EXHIBIT 99.1
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF VALTRA INC.
We have audited the combined balance sheets of Valtra Group as of June 30, 2002,
December 31, 2002 and 2003 and the related combined statements of operations
and combined statements of cash flows for the year ended December 31, 2001 and
the periods from January 1, 2002 to June 30, 2002 (Predecessor) and from July 1,
2002 to December 31, 2002 (Successor) and for the year ended December 31, 2003.
These combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Finland and in 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 misstatements. An audit also 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Valtra
Group as of June 30, 2002, December 31, 2002 and 2003 and the combined results
of their operations and their cash flows for the year ended December 31, 2001
and the periods from January 1, 2002 to June 30, 2002 (Predecessor) and from
July 1, 2002 to December 31, 2002 (Successor) and for the year ended December
31, 2003 in conformity with accounting principles generally accepted in Finland.
Accounting principles generally accepted in Finland 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 18 to the combined financial statements.
Helsinki, Finland
12 March, 2004
KPMG WIDERI OY AB
/s/ Solveig Tornroos-Huhtamaki
- --------------------------------
Solveig Tornroos-Huhtamaki
Authorized Public Accountant
VALTRA GROUP 1
COMBINED STATEMENTS OF OPERATIONS
(AMOUNTS IN MILLIONS OF EURO)
SUCCESSOR PREDECESSOR
----------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31, | JANUARY 1 TO DECEMBER 31,
NOTES 2003 2002 | JUNE 30, 2002 2001
-----------------------------------------------------------------------
|
Net sales 2 852,4 379,4 | 382,3 685,5
Cost of goods sold (695,4) (308,9) | (315,4) (563,3)
|
Gross profit 157,0 70,5 | 66,9 122,2
|
Selling and marketing expenses (64,7) (31,2) | (30,7) (63,3)
Research and development expenses (17,0) (5,4) | (6,8) (13,3)
Administration expenses (19,5) (9,6) | (9,6) (19,0)
Other operating income 5 4,0 1,2 | 2,1 1,6
Other operating expenses 5 (3,5) (1,3) | (1,5) (2,3)
---------------------------------------------------------------
Total (100,7) (46,3) | (46,5) (96,3)
---------------------------------------------------------------
|
Operating profit 56,3 24,2 | 20,4 25,9
Equity in income (loss) of associated companies 0,1 0,1 | (0,1) (0,3)
|
Financial items |
Other interest income 3,9 0,4 | 0,3 0,9
Interest expenses (6,2) (2,6) | (2,3) (7,2)
Other financial items 6 (1,7) (0,2) | (1,0) (1,0)
---------------------------------------------------------------
Total (4,0) (2,4) | (3,0) (7,3)
---------------------------------------------------------------
|
Profit after financial items 52,4 21,9 | 17,3 18,3
|
Extraordinary items
Group contributions (paid)/received 110,5 (24,7) | - (13,6)
Profit before appropriations and taxes 162,9 (2,8) | 17,3 4,7
Change in deferred taxes 7 - (1,4) | 0,2 4,8
Direct taxes 7 (17,0) (2,2) | (4,2) (4,8)
---------------------------------------------------------------
NET INCOME/(LOSS) FOR THE PERIOD 145,9 (6,4) | 13,3 4,7
---------------------------------------------------------------
See accompanying notes to the combined financial statements.
VALTRA GROUP 2
COMBINED BALANCE SHEETS
(AMOUNTS IN MILLIONS OF EURO)
SUCCESSOR PREDECESSOR
-----------------------------------------------------
AT AT | AT
DECEMBER 31, DECEMBER 31, | JUNE 30,
NOTES 2003 2002 | 2002
-------------------------------------------------------------
|
ASSETS |
FIXED ASSETS AND OTHER LONG-TERM INVESTMENTS |
Intangible assets |
Other capitalised expenditure 8 1,7 1,2 | 1,6
|
Tangible assets |
Land 8 1,4 1,4 | 2,2
Buildings and constructions 8 23,5 20,1 | 20,1
Machinery and equipment 8 37,4 30,3 | 28,3
Other tangible assets 8 0,1 0,1 | 0,1
Advance payments and construction in progress 8 5,2 5,0 | 6,1
---------------------------------------------------
Total 67,6 56,9 | 56,8
---------------------------------------------------
|
Investments
Investments in equity method investees 8,9 1,6 1,6 | 1,5
Other shares and participations 8,9 0,1 0,1 | 0,3
Long-term loan receivables 10 0,3 1,6 | 1,0
---------------------------------------------------
Total 2,0 3,3 | 2,8
---------------------------------------------------
|
Total fixed assets and long-term investments 71,3 61,4 | 61,2
---------------------------------------------------
|
CURRENT ASSETS |
Inventories |
Materials and supplies 42,4 32,6 | 30,5
Work in progress 5,7 5,6 | 11,1
Finished goods 70,2 60,7 | 57,8
---------------------------------------------------
Total 118,3 98,9 | 99,4
---------------------------------------------------
|
Receivables |
Accounts receivable 88,2 76,3 | 89,4
Loan receivables 10 2,4 74,3 | -
Other receivables 10 110,7 4,0 | -
Deferred tax assets 7 6,2 6,5 | 7,9
Prepaid expenses and accrued income 10 21,5 18,1 | 21,9
---------------------------------------------------
Total 229,0 179,2 | 119,2
---------------------------------------------------
|
Cash and bank balances 126,4 30,3 | 18,2
---------------------------------------------------
|
Total current assets 473,7 308,4 | 236,8
|
TOTAL ASSETS 545,0 369,8 | 298,0
===================================================
See accompanying notes to the combined financial statements.
VALTRA GROUP 3
COMBINED BALANCE SHEETS
(AMOUNTS IN MILLIONS OF EURO)
SUCCESSOR PREDECESSOR
-----------------------------------------------
AT AT | AT
DECEMBER 31, DECEMBER 31, | JUNE 30,
NOTES 2003 2002 | 2002
-------------------------------------------------------
|
SHAREHOLDERS' EQUITY AND |
LIABILITIES |
Shareholders' equity |
Share capital 11 43,6 43,6 | 43,6
Share premium account 11 27,0 54,7 | 54,7
Retained earnings (deficit) 11 (25,8) (44,7) | (48,3)
Net income for the period 145,9 (6,4) | 13,3
---------------------------------------------
Total shareholders' equity 190,7 47,2 | 63,3
---------------------------------------------
|
Liabilities |
Long-term |
Other interest-bearing liabilities 12 77,2 75,1 | 45,4
Other non interest-bearing liabilities 12 - 1,4 | 0,8
Deferred tax liability 7 - 0,1 | 0,1
---------------------------------------------
Total 13 77,2 76,6 | 46,3
---------------------------------------------
|
Current |
Other interest-bearing liabilities 13 88,6 91,3 | 57,9
Advances received 14 5,5 3,9 | 0,3
Accounts payable 14 59,4 59,0 | 70,3
Other non-interest bearing liabilities 43,1 - | -
Accrued expenses and deferred income 14,15 80,5 91,8 | 59,9
---------------------------------------------
Total 277,1 246,0 | 188,4
---------------------------------------------
|
Total liabilities 354,3 322,6 | 234,7
|
---------------------------------------------
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 545,0 369,8 | 298,0
=============================================
See accompanying notes to the combined financial statements.
VALTRA GROUP 4
COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS IN MILLIONS OF EURO)
SUCCESSOR PREDECESSOR
----------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31, | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
---------------------------------|------------------------------
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net profit before taxation, and extraordinary item 52,4 21,9 | 17,3 18,3
Adjustments for: |
Depreciation and amortization 11,5 5,1 | 5,8 11,1
Financial items 3,9 2,2 | 3,1 7,7
Investment income (0,5) - | - 0,1
-------------------------------|--------------------------
Cash generated from operations before change in net working |
capital 67,3 29,2 | 26,2 37,2
-------------------------------|--------------------------
|
CHANGE IN NET WORKING CAPITAL: |
Increase (-) / decrease (+) in trade and other receivables (11,9) 17,4 | (9,7) (0,3)
Increase (-) / decrease (+) in inventories (20,6) (0,4) | (18,1) (7,0)
Decrease (-) / increase (+) in trade payables 45,1 (9,1) | 17,0 18,9
-------------------------------|--------------------------
Cash generated from operations 79,9 37,1 | 15,4 48,8
-------------------------------|--------------------------
|
Interest paid (7,9) (3,7) | (3,8) (8,1)
Interest received 4,1 0,1 | - 0,9
Income taxes paid (6,8) (1,9) | (0,7) (8,1)
-------------------------------|--------------------------
NET CASH FROM OPERATING ACTIVITIES 69,3 31,6 | 10,9 33,5
-------------------------------|--------------------------
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
Purchase of property, plant and equipment (22,6) (9,1) | (5,2) (15,0)
Proceeds from sale of property, plant and equipment 0,7 0,7 | - 0,3
-------------------------------|--------------------------
NET CASH USED IN INVESTING ACTIVITIES (21,9) (8,4) | (5,2) (14,7)
-------------------------------|--------------------------
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
Proceeds from long-term borrowings 76,3 - | 7,3 21,2
Payment of long-term borrowings - (44,5) | - (15,2)
Proceeds from short-term loans 10,9 33,4 | - 10,9
Payment of short-term loans (13,6) - | (6,0) -
Paid group contributions (24,9) - | (13,6) (26,7)
-------------------------------|--------------------------
NET CASH FROM (USED IN) FINANCING ACTIVITIES 48,7 (11,1) | (12,3) (9,8)
-------------------------------|--------------------------
NET INCREASE (+) /DECREASE (-) IN CASH AND CASH EQUIVALENTS 96,1 12,1 | (6,6) 9,0
=========================================================
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 30,3 18,2 24,8 15,8
CASH AND CASH EQUIVALENTS AT END OF PERIOD 126,4 30,3 18,2 24,8
See accompanying notes to the combined financial statements.
VALTRA GROUP 5
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Valtra Group ("Valtra" and "Group") is owned by KONE Corporation, a
publicly listed company in Finland ("KONE") and develops, manufactures and sells
tractors and diesel engines for off-road vehicles. