | | | 1.2 | | | |
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| | | | | 22. DISSECTIONOF LIABILITIES | | | | | | | | | | | | | | Consolidated
| | $ in Millions
| | 2004
| | | 2003
| | | 2002
| | Secured | | | | | | | | | | Bank overdrafts and other loans | | 0.6 | | | 1.1 | | | 1.5 | | Bank loans | | 0.8 | | | 0.6 | | | 0.9 | | Unsecured | | | | | | | | | | Bank overdrafts | | 2.7 | | | 1.5 | | | 13.1 | | Bank loans | | 108.6 | | | 14.8 | | | 26.5 | | Other loans | | 313.5 | | | 453.8 | | | 582.1 | | Trade creditors | | 124.1 | | | 130.1 | | | 166.6 | | Other creditors | | 38.6 | | | 27.5 | | | 29.8 | | Provisions (as per Note 20) | | 98.7 | | | 103.8 | | | 135.0 | | Other liabilities (as per Note 21) | | — | | | 1.1 | | | 1.2 | | | |
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| Total Unsecured Liabilities | | 686.2 | | | 732.6 | | | 954.3 | | | |
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| Total Liabilities | | 687.6 | | | 734.3 | | | 956.7 | | | |
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| | | | | 23. EXPENDITURE COMMITMENTS | | | | | | | | | | | | | | Consolidated
| | $ in Millions
| | 2004
| | | 2003
| | | 2002
| | (a) Capital expenditure commitments | | | | | | | | | | Contracted but not provided for in the financial statements: | | — | | | 0.2 | | | 0.2 | | Plant and equipment | | — | | | 0.2 | | | 0.2 | | | |
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| Payable within one year | | — | | | 0.2 | | | 0.2 | | | |
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| (b) Operating Lease Commitments | | | | | | | | | | Future operating lease commitments not provided for in the financial statements and payable: | | | | | | | | | | Within one year | | 11.8 | | | 14.0 | | | 11.0 | | One year or later and no later than five years | | 30.1 | | | 33.3 | | | 29.1 | | Later than five years | | 14.4 | | | 11.1 | | | 15.6 | | | |
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| | | 56.3 | | | 58.4 | | | 55.7 | | | |
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| | | | | | | | | Consolidated
| Employee Entitlements
| | 2005
| | 2004
| | 2003
| Assumed rate of increase in wage and salary rates | | 4.0% | | 2.0% | | 3.4% | Discount rate | | 1.3% | | 4.1% | | 1.7% | Settlement term (years) | | 10-15 | | 10-15 | | 10-15 | Number of employees at year end | | 11,059 | | 11,530 | | 12,013 |
23. DISSECTIONOF LIABILITIES | | | | | | | | | Consolidated
| $ in Millions
| | 2005
| | 2004
| | 2003
| Secured | | | | | | | Bank overdrafts | | 0.3 | | 0.6 | | 1.1 | Bank loans | | 1.4 | | 0.8 | | 0.6 | Unsecured | | | | | | | Bank overdrafts | | 1.1 | | 2.7 | | 1.5 | Bank loans | | 234.8 | | 108.6 | | 14.8 | Other loans | | 127.7 | | 313.5 | | 453.8 | Trade creditors | | 106.8 | | 124.1 | | 130.1 | Other creditors | | 26.8 | | 38.6 | | 28.6 | Provisions (as per Note 22) | | 97.5 | | 98.7 | | 103.8 | | |
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| Total Unsecured Liabilities | | 594.7 | | 686.2 | | 732.6 | | |
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| Total Liabilities | | 596.4 | | 687.6 | | 734.3 | | |
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24. EXPENDITURE COMMITMENTS | | | | | | | | | Consolidated
| $ in Millions
| | 2005
| | 2004
| | 2003
| (a) Capital expenditure commitments | | | | | | | Contracted but not provided for in the financial statements: | | | | | | | Plant and equipment | | 0.9 | | — | | 0.2 | | |
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| | | 0.9 | | — | | 0.2 | | |
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| Payable within one year | | 0.9 | | — | | 0.2 | (b) Operating Lease Commitments | | | | | | | Future operating lease commitments not provided for in the financial statements and payable: | | | | | | | Within one year | | 9.5 | | 11.8 | | 14.0 | One year or later and no later than five years | | 27.0 | | 30.1 | | 33.3 | Later than five years | | 9.5 | | 14.4 | | 11.1 | | |
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| | | 46.0 | | 56.3 | | 58.4 | | |
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The Group leases property under operating leases expiring from one to twentyfifteen years. Leases generally provide the Group with a right of renewal at which time all terms are renegotiated. 101
PART III
Item 18 : Consolidated Financial Statements 25. SUPERANNUATION Ansell Limited and certain controlled entities contribute to certain defined benefit and accumulation Superannuation Funds maintained to provide superannuation benefits for employees. The 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. | $ 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
| | $ in millions Defined Benefit Plan
| | | 2005
| | 2004
| | | 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 | | Equipsuper Superannuation Fund | | | 16.6 | | 16.4 | | 0.2 | | | 16.4 | | 37.4 | | 26.7 | | 10.7 | | | 22.5 | Plans sponsored by other entities in the consolidated entity | 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 | | 29.9 | | 40.4 | | (10.5 | ) | | 39.2 | | 33.0 | | 44.0 | | (11.0 | ) | | 42.7 | 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 Healthcare Products Inc. | | | | | | | | | | | | | | Union Retirement Plan | | | 7.6 | | 10.8 | | (3.2 | ) | | 10.8 | | 7.8 | | 12.0 | | (4.2 | ) | | 12.0 | Ansell Cash Balance Restoration Plan | | — | | 1.3 | | (1.3 | ) | | 1.3 | | — | | 1.6 | | (1.6 | ) | | 1.6 | | — | | 1.9 | | (1.9 | ) | | 1.9 | | — | | 1.3 | | (1.3 | ) | | 1.2 | | — | | 1.3 | | (1.3 | ) | | 1.3 | | |
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| 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 | | 54.1 | | 68.9 | | (14.8 | ) | | 67.6 | | 78.2 | | 84.0 | | (5.8 | ) | | 78.5 | | |
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Equipsuper Superannuation Fund | | | Pacific Dunlop Superannuation Fund | | | Country | | Australia | Benefit type | | Defined benefit/ Accumulation | Basis of contribution | | Balance of Cost/Defined Contribution | Date of last actuarial valuation | | 01/07/200230/06/2004 | Actuary | | Mercer Human Resource Consulting Pty. Ltd. |
Effective 1 April 2004 members were transferred out of the Pacific Dunlop Superannuation Fund to Equipsuper (an independent Superannuation Fund). Plan net assets and vested benefits attributable to Ansell Limited employees have been calculated at 30 June 2003,2004, 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 April30 June 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. | | | Ansell Cash Balance Pension Plan | | | Country | | USA | Benefit type | | Defined Benefit | Basis of contribution | | Statutory Funding Requirements | Date of last actuarial valuation | | 31/03/20042005 | Actuary | | Retirement Plan Actuaries, Inc | | | Ansell Healthcare Products Inc. Union Retirement Plan | | | | | Country | | USA | Benefit type | | Defined Benefit | Basis of contribution | | Statutory Funding Requirements | Date of last actuarial valuation | | 31/03/20042005 | 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 | | 31/03/20042005 | 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. 2005. 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)25. 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 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 theall funds are as follows: | | | Consolidated
| | | Consolidated
| $ in millions
| | 2004
| | 2003
| | 2002
| $ in millions
| | 2005
| | 2004
| | 2003
| Contributions to defined benefit funds during the year | | 9.9 | | 10.7 | | 3.2 | Contributions to defined benefit funds during the year | | 5.0 | | 4.8 | | 10.7 | Contributions to accumulation funds during the year | | 1.1 | | 1.5 | | 0.8 | Contributions to accumulation funds during the year | | 4.9 | | 6.2 | | 1.5 |
25. | OWNERSHIP-BASED REMUNERATION SCHEMES |
Following the transfer of the members and assets of the Pacific Dunlop Superannuation Fund to Equipsuper, the Company received $8.6 million related to the utilisation of surplus assets. Executive and Employee Share Plans26. OWNERSHIP-BASED REMUNERATION SCHEMES
Ansell Limited Stock Incentive Plan The Company has operated two share plans for employees and Directorsonly operates one equity incentive plan, the Ansell Limited Stock Incentive plan. Details of the consolidated entity:operation of the Plan and the details and number of Performance Share Rights (PSRs) and options granted during the year are set out in Item 6B Compensation. In accordance with the Pacific Dunlopdisclosure 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 allocated over the vesting period for these securities. The amount included as remuneration (as disclosed in the Item 6B Compensation and Note 29 Director and Executive Share Plan (“Executive Plan”), and Disclosures) is not related to, or indicative of, the Pacific Dunlop Employee Share Plan (“Employee Plan”). No issue of shares has been made under either Plan since February 1994 andbenefit (if any) that individual executives may ultimately realise should the Board determined during 1996 that no further issues of shares will be made under the Executive Plan.options or PSRs vest.
The Employee Plan permits full timefair value of options 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 asPSRs is calculated at the date of issue, payablegrant using binomial tree techniques. The fair values and the factors and assumptions used in determining the fair values of the tranches of options and PSRs applicable for financial year 2005 are as follows: | | | | | | | | | | | | | | | | | | | | | Instrument
| | Number Issued
| | Grant Date
| | Expiry Date
| | Fair Value per Option/PSR
| | Exercise Price
| | Share Price on Grant Date
| | Risk Free Interest Rate
| | | Dividend Yield
| | Options | | 300,000 | | 23/9/2002 | | 23/9/2012 | | $2.66 -$ 2.70 | | $ | 6.97 | | $ | 6.88 | | 5.3 | % | | 0.0 | % | Options | | 525,000 | | 30/6/2004 | | 30/6/2014 | | $2.35 - $2.38 | | $ | 7.40 | | $ | 7.74 | | 6.1 | % | | 2.0 | % | PSRs | | 437,500 | | 19/2/2003 | | 30/6/2005 | | $6.07 | | | N/A | | $ | 6.07 | | N/A | | | 0.0 | % | PSRs | | 515,000 | | 18/12/2003 | | 30/6/2006 | | $5.89 - $6.12 | | | N/A | | $ | 6.19 | | N/A | | | 2.0 | % | PSRs | | 150,000 | | 30/6/2004 | | 30/6/2007 | | $6.94 - $7.22 | | | N/A | | $ | 7.74 | | N/A | | | 2.0 | % | PSRs | | 391,000 | | 8/8/2005 | | 30/6/2007 | | $7.34 - $7.64 | | | N/A | | $ | 7.78 | | N/A | | | 2.0 | % |
An estimated volatility factor of up 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 are20% has been applied in reductionthe above valuations and is based on an analysis of the loan). 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.historical share price data. 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 - 8 1/4 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 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 $4,366 pre-tax in respect of the Employee Share Plan was recognised in the Company and the consolidated financial statements for 2004 (2003 -$13,288 pre-tax; 2002 - $535,381 pre-tax).
The market price of the Company’s shares as at 30 June 2004 was $7.74.
Options - Generally At reporting date andAs at the date of this report 1,825,000825,000 unissued ordinary shares in the Company remain under option (refer Note 28 Director and Executive Disclosures for details).
Ansell Limited Stock Incentive Plan
Options 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 to the Chief Executive Officer 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 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 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 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 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 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 targets 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 targets 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 2005 financial year.
104option.
PART III
Item 18 : Consolidated Financial Statements 25. | OWNERSHIP-BASED REMUNERATION SCHEMES (CONTINUED) |
26. OWNERSHIP-BASED REMUNERATION SCHEMES (CONTINUED) During 2004Discontinued Executive and Employee Share Plans
The Company (when it was Pacific Dunlop Limited) historically operated two share plans for employees and Directors of the consolidated entity: the Pacific Dunlop Executive Share Plan (“Executive Plan”) - discontinued in 1996, and the Pacific Dunlop Employee Share Plan (“Employee Plan”) - discontinued in 1994. The Employee Plan permitted eligible employees to acquire a further 665,000 PSRs, exercisablenumber of shares in three equal tranches,the Company. The shares were grantedissued at market value, payable as to executives (including those granted50 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). Shares issued under the Executive Plan to selected employees (“Executives”) were paid up to 5 cents and were subject to restrictions for a period. 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 Chief Executive Officer). event giving rise to a call being made. Once restrictions ceased the price payable upon a call being made is 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 performance targetsCompany’s accounting policy in respect of the first trancheEmployee Plan was to recognise the paid up capital upon allotment and the receivable created by the loan to employees to acquire the shares. In respect of PSRs grantedthe 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 of Executive Plan Shares (ordinary plan shares paid to five cents) as at balance date are shown in Note 5. A loss of $13,801 pre-tax in respect of the Employee Share Plan was recognised in the current year (withCompany and the exception of those granted to the Chief Executive Officer) have been achieved and these PSRs have vested. The second and third tranches are subject to the achievement of performance targetsconsolidated financial statements for the 2005 and 2006 financial years respectively.(2004 - $4,366 pre-tax; 2003 - $13,288 pre-tax). In relation to the 2005 financial year the performance condition 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 exceeds US$115 million. Performance targets for periods beyond financial year 2005 are under review pending Board consideration of the next stageThe market price of the Company’s development under the leadership of the recently-appointed Chief Executive Officer.shares as at 30 June 2005 was $10.04.
Item 18 : Consolidated Financial Statements 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 these securities. The amount included as remuneration (as disclosed in Note 28 Director and Executive Disclosures) is not related to, or indicative of, the benefit (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.27. CONTINGENT LIABILITIESAND CONTINGENT ASSETS
The fair value of options and PSRs is calculated at the date of grant using binomial tree techniques. The fair values and the factors and assumptions used in determining the fair values of the tranches of 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 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 Only 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 France. As at 30 June 2004,2005, the balance of the provisions made for settlements in relation to claims (approximately A$11.2 million)(as disclosed in Note 22) is considered adequate to address any remaining liability of members of the Ansell Group. 105
PART III
Item 18 : Consolidated Financial Statements
26. | CONTINGENT LIABILITIESAND CONTINGENT ASSETS (CONTINUED) |
Latex Allergy Litigation As at 30 June 2004,2005, there were approximately 46nine product liability cases pending against one or more Ansell Group Companies in the United States in relation to allergic reaction to exposure to natural rubber latex gloves. In a number of additional cases, distributors of latex gloves, who have also been named as defendants, are pursuing cross-claims and third party claims against several manufacturers of natural rubber latex gloves, including the Ansell Group Companies, in an effort to recover their costs related to the latex litigation. In some cases, judgement has been entered against an Ansell Group Company. The relevant Ansell Group Companies are appealing these decisions. The Company is not a defendant in any cases in the United States Group Companies. States. It is not possible at this time to quantify the potential financial impact of suchthe remaining cases on the Group.Group, however they are not considered to have a material potential impact on the Group results either individually or on an aggregate basis. 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. No formal proceedings are 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 in connection with the sale of the GNB business. Proceedings 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, Inc., a company which has emerged from bankruptcy. The Ansell Group has requested that the Court reviewreconsider its decision. Thedecision and the Court has yetdenied that request. The Ansell Group has filed an appeal to do so.the appropriate court. The Ansell Group will continue to pursue recovery of the amounts owed by the Exide Group, but as to the reorganised Company (Exide Technologies, Inc) the Ansell Group only expects to recover only stock in the reorganised company (Exide Technologies, Inc.).that Company. The ultimate amount of the Ansell Group’s claims havehas not yet been determined and therefore the amount and value of the stock that may be recovered from Exide Technologies, Inc. is also undetermined. 106
PART III
Item 18 : Consolidated Financial Statements 28. 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
| | | | Fixed Interest maturing in:
| | Non Interest Bearing
| | Total
| $ in millions
| | | 1 year or less
| | 1 to 5 years
| | Over 5 years
| | | Weighted Average Effective Interest Rate %
| | Floating
| | 1 year or less
| | 1 to 5 years
| | Over 5 years
| | Financial Assets 2005 | | | | | | | | Recognised | | | | | | | | Cash on hand and at bank | | | 1.6 | % | | 19.2 | | | 6.5 | | | — | | | — | | 43.7 | | 69.4 | Short-term deposits | | | 4.5 | % | | 48.8 | | | 105.4 | | | — | | | — | | 3.7 | | 157.9 | Receivables – trade | | | NA | | | — | | | — | | | — | | | — | | 170.8 | | 170.8 | Receivables – other | | | 6.1 | % | | 66.8 | | | — | | | — | | | — | | 44.8 | | 111.6 | Investments | | | NA | | | — | | | — | | | — | | | — | | 59.0 | | 59.0 | | | |
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| Total Financial Assets 2005 | | | | 134.8 | | | 111.9 | | | — | | | — | | 322.0 | | 568.7 | | | |
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| Financial Liabilities 2005 | | | | | | | | Recognised | | | | | | | | Payables - trade | | | NA | | | — | | | — | | | — | | | — | | 106.8 | | 106.8 | Payables - other | | | NA | | | — | | | — | | | — | | | — | | 26.8 | | 26.8 | Bank overdraft | | | 4.5 | % | | 0.3 | | | — | | | — | | | — | | 1.1 | | 1.4 | Bank and other loans | | | 5.1 | % | | 6.7 | | | — | | | 357.2 | | | — | | — | | 363.9 | Provision for employee entitlements | | | NA | | | — | | | — | | | — | | | — | | 50.1 | | 50.1 | | | |
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| Total Financial Liabilities 2005 | | | | 7.0 | | | — | | | 357.2 | | | — | | 184.8 | | 549.0 | | | | |
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| Net Financial Assets/(Liabilities) 2005 | | | | 127.8 | | | 111.9 | | | (357.2 | ) | | — | | 137.2 | | 19.7 | | | | |
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| Financial Assets 2004 | | | | | | | | | | | | | Recognised | | | | | | | | | | | | | Cash on hand and at bank | | 1.1 | % | | 20.5 | | | — | | | — | | | — | | 50.2 | | 70.7 | | 1.1 | % | | 20.5 | | | — | | | — | | | — | | 50.2 | | 70.7 | Short-term deposits | | 4.8 | % | | 231.8 | | | — | | | 15.6 | | | — | | — | | 247.4 | | 4.8 | % | | 231.8 | | | — | | | 15.6 | | | — | | — | | 247.4 | Receivables - trade | | N/A | | | — | | | — | | | — | | | — | | 183.0 | | 183.0 | | NA | | | — | | | — | | | — | | | — | | 183.0 | | 183.0 | Receivables - other | | 6.1 | % | | 62.8 | | | — | | | — | | | — | | 46.5 | | 109.3 | | 6.1 | % | | 62.8 | | | — | | | — | | | — | | 46.5 | | 109.3 | Investments | | N/A | | | — | | | — | | | — | | | — | | 141.4 | | 141.4 | | NA | | | — | | | — | | | — | | | — | | 141.4 | | 141.4 | | | |
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| Total Financial Assets 2004 | | | 315.1 | | | — | | | 15.6 | | | — | | 421.1 | | 751.8 | | | 315.1 | | | — | | | 15.6 | | | — | | 421.1 | | 751.8 | | | |
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| Financial Liabilities 2004 | | | | | | | | | | | | | Recognised | | | | | | | | | | | | | Payables - trade | | NA | | | — | | | — | | | — | | | — | | 124.1 | | 124.1 | | NA | | | — | | | — | | | — | | | — | | 124.1 | | 124.1 | Payables - other | | NA | | | — | | | — | | | — | | | — | | 38.6 | | 38.6 | | NA | | | — | | | — | | | — | | | — | | 38.6 | | 38.6 | Bank overdraft | | 1.5 | % | | 3.3 | | | — | | | — | | | — | | — | | 3.3 | | 1.5 | % | | 3.3 | | | — | | | — | | | — | | — | | 3.3 | Bank and other loans | | 5.6 | % | | 321.2 | | | — | | | 101.7 | | | — | | — | | 422.9 | | 5.6 | % | | 321.2 | | | — | | | 101.7 | | | — | | — | | 422.9 | Provision for employee entitlements | | N/A | | | — | | | — | | | — | | | — | | 41.0 | | 41.0 | | NA | | | — | | | — | | | — | | | — | | 41.0 | | 41.0 | Unrecognised | | | | | | | | | | | | | Net interest rate swaps | | 2.0 | % | | (147.4 | ) | | 121.1 | | | 26.3 | | | — | | — | | — | | 2.0 | % | | (147.4 | ) | | 121.1 | | | 26.3 | | | — | | — | | — | | | |
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| Total Financial Liabilities 2004 | | | 177.1 | | | 121.1 | | | 128.0 | | | — | | 203.7 | | 629.9 | | | 177.1 | | | 121.1 | | | 128.0 | | | — | | 203.7 | | 629.9 | | | |
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| Net Financial Assets/(Liabilities) 2004 | | | 138.0 | | | (121.1 | ) | | (112.4 | ) | | — | | 217.4 | | 121.9 | | | 138.0 | | | (121.1 | ) | | (112.4 | ) | | — | | 217.4 | | 121.9 | | | |
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| Financial Assets 2003 | | | | | | | | Recognised | | | | | | | | Cash on hand and at bank | | 1.3 | % | | 61.4 | | | — | | | — | | | — | | — | | 61.4 | | Short-term deposits | | 3.9 | % | | 238.4 | | | — | | | — | | | — | | — | | 238.4 | | Receivables - trade | | N/A | | | — | | | — | | | — | | | — | | 197.5 | | 197.5 | | Receivables - other | | 5.4 | % | | 62.7 | | | — | | | — | | | — | | 59.2 | | 121.9 | | Investments | | N/A | | | — | | | — | | | — | | | — | | 141.4 | | 141.4 | | | | |
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| | Total Financial Assets 2003 | | | 362.5 | | | — | | | — | | | — | | 398.1 | | 760.6 | | | | |
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| | Financial Liabilities 2003 | | | | | | | | Recognised | | | | | | | | Payables - trade | | N/A | | | — | | | — | | | — | | | — | | 130.1 | | 130.1 | | Payables -other | | N/A | | | — | | | — | | | — | | | — | | 27.5 | | 27.5 | | Bank overdraft | | 3.2 | % | | 1.3 | | | — | | | — | | | — | | 1.3 | | 2.6 | | Bank and other loans | | 6.4 | % | | 370.0 | | | 24.2 | | | 75.0 | | | — | | — | | 469.2 | | Provision for employee entitlements | | N/A | | | — | | | — | | | — | | | — | | 39.4 | | 39.4 | | Unrecognised | | | | | | | | Net interest rate swaps | | 2.5 | % | | (319.4 | ) | | 168.8 | | | 150.6 | | | — | | — | | — | | | | |
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| | Total Financial Liabilities 2003 | | | 51.9 | | | 193.0 | | | 225.6 | | | — | | 198.3 | | 668.8 | | | | |
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| | Net Financial Assets/(Liabilities) 2003 | | | 310.6 | | | (193.0 | ) | | (225.6 | ) | | — | | 199.8 | | 91.8 | | | | |
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107
PART III
Item 18 : Consolidated Financial Statements 27. | FINANCIAL INSTRUMENTS (continued) |
28. 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 $47.4 million (2004 - $57.7 million (2003million; 2003 - $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 1921 - Interest Bearing Liabilities. Credit Risk and Net Fair Value Recognised Financial Instruments:Instruments (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 Company considersDirectors consider 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 Instruments: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 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 $3.5 million (2004 - $1.6 million (2003 -million; 2003 – ($11.1) million; 2002 - ($23.8) million), if all contracts were closed out on 30 June 2004.2005. | | | Face Value
| | Credit Risk
| | Net Fair Value
| | | Face Value
| | Credit Risk
| | Net Fair Value
| | $ in millions
| | 2004
| | 2003
| | 2002
| | 2004
| | 2003
| | 2002
| | 2004
| | 2003
| | 2002
| | | 2005
| | 2004
| | 2003
| | 2005
| | 2004
| | 2003
| | 2005
| | 2004
| | 2003
| | Foreign Exchange Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Purchase/Sale Contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - U.S. dollars | | 77.0 | | 112.0 | | 329.7 | | 0.4 | | 0.3 | | 1.6 | | 0.2 | | | (0.4 | ) | | (7.3 | ) | | 78.5 | | 77.0 | | 112.0 | | 0.5 | | 0.4 | | 0.3 | | 0.4 | | | 0.2 | | | (0.4 | ) | - Australian dollars | | 22.0 | | 47.5 | | 49.4 | | — | | 1.8 | | — | | — | | | 1.8 | | | — | | | 5.0 | | 22.0 | | 47.5 | | — | | — | | 1.8 | | — | | | — | | | 1.8 | | - Euro | | | 20.7 | | 19.9 | | — | | — | | — | | — | | (0.7 | ) | | — | | | — | | - Other currencies | | 33.4 | | 44.8 | | 216.5 | | 0.2 | | — | | 2.5 | | 0.1 | | | (0.9 | ) | | 2.4 | | | 5.3 | | 13.5 | | 44.8 | | — | | 0.2 | | — | | (0.1 | ) | | 0.1 | | | (0.9 | ) | Cross Currency Swaps: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - U.S. dollars | | 53.8 | | 69.4 | | 96.5 | | 1.9 | | 2.7 | | 2.2 | | 1.9 | | | 2.7 | | | (1.5 | ) | | 23.7 | | 53.8 | | 69.4 | | 0.9 | | 1.9 | | 2.7 | | 0.9 | | | 1.9 | | | 2.7 | | - Other currencies | | — | | — | | 16.5 | | — | | — | | — | | — | | | — | | | (2.1 | ) | | Foreign Exchange Options | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Zero Cost Collar | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - Euro/U.S. dollars | | 193.5 | | 103.5 | | — | | 2.2 | | 0.8 | | — | | 0.7 | | | (2.6 | ) | | — | | | 99.3 | | 145.4 | | 103.5 | | 2.6 | | 1.6 | | 0.8 | | 3.3 | | | 0.4 | | | (2.6 | ) | - U.S. dollars/Thai baht | | | 16.5 | | 21.5 | | — | | 04 | | 0.1 | | — | | (0.3 | ) | | (0.2 | ) | | — | | - Australian dollars/U.S. dollars | | | 6.0 | | 11.3 | | — | | — | | 0.4 | | — | | — | | | 0.6 | | | — | | - Canadian dollars/U.S. dollars | | | 29.1 | | 6.8 | | — | | 0.2 | | 0.1 | | — | | (0.1 | ) | | (0.1 | ) | | — | | - GBP/U.S. dollars | | | 0.9 | | 8.5 | | — | | — | | — | | — | | — | | | — | | | — | | - U.S. dollars/Euro | | | 6.6 | | — | | — | | — | | — | | — | | (0.2 | ) | | — | | | — | | 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 | | 141.0 | | 369.4 | | 435.1 | | 0.4 | | 0.3 | | 3.0 | | (1.2 | ) | | (10.9 | ) | | (14.5 | ) | | 38.0 | | 141.0 | | 369.4 | | 0.4 | | 0.4 | | 0.3 | | 0.3 | | | (1.2 | ) | | (10.9 | ) | - Australian dollars | | 50.0 | | 100.0 | | 300.0 | | — | | — | | — | | (0.1 | ) | | (1.0 | ) | | (0.8 | ) | | — | | 50.0 | | 100.0 | | — | | — | | — | | — | | | (0.1 | ) | | (1.0 | ) | - Other currencies | | — | | — | | 17.5 | | — | | — | | — | | — | | | — | | | — | | | | |
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| Total | | 570.7 | | 866.4 | | 1,461.2 | | 5.1 | | 6.1 | | 9.3 | | 1.6 | | | (11.1 | ) | | (23.8 | ) | | 329.6 | | 570.7 | | 866.4 | | 5.0 | | 5.1 | | 6.1 | | 3.5 | | | 1.6 | | | (11.1 | ) | | |
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108
PART III
Item 18 : Consolidated Financial Statements 27. | FINANCIAL INSTRUMENTS (continued) |
28. FINANCIAL INSTRUMENTS (CONTINUED) From time to time in the ordinary course of business, the consolidated entity enters into forward exchange contracts to hedge a proportion of its purchase and sale commitments denominated in foreign currencies (principally US dollars). Hedge cover does not exceed 12 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: (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
(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
| | Interest Rate
| | Foreign Exchange
| | | | | Foreign Exchange Related Contracts
| | Interest Rate Contracts
| | Foreign Exchange Options
| | Total
| | Related Contracts
| | Contracts
| | Options
| | Total
| $ in millions
| | 2004
| | 2003
| | 2002
| | 2004
| | 2003
| | 2002
| | 2004
| | 2003
| | 2002
| | 2004
| | 2003
| | 2002
| | 2005
| | 2004
| | 2003
| | 2005
| | 2004
| | 2003
| | 2005
| | 2004
| | 2003
| | 2005
| | 2004
| | 2003
| Term: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 0 to 6 mths | | 0.6 | | 2.1 | | 4.1 | | — | | 0.3 | | — | | 1.1 | | 0.4 | | — | | 1.7 | | 2.8 | | 4.1 | | 0.5 | | 0.6 | | 2.1 | | — | | — | | 0.3 | | 2.1 | | 1.1 | | 0.4 | | 2.6 | | 1.7 | | 2.8 | 6 to 12 mths | | 0.1 | | — | | — | | — | | — | | — | | 1.1 | | 0.6 | | — | | 1.2 | | 0.6 | | — | | — | | 0.1 | | — | | — | | — | | — | | 1.1 | | 1.1 | | 0.6 | | 1.1 | | 1.2 | | 0.6 | 1 to 2 yrs | | — | | 0.2 | | — | | — | | — | | 3.0 | | — | | — | | — | | — | | 0.2 | | 3.0 | | 0.9 | | — | | 0.2 | | — | | — | | — | | — | | — | | — | | 0.9 | | — | | 0.2 | 2 to 5 yrs | | 1.8 | | 2.5 | | 2.2 | | 0.4 | | — | | — | | — | | — | | — | | 2.2 | | 2.5 | | 2.2 | | — | | 1.8 | | 2.5 | | 0.4 | | 0.4 | | — | | — | | — | | — | | 0.4 | | 2.2 | | 2.5 | | |
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| Total | | 2.5 | | 4.8 | | 6.3 | | 0.4 | | 0.3 | | 3.0 | | 2.2 | | 1.0 | | — | | 5.1 | | 6.1 | | 9.3 | | 1.4 | | 2.5 | | 4.8 | | 0.4 | | 0.4 | | 0.3 | | 3.2 | | 2.2 | | 1.0 | | 5.0 | | 5.1 | | 6.1 | | |
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(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
| | 2004
| | 2003
| | 2002
| | 2004
| | 2003
| | 2002
| | | 2005
| | 2004
| | 2003
| | 2005
| | 2004
| | 2003
| Exposures | | | | | | | | | | | | Anticipated Exposures | | | | | | | | | | Less than 1 year | | — | | — | | — | | (0.1 | ) | | 1.9 | | (0.5 | ) | | — | | | — | | — | | — | | (0.1 | ) | | 1.9 | | Realised Swaps Deferred | | | | | | | | | | | | | | | | | | | Less than 1 year | | 0.7 | | 0.4 | | 0.1 | | | | | | — | | | 0.7 | | 0.4 | | | | | 1 to 2 years | | 0.7 | | 0.8 | | 0.7 | | | | | | (0.3 | ) | | 0.7 | | 0.8 | | | | | 2 to 5 years | | 4.9 | | 0.9 | | 2.2 | | | | | | (3.6 | ) | | 4.9 | | 0.9 | | | | |
109
PART I
Item 18 : Consolidated Financial Statements 28. | DIRECTORAND EXECUTIVE DISCLOSURES29. DIRECTORAND EXECUTIVE DISCLOSURE |
Specified Directors:
The following persons were directors of Ansell Limited during the financial year:
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. Heintz | | Senior Vice President and Regional, Director - Europe | | Ansell Healthcare Europe N.V. | R. Jilla | | Senior Vice President and Chief Financial Officer | | Ansell Healthcare Products LLC. | N. O’Donnell | | Senior Vice President and Regional Director - Asia Pacific | | Ansell Limited | W. Reed | | Senior Vice President and Regional Director - Americas | | Ansell Healthcare Products LLC. | W. Reilly, Jr. | | Senior Vice President and General Counsel | | Ansell 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 ofTotal remuneration
The Board’s Nomination, Remunerationtotal remuneration of all directors of Ansell Limited and Evaluation Committee is responsible for reviewing the remuneration policies and practicesspecified executives of the Company, including the compensation arrangementsconsolidated entity for the Managing Director2005 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 Directoryears 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
Item 18 : Consolidated Financial Statements
28. | DIRECTORAND EXECUTIVE DISCLOSURES (CONTINUED) |
Senior 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
Specified Directors of Ansell Limited Executives in Ansell Grades E1-E3 and other key management talent as designated by the CEO and or the Compensation Committee.
| | | | | | | | | | | | | | | Primary
| | Post Employment
| | Equity
| | Other Benefits
| | | | | Fees, cash salary, bonus and non- salary benefits
| | Non- monetary benefits
| | Superannuation Contributions
| | Notional value of equity compensation
| | Termination payments
| | Total
| | | $ | | $ | | $ | | $ | | $ | | $ | 2005 | | 2,203,809 | | 36,055 | | 165,898 | | 1,409,968 | | — | | 3,815,730 | 2004(a) | | 1,984,875 | | — | | 408,320 | | 537,500 | | 2,895,566 | | 5,826,261 |
CompensationSpecified Executives of participants is composed of four regular elements as follows:the consolidated entity
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
| | | | | | | | | | | | | | | Primary
| | Post Employment
| | Equity
| | Other Benefits
| | | | | Cash salary, bonus and non-salary benefits
| | Non- monetary benefits
| | Superannuation Contributions
| | Notional value of equity compensation
| | Termination payments
| | Total
| | | $ | | $ | | $ | | $ | | $ | | $ | 2005 | | 3,495,806 | | — | | 441,395 | | 1,056,489 | | 752,784 | | 5,746,474 | 2004(a) | | 2,886,724 | | — | | 424,791 | | 900,413 | | — | | 4,211,928 |
PART III
Item 18 : Consolidated Financial Statements
28.(a) | DIRECTORAND EXECUTIVE DISCLOSURES (CONTINUED)Prior year information has been restated to enhance comparability. |
Details of remuneration Details of the remuneration of all directors of Ansell Limited andfor the 2005 financial year is set out in the following table: | | | | | | | | | | | | | Primary
| | Post Employment
| | Equity
| | | | | Cash salary, bonus and non- salary benefits
| | Non-Monetary Benefits(1)
| | Superannuation Contributions (2)
| | Notional value of equity compensation
| | Total
| | | $ | | $ | | $ | | $ | | $ | Non-executive | | | | | | | | | | | P L Barnes | | 91,875 | | 1,287 | | 8,269 | | — | | 101,431 | L D Crandall | | 82,500 | | 17,690 | | 7,425 | | — | | 107,615 | H J Elliott | | 82,500 | | — | | 7,425 | | — | | 89,925 | M J McConnell | | 82,500 | | 16,034 | | 7,425 | | — | | 105,959 | E D Tweddell | | 234,375 | | 1,044 | | 21,094 | | — | | 256,513 | Executive | | | | | | | | | | | D. Tough (appointed CEO and Managing Director 1 July 2004) | | 1,630,059 | | — | | 114,260 | | 1,409,968 | | 3,154,287 | | |
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| Total all specified Directors | | 2,203,809 | | 36,055 | | 165,898 | | 1,409,968 | | 3,815,730 | | |
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(1) | Includes spouse travel incurred in accompanying the Director while on Company business. |
(2) | Contributions are made on a notional basis upon the advice of the Trustee, as the Company’s superannuation fund is currently in surplus. |
Item 18 : Consolidated Financial Statements 29. DIRECTORAND EXECUTIVE DISCLOSURE (CONTINUED) Details of remuneration (continued) Details of the remuneration of all directors of Ansell Limited for the 2004 financial year is set out in the following table: | | | | | | | | | | | | | | | Primary
| | Post Employment
| | Equity
| | Other Benefits
| | | | | Cash salary, bonus and non-salary benefits
| | Non-monetary benefits
| | Superannuation Contributions
| | Notional value of equity compensation
| | Termination payments
| | Total
| | | $ | | $ | | $ | | $ | | $ | | $ | Non-executive | | | | | | | | | | | | | E. D. Tweddell | | 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) | | 1,410,813 | | | | 356,636 | | 537,500 | | 2,895,566 | | 5,200,515 | | |
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| Total all specified Directors | | 1,984,875 | | | | 408,320 | | 537,500 | | 2,895,566 | | 5,826,261 | | |
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Details of the remuneration of each of the specified executives of the consolidated entity for the 2005 financial year are set out in the following tables.table: 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 | | |
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| Total all specified Directors | | 1,541,043 | | 419,545 | | 408,320 | | | | 537,500 | | 2,204,960 | | 714,893 | | 5,826,261 | | |
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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 | | |
| |
| |
| | | |
| | | |
| |
|
| | | | | | | | | | | | | | | Primary
| | Post Employment
| | Equity
| | Other Benefits
| | | | | Cash salary, bonus and non-salary benefits
| | Non-monetary benefits
| | Superannuation Contributions
| | Notional value of equity compensation
| | Termination payments
| | Total
| | | $ | | $ | | $ | | $ | | $ | | $ | P Corke | | 554,612 | | | | 59,193 | | 133,886 | | — | | 747,691 | W Heintz | | 715,870 | | | | 117,218 | | 181,757 | | — | | 1,014,845 | R Jilla | | 739,377 | | | | 94,540 | | 403,242 | | — | | 1,237,159 | P Soszyn(1) | | 308,511 | | | | 24,855 | | 26,863 | | 752,784 | | 1,113,013 | W Reed | | 636,265 | | | | 83,260 | | 176,855 | | — | | 896,380 | W Reilly | | 541,171 | | | | 62,329 | | 133,886 | | — | | 737,386 | | |
| | | |
| |
| |
| |
| Total all specified executives | | 3,495,806 | | | | 441,395 | | 1,056,489 | | 752,784 | | 5,746,474 | | |
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| |
| |
| |
|
(a)(1) | For Directors includes notional contributions at the rate that satisfies Australian Superannuation Guarantee requirements. No amounts were required to be paid to the Australian Superannuation fund in respect of 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.Ceased employment 28 February 2005. |
(b) | In accordance with the requirements of Accounting Standards, remuneration includes a proportion of the notional 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 the benefit (if any) that individual executives may ultimately realise should the options or PSRs vest. |
(c) | Includes cash benefits such as motor vehicle allowances, home office expenses, executive insurance, housing allowances and statutory amounts paid on termination including accumulated annual leave and long service leave. |
(d) | US-based Executives are paid in US$. The average exchange rate for June 2004 is US$0.7016 = A$1.00. |
(e) | Europe-based Executive paid in Euros. The average exchange rate for June 2004 is Euros 0.5775 = A$1.00. |
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PART III
Item 18 : Consolidated Financial Statements 28. | DIRECTORAND EXECUTIVE DISCLOSURES29. DIRECTORAND EXECUTIVE DISCLOSURE (CONTINUED) |
(f) | Notional 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 each share acquired, vested upon achievement of performance conditions applicable to the 2004 financial year. |
(g) | Notional value of Equity Compensation includes the notional value of 100,000 options granted in September 2002. The options, which have an exercise price of $6.97 for each share acquired, vested upon achievement of performance conditions applicable to the 2004 financial year. |
(h) | Notional value of Equity Compensation includes the notional vale of PSRs granted in 2002 and 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
Item 18 : Consolidated Financial StatementsDetails of remuneration (continued)
28. | DIRECTORAND EXECUTIVE DISCLOSURES (CONTINUED) |
Details of the remuneration of each of the specified executives of the consolidated entity for the 2004 financial year are set out in the following table: | | | | | | | | | | | | | | | Primary
| | Post Employment
| | Equity
| | Other Benefits
| | | Name
| | Cash salary, bonus and non-salary benefits
| | Non-monetary benefits
| | Superannuation Contributions
| | Notional value of equity compensation
| | Termination payments
| | Total
| | | $ | | $ | | $ | | $ | | $ | | $ | W. Heintz | | 837,293 | | | | 125,923 | | 152,988 | | | | 1,116,204 | R. Jilla | | 620,415 | | | | 93,910 | | 407,732 | | | | 1,122,057 | N. O’Donnell | | 290,145 | | | | 39,004 | | 99,176 | | | | 428,325 | W. Reed | | 517,278 | | | | 87,469 | | 142,945 | | | | 747,692 | W. Reilly | | 496,747 | | | | 66,173 | | 97,572 | | | | 660,492 | D. Tough (appointed as an executive 11 May 2004 and CEO and Managing Director 1 July 2004) | | 124,846 | | | | 12,312 | | | | | | 137,158 | | |
| | | |
| |
| | | |
| Total all specified executives | | 2,886,724 | | | | 424,791 | | 900,413 | | | | 4,211,928 | | |
| | | |
| |
| | | |
|
Equity 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
| | Held at 1 July 2004
| | Purchases (a)
| | Received on vesting of PSRs
| | Sales
| | Held at 30 June 2005
| Specified directors | | | | | | | | | | | | | | | | | | | | | E. D. Tweddell | | 30,872 | | 3,348 | | — | | — | | 34,220 | | 34,220 | | 2,444 | | — | | 20,000 | | 16,664 | P. L. Barnes | | 10,370 | | 1,315 | | — | | — | | 11,685 | | 11,685 | | 954 | | — | | — | | 12,639 | H. Boon | | 56,701 | | — | | — | | — | | 56,701 | | L. D. Crandall | | 3,828 | | 4,280 | | — | | — | | 8,108 | | 8,108 | | 855 | | — | | — | | 8,963 | H. J. Elliott | | 7,798 | | 1,178 | | — | | — | | 8,976 | | 8,976 | | 855 | | — | | — | | 9,831 | S. P. Gold(b) | | 24,437,905 | | 6,174 | | — | | 8,000,000 | | 16,444,079 | | S. P. Gold(b) (alternate to M. J. McConnell) | | | 16,444,079 | | — | | — | | 16,444,079 | | — | M. J. McConnell | | 20,000 | | 6,406 | | — | | — | | 26,406 | | 26,406 | | 5,678 | | — | | 26,730 | | 5,354 | D. Tough | | | — | | 20,000 | | — | | — | | 20,000 | Specified executives | | | | | | | | | | | | | | | | | | | | | P. Corke | | | 8,333 | | — | | 13,333 | | 5,561 | | 16,105 | W. Heintz | | — | | — | | 8,333 | | — | | 8,333 | | 8,333 | | — | | 18,333 | | — | | 26,666 | R. Jilla | | 6,000 | | — | | — | | — | | 6,000 | | 6,000 | | — | | 16,666 | | — | | 22,666 | N. O’Donnell | | — | | — | | 5,000 | | — | | 5,000 | | W. Reed | | 100 | | — | | 10,000 | | 6,498 | | 3,602 | | 3,602 | | — | | 18,333 | | 5,453 | | 16,482 | W. Reilly | | — | | — | | 8,333 | | 2,788 | | 5,545 | | 5,545 | | — | | 13,333 | | 3,965 | | 14,913 | D. Tough | | — | | — | | — | | — | | — | | P. Soszyn | | | 8,333 | | — | | 13,333 | | 16,897 | | 4,769 |
Item 18 : Consolidated Financial Statements (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). |
29. DIRECTORAND EXECUTIVE DISCLOSURE (CONTINUED) (a) Includes shares purchased on market pursuant to the Non-executive Directors’ Share Plan. (b) Mr Gold had an indirect non-beneficial interest in 16,428,840 shares at 1 July 2004 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 a substantial shareholder of Ansell Limited as at 30 June 2004. During the year ended 30 June 2005 Shamrock Holdings divested its shareholding in Ansell Limited. Service Agreements The Company has no service agreements with the Non-executive Directors. 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 AGREEMENTS30. NOTESTOTHE INDUSTRY SEGMENTS REPORT |
The Company has no service agreements with the Non-executive Directors.
115
PART III
Item 18 : Consolidated Financial Statements
30. | NOTESTOTHE 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.
(e)(b) Cash
Cash also includes Accufix Pacing Leads restricted deposits. (f)(c) Inter-Segment Transactions
Significant inter-segment sales were made by Asia Pacific - $196.8 million (2004 - $216.3 million (2003million; 2003 - $258.2 million; 2002 - $304.9 million) and Americas - $219.9 million (2004 - $233.0 million (2003million; 2003 - $254.7 million; 2002 - $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. (g)(d) 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 products. Discontinued Businesses - represents former Industry Segment businesses which have been sold or abandoned.
(h)(e) 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.
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. Sales revenue in Australia for the Healthcare operations during 20042005 were $109.5 million (2004 - $108.3 million (2003million; 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$453.4 million in 2004 (20032005 (2004 - $582.0$472.8 million; 2002 $723.32003- $582.0 million). 116
PART III
Item 18 : Consolidated Financial Statements 30. | 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
| | | | | | | | | 2005
| | 2004
| | 2003
| | | $m | | $m | | $m | (f) Segment Capital Expenditure | | | | | | | Occupational Healthcare | | 5.1 | | 5.4 | | 3.2 | Professional Healthcare | | 6.0 | | 4.4 | | 8.6 | Consumer Healthcare | | 3.0 | | 3.3 | | 3.4 | (g) Region Capital Expenditure | | | | | | | Asia Pacific | | 8.3 | | 8.7 | | 10.1 | Americas | | 4.6 | | 3.4 | | 4.2 | Europe | | 1.2 | | 1.0 | | 0.9 | (h) Segment Depreciation | | | | | | | Occupational Healthcare | | 9.1 | | 8.7 | | 11.0 | Professional Healthcare | | 11.1 | | 11.5 | | 15.5 | Consumer Healthcare | | 4.2 | | 5.1 | | 4.8 | (i) Segment Other Non Cash Expenses (excluding Provision for Rationalisation and Write-down of Assets separately disclosed) | | | | | | | Occupational Healthcare | | 11.3 | | 6.9 | | 8.3 | Professional Healthcare | | 2.7 | | 1.5 | | 0.7 | Consumer Healthcare | | 1.3 | | 4.9 | | 2.9 |
Item 18 : Consolidated Financial Statements 31. | NOTESTOTHE STATEMENTSOF CASH FLOWS |
31. NOTESTOTHE STATEMENTSOF CASH FLOWS (a) Reconciliation of Net Cash Provided by Operating Activities to Net Profit/(Loss)Profit after Income Tax | | | Consolidated
| | | Consolidated
| | $ in Millions
| | 2004
| | 2003
| | 2002
| | | 2005
| | 2004
| | 2003
| | Net profit/(loss) after income tax | | 72.6 | | | 52.5 | | | (113.0 | ) | | Net profit after income tax | | | 13.1 | | | 72.6 | | | 52.5 | | Add/(less) non-cash items: | | | | | Depreciation | | 23.8 | | | 29.5 | | | 50.3 | | | 23.4 | | | 23.8 | | | 29.5 | | Amortisation | | 22.9 | | | 27.0 | | | 32.0 | | | 21.9 | | | 22.9 | | | 27.0 | | Provision for doubtful debts - trade | | 1.2 | | | (2.5 | ) | | (2.9 | ) | | (0.1 | ) | | 1.2 | | | (2.5 | ) | Write off of FITB attributable to Australian tax losses | | — | | | — | | | 15.2 | | | Write down of assets | | 1.0 | | | 6.1 | | | 75.2 | | | Write down of investments in SPT partnership and other companies | | | 80.0 | | | 1.0 | | | 6.1 | | Write down of property, plant and equipment | | 8.8 | | | — | | | 69.3 | | | — | | | 8.8 | | | — | | 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 | ) | | (8.5 | ) | | (9.0 | ) | | (8.0 | ) | Borrowing costs | | 29.4 | | | 37.8 | | | 70.2 | | | 21.9 | | | 29.4 | | | 37.8 | | Loss/(gain) on sale of investments, properties, plant and equipment | | (0.8 | ) | | (5.6 | ) | | 5.6 | | | 0.1 | | | (0.8 | ) | | (5.6 | ) | Gain on sale of controlled entities and businesses | | — | | | — | | | (25.7 | ) | | | |
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|
| Net cash provided by operating activities before change in assets and liabilities | | 149.9 | | | 136.5 | | | 158.8 | | | 151.8 | | | 149.9 | | | 142.6 | | Change in assets and liabilities net of effect from acquisitions and disposals of controlled entities and businesses: | | | | Change in assets and liabilities net of effect from acquisition and disposals of controlled entities and businesses | | | | (Increase)/Decrease in debtors | | 24.9 | | | 34.5 | | | (0.3 | ) | | 10.0 | | | 24.9 | | | 34.5 | | (Increase)/Decrease in inventories | | (2.6 | ) | | 47.2 | | | 39.4 | | | 28.5 | | | 2.1 | | | 47.2 | | Decrease/(Increase) in prepaid expenses | | (0.8 | ) | | 4.9 | | | (2.4 | ) | | Decrease/(Increase) in prepaid expenses/other assets | | | 2.0 | | | (5.5 | ) | | 4.9 | | (Increase)/Decrease in deferred expenses | | — | | | — | | | 4.3 | | | (2.1 | ) | | — | | | — | | Increase/(Decrease) in creditors and bills payable | | (6.0 | ) | | (36.5 | ) | | 78.3 | | | (17.3 | ) | | (6.0 | ) | | (36.5 | ) | (Decrease)/Increase in provisions and other liabilities | | 7.8 | | | (31.9 | ) | | (203.1 | ) | | (7.3 | ) | | 7.8 | | | (31.9 | ) | Increase/(Decrease) in provision for deferred income tax | | (1.3 | ) | | (2.9 | ) | | 2.3 | | | (5.4 | ) | | (1.3 | ) | | (2.9 | ) | (Increase)/Decrease in future income tax benefit | | 7.8 | | | 17.7 | | | 24.7 | | | 9.1 | | | 7.8 | | | 17.7 | | (Decrease)/Increase in provision for income tax | | (0.5 | ) | | 1.2 | | | (8.5 | ) | | (0.3 | ) | | (0.5 | ) | | 1.2 | | Other non-cash items | | — | | | (9.1 | ) | | 19.6 | | | (16.2 | ) | | — | | | (9.1 | ) | | |
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|
| Net cash provided by operating activities | | 179.2 | | | 161.6 | | | 113.1 | | | 152.8 | | | 179.2 | | | 167.7 | | | |
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(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: | | | | | | | | | | | | | | Note
| | Consolidated
| | $ in Millions
| | | 2004
| | | 2003
| | | 2002
| | Cash on hand | | 11 | | 0.9 | | | 0.6 | | | 0.2 | | Cash at bank | | 11 | | 69.8 | | | 60.8 | | | 72.0 | | Short-term deposits | | 11 | | 237.1 | | | 224.6 | | | 186.3 | | Restricted deposits* | | 11 | | 10.3 | | | 13.8 | | | 18.4 | | Bank overdrafts | | 19 | | (3.3 | ) | | (2.6 | ) | | (14.6 | ) | | | | |
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| | | | | 314.8 | | | 297.2 | | | 262.3 | | | | | |
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|
| | | | | | | | | | | | | | Consolidated
| | $ in Millions
| | Note
| | 2005
| | | 2004
| | | 2003
| | Cash on hand | | 11 | | 0.2 | | | 0.9 | | | 0.6 | | Cash at bank | | 11 | | 69.2 | | | 69.8 | | | 60.8 | | Short-term deposits | | 11 | | 149.5 | | | 237.1 | | | 224.6 | | Restricted deposits* | | 11 | | 8.4 | | | 10.3 | | | 13.8 | | Bank overdrafts | | 21 | | (1.4 | ) | | (3.3 | ) | | (2.6 | ) | | | | |
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| | | | | 225.9 | | | 314.8 | | | 297.2 | | | | | |
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* | Refer to note 11 for further details on these amounts. |
118
PART III
Item 18 : Consolidated Financial Statements 32. | ACQUISITIONOF CONTROLLED ENTITIESAND MATERIAL BUSINESSES |
32. ACQUISITIONOF CONTROLLED ENTITIESAND MATERIAL BUSINESSES | | | | | | | | | | | | | Date of Acquisition
| | Voting Shares Acquired
| | Cost of Acquisition
| | Net Tangible During the year theAssets
following businesses
were acquired:Acquired
| | Date Description
of AcquisitionPurchase Consideration
| | | Voting
Shares
Acquired
%
| | Cost of
Acquisition
$ million
| | Net Tangible Assets
Acquired $ million%
| | Description of
Purchase
Consideration$ million
| | $ million | | | No acquisitions were made during the year. | | | | | | | | | | |
No material acquisitions were made during the year.33. DISPOSALOF CONTROLLED ENTITIESAND MATERIAL BUSINESSES
33. | DISPOSALOF CONTROLLED ENTITIESAND MATERIAL BUSINESSES |
| | | | | | | | | | | | | During the year theDate of
following material
businesses wereDisposaldisposed of:
| | Date of DisposalVoting Shares Disposed
| | Voting
Shares
Disposed
%
| | Consideration (Cash) $ million
| | Net Tangible
Net Tangible Assets Disposed
$ million
| | Profit / (Loss) on Disposal $ million
| | | | | % | | $ million | | $ million | | $ million | No disposals were made during the year. | | | | | | | | | | |
No material disposals were made during the year.34. NON-DIRECTOR RELATED PARTY DISCLOSURES
34. | NON-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. (a) Transactions with Associates and Other Related 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 NZN.Z. Ltd. In prior years the Company and consolidated entity conducted financial transactions with associated companies, while still having an ownership interest, on normal commercial terms and conditions. The nature and amounts of these transactions areas detailed as follows:below: | | | | | | | | | Consolidated
| | | 2004 $m
| | 2003 $m
| | 2002 $m
| Sale of goods and services | | | | | | | Car Parts Distribution Pty Ltd | | — | | — | | 7.5 | Royalty revenue | | | | | | | South Pacific Tyres N.Z. Ltd. | | 1.3 | | — | | 0.4 | Dividend revenue | | | | | | | Pacific Marine Batteries Pty. Ltd. | | — | | — | | — |
119
PART III
Item 18 : Consolidated Financial Statements
34. | NON-DIRECTOR RELATED PARTY DISCLOSURES (CONTINUED) |
| | | | | | | | | Consolidated
| | | 2005
| | 2004
| | 2003
| | | $m | | $m | | $m | Royalty revenue | | | | | | | South Pacific Tyres N.Z. Ltd. | | 0.6 | | 1.3 | | — |
(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’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 with Novare Asia Pacific until 31 August 2001) on normal commercial terms and conditions being: | | | | | | | | | Consolidated
| $ in Millions
| | 2004
| | 2003
| | 2002
| Sales of goods and services | | | | | | | South Pacific Tyres | | — | | — | | 1.3 | | |
| |
| |
| | | — | | — | | 1.3 | | |
| |
| |
| Purchases of goods and services | | | | | | | Novare Asia Pacific | | — | | — | | 5.5 | | |
| |
| |
| | | — | | — | | 5.5 | | |
| |
| |
| Other revenue | | | | | | | South Pacific Tyres | | 3.5 | | 3.3 | | 2.5 | | |
| |
| |
| Aggregate current amounts receivable(a) | | | | | | | South Pacific Tyres | | 0.5 | | 7.6 | | — | | |
| |
| |
| Aggregate non-current amounts receivable South Pacific Tyres(a) | | 62.3 | | 55.1 | | 59.4 | | |
| |
| |
| | | 62.3 | | 55.1 | | 59.4 | | |
| |
| |
|
| | | | | | | | | Consolidated
| $ in Millions
| | 2005
| | 2004
| | 2003
| Other revenue | | | | | | | South Pacific Tyres | | 4.0 | | 3.5 | | 3.3 | | |
| |
| |
| Aggregate current amounts receivable (a) | | | | | | | South Pacific Tyres | | 0.6 | | 0.5 | | 7.6 | | |
| |
| |
| Aggregate non-current amounts receivable | | | | | | | South Pacific Tyres (a) | | 66.2 | | 62.3 | | 55.1 | | |
| |
| |
| | | 66.2 | | 62.3 | | 55.1 | | |
| |
| |
|
(a) | Amount included within Other Amounts Receivable (Note 12) |
Item 18 : Consolidated Financial Statements 34. NON-DIRECTOR RELATED PARTY DISCLOSURES (CONTINUED) Loans On 20 December 2000, the Company agreed to make available to the South Pacific Tyres partnershipPartnership a loan for $56.3 million for a period of two 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 year ended 30 June 2002 Goodyear repaid the loans. In October 2001, the Company through a controlled entity agreed to lend South Pacific Tyres up to $56.3 million. The terms of the further agreements of October 2001 with Goodyear containing put and call options (which enables Ansell to put its investment to Goodyear during the 12 month period commencing 1513 August 2005 or for Goodyear to exercise its call option over Ansell’s investment during the 6 month period from 1513 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 earlier of :of: the Company exercising the put option (no earlier than August 2005), the tenth anniversary of the agreement (October 2011);, and the dissolution of the partnership (not expected). Interest is charged at the 90 day bank bill rate plus a margin of 0.6% per annum, and is capitalised to the principal balance quarterly. Interest brought to account by the Company in relation to this loan during the year:
Interest | brought to account in relation to this loan during the year: |
| | | $ in Millions
| | Consolidated
2004
| Interest revenue
| | 3.5 |
| | | | | | | Consolidated
| $ in Millions
| | 2005
| | 2004
| Interest revenue | | 4.0 | | 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 (2003 - $0.2(2004—$0.2 million; 2002 - $0.22003—$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
Item 18 : Consolidated Financial Statements 35. EARNINGSPER SHARE | | | Consolidated
| | | Consolidated
| $ in Millions
| | 2004
| | 2003
| | 2002
| | | 2005
| | 2004
| | 2003
| Earnings reconciliation | | | | | | | | | | | | | Net profit/(loss) | | 72.6 | | 52.5 | | (113.0 | ) | | Net profit | | | 13.1 | | 72.6 | | 52.5 | Net profit attributable to outside equity interests | | 1.9 | | 2.6 | | 2.8 | | | 1.8 | | 1.9 | | 2.6 | Basic earnings | | | 11.3 | | 70.7 | | 49.9 | | |
| |
| |
|
| |
| |
| |
| Basic earnings | | 70.7 | | 49.9 | | (115.8 | ) | | Diluted earnings | | 70.7 | | 49.9 | | (115.8 | ) | | 11.3 | | 70.7 | | 49.9 | Weighted average number of ordinary shares used as the denominator | | | | | | | | | | | | | Number for basic earnings per share | | | | | | | | Number for basic earnings per share (millions) | | | | | | | | Ordinary shares | | 180.8 | | 187.1 | | 186.9 | | | 167.5 | | 180.8 | | 187.1 | Effect of partly paid Executive Plan shares, and options | | 0.6 | | 0.6 | | 0.7 | | | Effect of partly paid Executive Plan shares, options and PSR’s | | | 1.6 | | 1.3 | | 0.6 | | |
| |
| |
|
| |
| |
| |
| Number for diluted earnings per share | | 181.4 | | 187.7 | | 187.6 | | | 169.1 | | 182.1 | | 187.7 | | |
| |
| |
|
| |
| |
| |
|
Partly paid Executive Plan shares, options and optionsPSR’s have been included in diluted earnings per share in accordance with accounting standards. Conversion, Call, Subscription or issue after 30 June 2004:2005 Refer to Note 5 for further information.
36.Refer | ENVIRONMENTAL MATTERSto Note 5 for further information. |
36. ENVIRONMENTAL 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.can be reliably measured. 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
Item 18 : Consolidated Financial Statements 37. | 37. PARTICULARS RELATINGTO CONTROLLED ENTITIES |
| | | | | | | | | | | | | Beneficial Interest
| Particulars Relating to Controlled Entities
| | Country of Incorporation
| | 2004 %
| | 2003 %
| | 2002 %
| Ansell Limited | | Australia | | | | | | | Ansell Healthcare Japan Co. Ltd. | | *Japan | | 100 | | 100 | | 100 | Ativ Pac Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | BNG Battery Technologies Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Cliburn Investments Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Dexboy International Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Corrvas Insurance Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Dunlop Olympic Manufacturing Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | FGDP Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | H.C. Sleigh Services Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | N Harvesters Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | PSL Industries Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | International Better Brands Pty Ltd | | Australia | | 100 | | 100 | | 100 | Licknib Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Nucleus Ltd. | | Australia | | 100 | | 100 | | 100 | Lifetec Project Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Medical TPLC Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | N&T Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Nucleus Trading Pte. Ltd. | | *Singapore | | 100 | | 100 | | 100 | THLD Ltd. | | Australia | | 100 | | 100 | | 100 | TNC Holdings Pte. Ltd. | | *Singapore | | 100 | | 100 | | 100 | TPLC Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Societe de Management Financier S.A. | | *France | | 100 | | 100 | | 100 | TPLC S.A. | | *France | | 100 | | 100 | | 100 | Olympic General Products Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Foamlite (Australia) Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Distribution Properties Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Dunlop Finance Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Dunlop Holdings (China) Co. Ltd. | | *China | | 100 | | 100 | | 100 | Pacific Dunlop Linings Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Dunlop Tyres Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | P.D. Holdings Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | P.D. International Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Ansell Belgium Holdings SPRL N.V. | | *Belgium | | 100 | | 100 | | 100 | Ansell Canada Inc. | | *Canada | | 100 | | 100 | | 100 | Llesna Healthcare Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Ansell Kemwell Ltd. | | *India | | 74.9 | | 74.9 | | 74.9 | Ansell Lanka (Pvt.) Ltd. | | *Sri Lanka | | 100 | | 100 | | 100 | Ansell (Thailand) Ltd. | | *Thailand | | 100 | | 100 | | 100 | Medical Telectronics N.V. | | *Netherlands Ant. | | 100 | | 100 | | 100 | Medical Telectronics Holding & Finance (Holland) B.V. | | *Netherlands | | 100 | | 100 | | 100 | Mt Waverley Estates Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Dunlop (Hong Kong) Limited. | | *Hong Kong | | 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 | Ansell Brazil LTDA | | *Brazil | | 100 | | 100 | | 100 | Ansell Edmont Industrial de Mexico S.A. de C.V. | | *Mexico | | 100 | | 100 | | 100 | Ansell Perry de Mexico S.A. de C.V. | | *Mexico | | 100 | | 100 | | 100 | Commercializadora GNK S.A de C.V. | | *Mexico | | 100 | | 100 | | 100 | Golden Needles de Mexico S.A de C.V. | | *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 |
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PART III
| | | | | | | | | Particulars Relating to Controlled Entities
| | Country of Incorporation
| | Beneficial Interest
| | | 2005
| | 2004
| | 2003
| | | | | % | | % | | % | Ansell Limited | | Australia | | | | | | | Ansell Healthcare Japan Co. Ltd. | | *Japan | | 100 | | 100 | | 100 | Ativ Pac Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | BNG Battery Technologies Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Cliburn Investments Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Dexboy International Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Corrvas Insurance Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Dunlop Olympic Manufacturing Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | FGDP Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | H.C. Sleigh Services Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | N Harvesters Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | PSL Industries Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | International Better Brands Pty Ltd | | Australia | | 100 | | 100 | | 100 | Licknib Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Nucleus Ltd. | | Australia | | 100 | | 100 | | 100 | Lifetec Project Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Medical TPLC Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | N&T Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Nucleus Trading Pte. Ltd. | | *Singapore | | 100 | | 100 | | 100 | THLD Ltd. | | Australia | | 100 | | 100 | | 100 | TNC Holdings Pte. Ltd. | | *Singapore | | 100 | | 100 | | 100 | TPLC Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Societe de Management Financier S.A. | | *France | | 100 | | 100 | | 100 | Olympic General Products Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Foamlite (Australia) Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Distribution Properties Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Dunlop Finance Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Dunlop Holdings (China) Co. Ltd. | | *China | | 100 | | 100 | | 100 | Pacific Dunlop Linings Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Dunlop Tyres Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | P.D. Holdings Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | P.D. International Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Ansell Canada Inc. | | *Canada | | 100 | | 100 | | 100 | Llesna Healthcare Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Ansell Kemwell Ltd. | | *India | | 74.9 | | 74.9 | | 74.9 | Ansell Lanka (Pvt.) Ltd. | | *Sri Lanka | | 100 | | 100 | | 100 | Ansell (Thailand) Ltd. | | *Thailand | | 100 | | 100 | | 100 | Medical Telectronics N.V. | | *Netherlands Ant. | | 100 | | 100 | | 100 | Medical Telectronics Holding & Finance (Holland) B.V. | | *Netherlands | | 100 | | 100 | | 100 | Mt Waverley Estates Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Dunlop (Hong Kong) Limited. | | *Hong Kong | | 100 | | 100 | | 100 | Corrvas Insurance (Singapore) Pte. Ltd. | | *Singapore | | 100 | | 100 | | 100 | Pacific Dunlop Investments (USA) Inc. | | *USA | | 100 | | 100 | | 100 | Ansell Brazil LTDA | | *Brazil | | 100 | | 100 | | 100 | Ansell Edmont Industrial de Mexico S.A. de C.V. | | *Mexico | | 100 | | 100 | | 100 | Ansell Perry de Mexico S.A. de C.V. | | *Mexico | | 100 | | 100 | | 100 | Commercializadora GNK S.A de C.V. | | *Mexico | | 100 | | 100 | | 100 | Golden Needles de Mexico S.A de C.V. | | *Mexico | | 100 | | 100 | | 100 | Pacific Dunlop Holdings (USA) Inc. | | *USA | | 100 | | 100 | | 100 | Ansell Healthcare Products LLC. (a) | | *USA | | 100 | | 100 | | 100 |
Item 18 : Consolidated Financial Statements 37. | 37. PARTICULARS RELATINGTO CONTROLLED ENTITIES (CONTINUED) |
| | | | | | | | | | | Country of Incorporation
| | Beneficial Interest
| Particulars Relating to Controlled Entities
| | | 2004 %
| | 2003 %
| | 2002 %
| Pacific Dunlop Holdings Inc. | | *USA | | 100 | | 100 | | 100 | Pacific Dunlop USA Inc. | | *USA | | 100 | | 100 | | 100 | TPLC Holdings Inc. | | *USA | | 100 | | 100 | | 100 | Accufix Research Institute Inc. | | *USA | | 100 | | 100 | | 100 | Cotac Corporation | | *USA | | 100 | | 100 | | 100 | Pacific Dunlop Finance Company Inc. | | *USA | | 100 | | 100 | | 100 | Pacific Dunlop Holdings (Europe) 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 | Pacific Dunlop Holdings (Singapore) Pte. Ltd. | | *Singapore | | 100 | | 100 | | 100 | JK Ansell Ltd. | | *India | | (a) 50 | | (a) 50 | | (a) 50 | Ansell Services (Asia) Sdn. Bhd. (formerly P.D. Holdings (Malaysia) Sdn. Bhd.) | | *Malaysia | | 100 | | 100 | | 100 | Ansell Ambi Sdn. Bhd. | | *Malaysia | | 100 | | 100 | | 100 | Ansell (Kedah) Sdn. Bhd. | | *Malaysia | | 100 | | 100 | | 100 | Ansell (Kulim) Sdn. Bhd. | | *Malaysia | | 100 | | 100 | | 100 | Ansell Malaysia Sdn. Bhd. | | *Malaysia | | 75 | | 75 | | 75 | Ansell Medical Sdn. Bhd. | | *Malaysia | | 75 | | 75 | | 75 | Ansell N.P. Sdn. Bhd. | | *Malaysia | | 75 | | 75 | | 75 | Ansell Shah Alam Sdn. Bhd. | | *Malaysia | | 100 | | 100 | | 100 | PDOCB Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Ansell Medical Products Pvt. Ltd. | | *India | | 100 | | 100 | | 100 | Suretex Ltd. | | *Thailand | | 100 | | 100 | | 100 | Latex Investments Ltd. | | Mauritius | | 100 | | 100 | | 100 | Suretex Prophylactics (India) Ltd. | | *India | | 100 | | 100 | | 100 | STX Prophylactics S.A .(Pty.) Ltd. | | *Sth Africa | | 100 | | 100 | | 100 | PD Licensing Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | PD Shared Services Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | PD Shared Services Holdings Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Siteprints Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | S.T.P. (Hong Kong) Ltd. | | *Hong Kong | | 100 | | 100 | | 100 | Pacific Dunlop Holdings N.V. | | *Netherlands Ant. | | 100 | | 100 | | 100 | Pacific Dunlop (Netherlands) B.V. | | *Netherlands | | 100 | | 100 | | 100 | Textile Industrial Design & Engineering Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | The Distribution Group Holdings Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | The Distribution Group Pty. Ltd. | | Australia | | (b) 100 | | (b) 100 | | (b) 100 | Nwodhsa Enterprises (Wholesale) Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | TDG Warehousing Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | The Distribution Trust | | Australia | | 100 | | 100 | | 100 | Union Knitting Mills Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Xelo Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Xelo Sacof Pty. Ltd. | | Australia | | 100 | | 100 | | 100 |
Controlled Entities Sold in Year Ended 30 June 2004
No controlled entities were sold during the current financial year. | | | | | | | | | | | | Particulars Relating to Controlled Entities
| | Country of Incorporation
| | Beneficial Interest
| | | 2005
| | 2004
| | 2003
| | | | | % | | % | | % | Ansell Protective Products Inc. | | *USA | | | 100 | | | 100 | | | 100 | Pacific Chloride Inc. | | *USA | | | 100 | | | 100 | | | 100 | Pacific Dunlop Holdings Inc. | | *USA | | | 100 | | | 100 | | | 100 | Pacific Dunlop USA Inc. | | *USA | | | 100 | | | 100 | | | 100 | TPLC Holdings Inc. | | *USA | | | 100 | | | 100 | | | 100 | Accufix Research Institute Inc. | | *USA | | | 100 | | | 100 | | | 100 | TPLC S.A. | | *France | | | 100 | | | 100 | | | 100 | Cotac Corporation | | *USA | | | 100 | | | 100 | | | 100 | Pacific Dunlop Finance Company Inc. | | *USA | | | 100 | | | 100 | | | 100 | Pacific Dunlop Holdings (Europe) 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 Spain SL (Sociedad de Responsabilidad Limitada) | | *Spain | | | 100 | | | — | | | — | Ansell UK Limited | | *U.K. | | | 100 | | | 100 | | | 100 | Pacific Dunlop Holdings (Singapore) Pte. Ltd. | | *Singapore | | | 100 | | | 100 | | | 100 | JK Ansell Ltd. | | *India | | (b) | 50 | | (b) | 50 | | (b) | 50 | Ansell Services (Asia) Sdn. Bhd. | | *Malaysia | | | 100 | | | 100 | | | 100 | Ansell Ambi Sdn. Bhd. | | *Malaysia | | | 100 | | | 100 | | | 100 | Ansell (Kedah) Sdn. Bhd. | | *Malaysia | | | 100 | | | 100 | | | 100 | Ansell (Kulim) Sdn. Bhd. | | *Malaysia | | | 100 | | | 100 | | | 100 | Ansell Malaysia Sdn. Bhd. | | *Malaysia | | | 75 | | | 75 | | | 75 | Ansell Medical Sdn. Bhd. | | *Malaysia | | | 75 | | | 75 | | | 75 | Ansell N.P. Sdn. Bhd. | | *Malaysia | | | 75 | | | 75 | | | 75 | Ansell Shah Alam Sdn. Bhd. | | *Malaysia | | | 100 | | | 100 | | | 100 | PDOCB Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 | Ansell Medical Products Pvt. Ltd. | | *India | | | 100 | | | 100 | | | 100 | Suretex Ltd. | | *Thailand | | | 100 | | | 100 | | | 100 | Latex Investments Ltd. | | Mauritius | | | 100 | | | 100 | | | 100 | Suretex Prophylactics (India) Ltd. | | *India | | | 100 | | | 100 | | | 100 | STX Prophylactics S.A .(Pty.) Ltd. | | *Sth Africa | | | 100 | | | 100 | | | 100 | PD Licensing Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 | PD Shared Services Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 | PD Shared Services Holdings Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 | Siteprints Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 | S.T.P. (Hong Kong) Ltd. | | *Hong Kong | | | 100 | | | 100 | | | 100 | Pacific Dunlop Holdings N.V. | | *Netherlands Ant. | | | 100 | | | 100 | | | 100 | Pacific Dunlop (Netherlands) B.V. | | *Netherlands | | | 100 | | | 100 | | | 100 | Textile Industrial Design & Engineering Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 | The Distribution Group Holdings Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 | The Distribution Group Pty. Ltd. | | Australia | | (c) | 100 | | (c) | 100 | | | (c) 100 | Nwodhsa Enterprises (Wholesale) Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 | TDG Warehousing Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 | The Distribution Trust | | Australia | | | 100 | | | 100 | | | 100 | Union Knitting Mills Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 | Xelo Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 | Xelo Sacof Pty. Ltd. | | Australia | | | 100 | | | 100 | | | 100 |
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PART III
Item 18 : Consolidated Financial Statements 37. PARTICULARS RELATINGTO CONTROLLED ENTITIES (CONTINUED) | | | | | | | | | | | Country of Incorporation
| | Beneficial Interest
| | | | 2005
| | 2004
| | 2003
| | | | | % | | % | | % | Controlled Entities Sold in Year Ended 30 June 2005 | | | | | | | | | | | | | | No controlled entities were sold during the current financial year. | | | | | | | | | | | | | | Controlled Entities in Voluntary Liquidation at 30 June 2005 | | | | | | | | | TPLC Medizinprodukte GmbH. | | *Germany | | 100 | | 100 | | 100 | Controlled Entities Voluntarily Liquidated During the Year Ended 30 June 2005 | | | | | | | | | 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 | TPLC Ltd. | | *UK | | 100 | | 100 | | 100 | Ansell Belgium Holdings SPRL N.V. | | *Belgium | | 100 | | 100 | | 100 |
37. | PARTICULARS RELATINGTO CONTROLLED ENTITIES (CONTINUED) |
| | | | | | | | | | | 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 | | | | | | Controlled Entities Voluntarily Liquidated During the Year
| | | | | | | | | BNG Sub Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | F.J.’s Auto Plus Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Gardenland Frozen Food Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | General Jones Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | H.C. Sleigh Investments Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Herbert Adams Holdings Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Jetbase Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Kcilc Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Lifetec R&D Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Maspas Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Novare Partnership Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Ocper Auto Parts Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | PA Furniture Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Distribution Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Pacific Dunlop Belting Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Project Array Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Project (X92) Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Retsamttaw Ocla Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Robur Tea Company Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Slumberland (Australia) Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Softwood Towns Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Sport Australia (Export) Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Super Cycle Pty. Ltd. | | Australia | | 100 | | 100 | | 100 | Xdds Pty. Ltd. | | Australia | | 100 | | 100 | | 100 |
* | Controlled Entities incorporated outside Australia carry on business in those countries. |
(a) | During the year Ansell Services Inc. was merged with Ansell Healthcare Products LLC. |
(b) | Ansell Healthcare has day-to-day management control of this entity. |
(b)(c) | The trustee of The Distribution Trust is The Distribution Group Pty. Ltd. The beneficiary of the trust is Ansell Limited. |
124
PART III
Item 18 : Consolidated Financial Statements 38. | INVESTMENTSIN 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 | ) | | |
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| |
|
| Share of associates’ retained profits at the end of the financial year | | — | | — | | | (0.1 | ) | | |
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|
| 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 | ) | | |
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|
| Share of associates’ asset revaluation reserve at the end of the financial year | | — | | — | | | — | | | |
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|
| 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 | ) | | |
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|
| Share of associates’ foreign currency translation reserve at the end of the financial year | | — | | — | | | — | | | |
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|
| 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 | ) | | |
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| | | — | | 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 | ) | | |
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| Carrying amount of investment in associates at the end of the financial year | | — | | — | | | 13.3 | | | |
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| 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 | | — | | — | | | — | | | |
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| | | — | | — | | | 0.2 | | | |
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125
PART III38. IMPACTOF ADOPTING AUSTRALIAN EQUIVALENTSTO IFRS
Ansell is in the process of transitioning its accounting polices and financial reporting from current Australian Accounting Standards (AGAAP) to Australian equivalents of International Financial Reporting Standards (AIFRS). The adoption of AIFRS will be reflected in Ansell’s financial statements for the half-year ending 31 December 2005 and the year ending 30 June 2006. Entities complying with AIFRS for the first time will be required to restate their comparative financial statements to amounts reflecting the application of AIFRS to that comparative period. This will mean that the opening AIFRS balance sheet will be a restated comparative balance sheet, dated 1 July 2004. Most adjustments required on transition to AIFRS will be made, retrospectively against opening accumulated losses as at 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 AIFRS will be reported, for the first time, in the financial statements for the half-year ending 31 December 2005. Ansell has established a project team to plan and implement the transition process to AIFRS. The project team has analysed all of the AIFRS and has identified the accounting policy changes that will be required. In some cases choices of accounting policies are available, including elective exemptions under Accounting Standard AASB1 “First-time Adoption of Australian Equivalents to International Financial Reporting Standards”. The choices have been analysed to determine the most appropriate accounting policy for Ansell. Set out below are the key areas where accounting policies are expected to change on adoption of AIFRS and the known or reliably estimable impacts on the financial report for the year ended 30 June 2005 had it been prepared using AIFRS. The figures disclosed are management’s best estimates of the quantitative impact of the changes as at the date of preparing the 30 June 2005 financial report. The actual effects of transition to AIFRS may differ from the estimates disclosed due to (a) ongoing work being undertaken by the AIFRS project team; (b) potential amendments to AIFRSs and Interpretations thereof being issued by the standard-setters and IFRIC; and (c) emerging accepted practice in the interpretation and application of AIFRS and UIG interpretations. Therefore, until Ansell prepares its first full AIFRS financial statements, the possibility cannot be excluded that the accompanying disclosures may have to be adjusted. Impact on Statement of Financial Performance for the year ended 30 June 2005 | | | | | | | | | | | | | | Consolidated
| | | | | | Note
| | AGAAP
| | Transition Impact
| | | AIFRS
| | | | | $m | | $m | | | $m | Revenue | | | | | | | | | | Total revenue | | | | 1,109.9 | | | | | 1,109.9 | Expenses | | | | | | | | | | Cost of goods sold | | | | 650.1 | | | | | 650.1 | Selling, distribution and administration | | (b) (c) | | 277.8 | | (1.1 | ) | | 276.7 | Depreciation and amortisation | | (a) | | 45.3 | | (20.5 | ) | | 24.8 | Write-down of assets | | | | 80.0 | | | | | 80.0 | Other | | | | — | | | | | — | | | | |
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|
| |
| Total expenses, excluding borrowing costs | | | | 1,053.2 | | (21.6 | ) | | 1,031.6 | Borrowing costs | | | | 21.9 | | | | | 21.9 | | | | |
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|
| |
| Profit from ordinary activities before income tax expense | | | | 34.8 | | 21.6 | | | 56.4 | Income tax expense attributable to ordinary activities | | | | 21.7 | | | | | 21.7 | | | | |
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| |
| Net profit from ordinary activities after income tax expense | | | | 13.1 | | 21.6 | | | 34.7 | Outside equity interests in net profit after income tax | | | | 1.8 | | | | | 1.8 | | | | |
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| Net profit after income tax attributable to Ansell Limited shareholders | | | | 11.3 | | 21.6 | | | 32.9 | | | | |
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Item 18 : Consolidated Financial Statements 38. | INVESTMENTSIN ASSOCIATES (continued)38. IMPACTOF ADOPTING AUSTRALIAN EQUIVALENTSTO IFRS (CONTINUED) |
Details of investments in associates are as follows :
| | | | | | | | | | | | | | | | | | | Principal Activities
| | Balance Date
| | 2004 %
| | Consolidated Ownership Interest 2003 %
| | 2002 %
| | Consolidated Investment Carrying Amount
| Name
| | | | | | | 2004 $m
| | 2003 $m
| | 2002 $m
| Pacific Marine Batteries Pty. Ltd. | | Manufacturing | | 30 June | | — | | — | | 50 | | — | | — | | 2.7 | BT Equipment Pty. Ltd. | | Manufacturing | | 30 June | | — | | — | | 45 | | — | | — | | 10.6 | | | | | | | | | | | | |
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| |
| | | | | | | | | | | | | — | | — | | 13.3 | | | | | | | | | | | | |
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|
No dividends were received by the Company from associates during the year ended 30 June 2004
(2003 - $2.6 million; 2002 - $1.3 million).
