EXHIBIT 99.2
Independent Auditors' Report
The Board of Directors and members of RAG Australia Coal Pty Limited:
We have audited the accompanying consolidated statements of financial position
of RAG Australia Coal Pty Limited and its controlled entities (the "Company") as
of December 31, 2003 and 2002, and the related consolidated statements of
financial performance and cash flows for each of the years in the three-year
period ended December 31, 2003, all expressed in Australian dollars. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Australia and the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of RAG Australia Coal
Pty Limited and its controlled entities as of December 31, 2003 and 2002, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2003, 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 of America. Information relating to the nature and effect of such
differences is presented in Note 22 to the consolidated financial statements.
KPMG
Sydney, Australia
March 9, 2004
F1
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENTS OF FINANCIAL PERFORMANCE
For the year ended December 31,
--------------------------------
2001 2002 2003
Note A$'000 A$000 A$'000
------- ------- -------
Revenue from sale of coal 2 379,498 369,155 370,131
Other revenues from ordinary activities 2 110,555 7,898 8,652
------- ------- -------
Total revenue 2 490,053 377,053 378,783
Cost of goods sold:
- mining costs (163,740) (172,288) (211,017)
- depreciation and amortisation (44,038) (36,820) (44,961)
- royalty costs (23,451) (25,247) (26,243)
Exploration and development costs
written off (17,605) - -
Selling and distribution expenses (50,178) (45,714) (54,435)
Administration expenses (8,858) (11,684) (12,511)
Borrowing costs (15,732) (12,746) (9,852)
Other benefits/(expenses) from ordinary
activities* (75,003) 22,293 46,286
Cost of assets disposed (52,961) - -
------- ------- -------
PROFIT FROM ORDINARY ACTIVITIES BEFORE
RELATED INCOME TAX EXPENSE 3 38,487 94,847 66,050
Income tax expense relating to ordinary
activities 5 21,877 24,928 19,627
------- ------- -------
NET PROFIT 16,610 69,919 46,423
======= ======= =======
* - This category includes foreign currency losses of $66,476,000 in 2001 and
foreign currency gains of $23,589,000 in 2002 and $46,709,000 in 2003.
See accompanying notes to consolidated financial statements.
F2
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
For the year ended December 31,
-------------------------------
2002 2003
Note A$'000 A$'000
------- -------
CURRENT ASSETS
Cash assets 6 227,377 111,337
Receivables 7 55,420 59,156
Inventories 8 13,973 16,469
Current tax receivable 5 - 11,317
Other 9 3,700 27,592
------- -------
TOTAL CURRENT ASSETS 300,470 225,871
------- -------
NON-CURRENT ASSETS
Receivables 7 - -
Other financial assets 10 1,801 1,801
Property, plant and equipment 11 163,161 201,624
Deferred tax assets 5 12,704 5,613
Other 9 478 478
------- -------
TOTAL NON-CURRENT ASSETS 178,144 209,516
------- -------
TOTAL ASSETS 478,614 435,387
------- -------
CURRENT LIABILITIES
Payables 12 53,612 44,418
Interest bearing liabilities 13 16,992 14,972
Current tax liabilities 5 21,256 -
Provisions 14 32,358 3,634
------- -------
TOTAL CURRENT LIABILITIES 124,218 63,024
------- -------
NON-CURRENT LIABILITIES
Interest bearing liabilities 13 142,897 97,194
Deferred tax liabilities 5 2,882 18,517
Provisions 14 1,275 2,887
------- -------
TOTAL NON-CURRENT LIABILITIES 147,054 118,598
------- -------
TOTAL LIABILITIES 271,272 181,622
------- -------
NET ASSETS 207,342 253,765
======= =======
EQUITY
Contributed equity 15 80,000 80,000
Retained profits 16 127,342 173,765
------- -------
TOTAL EQUITY 207,342 253,765
======= =======
See accompanying notes to consolidated financial statements.
F3
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31,
------------------------------
2001 2002 2003
Note A$'000 A$'000 A$'000
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations 391,578 377,412 399,853
Cash payments in the course of operations (305,932) (255,190) (363,381)
Dividends received 512 - 827
Interest received 8,203 6,802 5,161
Interest paid (15,732) (12,746) (9,852)
Tax paid (21,518) (12,987) (29,534)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 19(ii) 57,111 103,291 3,074
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash payments for controlled entities (net of
cash acquired) - (37) (7,887)
Payments for property, plant and equipment (14,763) (27,152) (60,595)
Proceeds from sale of non-current assets (net
of cash disposed) 101,342 123 -
Loans to other parties (9,000) - -
Loans to related parties (357) (7,834) (16,994)
Proceeds from capital refund 200 - -
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES 77,422 (34,900) (85,476)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings (22,998) (13,555) (4,136)
Dividends paid (155) (900) (18,000)
-------- -------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES (23,153) (14,455) (22,136)
-------- -------- --------
NET INCREASE/(DECREASE) IN CASH HELD 111,380 53,936 (104,538)
CASH AT THE BEGINNING OF THE FINANCIAL YEAR 61,320 176,526 227,377
Effects of exchange rate fluctuations in
respect of funds held in foreign currencies 3,826 (3,085) (11,502)
-------- -------- --------
CASH AT THE END OF THE FINANCIAL YEAR 19(i) 176,526 227,377 111,337
======== ======== ========
See accompanying notes to consolidated financial statements.
F4
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The significant policies which have been adopted in the preparation of
this financial report are:
(a) BASIS OF PREPARATION
In the opinion of the Directors, RAG Australia Coal Pty Limited and its
controlled entities ("the company") 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 members and
for the purpose of fulfilling the requirements of the Corporations Act
2001.
The financial report has been prepared on the accrual basis of
accounting as defined in AASB 1001, Accounting Policies, using the
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. Except where stated, the accounting
policies have been consistently applied.
The financial report has been prepared in accordance with the
requirements of the Corporations Act 2001, the recognition and
measurement aspects of all applicable Accounting Standards, Urgent
Issues Group Consensus Views and other authoritative pronouncements of
the Australian Accounting Standards Board that have material effect.
The financial report does not include the disclosure requirements of
the following pronouncements having a material effect:
- AASB 1005 Segment reporting
- AASB 1008 Accounting for Leases
- AASB 1017 Related Party Disclosures
- AASB 1026 Statement of Cash Flows
- AASB 1028 Accounting for Employee Entitlements
- AASB 1033 Presentation and Disclosure of Financial Instruments
- AASB 1041 Revaluation of Non-current Assets
- AASB 1044 Provisions, Contingent Liabilities and Contingent Assets
(b) PRINCIPLES OF CONSOLIDATION
CONTROLLED ENTITIES
The financial statements of controlled entities are included from the
date control commences until the date control ceases.
JOINT VENTURES
A joint venture is either an entity or operation that is jointly
controlled by the consolidated entity.
Joint venture operation
Interests in an unincorporated joint ventures are brought to account by
including the proportionate share of the joint venture's assets,
liabilities and expenses and the revenue from the sale of proportionate
share of output on a line-by-line basis, from the date joint venture
control commences to the date joint venture control ceases.
F5
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) PRINCIPLES OF CONSOLIDATION (CONTINUED)
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.
Unrealised gains resulting from transactions with associates and joint
ventures are eliminated to the extent of the consolidated entity's
interest. Unrealised gains relating to associates and joint venture
entities are eliminated against the carrying amount of the investment.
Unrealised losses are eliminated in the same way as unrealised gains,
unless they evidence a recoverable impairment.
(c) REVENUE RECOGNITION
Revenues are recognised at fair value of the consideration received net
of the amount of goods and services tax (GST).
SALE OF COAL
Revenue from the sale of coal is recognised (net of returns, discounts
and allowances) when control of the goods passes to the customer.
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.
RENTAL REVENUE
Rental revenue is recognised as it accrues.
DIVIDEND REVENUE
Revenue from dividends from investments in other entities are
recognised when received.
OTHER REVENUE
Revenue recognition policies for investments are described in
Accounting Policy Note 1(m).
(d) BORROWING COSTS
Borrowing costs include interest. Borrowing costs are expensed as
incurred unless they relate to qualifying assets. Qualifying assets are
assets which generally 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 assets.
F6
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) 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 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.
(f) 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 balance 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.
HEDGES
Anticipated transactions
Where hedge transactions are designated as a hedge of the anticipated
purchase or sale of goods or services, or purchase of qualifying
assets, gains and 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 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.
When the anticipated transaction is no longer expected to occur as
designated the deferred gains and 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 and 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 when it occurs. Where a hedge transaction is
terminated early because the anticipated transaction is no longer
expected to occur as designated, deferred gains and losses that arose
on the foreign currency hedge prior to its termination are included in
the statement of financial performance for the period.
F7
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) FOREIGN CURRENCY (CONTINUED)
Where a hedge is redesignated as a hedge of another transaction, gains
and 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 and 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 and 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 balance 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. Costs or
gains arising at the time of entering into the hedge are deferred and
amortised over the life of the hedge.
(g) TAXATION
The consolidated entity adopts 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 items being brought to
account in different periods for income tax and accounting purposes, is
carried forward in the balance sheet 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 effect of capital
losses is not brought to recorded unless realisation is virtually
certain.
(h) ACQUISITION OF ASSETS
All assets acquired including property, plant and equipment 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.
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 company if similar borrowing were obtained from
an independent financier under comparable terms and conditions.
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(d)
Expenditure other than research and development, is only recognised as
an asset when the entity controls future economic benefits as a result
of costs incurred, it is probable that those future economic benefits
will eventuate, and costs can be measured reliably.
F8
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) ACQUISITION OF ASSETS (CONTINUED)
SUBSEQUENT ADDITIONAL COSTS
Costs incurred on assets subsequent to initial acquisition are
capitalised when it is probable that future economic benefits in excess
of the originally assessed performance of the asset will flow to the
company in future years. Costs that do not meet the criteria for
capitalisation are expensed as incurred.
(i) REVISIONS OF ACCOUNTING ESTIMATES
Revisions to accounting estimates are recognised prospectively in
current and future periods only.
(j) CASH ASSETS
Cash assets are carried at face value of the amounts deposited. The
carrying amounts of cash assets approximate net fair value.
(k) RECEIVABLES
The collectability of debts is assessed at year-end and specific
provision made for any doubtful accounts.
TRADE DEBTORS
Trade debtors to be settled within 60 days are carried at amounts due.
(l) INVENTORIES
Coal stocks are valued at the lower of average cost of production and
net realisable value. Cost of production includes direct production
costs and an appropriate allocation of fixed and variable overheads.
Materials and supplies are carried at the lower of cost and net
realisable value.
(m) INVESTMENTS
Investments in other unlisted entities are carried at the lower of cost
and recoverable amount based on the underlying net assets of the
company.
F9
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n) LEASED ASSETS
Leases of plant and equipment under which the company assumes
substantially all of the risks and benefits of ownership are classified
as finance leases. Other leases are classified as operating leases.
FINANCE LEASES
Finance leases are capitalised. A lease asset and a lease liability
equal to the present value of the minimum lease payments are recorded
at the inception of the lease.
Lease liabilities are reduced by repayments of principal. The interest
components of the lease payments are expensed. Contingent rentals are
expensed as incurred. Capitalised lease assets are amortised on a
straight-line basis over the term of the relevant lease, or where it is
likely the group will obtain ownership of the asset, the life of the
asset.
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.
(o) RECOVERABLE AMOUNT OF NON-CURRENT ASSETS VALUED ON COST BASIS
The carrying amounts of all non-current assets valued on cost basis
other than exploration and evaluation expenditure carried forward
(refer Note 1(q)), 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 the 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 recoverable amounts of non-current assets the relevant
cash flows have not been discounted to their present value, except
where specifically stated. Except where specifically stated,
non-current assets are recorded at the lower of cost and recoverable
amount.
(p) DEPRECIATION AND AMORTISATION
Items of property, plant and equipment are initially recorded at cost
and depreciated as outlined below.
The cost of property, plant and equipment constructed by the company
includes the cost of materials and direct labour. The proportion of
overheads and other incidental costs directly attributable to its
construction are also capitalised to the cost of property, plant and
equipment.
USEFUL LIVES
Items of property, plant and equipment, including mining equipment
under lease are depreciated using the straight-line method over their
estimated useful lives. This takes into account production output so as
to write-off the net cost of each asset over the shorter of its
expected useful life or the production life of the mine at which the
asset is sited.
The depreciation rates used for mining property, plant and equipment
appropriate 5% to 20%
F10
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p) DEPRECIATION AND AMORTISATION (CONTINUED)
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.
(q) EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE
Exploration, evaluation and development costs are accumulated in
respect of each separate area of interest.
Exploration and evaluation costs are carried forward where right of
tenure of the area of interest is current and they are expected to be
recouped through sale or successful development and exploitation of the
area of interest, or, where evaluation and activities in the area of
interest have not yet reached a stage that permits reasonable
assessment of the existence of economically recoverable reserves.
Development costs related to an area of interest are carried forward to
the extent that they are expected to be recouped either through sale or
successful exploitation of the area of interest.
When an area of interest is abandoned or the directors decide that it
is not commercial, any accumulated costs in respect of that area are
written off in the financial period the decision is made. Each area of
interest is also reviewed at the end of each accounting period and
accumulated costs written off to the extent that they will not be
recoverable in the future.
Amortisation is not charged on costs carried forward in respect of
areas of interest in the development phase until production commences.
When production commences, carried forward evaluation and development
costs are amortised on a units of production basis over the life of the
economically recoverable reserves.
(r) PAYABLES
Liabilities are recognised for amounts to be paid in the future for
goods or services received. Trade accounts payable are normally settled
within 60 days.
(s) EMPLOYEE ENTITLEMENTS
WAGES, SALARIES, ANNUAL LEAVE
Liabilities for employee benefits for wages, salaries (including
non-monetary benefits), and annual leave to be settled within 12 months
of the reporting date representing present obligations resulting from
employees' services provided up to the reporting date, calculated at
undiscounted amounts based on remuneration rates that the company
expects to pay as at reporting date including related on-costs.
F11
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s) EMPLOYEE ENTITLEMENTS (CONTINUED)
LONG SERVICE LEAVE
The liability for employees' entitlements to long service leave is only
accrued for those employees not covered by the Coal Mining Industry
Long Service Leave Fund and represents the present value of the
estimated future cash outflows to be made by the employer resulting
from employees' services provided up to balance date, including related
on-costs.
For those employees covered by the Coal Mining Industry Long Service
Leave Fund no provision is recorded by the consolidated entity as the
liability for payment of long service leave is reimbursed from the Coal
Mining Industry (Long Service Leave) Fund. The consolidated entity
accrues for all levy's charged by the Fund as incurred.
SUPERANNUATION PLAN
The Company contributes to several defined contribution superannuation
plans. Contributions are charged against income as they are made.
(t) PROVISIONS
A provision is recognised when a legal or constructive obligation
exists as a result of a past event and it is probable that an outflow
of economic benefits will be required to settle the obligation, the
timing or amount of which is uncertain.
If the effect is material, provisions are 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, being risk free rates on government bonds
most closely matching the expected future payments, except where noted
below. The unwinding of the discount is treated as part of the expense
related to the particular provision.
When some or all of the economic benefit required to settle a provision
are expected to be recovered from a third party, the recovery will be
received and is measured on a basis consistent with the measurement of
the related provision.
In the statement of financial performance, the expense recognised in
respect of a provision is presented net of the recovery.
In the statement of financial position, the provision is recognised net
of the recovery receivable when the company:
- has a legal recognised right to set-off the recovery receivable and
the provision; and
- intends to settle on a net basis, or to realise the asset and settle
the provision simultaneously.
F12
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(t) PROVISIONS (CONTINUED)
RESTORATION
Provisions are made for mine site rehabilitation and restoration on an
incremental basis during the course of mine life. Provisions, which are
determined on an undiscounted basis, include the following costs:
reclamation, plant closure, waste site closure and monitoring
activities. These costs have been determined on the basis of current
costs, current legal requirements and current technology. Changes in
estimates are dealt with on a prospective basis.
Significant uncertainty exists as to the amount of restoration
obligations which will be incurred due to the following factors:
- Uncertainty as to the remaining life of existing sites
- The impact of changes in environmental legislation.
Assumptions have been made as to the remaining life of existing sites
based on studies conducted by independent technical advisors. Such
studies are conducted at least once in each three year period.
(u) COMPARATIVE AMOUNTS
Where necessary, comparative information has been reclassified to
achieve consistency in disclosure with current financial year amounts
and other disclosures.
2 REVENUE FROM ORDINARY ACTIVITIES
Consolidated
-------------------------
2001 2002 2003
A$'000 A$'000 A$'000
------- ------- -------
Revenue from sale of coal 379,498 369,155 370,131
------- ------- -------
OTHER REVENUES:
From operating activities
Interest received from:
Other parties 8,203 6,802 5,161
Dividends 512 - 827
Rental proceeds received - 478 2,392
From outside operating activities
Proceeds from sale of non-current assets 101,814 123 -
Other 26 495 272
------- ------- -------
Total other revenues 110,555 7,898 8,652
------- ------- -------
TOTAL REVENUE FROM ORDINARY ACTIVITIES 490,053 377,053 378,783
======= ======= =======
F13
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3 PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE
Consolidated
-------------------------
2001 2002 2003
A$'000 A$'000 A$'000
------- ------ ------
(a) INDIVIDUALLY SIGNIFICANT ITEMS INCLUDED IN PROFIT FROM ORDINARY
ACTIVITIES BEFORE INCOME TAX EXPENSE
Net gain on sale of investments in joint venture operations and
associated entities (48,730) - -
Exploration and development costs written off 17,605 - -
Property, plant and equipment written off 7,728 - -
(b) PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE HAS BEEN
ARRIVED AT AFTER CHARGING/(CREDITING) THE FOLLOWING ITEMS:
Borrowing costs:
Related parties 601 - -
Other parties 15,131 12,746 9,852
Depreciation of property, plant and equipment 44,038 36,820 44,961
Amortisation:
Deferred expenditure 1,809 521 -
Net (profit)/loss on sale of property, plant and equipment (123) (94) 138
Net foreign exchange loss/(gain) 66,476 (23,589) (46,709)
Net expense for movements in provision for:
Doubtful debts (134) 161 (108)
Stock obsolescence (282) - -
Restoration 588 509 881
Employee entitlements 69 18 3,238
Land compensation - 103 -
Contract losses on oxidised coal (849) - -
F14
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4 AUDITORS' REMUNERATION
Consolidated
---------------------------
2001 2002 2003
A$ A$ A$
------- ------- -------
AUDIT SERVICES
Auditor of the company -KPMG
Audit and review of the financial report for the
Corporate entities 57,500 47,500 137,500
Audit and review of the financial report for the
unincorporated joint ventures 65,000 67,000 36,500
------- ------- -------
122,500 114,500 174,000
======= ======= =======
OTHER SERVICES:
Auditor of the Company -KPMG
Other assurance services 62,000 91,753 262,709
Taxation services 443,505 477,032 468,280
------- ------- -------
505,505 568,785 730,989
======= ======= =======
5 TAXATION
Consolidated
------------------------
2001 2002 2003
A$'000 A$'000 A$'000
------ ------ ------
(a) INCOME TAX EXPENSE
Prima facie income tax expense calculated at 30% on
the profit from ordinary activities: 11,546 28,454 19,815
Increase/(decrease) in income tax expense due to:
Non-deductible mining rights depreciation 5,117 3,046 3,631
Non deductible interest 543 157 30
Non deductible exploration costs 5,757 - -
Legal expenses 95 93 -
Non deductible expense on acquisition of
controlled entities - - 759
Non-deductible tax assets disposed during the year 4,979 - -
Deductible losses on closing hedge contracts (2,404) (3,328) (2,706)
Non assessable profit on disposal of joint venture
operations and associated entities 88 - -
Recovery of deferred tax assets not previously
brought to account - - (1,452)
Sundry items (1) 10 (12)
Income tax over provided in prior year (3,843) (3,504) (438)
------ ------ ------
Income tax expense 21,877 24,928 19,627
====== ====== ======
F15
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5 TAXATION (CONTINUED)
Consolidated
------------------------
2001 2002 2003
A$'000 A$'000 A$'000
------ ------ ------
Income tax expense attributable to operating profit
is made up of:
Current tax provision 27,517 23,252 2,373
Deferred income tax provision (3,527) 86 11,777
Future income tax benefit 1,730 5,094 5,915
Over provision in prior year (3,843) (3,504) (438)
-------- ------ ------
INCOME TAX EXPENSE 21,877 24,928 19,627
======== ====== ======
Consolidated
------------------
2002 2003
A$'000 A$'000
------- -------
(b) CURRENT TAX LIABILITIES/(ASSETS)
PROVISION FOR CURRENT INCOME TAX
Movements during the year were as follows:
Balance at beginning of year 15,770 21,256
Income tax paid (12,987) (29,534)
Current year's income tax expense on profit from
ordinary activities 23,252 2,373
Addition through acquisition of a controlled entity -- 971
Over provision in prior year:
Permanent differences (3,504) (438)
Timing differences (1,275) (5,945)
------- -------
Balance at end of year 21,256 (11,317)
======= =======
(c) DEFERRED TAX LIABILITIES
PROVISION FOR DEFERRED INCOME TAX
Provision for deferred income tax comprises the
estimated expense at the applicable rate of 30%
on the following items:
Difference in depreciation and amortisation of
property, plant and equipment for accounting and
income tax purposes 2,321 12,922
Unrealized currency differences - 5,595
Expenditure currently deductible for tax but
deferred and amortised for accounting purposes 561 -
------- -------
2,882 18,517
======= =======
F16
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5 TAXATION (CONTINUED)
Consolidated
---------------
2002 2003
A$'000 A$'000
------ ------
(d) DEFERRED TAX ASSETS
FUTURE INCOME TAX BENEFIT
Future income tax benefit comprises the estimated
future benefit, at the applicable rate of 30% on
the following items:
Provision and accrued employee entitlements not
currently deductible 4,943 5,455
Unrealised currency differences 7,539 -
Sundry items 222 158
------ ------
12,704 5,613
====== ======
(e) DIVIDEND FRANKING ACCOUNT
30% franking credits available to shareholders of
RAG Australia Coal Pty Limited and its Controlled
Entities for subsequent financial years 44,172 17,074
====== ======
The above available amounts are based on the balance of the dividend
franking account at year-end adjusted for:
(a) franking credits/debits that will arise from the payment/receipt of
the amount of the provision for income tax
(b) franking debits that will arise from the payment of dividends
recognised as a liability at the year-end
(c) franking credits that will arise from the receipt of dividends
recognised as receivables at the year-end
(d) franking credits that the entity may be prevented from distributing in
subsequent years.
The ability to utilise the franking credits is dependent upon there being
sufficient available profits to declare dividends.
F17
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Consolidated
----------------
2002 2003
A$'000 A$'000
------- -------
6 CASH ASSETS
Cash at bank 227,377 111,337
======= =======
The weighted average interest rate on cash
assets at 31 December 2003 is 4.2% (2002: 3.31%)
7 RECEIVABLES
CURRENT
Trade debtors 33,754 19,713
Less: Provision for doubtful debts (351) (243)
------- ------
33,403 19,470
------- ------
Other debtors 3,116 16,647
Loan to related parties 18,901 23,039
------- ------
55,420 59,156
======= ======
8 INVENTORIES
CURRENT
Raw materials and stores - at net realisable value 1,869 4,765
Work in progress - at cost 750 43
Finished goods - at cost 11,354 11,661
------- ------
13,973 16,469
======= ======
F18
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Consolidated
---------------
2002 2003
A$'000 A$'000
------ ------
9 OTHER ASSETS
CURRENT
Prepayments 3,597 4,403
Security deposits 3 3
Deferred expenditure 100 4,559
Hedge receivable - 18,627
------ ------
3,700 27,592
====== ======
OTHER NON-CURRENT ASSETS
Security deposits 478 478
====== ======
10 OTHER FINANCIAL ASSETS
Other corporations
Unlisted shares at cost 1,801 1,801
------ ------
1,801 1,801
====== ======
ORDINARY SHARE
CONSOLIDATED ENTITY INTEREST
2002 2003
% %
---- ----
(a) PARTICULARS IN RELATION TO CONTROLLED ENTITIES
Name
Parent entity
RAG Australia Coal Pty Limited
Controlled entities
Ellensfield Pty Limited 100 100
North Goonyella Coal Properties Pty Limited 100 100
RAG Trading Pacific Pty Limited 100 100
North Goonyella Coal Mines Pty Limited - 100
North Goonyella Coal Mine Management Pty Limited - 100
Burton Coal Pty Limited 100 100
Watonga Pty Limited 100 100
Coal Developments (German Greek) Pty Limited 100 100
Mitterb Pty Limited - 100
F19
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10 OTHER FINANCIAL ASSETS (CONTINUED)
(b) ACQUISITION OF ENTITIES
On 16 January 2003, the consolidated entity purchased the remaining 40% in
the North Goonyella Joint Venture and 100% of the share capital of North
Goonyella Coal Mines Pty Limited.
On 1 May 2002, the consolidated entity purchased 100% of the voting shares
of RAG Trading Pacific Pty Limited.
Details of the acquisitions are as follows:
Consolidated
-----------------------
2001 2002 2003
A$'000 A$'000 A$'000
------ ------ ------
Consideration - 591 8,565
Cash acquired - (554) (678)
---- ---- -------
Outflow/(Inflow) of cash - 37 7,887
==== ==== =======
Fair value of net assets acquired:
Property plant and equipment - 115 22,691
Receivables - - 15,827
Inventories - - 1,451
Cash assets - 554 678
Deferred tax assets - - 1,325
Other - - 2,093
Payables - (78) (31,217)
Current tax liabilities - - (971)
Deferred tax liabilities - - (2,581)
Provision for restoration - - (731)
---- ---- -------
Consideration - 591 8,565
==== ==== =======
(c) DISPOSAL OF ENTITIES
On 1 January 2001 the consolidated entity disposed of its 22.83% share in
the Capricorn Coal Developments Joint Venture and 33.47% interest in Jena
unit trust.
F20
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10 OTHER FINANCIAL ASSETS (CONTINUED)
Details of the disposal are as follows (in aggregate):
Consolidated
-----------------------
2001 2002 2003
A$'000 A$'000 A$'000
------- ------ ------
Consideration (cash) 101,659 - -
Net assets of entities disposed of
Cash 472 - -
Property plant and equipment 38,709 - -
Mining interests 3,398 - -
Inventories 4,930 - -
Trade and other debtors 6,140 - -
Other receivables 843 - -
Investments in unit trusts 19,089 - -
Unlisted shares at cost 133 - -
Trade creditors (8,340) - -
Interest bearing liabilities (81) - -
Conveyor lease liability (2,728) - -
Loan from associated trust (825) - -
Provisions (8,985) - -
Other 174 - -
------- ------ ------
52,929 - -
------- ------ ------
Profit on disposal 48,730 - -
======= ====== ======
11 PROPERTY, PLANT AND EQUIPMENT
Consolidated
------------------
2002 2003
A$'000 A$'000
------- --------
Mining property, plant and equipment 236,914 299,953
Exploration and/or evaluation phase 17,285 26,235
Longwall set-up and development costs - 17,591
Accumulated depreciation (91,038) (142,155)
------- --------
Total property, plant and equipment
Net book value 163,161 201,624
======= ========
The ultimate recoupment of costs carried forward for exploratory and
evaluation phases is dependent on the successful development and
commercial exploitation or sale of the respective areas.
F21
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Consolidated
-----------------
2002 2003
A$'000 A$'000
------- -------
12 PAYABLES
CURRENT
Trade creditors 42,616 40,050
Other creditors and accruals 10,996 4,368
Loans from controlled entities - -
------- -------
53,612 44,418
======= =======
NON-CURRENT
Loans from controlled entities - -
======= =======
13 INTEREST BEARING LIABILITIES
CURRENT
Unsecured bank loans 16,992 14,972
======= =======
NON-CURRENT
Unsecured bank loans 142,897 97,194
======= =======
14 PROVISIONS
CURRENT
Employee entitlements 293 3,531
Hedge acquisition loss 9,019 -
Provision for hedge book losses 4,943 -
Provision for land compensation 103 103
Provision for dividend 18,000 -
------- -------
32,358 3,634
======= =======
NON-CURRENT
Provision for restoration 1,275 2,887
======= =======
15 CONTRIBUTED EQUITY
ISSUED AND PAID-UP SHARE CAPITAL
1,500 ordinary shares fully paid 15,000 15,000
65,000,000 redeemable preferences
shares, fully paid 65,000 65,000
======= =======
80,000 80,000
======= =======
F22
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15 CONTRIBUTED EQUITY (CONTINUED)
REDEEMABLE PREFERENCE SHARES
Dividends payable in respect of redeemable preference shares are determined
by the Board in its absolute discretion.
Each redeemable preference share entitles the holder to the same voting
rights as ordinary share holders and may be redeemed at any time for the
amount paid to the company as determined by a resolution of the directors
of RAG Australia Coal Pty Limited.
In the event of the winding up of the Company, each redeemable preference
shares carries a right in priority to any other class of shares only as to
the amount paid to the company on the issue of the redeemable preference
share.
ORDINARY SHARES
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 shares rank after all
other shareholders and creditors and are fully entitled to any proceeds of
liquidation.
16 RETAINED PROFITS
Consolidated
--------------------------
2001 2002 2003
A$'000 A$'000 A$'000
------ ------- -------
Retained profits at beginning
of the year 49,992 66,447 127,342
Net profit 16,610 69,919 46,423
Transfer from capital profits - 9,876
Dividends provided/paid (155) (18,900) -
------ ------- -------
Retained profits at the end
of the year 66,447 127,342 173,765
====== ======= =======
F23
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17 INTERESTS IN JOINT VENTURE OPERATIONS
The consolidated entity holds a 95% interest in Burton Coal Joint venture
and 100% of the North Goonyella Coal Mine. In the prior year the
consolidated entity held a 60% interest in the North Goonyella Joint
Venture.
The purpose of the Joint Venture operations are to explore, investigate,
evaluate, develop and exploit mining leases held in the Burton and North
Goonyella regions of Queensland, Australia. Included in the assets and
liabilities of the consolidated entity are the following items which
represent the consolidated entity's interest in assets and liabilities
employed in the joint ventures, recorded in accordance with the accounting
policies described in Note 1(b) are:
Consolidated
------------------
2002 2003
A$'000 A$'000
------- -------
CURRENT ASSETS
Cash assets 2,444 5,832
Receivables 3,133 4,217
Inventory 13,972 8,788
Other 3,134 -
------- -------
TOTAL CURRENT ASSETS 22,683 18,837
------- -------
NON-CURRENT ASSETS
Other financial assets 1,801 1,801
Property, plant and equipment 162,663 110,629
Other 235 222
------- -------
TOTAL NON-CURRENT ASSETS 164,699 112,652
------- -------
TOTAL ASSETS 187,382 131,489
======= =======
CURRENT LIABILITIES
Payables 49,204 23,876
Provisions 136 78
------- -------
TOTAL CURRENT LIABILITIES 49,340 23,954
------- -------
NON-CURRENT LIABILITIES
Provisions 1,275 78
------- -------
TOTAL NON-CURRENT LIABILITIES 1,275 78
------- -------
TOTAL LIABILITIES 50,615 24,032
======= =======
Refer to Note 18 for details of commitments and contingent liabilities.
F24
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18 COMMITMENTS AND CONTINGENT LIABILITIES
The Burton Coal and North Goonyella Joint Venture managers, on behalf of
the Joint Venture partners, pay the levy imposed by the Coal Mining
Industry (Long Service Leave) Payroll Levy Act 1992 and expects to be
reimbursed in accordance with the Coal Mining Industry (Long Service Leave
Funding) Act 1992 for long service leave payments made to eligible
employees.
The liability for payment of long service to employees and the expected
right to reimbursement from the Coal Mining Industry (Long Service Leave)
Fund are anticipated to be equal.
19 NOTES TO THE STATEMENTS OF CASH FLOWS
(i) RECONCILIATION OF CASH
For the purposes of the Statements of cash flows, cash includes cash on
hand and at bank and short term deposits at call, net of outstanding bank
overdrafts. Cash as at the end of the financial year as shown in the
Statements of cash flows is reconciled to the related items in the balance
sheets as follows:
Consolidated
-------------------------
2001 2002 2003
A$'000 A$'000 A$'000
------- ------- -------
Cash 176,526 227,377 111,337
======= ======= =======
F25
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19 NOTES TO THE STATEMENTS OF CASH FLOWS (CONTINUED)
Consolidated
-------------------------
2001 2002 2003
A$'000 A$'000 A$'000
------- ------- ------
(ii) RECONCILIATION OF OPERATING PROFIT/
(LOSS) AFTER INCOME TAX TO NET
CASH PROVIDED BY/(USED IN) OPERATING
ACTIVITIES
Operating profit after income tax 16,610 69,919 46,423
Add/(less) items classified as investing/
financing activities:
(Profit)/loss on sale of non-current assets (48,853) (94) 138
Unrealised exchange loss/(gain) 11,022 (11,468) (23,762)
Add/(less) non-cash items:
Exploration and development costs written off 17,605 - -
Property, plant and equipment written off 7,728 - -
Amortisation 1,809 521 -
Depreciation 44,406 36,820 44,961
Amounts set aside to provisions 26,857 791 4,011
Increase/(decrease) in income taxes payable 2,155 5,486 (32,633)
Decrease/(increase) in deferred tax
assets/liabilities (1,797) 6,456 22,726
------- ------- -------
Net cash provided by operating activities before
change in assets and liabilities 77,542 108,431 61,864
Change in assets and liabilities adjusted for effects
of purchase of controlled entity's and joint venture
interests during the financial year:
(Increase)/Decrease in receivables (11,102) 8,021 16,337
Decrease in inventories 2,294 1,330 1,045
(Increase) in other assets (3,207) (154) (3,172)
Increase/(Decrease) in trade and other creditors 1,428 - -
Increase/(Decrease) in payables - 19,275 (40,411)
(Decrease) in hedge acquisition loss (9,844) (11,092) (9,019)
(Decrease) in hedge receivable - (22,520) (23,570)
------- ------- -------
Net cash provided by operating activities 57,111 103,291 3,074
======= ======= =======
F26
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20 DIVIDENDS
Dividends recognised by the Company are:
Per share Total Amount Percentage
$ $ Date of Payment Franked
--------- ------------ --------------- ----------
2003
- - 2002 Final - Ordinary dividend
declared and provided December 2002 12,000 18,000,000 18 December 2003 100%
2002
- - 2002 Interim - Ordinary dividend
declared and paid 600 900,000 15 May 2002 100%
2001
- - 2000 Final - Ordinary shares 103.135 154,702 9 November 2001 100%
21 EVENTS SUBSEQUENT TO BALANCE DATE
There has not arisen in the interval between the end of the financial year
and the date of this report, any item, transaction or event of a material
and unusual nature likely, in the opinion of the directors of the Company,
to affect significantly the operations of the consolidated entity, the
results of those operations, or the state of affairs of the consolidated
entity in future financial years.
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
The consolidated financial report is prepared in accordance with accounting
principles generally accepted in Australia (Australian GAAP). Certain
significant differences exist between Australian GAAP and accounting
principles generally accepted in the United States of America (U.S. GAAP).
The significant differences between Australian GAAP and U.S. GAAP as they
relate to the Company are presented throughout this note.
F27
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
(CONTINUED)
The following table includes a statement of financial performance prepared
in accordance with Australian GAAP, but presented in a U.S. GAAP format:
Consolidated
-----------------
2002 2003
A$000 A$000
------- -------
NET SALES 369,155 370,131
------- -------
Costs and expenses:
Cost of sales 197,535 237,260
Depreciation and amortisation 36,820 44,961
Selling, marketing and distribution 45,714 54,435
General and administrative 12,980 12,934
Foreign exchange gains (23,589) (46,709)
------- -------
TOTAL COSTS AND EXPENSES 269,460 302,881
------- -------
OPERATING INCOME 99,695 67,250
------- -------
Other revenues (1,096) (3,491)
Interest expense 12,746 9,852
Interest income (6,802) (5,161)
------- -------
OTHER INCOME AND EXPENSES 4,848 1,200
------- -------
PROFIT BEFORE INCOME TAXES 94,847 66,050
Income tax expense 24,928 19,627
------- -------
NET PROFIT 69,919 46,423
======= =======
F28
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
(CONTINUED)
Consolidated
--------------
2002 2003
Note A$000 A$000
------ ------ ------
RECONCILIATION OF NET PROFIT TO U.S. GAAP
Australian GAAP net profit reported in
statement of financial performance 69,919 46,423
Adjustments required to comply with U.S. GAAP:
Exploration, evaluation and development costs 22(a) (3,356) (4,214)
Deferred costs 22(b) - (7,052)
Provision for restoration 22(c) - (706)
Depreciation of non-current assets 22(d) 3,858 3,274
Tax effect of U.S. GAAP adjustments (151) 2,609
------ ------
NET PROFIT UNDER U.S. GAAP 70,270 40,334
------ ------
STATEMENT OF COMPREHENSIVE INCOME
Comprehensive income equals net profit under U.S. GAAP for each of the years
ended December 31, 2002 and 2003.
F29
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
(CONTINUED)
U.S. GAAP EARNINGS PER SHARE
Basic earnings per share is computed by dividing profit available to
ordinary shareholders by the weighted average number of ordinary shares
outstanding for the reporting period. Under U.S. GAAP, diluted earnings per
share reflects the potential dilution that could occur if securities or
other contracts to issue ordinary stock were exercised or converted into
ordinary stock. The Company has no dilutive shares.
SHARES
------------
2002 2003
---- ----
Weighted average number of shares on
which earnings per share Calculations
are based:
Basic and diluted 1,500 1,500
----- -----
2002 2003
-------------------------- ------------------------
A$ 000'S DOLLARS/SHARE A$ 000'S DOLLARS/SHARE
-------- ------------- -------- -------------
EARNINGS PER SHARE:
Earnings per ordinary share -
basic and diluted
Net profit 70,270 46,847 40,334 26,889
-------- ------------- -------- -------------
2002 2003
NOTE A$'000 A$'000
----- ------- -------
RECONCILIATION OF SHAREHOLDER'S EQUITY TO U.S. GAAP
Australian GAAP shareholder's equity per
statement of financial position 207,342 253,765
Cumulative adjustments required to comply with U.S. GAAP:
Exploration, evaluation and development costs 22(a) (7,467) (11,681)
Deferred costs 22(b) - (7,052)
Provision for restoration 22(c) - (706)
Depreciation of non-current assets 22(d) 3,858 7,132
Redeemable preference shares 22(e) (65,000) (65,000)
Tax effect of U.S. GAAP adjustments 1,082 3,691
------- -------
SHAREHOLDER'S EQUITY UNDER U.S. GAAP 139,815 180,149
------- -------
F30
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
(CONTINUED)
(a) Exploration, evaluation and development costs
Under Australian GAAP, exploration, evaluation and development costs
are accumulated in respect of each separate area of interest.
Exploration and evaluation costs are deferred where right of tenure of
the area of interest is current and they are expected to be recouped
through sale or successful development and exploitation of the area of
interest, or, where evaluation and activities in the area of interest
have not yet reached a stage that permits reasonable assessment of the
existence of economically recoverable reserves. Development costs
related to an area of interest are deferred to the extent they are
expected to be recouped either through sale or successful exploitation
of the area of interest.
When an area of interest is abandoned or the directors decide that it
is not commercial, any accumulated costs in respect to that area are
written off in the financial period the decision is made. Each area of
interest is also reviewed at the end of each accounting period and
accumulated costs written off to the extent they will not be
recoverable in the future.
Under U.S. GAAP, exploration and evaluation costs are expensed as
incurred. Development costs incurred to develop coal mines or to
expand the capacity of operating mines are capitalised. All other
development costs are charged to operating costs as incurred.
(b) Deferred costs
Under Australian GAAP, all costs incurred in relation to setting up
existing longwall equipment is deferred and amortised on a unit of
production basis over the relevant longwall panel. These costs include
surveying prospective panels and physically moving the longwall
equipment.
Under U.S. GAAP, such costs are expensed as incurred, unless they
relate to the initial set-up of new longwall equipment. RAG have not
incurred any costs associated with set-up of new longwall equipment in
respect of the two years ended December 31, 2003.
F31
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
(CONTINUED)
(c) Provision for restoration
Under Australian GAAP, provisions are recorded for mine site
rehabilitation on an incremental basis during the course of mine life.
Provisions, which are determined on an undiscounted basis, include the
following costs: reclamation, plant closure, waste site closure and
monitoring activities. These costs have been determined on the basis
of current costs, current legal requirements and current technology.
Changes in estimates are dealt with on a prospective basis.
Significant uncertainty exists as to the amount of restoration
obligations which will be incurred due to the following factors: (a)
uncertainty as to the remaining life of existing sites; and (b) the
impact of changes in environmental legislation.
Assumptions are made as to the remaining life of existing sites based
on studies conducted by independent technical advisors. Such studies
are conducted at least once in each three-year period.
This policy was consistent in most major respects with the
requirements under U.S. GAAP until June 2001 when the Financial
Accounting Standards Board (FASB) issued SFAS No. 143 "Accounting for
Asset Retirement Obligations" (SFAS No. 143).
SFAS No. 143 requires an enterprise to record the fair value of an
asset retirement obligation as a liability in the period in which it
incurs a legal obligation associated with the retirement of tangible
long-lived assets that results from the acquisition, construction,
development or normal use of the assets. The enterprise should also
record a corresponding increase to the carrying amount of the related
long-lived asset (i.e., the associated asset retirement costs) and
depreciate that cost over the life of the asset. The liability is
adjusted each period to reflect the passage of time (i.e., accretion
expense) and changes in the estimated future cash flows underlying the
initial fair value measurement. Because of the extensive use of
estimates, many enterprises will record a gain or loss when they
settle the obligation.
This Statement is effective for fiscal years beginning after June 15,
2002 (effective January 1, 2003 for RAG Australia Coal).
On initial adoption of SFAS No. 143, RAG Australia Coal recorded a
cumulative loss of $2,265,000, net of increased depreciation and
accretion expenses, increased the carrying amount of mining property
and equipment by $5,637,000 and increased the provision for
restoration by $7,902,000.
In accordance with U.S. GAAP for the year ended December 31, 2003, RAG
Australia Coal recorded depreciation and accretion charges associated
with restoration provisions of $656,000 and $1,095,000 compared to the
$3,310,000 expense recorded under Australian GAAP.
Under Australian GAAP, a component of the restoration provisions is
recorded against accumulated depreciation. Under U.S. GAAP, this
provision would be reclassified into non-current liabilities. No
adjustment to equity would result from this reclassification.
F32
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
(CONTINUED)
(d) Depreciation of non-current assets
Under Australian GAAP, items of property, plant and equipment,
including mining equipment under lease are depreciated using the
straight-line method over their estimated useful lives. This takes
into account production output so as to write-off the net cost of each
asset over the shorter of its expected useful life or the production
life of the mine at which the asset is sited. This is consistent in
most major respects with U.S. GAAP.
Under Australian GAAP, deferred exploration, evaluation and
development costs are capitalised (refer Note 22 (a)) and depreciated
on a units of production basis over the life of the economically
recoverable reserves from the point at which production commences.
Under U.S. GAAP, these costs are expensed as incurred. Accordingly,
the annual depreciation charge recorded under Australian GAAP is
reduced for U.S. GAAP to the extent that the underlying assets are
written-off in Note 22 (a).
(e) Redeemable preference shares
As disclosed in Note 15 of the Consolidated Financial Statements each
redeemable preference share entitles the holder to the same voting
rights as ordinary share holders and may be redeemed at any time for
the amount paid to the Company as determined by a resolution of the
directors of RAG Australia Coal Pty Limited. In the event of the
winding up of the Company, each redeemable preference share carries a
right in priority to any other class of shares only as to the amount
paid to the Company on the issue of the redeemable preference share.
Dividends payable in respect of redeemable preference shares are
determined by the Board in its absolute discretion.
Under Australian GAAP these shares are classified as contributed
equity.
For U.S. GAAP purposes, this amount has been reclassified to debt in
the statement of financial position on the basis that the shares are
redeemable in cash only and cannot be converted to ordinary shares
under any circumstance and carry preferential rights on winding-up.
F33
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
(CONTINUED)
(f) Deferred income taxes
Deferred income taxes are accounted for under the liability method for
Australian GAAP purposes, which is equivalent in most major respects
to U.S. Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
Under U.S. GAAP, all deferred tax assets and liabilities are required
to be recognised on the Statement of Financial Position, and a
valuation allowance recorded against any deferred tax assets to the
extent it is not 'more likely than not' that they will be realised.
Under Australian GAAP, deferred tax assets related to temporary
differences are brought to account when it is assured 'beyond a
reasonable doubt' and tax losses carried forward must past a
'virtually certain' threshold.
The definition of 'more likely than not' is a level of likelihood that
is more than 50 percent, which is considered a lesser recognition
threshold than the 'virtually certain' criterion. Deferred tax assets
of $2,296,000 carried forward have been recognized for U.S. GAAP
purposes the year ended December 31, 2003, which have not been
recognized for Australian GAAP. As a full valuation allowance would be
recorded against these assets for U.S. GAAP purposes as the
realization of the deferred tax assets is not considered more likely
than not.
Under Australian GAAP, deferred taxes are not recorded on the fair
value of intangible assets and property, plant and equipment acquired
through a business combination. Under U.S. GAAP, deferred tax assets
and liabilities are recognized on acquisition, based on the difference
between the fair value and tax value of assets acquired and
liabilities assumed. The recognition of deferred tax assets and
liabilities on acquisition is adjusted against the carrying value of
goodwill recognized on acquisition. This differing accounting
treatment did not give rise to any equity or income adjustments for
the consolidated entity during the two years ended December 31, 2003.
(g) Acquired mineral tenements
Under Australian GAAP, the cost of mining rights and reserves acquired
under a business combination or asset purchase are capitalised as
'exploration, evaluation and development expenditure' and amortised on
a units of production basis.
Under U.S. GAAP, these costs would be classified as either 'Land and
Coal Interests' or "Leased Coal Interests' (i.e., other intangible
asset) and amortised on a consistent basis with Australian GAAP. This
reclassification does not impact either shareholder's equity or the
Statement of Financial Performance.
The potential impairment of these assets has been considered in
accordance with SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets" and no adjustment has been recorded
against the carrying value of these assets to comply with U.S. GAAP.
F34
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
(CONTINUED)
(h) Sale of non-current assets
Under Australian GAAP, proceeds from the sale of non-current assets
are recorded as other revenues from ordinary activities and the basis
of the assets sold is included in expenses. Under U.S. GAAP, the
difference between the sales proceeds and the cost basis of the assets
sold is presented as a net gain or loss and included in the
determination of operating income.
(i) Recently issued U.S. accounting pronouncements
In June 2001 the FASB issued Statement No. 141, "Business
Combinations", and Statement No. 142, "Goodwill and Intangible
Assets". Statement No. 141 requires that the purchase method of
accounting be used for all business combinations completed after June
30, 2001 and also specifies the types of acquired intangible assets
that are required to be recognized and reported separately from
goodwill and those acquired intangible assets that are required to be
included in goodwill. Statement No. 142 will require that goodwill no
longer be amortized, but instead tested for impairment at least
annually. Statement No. 142 will also require recognized intangible
assets to be amortized over their respective estimated useful lives
and reviewed for impairment in accordance with Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (Statement No. 144.) Any recognized
intangible asset determined to have an indefinite useful life will not
be amortized, but instead tested for impairment in accordance with
Statement No. 142 until its life is determined to no longer be
indefinite.
The provisions of Statement No. 141 are applicable to all business
combinations accounted for by the purchase method for which the date
of acquisition is July 1, 2001, or later. The Company is required to
adopt the provisions of Statement No. 142 on January 1, 2002.
Retroactive application of Statements No. 141 and No. 142 is not
permitted. However, any goodwill and any intangible asset determined
to have an indefinite useful life that are acquired in a business
combination completed after June 30, 2001 will not be amortized.
Goodwill and intangible assets acquired in business combinations
completed before July 1, 2001 will continue to be amortized until June
30, 2002.
The adoption of Statement No. 141 did not have a material impact on
the Company's consolidated financial statements under U.S. GAAP. The
Company implemented Statement No. 142 on January 1, 2002. The Company
determined that the value of acquired mineral tenements was not
impaired as of January 1, 2002 or subsequently.
F35
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
(CONTINUED)
(i) Recently issued U.S. accounting pronouncements (continued)
In August 2001 the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". Statement No. 144
addresses financial accounting and reporting for the impairment of
long lived assets and will supersede (a) Statement of Financial
Accounting Standards No. 121 with respect to the accounting for the
impairment or disposal of long lived assets and (b) Accounting
Principles Board Opinion No. 30 (APB Opinion No. 30) for the disposal
of a segment of a business. Statement No. 144 retains the requirements
of Statement No. 121 to (a) recognize 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.
Statement 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.
Statement No. 144 retains the basic provisions of APB Opinion No. 30
for the presentation of discontinued operations in the income
statement but broadens that presentation to include a component of an
entity (rather than a segment of a business). A component of an entity
comprises operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the rest of
the entity. A component of an entity that is classified as held for
sale or that has been disposed of is presented as a discontinued
operations if the operations and cash flows of the component will be
(or have been) eliminated from the ongoing operations of the entity
and the entity will not have any significant continuing involvement in
the operations of the component. In addition, discontinued operations
are no longer measured on a net realizable value basis, and future
operating losses are no longer recognized before they occur.
The Company implemented Statement No. 144 on January 1, 2002. This
statement did not have a material impact on the Company's results or
financial position on the date of adoption.
In April 2002 the FASB issued Statement of Financial Accounting
Standards No.145, "Rescission of FASB Statements No.4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections." As a
result of the rescission of Statement No.4, the loss on extinguishment
of debt recognized in the year ended June 30, 2002 is no longer
presented as an extraordinary item upon the adoption of Statement
No.145, which is effective from July 1, 2002.
In July 2002 the FASB issued Statement of Financial Accounting
Standards No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities." Statement No. 146 is based on the general
principle that a liability for a cost associated with an exit or
disposal activity should be recorded when it is incurred and initially
measured at fair value. Statement No. 146 applies to costs associated
with (1) an exit activity that does not involve an entity newly
acquired in a business combination, or (2) a disposal activity within
the scope of Statement No. 144. These costs include certain
termination benefits, costs to terminate a contract that is not a
capital lease, and other associated costs to consolidate facilities or
relocate employees. This statement did not have a material impact on
the Company's consolidated results or financial position on the date
of adoption.
F36
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
(CONTINUED)
(i) Recently issued U.S. accounting pronouncements (continued)
In October 2002, the FASB issued Statement of Financial Accounting
Standards No. 147, "Acquisitions of Certain Financial Institutions."
The adoption of Statement No. 147 did not have a material impact on
the Company's results or financial position under U.S. GAAP.
In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, "Accounting for Stock-Based Compensation Transition
and Disclosure an amendment of Statement No. 123." This Statement
amends Statement No. 123, "Accounting for Stock Based Compensation,"
to provide alternative methods of voluntarily transitioning to the
fair value-based method of accounting for stock-based employee
compensation. Statement No. 148 also amends the disclosure
requirements of Statement No. 123 to require more prominent disclosure
of the method used to account for stock-based employee compensation
and the effect of the method on reported results in both annual and
interim Financial statements. The disclosure provisions are effective
for the Company from January 1, 2002. The adoption of Statement No.
148 did not have a material impact on the Company's consolidated
results or financial position under U.S. GAAP.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness to Others." This Interpretation
elaborates on the disclosures to be made by a guarantor in its interim
and annual financial statements about its obligations under guarantees
issued. This Interpretation also clarifies that a guarantor is
required to recognize, at inception of a guarantee, a liability for
the fair value of the obligation undertaken. The initial recognition
and measurement provisions of this Interpretation are applicable to
guarantees issued or modified after December 31, 2002 and have not had
a material effect on the Company's financial statements. The adoption
of this interpretation has not resulted in any additional disclosure
as the Company has not provided any guarantees of indebtedness to
others.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities." This Interpretation requires the
consolidation of entities that cannot finance their activities without
the support of other parties and that lack certain characteristics of
a controlling interest, such as the ability to make decisions about
the entity's activities via voting rights or similar rights. In
October 2003, the FASB postponed the applicability of Interpretation
4b to many variable interest entities. This Interpretation applies
immediately to variable interests in variable interest entities
created after January 31, 2003, and to variable interests in variable
interest entities obtained after January 31, 2003. For companies with
a variable interest in a variable interest entity created before
February 1, 2003, this Interpretation, as amended, applies no later
than the beginning of the first interim or annual reporting period
ending after December 15, 2003. This Interpretation requires certain
disclosures in financial statements issued after January 31, 2003 if
it is reasonably possible that the Company will consolidate or
disclose information about variable interest entities when the
Interpretation becomes effective. This Interpretation did not have a
material impact on the Company's consolidated results or financial
position on the date of adoption.
F37
RAG AUSTRALIA COAL PTY LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES
(CONTINUED)
(i) Recently issued U.S. accounting pronouncements (continued)
In April 2003, the FASB issued Statement of Financial Accounting
Standards No. 149, "Amendment of Statement No. 133 on Derivative
Instruments and Hedging Activities." This Statement amends and
clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in
other contracts and for hedging activities under Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
Statement requires contracts with comparable characteristics be
accounted for similarly. In particular, this Statement clarifies under
what circumstances a contract with an initial net investment meets the
characteristic of a derivative as discussed in Statement No. 133. In
addition, it clarifies when a derivative contains a financing
component that warrants special reporting in the statement of cash
flows. Statement No. 149 amends certain other existing pronouncements.
This Statement is effective for contracts entered into or modified
after June 30, 2003, except for hedging relationship designated after
June 30, 2003. The provisions of this Statement that relate to
Statement No. 133 implementation issues that have been effective for
fiscal quarters that began prior to June 15, 2003, should continue to
be applied in accordance with their respective effective dates. In
addition, certain provisions relating to forward purchases or sales of
when-issued securities or other securities that do not yet exist,
should be applied to existing contracts as well as new contracts
entered into after June 30, 2003. The adoption of Statement No. 149
did not have a material impact on the Company's consolidated results
or financial position under U.S. GAAP.
In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150, "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity." This statement
requires issuers to classify as liabilities (or assets in some
circumstances) three classes of freestanding financial instruments
(presently classified as equity) that embody obligations for the
issuer. Generally, this statement is effective for financial
instruments entered into or modified after May 31, 2003 and is
otherwise effective at the beginning of the first interim period
beginning after June 15, 2003. We do not expect the adoption of this
standard to have a material impact on the Company's consolidated
results or financial position under U.S. GAAP.
F38