SummaryImpact on the Statement of performanceFinancial Position of the consolidated entity at transition to AIFRS as at 1 July 2004 and financial position of associates:
| | | | | | | | | Consolidated
| $ in Millions
| | 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 | Current assets | | — | | — | | 24.0 | Non-current assets | | — | | — | | 4.7 | | |
| |
| |
| Total assets | | — | | — | | 28.7 | | |
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| |
| Current liabilities | | — | | — | | 15.2 | Non-current liabilities | | — | | — | | 0.2 | | |
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| |
| Total liabilities | | — | | — | | 15.4 | | |
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| |
| Net assets - as reported by associates | | — | | — | | 13.3 | | |
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126
PART IIIfor the AIFRS comparative period balance sheet as at 30 June 2005
| | | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated
| | | | | | | 1 July 2004
| | | 30 June 2005
| | | | | | | AGAAP
| | | Transition Impact
| | | AIFRS
| | | AGAAP
| | | Transition Impact
| | | AIFRS
| | | | Note | | | $m | | | $m | | | $m | | | $m | | | $m | | | $m | | Current Assets | | | | | | | | | | | | | | | | | | | | | | Cash on hand | | | | | 0.9 | | | | | | 0.9 | | | 0.2 | | | | | | 0.2 | | Cash at bank and on deposit | | | | | 306.9 | | | | | | 306.9 | | | 218.7 | | | | | | 218.7 | | Cash assets - restricted deposits | | | | | 10.3 | | | | | | 10.3 | | | 8.4 | | | | | | 8.4 | | Receivables | | | | | 228.7 | | | | | | 228.7 | | | 214.1 | | | | | | 214.1 | | Inventories | | | | | 185.8 | | | | | | 185.8 | | | 157.3 | | | | | | 157.3 | | Other | | | | | 16.4 | | | | | | 16.4 | | | 14.4 | | | | | | 14.4 | | | | | | |
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| Total Current Assets | | | | | 749.0 | | | — | | | 749.0 | | | 613.1 | | | — | | | 613.1 | | | | | | |
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| Non-Current Assets | | | | | | | | | | | | | | | | | | | | | | Receivables | | | | | 63.6 | | | | | | 63.6 | | | 68.3 | | | | | | 68.3 | | Other financial assets | | | | | 141.4 | | | | | | 141.4 | | | 59.0 | | | | | | 59.0 | | Property, plant and equipment | | | | | 227.8 | | | | | | 227.8 | | | 195.4 | | | | | | 195.4 | | Intangible assets | | (a | ) | | 293.4 | | | | | | 293.4 | | | 246.2 | | | 20.5 | | | 266.7 | | Deferred tax assets | | | | | 24.2 | | | | | | 24.2 | | | 15.1 | | | | | | 15.1 | | Other | | | | | — | | | | | | — | | | 2.1 | | | | | | 2.1 | | | | | | |
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| Total Non-Current Assets | | | | | 750.4 | | | — | | | 750.4 | | | 586.1 | | | 20.5 | | | 606.6 | | | | | | |
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| Total Assets | | | | | 1,499.4 | | | — | | | 1,499.4 | | | 1,199.2 | | | 20.5 | | | 1,219.7 | | | | | | |
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|
| Current Liabilities | | | | | | | | | | | | | | | | | | | | | | Payables | | (b | ) | | 159.4 | | | | | | 159.4 | | | 132.8 | | | (3.7 | ) | | 129.1 | | Interest bearing liabilities | | | | | 190.2 | | | | | | 190.2 | | | 34.3 | | | | | | 34.3 | | Provisions | | | | | 52.0 | | | | | | 52.0 | | | 56.7 | | | | | | 56.7 | | Current tax liabilities | | | | | 2.6 | | | | | | 2.6 | | | 2.3 | | | | | | 2.3 | | Other | | (c | ) | | — | | | 16.0 | | | 16.0 | | | — | | | 19.6 | | | 19.6 | | | | | | |
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|
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| Total Current Liabilities | | | | | 404.2 | | | 16.0 | | | 420.2 | | | 226.1 | | | 15.9 | | | 242.0 | | | | | | |
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|
| Non-Current Liabilities | | | | | | | | | | | | | | | | | | | | | | Payables | | | | | 3.3 | | | | | | 3.3 | | | 0.8 | | | | | | 0.8 | | Interest bearing liabilities | | | | | 236.0 | | | | | | 236.0 | | | 331.0 | | | | | | 331.0 | | Provisions | | | | | 23.9 | | | | | | 23.9 | | | 23.7 | | | | | | 23.7 | | Deferred tax liabilities | | | | | 20.2 | | | | | | 20.2 | | | 14.8 | | | | | | 14.8 | | | | | | |
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| |
|
| |
|
| |
|
| |
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| |
|
| Total Non-Current Liabilities | | | | | 283.4 | | | — | | | 283.4 | | | 370.3 | | | — | | | 370.3 | | | | | | |
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| Total Liabilities | | | | | 687.6 | | | 16.0 | | | 703.6 | | | 596.4 | | | 15.9 | | | 612.3 | | | | | | |
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| |
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| Net Assets | | | | | 811.8 | | | (16.0 | ) | | 795.8 | | | 602.8 | | | 4.6 | | | 607.4 | | | | | | |
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| Equity | | | | | | | | | | | | | | | | | | | | | | Contributed equity | | | | | 1,383.9 | | | | | | 1,383.9 | | | 1,232.8 | | | | | | 1,232.8 | | Reserves | | (b | ) (d) | | (275.6 | ) | | 279.6 | | | 4.0 | | | (296.6 | ) | | 284.2 | | | (12.4 | ) | Accumulated losses | | (c | ) (d) | | (306.7 | ) | | (295.6 | ) | | (602.3 | ) | | (342.5 | ) | | (279.6 | ) | | (622.1 | ) | | | | | |
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| Total equity attributable to Ansell Limited shareholders | | | 801.6 | | | (16.0 | ) | | 785.6 | | | 593.7 | | | 4.6 | | | 598.3 | | Outside equity interests | | | | | 10.2 | | | | | | 10.2 | | | 9.1 | | | | | | 9.1 | | | | | | |
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| |
|
| |
|
| |
|
| |
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| |
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| Total Equity | | | | | 811.8 | | | (16.0 | ) | | 795.8 | | | 602.8 | | | 4.6 | | | 607.4 | | | | | | |
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Item 18 : Consolidated Financial Statements 38. IMPACTOF ADOPTING AUSTRALIAN EQUIVALENTSTO IFRS (CONTINUED) Impact on Accumulated Losses as at 1 July 2004 | | | | | | 39.Consolidated
| | | | $m | MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP – RESTATED | Accumulated losses as at 1 July 2004 under AGAAP | | (306.7 | ) | AIFRS reconciliation | | | | - transfer from foreign currency translation reserve | | (279.6 | ) | - defined benefit plans accumulated pension liability | | (16.0 | ) | | |
|
| Accumulated losses as at 1 July 2004 under AIFRS | | (602.3 | ) | | |
|
|
Notes (a) Intangible Assets - goodwill Under AASB 3 “Business Combinations” amortisation of goodwill will be prohibited and will be replaced by impairment testing on an annual basis or upon the occurrence of triggers which may indicate a potential impairment. Such impairment testing will focus on the discounted cash flows of the related cash generating unit. This will result in a change to the current accounting policy, under which goodwill is amortised on a straight line basis over the period during which the benefits are expected to arise but not exceeding 20 years. The Group has not elected to apply AASB 3 retrospectively and hence, prior year amortisation would not be written-back as at the date of transition. If the policy required by AASB 3 had been applied during the year ended 30 June 2005, consolidated goodwill at 30 June 2005 would have been $20.5 million higher and consolidated amortisation expense for the year ended 30 June 2005 would have been $20.5 million lower. (b) Share based payments Options and/or Performance Share Rights (PSR’s) are granted to executives under the Ansell Limited Stock Incentive Plan. Under current Australian GAAP no expense is required to be recognised for options/PSR’s issued to employees however the Group has recorded a charge to the profit and loss over the past three years based on the expected vesting of PSR’s with the accrual for the current year of $3.7 million being recorded within current payables. Under AASB 2 “Share-based Payments” the Group is required to recognise an expense for the fair value of both options and PSR’s issued to employees after 7 November 2002 that had not vested as at 1 January 2005 with a corresponding increase in a share-based payment reserve. This will result in a change to the current policy of recognising an expense for PSR’s only and recording such an expense as an accrual within current payables. If the policy required by AASB 2 had been applied during the year ended 30 June 2005, consolidated employee costs at 30 June 2005 would have been $0.9 million higher, current liabilities would have been $3.7 million lower and a share-based payment reserve of $4.6 million would have been recognised. (c) Defined benefit superannuation plans Under current Australian GAAP, defined benefit superannuation plans are accounted for on a cash basis with no defined benefit obligation or plan assets recognised in the balance sheet. Under AASB 119 “Employee Benefits” the net deficit/surplus of the Group’s defined benefit superannuation plans is required to be recognised in the balance sheet as a liability/asset. The AASB 1 election to recognise all cumulative actuarial gains and losses at transition date through accumulated losses/retained earnings will be adopted. At the date of transition an amount of $16.0 million is expected to be recognised as a liability of the consolidated entity with a consequential increase in accumulated losses of $16.0 million. For the financial year ended 30 June 2005 the adjustment in the consolidated entity to recognise the increase in the pension liability for the year is expected to be $3.6 million with a reduction in employee costs of $2 million expected to be recognised in the income statement and actuarial losses of $5.6 million expected to be recognised in accumulated losses. Item 18 : Consolidated Financial Statements 38. IMPACTOF ADOPTING AUSTRALIAN EQUIVALENTSTO IFRS (CONTINUED) Notes (continued) (d) Foreign currency Under AASB 121 “The Effect of Changes in Foreign Exchange Rates” each entity in the consolidated entity determines its functional currency, being the currency of the primary economic environment in which the entity operates reflecting the underlying transactions, events and conditions that are relevant to the entity. The entity maintains its books and records in its functional currency. The assets and liabilities of foreign operations are translated from the entity’s functional currency to the consolidated entity’s presentation currency of Australian dollars at foreign exchange rates ruling at reporting date. The revenues and expenses of foreign operations are translated to Australian dollars at average exchange rates during the period which approximate the rates ruling at the date of the transactions. Foreign exchange differences arising on translation are recognised directly in a separate component of equity. There | are no expected changes in functional currency for the Company or its subsidiaries. |
The AASB 1 election to reset existing foreign currency translation reserve balances as at 1 July 2004 to nil will be adopted. As a result the debit balance of $279.6 million in the foreign currency translation reserve of the group at 30 June 2005 will be set to nil. Consolidated accumulated losses will increase by this amount. On the disposal/liquidation of a foreign operation, AASB 21 requires the amount recognised in the foreign currency translation reserve attributable to the foreign operation be included in the calculation of the gain or loss on disposal/liquidation and recycled through the current year income statement. (e) Financial Instruments The Group will be taking advantage of the exemption available under AASB 1 to apply AASB 132 “Financial Instruments : Disclosure and Presentation” and AASB 139 “Financial Instruments : Recognition and Measurement” only from 1 July 2005. This allows the Group to apply previous Australian generally accepted accounting principles (Australian GAAP) to the comparative information of financial instruments within the scope of AASB 132 and AASB 139 for the 30 June 2006 financial report. Under AASB 132, the current classification of financial instruments issued by entities in the consolidated entity would not change. The Group uses cash flow hedges such as interest rate swap contracts and foreign exchange forward and option contracts to hedge the variability in cash flows associated with floating debt and highly probable forecast sales and purchases in currencies other than US dollars. Under AASB 139 changes in the fair value of cash flow hedges can be deferred in equity in the Statement of Financial Position provided certain prescribed effectiveness test are met. Changes in the market value of fair value hedges together with changes in the fair value of the underlying positions are booked to the Statement of Financial Position. The Group currently values all hedges at their fair value and defers gains and losses on effective hedges to the Statement of Financial Position until the underlying transaction occurs. The Group expects to predominantly continue the use of cash flow hedging in respect of its foreign exchange and interest rate risk hedges, which will increase or decrease shareholders’ equity and assets/liabilities. However, the time value component of foreign exchange option contracts, which fall outside the prescribed effectiveness tests, will be recorded in reported earnings from 1 July 2005. Item 18 : Consolidated Financial Statements 39. MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP 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 2005, 2004, 2003, and 20022003 and net profit after income tax expense attributable to the Ansell Limited shareholders for each of the years in the three year period ended 30 June 2004,2005, 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 | | |
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| Restatement effect | | (11,914 | ) | | 11,609 | | | 737 | | |
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| 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 | ) | | |
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| US GAAP Net Profit/(Loss) from continuing operations – restated | | 69.4 | | | (125.5 | ) | | (280.8 | ) | | |
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| 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 | ) | | |
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| US GAAP Net Profit/(Loss) – restated | | 51.3 | | | (172.0 | ) | | (206.9 | ) | | |
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| 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 | ) | | |
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| Comprehensive Income/(Loss) restated | | (19.7 | ) | | (257.2 | ) | | (276.3 | ) | | |
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| 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 | ) | | — | | | — | | | |
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| Ansell Limited Shareholders’ Equity according to US GAAP (including Comprehensive Income) restated | | 864.3 | | | 873.8 | | | 1,138.9 | | | |
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| 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 | ) | | |
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| 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 | | | |
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| Closing Balance US GAAP Equity Roll-Forward restated | | 864.3 | | | 873.8 | | | 1,138.9 | | | |
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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. Under 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 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 revaluation reserves applicable to assets sold are reported as Income. As at 30 June 2005 the balance of the Asset Revaluation Reserve under AGAAP had been eliminated and as such no adjustments will be required under US GAAP from 1 July 2005. 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”. 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 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. No impairment charges have been necessary in fiscal years 2003, 2004 or 2005 as a result of applying 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 40 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. 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 GAAPrecognition criteria for accruing costs associated with business restructure contain certain very specific qualifying criteria including those set outrestructuring activities under AGAAP were aligned with and became consistent with SFAS 146 “Accounting for Costs Associated with Exit or Disposal Activities” following the release of AASB 1044 “Provisions and Contingencies’ which became effective for financial periods commencing after 1 July 2002. Accordingly, there are no differences to be recognised in EITF 94–3. Where these criteria are not satisfied an adjustment to earnings is included inaccounting for the reconciliationCompany’s restructuring activities under AGAAP as compared to US GAAP.
The provision for rationalisation and restructuring as at 30 June 2004 predominantly represents costs and claims now expected to be incurred in respect of businesses sold between 1996 and 2002. The adoption of AASB 1044 has resulted in no US GAAP differences in the fiscal years ended 30 June, 2003 or 2004.
127
PART III
Item 18 : Consolidated Financial Statements 39. | MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP—RESTATED (continued) |
39. MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP (CONTINUED) (d) Employee Loans, Executive Share Plan and Options Loans granted to employees in respect of the Employee Share Plan are classified as a reduction of Shareholders’ Equity for US GAAP purposes. Such loans are classified as an asset for Australian GAAP. For AGAAP purposes the Company 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 under the Ansell Limited Stock Incentive Plan. No options have actually been exercised. During 20042005 a $2.6$3.7 million compensation charge was recognized covering the current year costs associated with the grants of PSR’s. This treatment is consistent with US GAAP. For AGAAP purposes options are not expensed in the accounts. A further current year charge of $900,000 (2004 $300,000, 2003 Nil) under US GAAP was made in respect of the options in accordance with SFAS No. 123. This charge has been calculated using the fair value method whereby fair value is derived using an option pricing model that takes into consideration the stock price at grant date, the exercise price and the expected life of the award, the expected volatility of the underlying stock, the expected dividends on the stock and the risk free interest rate for the expected life of the option. Compensation cost is recognized over the service period, which is the vesting period, with an corresponding credit to stockholders’ equity. 500,000 options were exercised during the year and a further 500,000 were exercised subsequent to year end. (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 earnings per share in accordance with US GAAP are documented in SFAS No. 128 – “Earnings per Share”. Earnings per share computations recognise the effect of all bonus issues (stock splits) and bonus elements of rights issues made up to 30 June 2004,2005, and also give effect to the stock consolidation (reverse split) approved by shareholders in April 2002. For the three year period 1 July 20012002 to 30 June 20042005 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. All defined benefit plans are funded based on actuarial advice on a regular basis. Actuarial calculations have been carried out for the defined benefit funds and the material fund aspects are as detailed in Note 24.25. 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 Statement of Financial Performance. 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 40 to these consolidated financial statements. The Group reports pension plans aggregated where allowed by SFAS 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, 2005, 2004 2003 and 20022003 would have been $218.9 million, $307.8 million $286.0 million and $258.5$286.0 million respectively, under US GAAP. 128
PART III
Item 18 : Consolidated Financial Statements 39. | MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP – RESTATED (continued) |
39. MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP (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. AlthoughThe valuation allowance is determined after considering all available evidence both positive and negative and is regularly assessed. In assessing the need for a valuation allowance for US GAAP standard provides for a lower threshold than AGAAP, based onat 30 June 2005, management considered, among other things, the level of historicalfact that the Group’s US operations had generated taxable income in the preceding two years (being 30 June 2003 and 30 June 2004) and the current year, and expect to continue to generate taxable income in the foreseeable future. Available projections for the foreseeable future indicate that a portion of available US revenue losses will more likely than not be recouped, and as such a net deferred tax asset of $21.2 million has been recognised for US GAAP purposes as at 30 June 2005. Management does not believe that available revenue losses in other jurisdictions or any available capital losses meet the criteria for recognition under US GAAP. The amount of deferred tax asset recognised pursuant to US GAAP could be adjusted in the near term based upon changes in estimates of future taxable income over the periods in which the carry forward tax losses and deductible temporary differences will reverse, additional deferred tax adjustments are considered only after having regard to the level and jurisdiction of unbooked tax losses. At 30 June 2004 the gross tax losses of A$2.2 million for which future tax benefits (deferred tax assets) have been brought to account under both AGAAP and US GAAP have no expiry date.income.
All deferred tax balances brought to account at 30 June 20042005 relate to entities operating in foreign tax jurisdictions. At 30 June 20042005 the expiry dates of gross tax losses for which future tax benefits (deferred tax assets) have not been brought to account under AGAAP and US GAAP are as follows - in respect of financial years ending on 30 June; | Revenue Losses
| Revenue Losses
| | Capital Losses
| Revenue Losses
| | Capital Losses
| | | | AGAAP A$ | | US GAAP A$ | | AGAAP/US GAAP A$ | Year
| | A$ million
| | Year
| | A$ million
| | million
| | million
| | Year
| | million
| 2005 | | 82.9 | | 2005 | | | | 2006 | | 65.8 | | 2006 | | 473.0 | | 59.6 | | 48.5 | | 2006 | | 410.8 | 2007 | | 53.8 | | 2007 | | 10.0 | | 48.9 | | 19.0 | | 2007 | | 9.1 | 2008 | | 3.2 | | 2008 | | | | 2.5 | | 0.3 | | 2008 | | 2009 | | 2.9 | | 2009 | | 52.7 | | 1.4 | | 1.4 | | 2009 | | 47.5 | 2010 | | 1.9 | | 2010 | | | | 1.7 | | 2010 | | 2011 | | 108.0 | | 2011 | | | | 97.5 | | 83.1 | | 2011 | | 2012 | | 69.2 | | 2012 | | | | 63.5 | | 63.5 | | 2012 | | 2013 | | | 0.9 | | 0.9 | | 2013 | | 2019 | | 26.6 | | 2019 | | | | 24.0 | | 24.0 | | 2019 | | 2022 | | 9.7 | | 2022 | | | | 8.7 | | 8.7 | | 2022 | | No expiry date | | 712.0 | | No expiry date | | 624.9 | | 688.6 | | 688.6 | | No expiry date | | 596.0 |
The increasedecrease in the tax effect of unrecognised capital tax losses during the year of $107.0$32.5 million was primarily due to a reassessment of capital losses available in Australia following the completion of the first income tax return under the tax consolidation regime. Additional capital losses were also incurredgains being made in the USA during the period.and Australia. The future tax benefit of revenue losses not recognised fell by $16.5$68.0 million with the recoupment of revenue losses in the USA partially offset by additional revenue losses being incurred in Australia.and Australia and the recognition of the $21.2 million net deferred tax asset as mentioned above. Inclusive of the $24.2$15.1 million (2003 $32.0(2004 $24.2 million) set out in Note 1718 to the consolidated financial statements and the $21.2 million recognised for US GAAP purposes, the total deferred tax assets amounting to $763.0$674.6 million (June 2003 $680.32004 $763.0 million) are offset by valuation adjustments of $738.8$638.3 million as at 30 June 2005 (June 2004 (June 2003 $648.3$738.8 million) and total deferred tax liabilities amount to $20.2$14.8 million (June 2003 $21.52004 $20.2 million). The adequacy of the valuation allowance is regularly assessed and noneNone of the deferred tax assets relate to amounts which, if realised, would impact the carrying values of goodwill or any other intangible assets. The Company elected to enter the tax consolidation regime in Australia effective 1 July 2002. There was no impact on the consolidated financial statements of the Company as a result of this election as all tax balances of the Company and all Australian wholly owned subsidiaries were written off in a prior period.
Analysis of Pre Tax Profit/(Loss) | | | 2004
| | 2003
| | 2002
| | | 2005
| | 2004
| | 2003
| | | | A$m
| | A$m
| | A$m
| | | A$m | | A$m | | A$m | | Australian Operations | | (4.0 | ) | | (29.2 | ) | | (17.8 | ) | | (84.1 | ) | | (4.0 | ) | | (29.2 | ) | Foreign Operations | | 97.3 | | | 108.5 | | | (39.4 | ) | | 118.9 | | | 97.3 | | | 108.5 | | | |
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| Total Group | | 93.3 | | | 79.3 | | | (57.2 | ) | | 34.8 | | | 93.3 | | | 79.3 | | | |
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Total tax expense for 2005, 2004 and 2003 was comprised of foreign tax expense (of which $1.3$2.3 million is deferred, 2003—$24.82004 - $1.3 million, 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) |
39. MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP (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$14 million may become payable on a total amount of $39.7$46.0 million of unremitted earnings. (i) Accounting for Goodwill Shares in controlled entities are recorded 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. 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”, 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 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 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 values of goodwill and brand names capitalised under US GAAP 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. Under US GAAP this adjustment would be presented as a cumulative effect of a change in accounting principles in US GAAP income for the 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 primary 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 and brand names semi-annually based on the three business units, which are considered to be the cash generating units and the same as the Company’s business segments. Any material diminution in value is charged to the Statement of Financial Position for US GAAP purposes. For US GAAP purposes no goodwill amortisation has been charged against income since 1 July 2002, the 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$20.5 million under AGAAP in 2005, $21.4 in 2004 and $25.3 million in 2003 has also 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. 130There were no acquisitions or disposals of goodwill during the year with the movement in the net carrying value for US GAAP purposes being due to the impact of foreign currency translations.
129
PART III
Item 18 : Consolidated Financial Statements 39. | MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP—RESTATED (CONTINUED) |
39. MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP (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 AGAAP 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. 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. There were no acquisitions or disposals of brand names during the year with the movement in the net carrying value for US GAAP purposes being due to the impact of foreign currency translations. (k) 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 SFAS 133 as they relate to hedging of anticipated transactions. These amounts are adjusted in determining US GAAP income. The amount adjusted, by decreasingincreasing US GAAP net income by $0.1 million (2004- $2.0 million (2003 - $2.4decrease; 2003—$2.4 million increase; 2002 - $1.9 million decrease)increase), 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 presented 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 may pre-date completion. Sales revenue under US GAAP as disclosed in Note 40 to the consolidated 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 2022 to the consolidated financial statements as a current provision of $11.2$8.9 million. As set out in Note 2627 to the consolidated financial statements the expected outcomes 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 subject 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 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, as a component of its risk management strategy. The Company does not use derivatederivative 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. Ÿ | For 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. |
For a derivative designated as hedging the exposure to changes in the fair value of a recognized asset or liability or 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 Item 18 : Consolidated Financial Statements Ÿ | For 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. |
39. MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP (Continued) Ÿ | For 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. |
(m) Derivative Instruments and Hedging Activities (continued) Ÿ | For a derivative not designated as a hedging instrument, the gain or loss is recognized in earnings in the period of change. |
accounting is to reflect in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For 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. For 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. For 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 Statement of Financial Position at their fair value. On the date the derivative is entered into, Ansell Limited designates the derivative as either a fair value hedge or a cash flow hedge. 131
PART III
Item 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 difference between the accounting treatment under AGAAP and US GAAP detailed above affects only the pattern and timing of non-cash accounting recognition of gains and losses on derivative instruments and does not change the economic benefits of using these instruments to 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. The ineffective portion of changes in fair values of hedged positions, reported in earnings, amount to a gain of $1.8$0.4 million (2003(2004 - gain of $1.3$1.8 million: 20022003 - gain of $2.6$1.3 million), before income 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 million2006, no amount is expected to be reclassified to earnings. At 30 June 2004,2005, the maximum term of cash flow hedges that hedge forecasted transactions was 3858 months. A reconciliation of current period changes in Other Comprehensive Income within equity is as follows: | | | | | | $ millions
| | Opening balance of accumulated net gain/(loss)gain on cash flow hedges | | (12.6 | )4.7 | Net gain / (loss) on cash flow hedges - recognizedrecognised in OCI – net of nil tax | | 17.3 | 2.1 | Add reclassification adjustments to earnings | | — | | | |
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| Closing balance of accumulated net gain/(loss) on cash flow hedges | | 4.7 | 6.8 | | |
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(n) Investments For AGAAP purposes investments held in publicly listed companies have been marked to market and the charge included in AGAAP profit forin the prior year. To 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 Company has designated such securities as “available for sale” pursuant to SFAS No. 115. Accounting for the Investment in South Pacific Tyres (SPT) TheUnder AGAAP equity accounting for the investment in SPT is detailed in Notewas discontinued effective 1 to the Financial Statements.July 2001.
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. Item 18 : Consolidated Financial Statements 39. MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP (CONTINUED) (n) Investments (continued) During the year the investment in SPT was written down by $80 million under AGAAP to its estimated recoverable amount pursuant to the put and call options in place in the amended partnership agreement. The continued application of equity accounting under US GAAP has resulted in the Company bringing to account its share of the losses incurred by SPT from 1 July 2001 to 30 June 2004 with a corresponding reduction in the carrying value of the investment. The cumulative effect of equity accounting over this period has resulted in the carrying value of the investment in SPT under US GAAP being lower than the carrying value under AGAAP post the current year write-down. As a result the write-down is not required for US GAAP purposes and has been reversed in the current year. On 16 December 2005 the Company announced that it had reached agreement with Goodyear as to the terms of its exit from the South Pacific Tyres business. Pursuant to the agreed terms, Goodyear will purchase Ansell’s interest in SPT for $53 million. In addition a loan outstanding from Ansell to SPT will be repaid in full, which with accrued interest, totals approximately $69 million. As the final sale date has yet to be established the US GAAP outcome of the sale cannot be determined at this point. (o) Revenue Recognition Under AGAAP, interest income 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 income 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 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 Company 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 would bewas presented as a cumulative effect of a change in accounting principle in the period of adoption of the standard. A charge of $0.1 million per annum was recorded during 2003, 2004 and 20042005 reflecting the amortisation of the asset retirement obligation.related asset. (q) Research and Development Costs Effective 1 July 2004, the Company changed its accounting policy in respect of research and development costs whereby development expenditure on new products or substantially improved existing products is capitalized when future recoverability is reasonably assured. Amortisation of the capitalised expenditure commences in the half year period following the products commercialisation and continues for a three year period. Capitalised costs are regularly reviewed and when the criterion for capitalisation is no longer met such costs are written off. Previously all research and development costs were written off in the period in which they were incurred. SFAS 2 “Accounting for Research and Development Costs” requires research and development expenditure to be expensed as incurred. As such the written down value of capitalised research and development costs will be expensed for US GAAP purposes. (r) Recent Changes in US GAAP In November 2004, The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 151 “Inventory Costs, an amendment of ARB No. 43, Chapter 4’ (SFAS 151). SFAS 151 requires abnormal amounts of idle facility expense, freight, handling costs and wasted materials to be excluded from the costs of inventory and expensed as incurred. Fixed production overheads are therefore to be allocated to inventory based on the normal capacity of the production facility. SFAS 151 is applicable for financial years beginning after 15 June 2005. The Group does not expect the adoption of those current changes in US GAAP which are not yet effective is not expectedSFAF 151 to have anya material effectsimpact on the consolidatedits financial statementsposition or results of the Company.operations. 133In December 2004, the FASB issued SFAS No. 123 (revised) “Share-Based Payment” (SFAS 123R), which requires all share-based payments to employees to be measured at their fair value on grant date. The cost is to be recognised over the period during which the employee is required to provide services in exchange for the awards. SFAS 123R is applicable
PART III
Item 18 : Consolidated Financial Statements 40. | RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) |
| | | | | | | | | | | | Consolidated
| | $ in millions
| | 2004
| | | 2003
| | | 2002
| | Statement of Financial Performance (for years ended 30th June) | | | | | Restated | | | Restated | | Net profit/(loss) of the consolidated entity per Australian GAAP | | 72.6 | | | 52.5 | | | (113.0 | ) | Less interest of outside equity holders after income tax | | 1.9 | | | 2.6 | | | 2.8 | | | |
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| Net profit/(loss) attributable to Ansell Limited shareholders | | 70.7 | | | 49.9 | | | (115.8 | ) | Adjustments required to accord with US GAAP: | | | | | | | | | | add/(deduct) | | 19.7 | | | 1.4 | | | (56.2 | ) | | |
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| Net Profit/(Loss) according to US GAAP(2) | | 90.4 | | | 51.3 | | | (172.0 | ) | | |
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| Weighted average number of shares per basic EPS calculations (millions) | | 180.8 | | | 187.1 | | | 186.9 | | Weighted average number of shares/options (millions) | | 0.6 | | | 0.6 | | | 0.7 | | | |
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| Weighted average number of shares per diluted EPS calculations (millions) | | 181.4 | | | 187.7 | | | 187.6 | | Continuing Operations | | | | | | | | | | Income/(loss) from continuing operations | | | | | | | | | | Before income tax | | 104.0 | | | 96.2 | | | (98.6 | ) | Income tax expense | | (20.7 | ) | | (26.8 | ) | | (26.9 | ) | Income/(loss) from continuing operations | | 83.3 | | | 69.4 | | | (125.5 | ) | Discontinued Operations | | | | | | | | | | Income/(loss) from discontinued operations | | | | | | | | | | Before income tax(1) | | 7.1 | | | (12.8 | ) | | (27.0 | ) | Income tax expense | | — | | | — | | | (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 | ) | | — | | | |
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| Net profit/(loss) per US GAAP | | 90.4 | | | 51.3 | | | (172.0 | ) | | |
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| Earnings per share - basic and diluted (Australian Cents) | | | | | | | | | | 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 | )¢ | | — | | | |
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| Net Profit/(Loss)(3) - basic | | 50 | ¢ | | 27 | ¢ | | (92 | )¢ | - diluted | | 50 | ¢ | | 27 | ¢ | | (92 | )¢ | | |
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| Condensed US GAAP Consolidated Statement of Income Data excluding Discontinued Operations | | | | | | | | | | Revenues | | 1,113.3 | | | 1,293.6 | | | 1,414.2 | | Total costs and expenses | | 992.5 | | | 1,170.9 | | | 1,458.1 | | Interest expense | | 16.8 | | | 26.5 | | | 54.7 | | Tax expense | | 20.7 | | | 26.8 | | | 26.9 | | | |
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| Profit/(Loss) from continuing operations | | 83.3 | | | 69.4 | | | (125.5 | ) | | |
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| (1) Includes net gain/(loss) on disposal/liquidation of businesses and controlled entities | | — | | | (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 | | | |
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| Adjusted Net Profit/(Loss) | | 90.4 | | | 51.3 | | | (149.9 | ) | | |
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| Basic Earnings per share (Australian cents) | | | | | | | | | | Reported Net Profit/(Loss) | | 50 | ¢ | | 27 | ¢ | | (92 | )¢ | Goodwill and brand name amortisation | | | | | | | | 12 | ¢ | | |
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| Adjusted Net Profit/(Loss) | | 50 | ¢ | | 27 | ¢ | | (80 | )¢ | | |
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134
PART III39. MAJORDIFFERENCESBETWEEN AUSTRALIAN GAAPAND US GAAP (CONTINUED)
(r) Recent Changes in US GAAP (continued) for financial years beginning after 15 June 2005. As the Group currently measures share-based payments in this manner the adoption of SFAS 123R will not impact future results. In March 2005, FASB Interpretation No. 47 “Accounting for Conditional Asset Retirement Obligations an interpretation of FASB Statement No. 143’ (FIN 47) was issued. FIN 47 states that a conditional asset retirement obligation represents an unconditional obligation to perform an asset retirement activity where the timing or method of settlement are conditional on a future event that may or may not be within the control of the entity. The interpretation clarifies that an entity is required to recognise a liability for the fair value of a conditional asset retirement obligation, if the fair value of the liability can be reasonably estimated. Uncertainty about the timing or method of settlement of a conditional asset retirement obligation is factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies the conditions when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective for periods ending after 15 December 2005. The Group is currently assessing the impact of adopting FIN 47 on its financial statements. Item 18 : Consolidated Financial Statements 40. RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) | | | | | | | | | | | | Consolidated
| | $ in millions
| | 2005
| | | 2004
| | | 2003
| | Statement of Financial Performance (for years ended 30th June) | | | | | | | | | | Net profit of the consolidated entity per Australian GAAP | | 13.1 | | | 72.6 | | | 52.5 | | Less interest of outside equity holders after income tax | | 1.8 | | | 1.9 | | | 2.6 | | | |
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| Net profit attributable to Ansell Limited shareholders | | 11.3 | | | 70.7 | | | 49.9 | | Adjustments required to accord with US GAAP | | 118.8 | | | 19.7 | | | 1.4 | | | |
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| Net Profit according to US GAAP | | 130.1 | | | 90.4 | | | 51.3 | | | |
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| Weighted average number of shares per basic EPS calculations (millions) | | 167.5 | | | 180.8 | | | 187.1 | | Weighted average number of shares/options (millions) | | 1.6 | | | 1.3 | | | 0.6 | | | |
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| Weighted average number of shares per diluted EPS calculations (millions) | | 169.1 | | | 182.1 | | | 187.7 | | | | | | Continuing Operations | | | | | | | | | | Income from continuing operations | | | | | | | | | | Before income tax | | 130.6 | | | 104.0 | | | 96.2 | | Income tax expense | | (0.5 | ) | | (20.7 | ) | | (26.8 | ) | | |
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| Income from continuing operations | | 130.1 | | | 83.3 | | | 69.4 | | | | | | Discontinued Operations | | | | | | | | | | Income/(loss) from discontinued operations | | | | | | | | | | Before income tax(1) | | — | | | 7.1 | | | (12.8 | ) | Income tax expense | | — | | | — | | | — | | | |
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| Income/(loss) from discontinued operations | | — | | | 7.1 | | | (12.8 | ) | | |
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| Cumulative effect of a change in accounting principles – goodwill and asset retirement obligations (nil tax) | | — | | | — | | | (5.3 | ) | | |
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| Net profit per US GAAP | | 130.1 | | | 90.4 | | | 51.3 | | | |
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| Earnings per share - basic and diluted (Australian Cents) | | | | | | | | | | Continuing operations | | | | | | | | | | - basic | | 78 | ¢ | | 46 | ¢ | | 37 | ¢ | - diluted | | 77 | ¢ | | 46 | ¢ | | 37 | ¢ | | | | | Discontinued operations | | | | | | | | | | - basic | | — | | | 4 | ¢ | | (7 | )¢ | - diluted | | — | | | 4 | ¢ | | (7 | )¢ | Cumulative effect of a change in accounting principle | | | | | | | | | | - basic | | — | | | — | | | (3 | )¢ | - diluted | | — | | | — | | | (3 | )¢ | Net Profit | | | | | | | | | | | |
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| - basic | | 78 | ¢ | | 50 | ¢ | | 27 | ¢ | - diluted | | 77 | ¢ | | 50 | ¢ | | 27 | ¢ | | |
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| Condensed US GAAP Consolidated Statement of Income Data excluding Discontinued Operations | | | | | | | | | | Revenues | | 1,096.2 | | | 1,113.3 | | | 1,293.6 | | Total costs and expenses | | 956.0 | | | 992.5 | | | 1,170.9 | | Net interest expense | | 9.6 | | | 16.8 | | | 26.5 | | Tax expense | | 0.5 | | | 20.7 | | | 26.8 | | | |
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| Profit from continuing operations | | 130.1 | | | 83.3 | | | 69.4 | | | |
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| | | | | | | | | | (1) Includes net loss on disposal/liquidation of businesses and controlled entities | | — | | | — | | | (7.0 | ) |
Item 18 : Consolidated Financial Statements 40. RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US (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 | ) | | |
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| Net Profit/(Loss) after tax | | 90.4 | | | 51.3 | | | (172.0 | ) | | |
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| | | | | | | | | | | | Consolidated
| | $ in Millions
| | 2005
| | | 2004
| | | 2003
| | Reconciliation of Net Cash Provided by Operating Activities per AGAAP | | | | | | | | | | financial statements to Net Profit/(Loss) after Tax Under US GAAP | | | | | | | | | | | | | | Net Cash Provided by Operating Activities per AGAAP | | 152.8 | | | 179.2 | | | 161.6 | | Items classified as financing activities:(1) | | | | | | | | | | Interest received | | 8.5 | | | 9.0 | | | 8.0 | | Interest paid | | (21.9 | ) | | (29.4 | ) | | (37.8 | ) | | |
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| Net Cash Provided by Operating Activities per US GAAP | | 139.4 | | | 158.8 | | | 131.8 | | Write-down of non-current assets | | — | | | (1.0 | ) | | (6.1 | ) | Depreciation | | (23.4 | ) | | (23.8 | ) | | (29.4 | ) | Amortisation | | (2.4 | ) | | (1.9 | ) | | (2.5 | ) | Provision for doubtful debts - trade | | 0.1 | | | (1.2 | ) | | 2.5 | | Write down of property, plant and equipment | | — | | | (8.8 | ) | | — | | Share of net profit/(loss) of associate and joint venture entities | | 2.1 | | | (7.7 | ) | | (16.1 | ) | | | | | Change in assets and liabilities net of effect from acquisitions and disposals of subsidiaries and businesses: | | | | | | | | | | (Decrease)/Increase in debtors | | (10.0 | ) | | (24.9 | ) | | (34.5 | ) | (Decrease)/Increase in inventories | | (28.5 | ) | | 2.6 | | | (47.2 | ) | (Decrease)/Increase in prepaids | | (2.0 | ) | | 0.8 | | | (4.9 | ) | (Increase)/Decrease in creditors and bills payable | | 17.3 | | | 6.0 | | | 36.5 | | Decrease in provisions and other liabilities | | 4.8 | | | (2.2 | ) | | 37.4 | | (Increase)/Decrease in provision for deferred income tax | | 5.4 | | | 1.3 | | | 2.9 | | Increase/(Decrease) in future income tax benefit | | 12.1 | | | (7.8 | ) | | (17.7 | ) | (Increase)/Decrease in provision for income tax | | 0.3 | | | 0.5 | | | (1.2 | ) | (Loss)/Gain on sale of investments, properties, plant and equipment | | 0.5 | | | 1.6 | | | 5.6 | | Gain/(loss) on sale/liquidation of subsidiaries and businesses | | — | | | — | | | (7.0 | ) | Outside equity interest in profit for the year | | (1.8 | ) | | (1.9 | ) | | (2.6 | ) | Other | | 16.2 | | | — | | | 3.8 | | | |
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| Net Profit after tax | | 130.1 | | | 90.4 | | | 51.3 | | | |
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(1) | Interest is classified as a financing activity under AGAAP. |
135
PART III
Item 18 : Consolidated Financial Statements 40. RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US (US GAAP) (CONTINUED) | | | | | | | | | | | | | | | | | | Consolidated
| | $ in Millions
| | Note
| | | 2004
| | | 2003
| | | 2002
| | Adjustments to reflect U.S. GAAP | | | | | | | | Restated | | | Restated | | Add/(Deduct): Amortisation of goodwill for AGAAP purposes only | | 39 | (i) | | 21.4 | | | 25.3 | | | — | | Reduced goodwill amortisation charge as a result of differences in useful lives | | 39 | (i) | | — | | | — | | | 12.7 | | Amortisation of goodwill capitalised for US GAAP purposes only | | 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 | | 39 | (j) | | — | | | — | | | (4.5 | ) | 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 | | 39 | (p) | | (0.1 | ) | | (0.1 | ) | | — | | Pension Plans(1) | | 39 | (f) | | 5.8 | | | 1.9 | | | 5.4 | | 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 | | 39 | (a) | | 0.8 | | | (7.0 | ) | | 20.5 | | Net hedge (losses)/gains (brought to account)/ deferred for AGAAP | | 39 | (k) | | (2.0 | ) | | 2.4 | | | (1.9 | ) | Income tax (expense)/benefit | | | | | 0.6 | | | (0.7 | ) | | 0.6 | | Rationalisation and restructuring provision | | 39 | (c) | | — | | | — | | | (30.0 | ) | Income tax benefit | | | | | — | | | — | | | 8.1 | | Goodwill capitalised for US GAAP purposes written off on sale of controlled entities and businesses | | 39 | (i) | | — | | | — | | | (34.5 | ) | 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 | | | | | 2.3 | | | 4.9 | | | 11.1 | | Valuation adjustment for above income tax (benefit)/expense amounts | | | | | (0.6 | ) | | (3.2 | ) | | (8.4 | ) | | | | | |
|
| |
|
| |
|
| Total Adjustments | | | | | 19.7 | | | 1.4 | | | (56.2 | ) | | | | | |
|
| |
|
| |
|
| Shareholders’ Equity of the Group as at 30th June | | | | | 811.8 | | | 844.5 | | | 876.0 | | Deduct: Outside equity interests | | 39 | (b) | | (10.2 | ) | | (10.8 | ) | | (13.7 | ) | | | | | |
|
| |
|
| |
|
| Shareholders’ equity attributable to Ansell Limited | | | | | 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 (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 | | 39 | (p) | | (0.5 | ) | | (0.4 | ) | | — | | Pension Plans | | 39 | (f) | | 13.9 | | | 8.1 | | | 6.2 | | Hedging adjustments net of nil tax | | 39 | (k) | | 0.1 | | | 2.1 | | | (0.3 | ) | Reserves attributable to Asset Revaluation | | 39 | (a) | | (0.7 | ) | | (1.5 | ) | | (20.2 | ) | Depreciation charged on Revaluation increments | | 39 | (a) | | 0.1 | | | 0.1 | | | 12.6 | | Loans outstanding under ownership based remuneration scheme | | 39 | (d) | | (0.8 | ) | | (1.2 | ) | | (4.3 | ) | Net change in fair value hedges, hedged items and cash flow hedges | | 39 | (m) | | 0.8 | | | (1.0 | ) | | (2.3 | ) | Net gains/(losses) on cash flow hedges residing in Comprehensive Income | | 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 | | 39 | (n) | | — | | | — | | | 1.0 | | Equity share of South Pacific Tyres | | 39 | (n) | | (89.2 | ) | | (81.5 | ) | | (65.1 | ) | | | | | |
|
| |
|
| |
|
| Total Adjustments | | | | | 78.1 | | | 30.6 | | | 11.5 | | | | | | |
|
| |
|
| |
|
| Ansell Limited Shareholders’ Equity according to U.S. GAAP (including Comprehensive Income) | | | | | 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 | | | | | 90.4 | | | 51.3 | | | (172.0 | ) | 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/(Loss) | | | | | 96.1 | | | (19.7 | ) | | (257.2 | ) | | | | | |
|
| |
|
| |
|
|
(1) | Pension Plans - includes curtailment gains of $6.1 million for 2002 resulting from the sale of businesses. |
| | | | | | | | | | | | | | | | | | | | Consolidated
| | $ in Millions
| | Note
| | | 2005
| | | 2004
| | | 2003
| | Adjustments to reflect U.S. GAAP | | | | | | | | | | | | | Add/(Deduct): | | Amortisation of goodwill for AGAAP purposes only | | 39 | (i) | | 20.5 | | | 21.4 | | | 25.3 | | | | Write-down of US GAAP goodwill on adoption of SFAS No. 142 | | 39 | (i) | | — | | | — | | | (5.0 | ) | | | Amortisation of compensation component of options | | 39 | (d) | | (0.9 | ) | | (0.3 | ) | | (0.7 | ) | | | Creation of asset retirement obligation on adoption of SFAS No. 143 | | 39 | (p) | | — | | | — | | | (0.3 | ) | | | Amortisation of asset retirement obligation | | 39 | (p) | | (0.1 | ) | | (0.1 | ) | | (0.1 | ) | | | Pension Plans | | 39 | (f) | | (3.0 | ) | | 5.8 | | | 1.9 | | | | Income tax (expense)/benefit | | | | | 0.9 | | | (1.8 | ) | | (0.6 | ) | | | Net realisation of asset revaluation reserve and related depreciation adjustment on sale/liquidation of controlled entities, businesses and assets | | 39 | (a) | | 0.6 | | | 0.8 | | | (7.0 | ) | | | Net hedge (losses)/gains (brought to account)/ deferred for AGAAP | | 39 | (k) | | 0.1 | | | (2.0 | ) | | 2.4 | | | | Income tax (expense)/benefit | | | | | — | | | 0.6 | | | (0.7 | ) | | | Net change in fair value hedges | | 39 | (m) | | 0.4 | | | 1.8 | | | 1.3 | | | | Income tax expense | | | | | (0.1 | ) | | (0.5 | ) | | (0.4 | ) | | | Equity share in profit/(loss) of South Pacific Tyres | | 39 | (n) | | 2.1 | | | (7.7 | ) | | (16.4 | ) | | | Income tax (expense)/benefit | | | | | (0.6 | ) | | 2.3 | | | 4.9 | | | | Reverse AGAAP write-down of investment in South Pacific Tyres | | 39 | (n) | | 80.0 | | | — | | | — | | | | Write-off research and development expenditure capitalised for AGAAP | | 39 | (q) | | (2.1 | ) | | — | | | — | | | | Income tax benefit | | | | | 0.6 | | | — | | | — | | | | Valuation adjustment for above income tax (benefit)/expense amounts | | | | | (0.8 | ) | | (0.6 | ) | | (3.2 | ) | | | Reverse part of AGAAP valuation allowance in respect of US revenue tax losses | | 39 | (h) | | 21.2 | | | — | | | — | | | | | | | | |
|
| |
|
| |
|
| Total Adjustments | | | | | 118.8 | | | 19.7 | | | 1.4 | | | | | | | | |
|
| |
|
| |
|
| Shareholders’ Equity of the Group as at 30th June | | | | | 602.8 | | | 811.8 | | | 844.5 | | Deduct: | | Outside equity interests | | 39 | (b) | | (9.1 | ) | | (10.2 | ) | | (10.8 | ) | | | | | | | |
|
| |
|
| |
|
| Shareholders’ equity attributable to Ansell Limited | | | | | 593.7 | | | 801.6 | | | 833.7 | | | | | | | | |
|
| |
|
| |
|
| 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 (including fx impact) | | 39 | (i) | | 211.7 184.4 | | | 148.6 | | | | Amortisation of brand names – cumulative (including fx impact) | | 39 | (j) | | (19.5 | ) | | (21.5 | ) | | (22.2 | ) | | | Amortisation of asset retirement obligations | | 39 | (p) | | (0.6 | ) | | (0.5 | ) | | (0.4 | ) | | | Pension Plans | | 39 | (f) | | 10.9 | | | 13.9 | | | 8.1 | | | | Hedging adjustments net of nil tax | | 39 | (k) | | 0.2 | | | 0.1 | | | 2.1 | | | | Reserves attributable to Asset Revaluation | | 39 | (a) | | — | | | (0.7 | ) | | (1.5 | ) | | | Depreciation charged on Revaluation increments | | 39 | (a) | | — | | | 0.1 | | | 0.1 | | | | Loans outstanding under ownership based remuneration scheme | | 39 | (d) | | (1.4 | ) | | (0.8 | ) | | (1.2 | ) | | | Net change in fair value hedges, hedged items and cash flow hedges | | 39 | (m) | | 1.2 | | | 0.8 | | | (1.0 | ) | | | Net gains/(losses) on cash flow hedges residing in Comprehensive Income | | 39 | (m) | | 6.8 | | | 4.7 | | | (12.6 | ) | | | Additional minimum pension liability residing in Comprehensive Income | | 39 | (f) | | (13.5 | ) | | (13.2 | ) | | (7.9 | ) | | | Equity share of South Pacific Tyres net of reversal of write-down | | 39 | (n) | | (7.1 | ) | | (89.2 | ) | | (81.5 | ) | | | Research and development expenditure | | 39 | (q) | | (2.1 | ) | | — | | | — | | | | Valuation allowance adjustment | | 39 | (h) | | 21.2 | | | — | | | — | | | | | | | | |
|
| |
|
| |
|
| Total Adjustments | | | | | 207.8 | | | 78.1 | | | 30.6 | | | | | | | | |
|
| |
|
| |
|
| Ansell Limited Shareholders’ Equity according to U.S. GAAP (including Comprehensive Income) | | | | | 801.5 | | | 879.7 | | | 864.3 | | | | | | | | |
|
| |
|
| |
|
| Note: All US GAAP adjustments are in respect of 100% owned operations | | | | | | | | | | | | | Statement of Comprehensive Income: | | | | | | | | | | | | | Net profit per U.S. GAAP | | | | | 130.1 | | | 90.4 | | | 51.3 | | Foreign Currency Translation Reserve net of nil tax | | | | | (51.2 | ) | | (6.3 | ) | | (63.2 | ) | Unrealised net gain on cash flow hedges net of nil tax | | | | | 2.1 | | | 17.3 | | | 1.1 | | Additional minimum pension liability net of nil tax | | | | | (0.3 | ) | | (5.3 | ) | | (7.9 | ) | Unrealised loss on available for sale equity securities net of nil tax | | | | | — | | | — | | | (1.0 | ) | | | | | | | |
|
| |
|
| |
|
| Comprehensive Income/(Loss) | | | | | 80.7 | | | 96.1 | | | (19.7 | ) | | | | | | | |
|
| |
|
| |
|
|
136
PART III
Item 18 : Consolidated Financial Statements 40. RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US (US GAAP) (CONTINUED) | | | 2004
| | 2003
| | | 2005
| | 2004
| | $ in Millions
| | Australian Fund
| | US Funds
| | Australian Fund
| | US Funds
| | | 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 | | | 16.8 | | | 52.1 | | | 19.9 | | | 54.9 | | - Non-vested | | — | | | 1.2 | | | 0.7 | | | 1.3 | | | — | | | 1.2 | | | — | | | 1.2 | | Total accumulated benefit obligation | | 19.9 | | | 56.1 | | | 64.0 | | | 58.9 | | | 16.8 | | | 53.3 | | | 19.9 | | | 56.1 | | Projected benefit obligation | | 20.6 | | | 56.7 | | | 64.4 | | | 59.8 | | | 17.4 | | | 54.3 | | | 20.6 | | | 56.7 | | Plan assets at fair value | | 41.7 | | | 40.8 | | | 79.6 | | | 36.1 | | | 17.0 | | | 38.1 | | | 41.7 | | | 40.8 | | Excess/(deficiency) of assets over benefit obligations | | 21.1 | | | (15.9 | ) | | 15.2 | | | (23.7 | ) | | (0.4 | ) | | (16.2 | ) | | 21.1 | | | (15.9 | ) | Unrecognised net gain/(loss) | | (5.6 | ) | | 15.1 | | | (16.4 | ) | | 24.2 | | | 12.0 | | | 15.2 | | | (5.6 | ) | | 15.1 | | Unrecognised prior service costs | | — | | | (0.8 | ) | | — | | | (1.4 | ) | | — | | | (0.7 | ) | | — | | | (0.8 | ) | Unrecognised net transition obligation/(asset) and other deferrals | | — | | | — | | | (1.0 | ) | | — | | | — | | | — | | | — | | | — | | Net Pension (Liability)/Asset | | 15.5 | | | (1.6 | ) | | (2.2 | ) | | (0.9 | ) | | 11.6 | | | (1.7 | ) | | 15.5 | | | (1.6 | ) | | NET PENSION COST | | | | | Defined Benefit Plans: | | | | | - Service cost-benefits earned during the year | | 0.9 | | | 2.5 | | | 1.9 | | | 3.1 | | | 0.8 | | | 2.4 | | | 0.9 | | | 2.5 | | - Interest cost on projected benefit obligation | | 1.0 | | | 3.3 | | | 4.3 | | | 4.2 | | | 0.8 | | | 3.1 | | | 1.0 | | | 3.3 | | - Expected return on plan assets | | (2.7 | ) | | (3.7 | ) | | (5.5 | ) | | (4.7 | ) | | (1.1 | ) | | (3.3 | ) | | (2.7 | ) | | (3.7 | ) | - Net amortisation and settlement and curtailment (gain)/loss | | (5.9 | ) | | 3.1 | | | (1.1 | ) | | 0.8 | | | 3.4 | | | 1.3 | | | (5.9 | ) | | 3.1 | | Net Pension Cost of Defined Benefit Plans | | (6.7 | ) | | 5.2 | | | (0.4 | ) | | 3.4 | | | 3.9 | | | 3.5 | | | (6.7 | ) | | 5.2 | | | ASSUMPTIONS (used to determine net pension cost) | | | | | Weighted average discount rate | | 5.0 | % | | 5.8 | % | | 5.0 | % | | 5.8 | % | | 5.0 | % | | 5.8 | % | | 5.0 | % | | 5.8 | % | Rate of increase in compensation level | | 4.0 | % | | 4.3 | % | | 3.5 | % | | 4.3 | % | | 4.0 | % | | 4.3 | % | | 4.0 | % | | 4.3 | % | Expected long term rate of return | | 7.0 | % | | 8.0 | % | | 7.0 | % | | 8.0 | % | | 7.0 | % | | 8.00 | % | | 7.0 | % | | 8.00 | % | 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 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 | | |
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 05
| | | 31 March 05
| | | 30 June 04
| | | 31 March 04
| | CHANGE IN BENEFIT OBLIGATION | | | | | | | | | | | | | Projected Benefit Obligation at beginning of year | | 20.6 | | | 56.7 | | | 64.4 | | | 59.8 | | Adjustment to value at beginning of year | | (1.6 | ) | | — | | | — | | | — | | Service cost | | 0.8 | | | 2.4 | | | 0.9 | | | 2.5 | | Interest cost | | 0.8 | | | 3.1 | | | 1.0 | | | 3.3 | | Transfers from/(to) other funds* | | — | | | — | | | (42.5 | ) | | — | | Member contributions | | 0.1 | | | — | | | 0.3 | | | — | | Actuarial (gain)/loss | | (1.4 | ) | | 1.3 | | | 1.5 | | | 0.3 | | Benefits, administrative expenses and tax paid | | (1.8 | ) | | (5.9 | ) | | (5.0 | ) | | (7.2 | ) | Foreign currency exchange rate changes | | — | | | (3.3 | ) | | — | | | (2.0 | ) | Projected Benefit Obligation at end of year | | 17.4 | | | 54.3 | | | 20.6 | | | 56.7 | | | | | | | 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 | % | | 4.0 | % | | 4.3 | % | | | | | | CHANGE IN PLAN ASSETS | | | | | | | | | | | | | Market value of assets at beginning of year | | 41.7 | | | 40.8 | | | 79.6 | | | 36.1 | | Adjustment to fair value at beginning of the year | | (3.7 | ) | | — | | | 2.6 | | | — | | Member/Employer Contributions | | — | | | 4.3 | | | — | | | 4.3 | | Transfers from/(to) other funds* | | (21.4 | ) | | — | | | (42.5 | ) | | — | | Benefits, administrative expenses and tax paid | | (1.8 | ) | | (5.9 | ) | | (5.0 | ) | | (7.2 | ) | Actual return on plan assets | | 2.2 | | | 2.3 | | | 7.0 | | | 8.7 | | Foreign currency exchange rate changes | | — | | | (3.4 | ) | | — | | | (1.1 | ) | Market value of assets at end of year | | 17.0 | | | 38.1 | | | 41.7 | | | 40.8 | |
* | Current year representsRepresents removal of assets and liabilities relating to Ansell accumulation members from disclosures.disclosures and transfer of amounts to South Pacific Tyres. |
137
PART III
Item 18 : Consolidated Financial Statements 40. | RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED) |
40. RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED) $ 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.$0.5 million. In respect of its US plans the Company expects to contribute $4.6$4.7 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 | | 1.7 | 2007 | | | | 1.7 | | 1.9 | 2008 | | | | 1.9 | | 2.1 | 2009 | | | | 2.4 | | 2.0 | 2010 -2014 | | | | 11.4 | | 2010 | | | 1.7 | 2011 - 2015 | | | 7.4 |
Plan Assets The allocation of the Fund’s assets by asset category is as follows: | Asset Category
| | Target Allocation
| | | Plan assets at 30 June
| | | Target Allocation
| | | Plan assets at 30 June
| | | | 2004
| | 2003
| | | | 2005
| | 2004
| | Equity securities | | 64 | % | | 64 | % | | 73 | % | | 64 | % | | 65 | % | | 64 | % | Fixed Interest | | 22 | % | | 21 | % | | 15 | % | | 22 | % | | 20 | % | | 21 | % | Real estate | | 9 | % | | 9 | % | | 10 | % | | 9 | % | | 9 | % | | 9 | % | Other | | 5 | % | | 6 | % | | 2 | % | | 5 | % | | 6 | % | | 6 | % |
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 | | 3.9 | 2007 | | | | 3.1 | | 3.1 | 2008 | | | | 3.5 | | 3.9 | 2009 | | | | 3.7 | | 3.9 | 2010 -2014 | | | | 27.7 | | 2010 | | | 4.1 | 2011 - 2015 | | | 28.1 |
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
| | | Target Allocation
| | | Plan assets at 31 March
| | | Target Allocation
| | | 2004
| | 2003
| | | | 2005
| | 2004
| | Equity securities | | | 64 | % | | 56 | % | | 67 | % | | 68 | % | | 64 | % | Debt securities | | 32 | % | | 32 | % | | 41 | % | | 29 | % | | 28 | % | | 32 | % | Real estate | | 3 | % | | 3 | % | | — | | | 3 | % | | 3 | % | | 3 | % | Other | | 3 | % | | 1 | % | | 3 | % | | 1 | % | | 1 | % | | 1 | % |
The target allocation currently is 62%67% equity (47%(49% US, 15%18% International), 3% real estate, 32%29% debt and 3%1% cash. Over the past 5 years the allocation to equities has ranged from 55% to 65%68% 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. In light of the Plans’ decision to lower the assumed rate of return on portfolio assets to 6.5% we expect a gradual reduction in the level of equity investments over the next six months. The new investment return assumption reflects the anticipated Plan termination by 2010. 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
Item 18 : Consolidated Financial Statements 40. | RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED) |
40. RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED) Information for United States Investors | | | | | | | | | | | | 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
| | | Consolidated
| | $ in Millions
| | | 2005
| | 2004
| | 2003
| | Material Write-down of assets | | | | | Ambri Ltd investment | | | | The Group’s investment in Ambri Ltd was written down to recoverable amount in prior years. | | | — | | | (1.0 | ) | | (6.1 | ) | The investment was disposed of during the current year. | | | | | US GAAP Equity Roll-forward | | | | | | Opening Balance US GAAP equity | | 864.3 | | | 873.8 | | | 1,138.9 | | | 879.7 | | | 864.3 | | | 873.8 | | US GAAP Profit/(Loss) | | 90.4 | | | 51.3 | | | (172.0 | ) | | US GAAP Profit | | | 130.1 | | | 90.4 | | | 51.3 | | Proceeds from issue of shares | | 1.0 | | | 1.0 | | | 1.2 | | | 5.0 | | | 1.0 | | | 1.0 | | Dividends | | (31.0 | ) | | — | | | — | | | (23.6 | ) | | (31.0 | ) | | — | | Share buy back | | (65.4 | ) | | (8.2 | ) | | — | | | (156.1 | ) | | (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 | ) | | Movement in Foreign Currency Translation Reserve | | | (44.5 | ) | | (7.4 | ) | | (71.3 | ) | Unrealised net gain on cash flow hedges in OCI | | | 2.1 | | | 17.3 | | | 1.1 | | Additional minimum pension liability in OCI | | (5.3 | ) | | (7.9 | ) | | — | | | (0.3 | ) | | (5.3 | ) | | (7.9 | ) | Movements in Loans outstanding under Employee Share Plan | | 0.4 | | | 3.1 | | | 4.3 | | | (0.6 | ) | | 0.4 | | | 3.1 | | Other (including FX on US GAAP adjustments) | | 15.4 | | | 21.4 | | | (16.9 | ) | | 9.7 | | | 15.4 | | | 21.4 | | | |
|
| |
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| |
|
| |
|
| |
|
| |
|
| Closing balance US GAAP equity | | 879.7 | | | 864.3 | | | 873.8 | | | 801.5 | | | 879.7 | | | 864.3 | | | |
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|
139
PART III
Item 18 : Consolidated Financial Statements 40. | RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED) |
Information | for United States 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 | ) | | |
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| |
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| |
|
|
140
PART III40. RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(US GAAP) (CONTINUED) Information for United States Investors (continued) | | | | | | | | | | | | Consolidated
| | $ in Millions
| | 2005
| | | 2004
| | | 2003
| | Goodwill: | | | | | | | | | | AGAAP goodwill - written down value 30 June | | 140.2 | | | 176.0 | | | 203.3 | | Add: Amortisation for AGAAP only from 1 July 2002 | | 67.2 | | | 46.7 | | | 25.3 | | Add: Net Goodwill recognised for US GAAP only | | 33.3 | | | 33.3 | | | 33.3 | | Add :Adjustment for different amortisation basis on AGAAP goodwill | | 111.2 | | | 104.4 | | | 90.0 | | | |
|
| |
|
| |
|
| US GAAP goodwill - written down value 30 June | | 351.9 | | | 360.4 | | | 351.9 | | | |
|
| |
|
| |
|
| US GAAP Goodwill Comprises: | | | | | | | | | | Gross Goodwill | | 404.1 | | | 438.2 | | | 448.6 | | Accumulated Amortisation | | (52.2 | ) | | (77.8 | ) | | (96.7 | ) | | |
|
| |
|
| |
|
| Written down value | | 351.9 | | | 360.4 | | | 351.9 | | | |
|
| |
|
| |
|
| Brand names | | | | | | | | | | AGAAP brand names - 30 June | | 106.0 | | | 117.4 | | | 121.2 | | (Deduct): US GAAP accumulated amortisation | | (19.5 | ) | | (21.5 | ) | | (22.2 | ) | | |
|
| |
|
| |
|
| US GAAP Brand names - 30 June | | 86.5 | | | 95.9 | | | 99.0 | | | |
|
| |
|
| |
|
| Property, plant & equipment | | | | | | | | | | Property, plant & equipment at cost and valuation (net of accumulated depreciation) | | 195.4 | | | 227.8 | | | 262.9 | | (Deduct): Asset revaluation reserves applicable | | — | | | (0.7 | ) | | (1.5 | ) | Add: Adjustment to add back depreciation charged on the revaluation increments (cumulative) | | — | | | 0.1 | | | 0.1 | | | |
|
| |
|
| |
|
| Property, plant & equipment at cost (net of accumulated depreciation) | | 195.4 | | | 227.2 | | | 261.5 | | | |
|
| |
|
| |
|
| Analysis of long-lived assets by Country | | | | | | | | | | - Australia | | 79.7 | | | 53.4 | | | 62.8 | | - USA | | 228.3 | | | 293.4 | | | 338.1 | | - Malaysia | | 67.6 | | | 77.5 | | | 83.2 | | - Thailand | | 45.9 | | | 56.0 | | | 61.9 | | - Sri Lanka | | 37.2 | | | 43.7 | | | 49.3 | | - Other Countries | | 41.9 | | | 51.2 | | | 54.6 | | | |
|
| |
|
| |
|
| | | 500.6 | | | 575.2 | | | 649.9 | | | |
|
| |
|
| |
|
| 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 | | 0.9 | | | 0.8 | | | — | | Initial balance on adoption of SFAS No. 143 | | — | | | — | | | 0.7 | | Liabilities incurred in current period | | 0.1 | | | 0.1 | | | 0.1 | | | |
|
| |
|
| |
|
| Balance at end of period | | 1.0 | | | 0.9 | | | 0.8 | | | |
|
| |
|
| |
|
| Accumulated Other Comprehensive Income | | | | | | | | | | Foreign Currency Translation Reserve net of nil tax | | (189.4 | ) | | (138.2 | ) | | (131.9 | ) | Unrealised net gain/(loss) on cash flow hedges net of nil tax | | 6.8 | | | 4.7 | | | (12.6 | ) | Additional minimum pension liability net of nil tax | | (13.5 | ) | | (13.2 | ) | | (7.9 | ) | | |
|
| |
|
| |
|
| | | (196.1 | ) | | (146.7 | ) | | (152.4 | ) | | |
|
| |
|
| |
|
|
Item 18 : Consolidated Financial Statements 40. | RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED) |
40. RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Information | for United States Investors (continued) |
(US GAAP) (CONTINUED) Information for United States Investors (continued) Executive Share Option Data Supporting Notes 39(d), 2526 and 2829 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 at the date of this report has been calculated at $1.0$2.0 million. In respect of Equity Accounted Investments – South Pacific Tyres Equity accounting has been consistently applied for US GAAP purposes to the options granted to Mr D.Tough (on his appointmentGroup’s 50% interest in the South Pacific Tyres Partnership and South Pacific Tyres N.Z. Ltd (collectively known 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 allowSouth Pacific Tyres (SPT)). Summarised US GAAP financial information for SPT for the amortisation over the vesting period which commences 1 July 2004.last three years is as follows: 141
| | | | | | | | | | $ in millions
| | 2005
| | | 2004
| | | 2003
| | Statement of Financial Performance | | | | | | | | | | | | | | Sales | | 994.8 | | | 987.7 | | | 951.0 | | Cost of Goods Sold | | (693.8 | ) | | (698.1 | ) | | (685.4 | ) | Expenses | | (290.6 | ) | | (297.9 | ) | | (291.7 | ) | | |
|
| |
|
| |
|
| Operating Profit/(Loss) before Income Tax | | 10.4 | | | (8.3 | ) | | (26.1 | ) | Income Tax Expense | | (6.2 | ) | | 7.1 | | | 6.7 | | | |
|
| |
|
| |
|
| Profit/(Loss) after Income Tax | | 4.2 | | | (15.4 | ) | | (32.8 | ) | | |
|
| |
|
| |
|
| Ansell’s 50% share | | 2.1 | | | (7.7 | ) | | (16.4 | ) | | | | | Statement of Financial Position | | | | | | | | | | | | | | Current Assets | | 393.2 | | | 387.5 | | | 366.3 | | Non-Current Assets | | 224.5 | | | 244.4 | | | 276.2 | | | |
|
| |
|
| |
|
| Total Assets | | 617.7 | | | 631.9 | | | 642.5 | | | |
|
| |
|
| |
|
| Current Liabilities | | 517.2 | | | 528.1 | | | 517.2 | | Non-Current Liabilities | | 28.0 | | | 34.8 | | | 41.4 | | | |
|
| |
|
| |
|
| Total Liabilities | | 545.2 | | | 562.9 | | | 558.6 | | | |
|
| |
|
| |
|
| Net Assets | | 72.5 | | | 69.0 | | | 83.9 | | | |
|
| |
|
| |
|
| Shareholders’ Equity | | 72.5 | | | 69.0 | | | 83.9 | | | |
|
| |
|
| |
|
| | | | Reconciliation of Investment in SPT and share of SPT’s Net Assets under US GAAP | | | | | | | | | | | | Ansell’s share of SPT’s Net Assets under US GAAP | | 36.2 | | | 34.5 | | | 42.0 | | Plus New Zealand preference shares included within Liabilities for US GAAP purposes | | 4.6 | | | 4.6 | | | 4.4 | | Plus Other cumulative movements in SPT’s equity since cessation of equity accounting and other accounting adjustments | | 3.9 | | | 3.6 | | | 4.1 | | | |
|
| |
|
| |
|
| Investment value under US GAAP | | 44.7 | | | 42.7 | | | 50.5 | | | |
|
| |
|
| |
|
|
PART III
REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the members of Ansell Limited: We have audited the accompanying consolidated Statementsstatements of Financial Positionfinancial position of Ansell Limited and its subsidiaries as of 30 June, 2005, 2004 2003 and 2002,2003, and the related consolidated Statements of Financial Performance, and of Cash Flows for each of the years in the three year period ended 30 June, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 Ansell Limited and its subsidiaries at 30 June, 2004, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three year period ended 30 June, 2004 in conformity with accounting principles generally accepted 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 is presented in Notes 39 and 40 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 June 30, 2004 and the determination of Shareholder’s equity as of June 30, 2004, 2003 and 2002, to the extent summarized in Notes 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
Melbourne
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
| Chief Financial Officer
|
Dated: 28 March 2005
144
PART III
South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004
South Pacific Tyres
Statements filed in accordance with Rule 3.09.
STATEMENT OF FINANCIAL PERFORMANCE
For the year ended 30th June 2004
| | | | | | | | | | | | | | | 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. | | | | | | | | | | | | |
145
PART III
South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004
STATEMENTOF FINANCIAL POSITION
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.
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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.
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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.
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South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004
NOTES TO THE FINANCIAL STATEMENTS
Note 1 Statement of significant accounting policies
General
The principal activities of the consolidated entity during the period were:
Manufacture of tyres for vehicles
Wholesaling and retailing of vehicle and aircraft tyres.
There were no significant changes in the nature of the principal activities of the consolidated entity during the year.
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 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 consolidated entity is not a reporting entity. The financial report of the consolidated entity has been drawn up as a special purpose financial report for distribution to the partners and for the purpose of fulfilling the requirements of the Corporations Act 2001.
The financial report 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 has been prepared on the accrual basis of accounting as defined in AASB1001, Accounting Policies, using historical cost convention and going concern assumption. Except where stated, it does not take into account changing money values or current valuations of non-current assets.
The 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 consolidated 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.
(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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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.
(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
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.
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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
Consolidated entity
Income tax is only provided for in the financial statements in respect of the corporate entities forming part of the consolidated entity of South Pacific 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.
(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 instalments, but at a rate of not less than $250,000 pa | Over $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.
Acquisitions of assets
All 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 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.
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.
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NOTESTO THE FINANCIAL STATEMENTS(continued)
Note 1 Statement of significant accounting policies (continued)
(j) Use 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 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.
(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.
(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.
Cost 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 consolidated 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.
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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:
| | | | | | | | | | | | 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.
(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. 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
A provision for restructuring including termination benefits is only recognised when a detailed plan has been approved and the restructuring has either commenced or been publicly announced. Costs relating to ongoing activities are not provided for.
The liability for termination benefits are included in the provision for Rationalisation and restructure (Note 16).
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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.
(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 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 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.
The initial adjustments to the consolidated financial report as at 1 July 2002 as a result of this change are:
$103,373 increase in provision for employee benefits
$103,373 decrease in opening retained earnings.
As a result of this change in accounting policy, employee benefits expense increased by $139,957 and the income tax expense decreased by $2,222 for the year to 30 June 2003.
| | | | | | | | | 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 | | |
| |
| |
|
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PART III
South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004
NOTES TO THE FINANCIAL STATEMENTS (continued)
| | | | | | | | | | | | 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 | | | |
|
| |
|
| |
|
|
155
PART III
South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004
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 | ) | | |
|
| |
|
| |
|
|
156
PART III
South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004
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 | | | |
|
| |
|
| |
|
|
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 2004
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 | | — | | | — | | | — | | | |
|
| |
|
| |
|
| | | — | | | — | | | — | | | |
|
| |
|
| |
|
|
158
PART III
South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004
NOTES TO THE FINANCIAL STATEMENTS (continued)
| | | | | | | | | | | | 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 | | | |
|
| |
|
| |
|
|
159
PART III
South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004
NOTES TO THE FINANCIAL STATEMENTS (continued)
| | | | | | | | | | | | 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 2004
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 | | |
| |
| |
|
Partner Loans - Pacific Dunlop Tyres Pty Ltd & Goodyear Tyres Pty Ltd
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 2004
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 | | | |
|
| |
|
| |
|
|
162
PART III
South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004
NOTES TO THE FINANCIAL STATEMENTS(continued)
| | | | | | | | | | | | 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 2004
NOTES TO THE FINANCIAL STATEMENTS(continued)
| | | | | | | | | | | 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 | | | | | | | | | | | | | Goodyear Tyres Pty Ltd | | | | | | | | | Contributed equity at the beginning of year | | 158,837,569 | | | 158,837,569 | | 158,837,569 | | Additional contributed equity | | 13,000 | | | — | | — | | | |
|
| |
| |
|
| Contributed equity at the end of year | | 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 | | | |
|
| |
| |
|
| Contributed equity at the end of year | | 158,837,569 | | | 158,837,569 | | 158,837,569 | | | |
|
| |
| |
|
| | | 317,688,138 | | | 317,675,138 | | 317,675,138 | | | |
|
| |
| |
|
| Note 19 Reserves | | | | | | | | | | | | | Asset revaluation | | 12,374,551 | | | 12,570,229 | | 12,570,229 | | | |
|
| |
| |
|
| | | 12,374,551 | | | 12,570,229 | | 12,570,229 | | | |
|
| |
| |
|
| | | | | Movements during the year | | | | | | | | | | | | | Asset revaluation reserve | | | | | | | | | Balance at the beginning of year | | 12,570,229 | | | 12,570,229 | | 12,561,891 | | Transferred to retained profits | | (195,678 | ) | | — | | 8,338 | | | |
|
| |
| |
|
| Balance at the end of year | | 12,374,551 | | | 12,570,229 | | 12,570,229 | | | |
|
| |
| |
|
| | | | | Foreign currency translation reserve | | | | | | | | | Balance at the beginning of year | | — | | | — | | (3,341,868 | ) | Translation adjustment on assets and liabilities held in foreign currencies | | — | | | — | | (303,980 | ) | Transferred to retained profits | | — | | | — | | 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 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 2004
NOTES TO THE FINANCIAL STATEMENTS(continued)
| | | | | | | | | | | | 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 | | — | | | — | | | — | | | |
|
| |
|
| |
|
|
165
PART III
South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004
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 2004 the fixed rates were 5.9% (2003 : 5.7% to 5.9%) (2002 : 5.5% to 5.9%) and floating rates were at bank bill rates plus the consolidated entity’s credit margin. The weighted average effective floating interest rate at 30 June 2004 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 | | | | | | | | | | | | | | | |
|
| |
| | | | | | | | | | | | | | | | | | 2003
| | | | | | | | | | | | | | | | | | | Financial assets | | | | | | | | | | | | | | | | | | | Cash | | 7 | | 4.51 | % | | 15,133,917 | | | | | | | | | 96,022 | | 15,229,939 | Receivables | | 8 | | — | | | | | | | | | | | | 146,987,933 | | 146,987,933 | | | | | | | |
|
| | | | | | | |
| |
| | | | | | | | 15,133,917 | | | | | | | | | 147,083,955 | | 162,217,872 | | | | | | | |
|
| | | | | | | |
| |
| Financial liabilities | | | | | | | | | | | | | | | | | | | Bank overdrafts and loans | | 15 | | 8.27 | % | | 90,934,299 | | | | | | | | | | | 90,934,299 | Securitisation | | 15 | | 4.88 | % | | 74,890,227 | | | | | | | | | | | 74,890,227 | Partner Loans | | 15 | | 5.35 | % | | 111,097,444 | | | | | | | | | | | 111,097,444 | Trade bills | | 15 | | 5.66 | % | | 5,589,308 | | | | | | | | | | | 5,589,308 | Accounts payable | | 14 | | | | | | | | | | | | | | 167,940,789 | | 167,940,789 | Employee entitlements | | 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 | | | | | | | |
|
| |
| |
| |
| |
| |
| Interest rate swaps | | | | | | | (50,000,000 | ) | | 30,000,000 | | 20,000,000 | | | | | | | | | | | | | |
|
| |
| |
| | | | | | |
166
PART III
South Pacific Tyres and Controlled Entities – Statutory Accounts Year Ended 30 June 2004
NOTES TO THE FINANCIAL STATEMENTS(continued)
Note | 22 Additional financial instruments disclosure (continued) |
(a) Interest rate risk (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 entity.
| | | | | | | | | | | | | | | 2004
| | 2003
| | 2002
| | 2004 $
| | 2003 $
| | 2002 $
| | | | | Average rate | | | | | | | | | Buy US Dollars | | | | | | | | | | | | | Not later than one year | | 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 year but not later than three years | | | | | | | | — | | — | | — | | | | | | | | |
| |
| |
| | | | | | | | | 17,860,867 | | 26,558,702 | | 43,978 | | | | | | | | |
| |
| |
| Sell US Dollars | | | | | | | | | | | | | Not later than one year | | 0.7155 | | 0.64 | | — | | 1,623,900 | | 814,196 | | — | Later than one year but not later than two years | | | | | | | | — | | — | | — | Later than two year but not later than three years | | | | | | | | — | | — | | — | | | | | | | | |
| |
| |
| | | | | | | | | 1,623,900 | | 814,196 | | — | | | | | | | | |
| |
| |
| Buy EURO dollars | | | | | | | | | | | | | Not later than one year | | 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 year but not later than three years | | | | | | | | — | | — | | — | | | | | | | | |
| |
| |
| | | | | | | | | 5,693,338 | | 9,937,775 | | 1,096,037 | | | | | | | | |
| |
| |
| Sell EURO dollars | | | | | | | | | | | | | Not later than one year | | 0.61 | | 0.55 | | — | | 18,245 | | 179,783 | | — | Later than one year but not later than two years | | | | | | | | — | | — | | — | Later than two year but not later than three years | | | | | | | | — | | — | | — | | | | | | | | |
| |
| |
| | | | | | | | | 18,245 | | 179,783 | | — | | | | | | | | |
| |
| |
| Buy Japanese yen | | | | | | | | | | | | | Not later than one year | | 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 year but not later than three years | | | | | | | | — | | — | | — | | | | | | | | |
| |
| |
| | | | | | | | | 1,560,868 | | 2,101,635 | | 223,131 | | | | | | | | |
| |
| |
|
167
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NOTES TO THE FINANCIAL STATEMENTS(continued)
Note | 22 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 recognized in the financial statements at the time the underlying transaction occurs as designated. The gross deferred gains and losses on hedges of anticipated foreign current purchases are:
| | | | | | | | | | | | | | | 2004
| | 2003
| | 2002
| | | Gains $
| | Losses $
| | Gains $
| | Losses $
| | Gains $
| | Losses $
| Not later than one year | | 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 ) 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.
(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)
Note | 22 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:
| | | | | | | | | | | | | | | 2004
| | 2003
| | 2002
| | | Carrying amount $
| | Net fair value $
| | Carrying amount $
| | Net fair value $
| | Carrying amount $
| | Net fair value $
| Financial assets | | | | | | | | | | | | | Cash assets | | 56,435,875 | | 56,435,875 | | 15,229,939 | | 15,229,939 | | 37,100,672 | | 37,100,672 | Receivables | | 131,826,150 | | 131,826,150 | | 146,987,933 | | 146,987,933 | | 172,042,609 | | 172,042,609 | Financial liabilities | | | | | | | | | | | | | Payables | | 144,732,585 | | 144,732,585 | | 167,940,789 | | 167,940,789 | | 190,274,533 | | 190,274,533 | Bank overdrafts and loans | | 73,561,733 | | 73,561,733 | | 90,934,299 | | 90,934,299 | | 64,652,501 | | 64,652,501 | Securitisation | | 75,029,449 | | 75,029,449 | | 74,890,227 | | 74,890,227 | | 75,494,759 | | 75,494,759 | Partner Loans | | 160,741,176 | | 160,741,176 | | 111,097,444 | | 111,097,444 | | 61,095,014 | | 61,095,014 | Trade bills | | 4,859,813 | | 4,859,813 | | 5,589,308 | | 5,589,308 | | 2,247,952 | | 2,247,952 | Employee entitlements | | 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:
| | | | | | | | | | 2004 $
| | 2003 $
| | | 2002 $
| Forward foreign exchange contracts gains/(losses) | | 697,966 | | (1,977,334 | ) | | 54,818 | | | | | Note 23 Commitments | | | | | | | | | | | | Capital expenditure commitments | | | | | | | | Plant | | | | | | | | Contracted but not provided for and payable within one year | | 951,935 | | 3,311,414 | | | 4,505,841 | | |
| |
|
| |
| | | 951,935 | | 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 | | 29,992,274 | | 23,865,262 | | | 25,799,409 | One year or later and no later than five years | | 60,779,467 | | 47,292,290 | | | 48,518,490 | Later than 5 years | | 6,720,240 | | 15,992,314 | | | 10,596,215 | | |
| |
|
| |
| | | 97,491,981 | | 87,149,866 | | | 84,914,114 | | |
| |
|
| |
|
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 Tweddell | | Mr. Robert W. Tieken | Mr. Hugh D. Pace | | Mr. Herbert J. Elliott | | Mr. Clark E. Sprang | Ms. Janell Lopus | | Mr. Douglas Tough | | Mr. Harry Boon | Mr. Harold Smith | | Mr. David Graham | | |
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.
| | | | | | 2002
$
| | Net Assets
| | 148,178,000 | | Accrued benefits
| | 148,802,000 | | | |
|
| Deficiency
| | (624,000 | ) | | |
|
| Vested Benefits
| | 146,578,000 | |
| | | Country | | Australia | Benefit type | | Defined benefit / Accumulation | Basis of contribution | | Balance of cost / Defined contribution | Date of last actuarial valuation | | 30/06/2002 | 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 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
| | | Balance of cost | | The consolidated entity’s contribution is assessed by the Actuary after taking into account the member’s contribution and the value of assets. | | | Defined contribution | | The 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 | 33 Reconciliation to United States Generally Accepted Accounting Principles ( US GAAP ) ( continued ) |
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, 2004.2005. These consolidated financial statements are the responsibility of the Partnerships’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 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 ofAnsell Limited and its subsidiaries at 30 June, 2005, 2004 2003 and 2002,2003, and the results of itstheir operations and itstheir cash flows for each of the years in the three-year period ended 30 June, 20042005, in conformity with accounting principles generally accepted accounting principles in Australia. As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for research and development costs in 2005. Accounting principles generally accepted in Australia vary in certain significant respects from accounting principles generally accepted in the United States.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 would have affected consolidated financial performance for each of the years in the three-year period ended 30 June, 2004Notes 39 and the determination of partners’ equity as of 30 June, 2004, 2003 and 2002, to the extent summarized in Note 31 to 3340 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
18623 September, 2005, except for Notes 39 and 40, for which the date is 12 January, 2006.
Item 19 : Exhibits See Exhibit Index 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 Chief Financial Officer |
Dated: 12 January 2006 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). | | | 7.1 | | Computation of the Ratio of Earnings to Fixed Charges. | | | 8.1 | | List of Subsidiaries. | | | 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 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. |
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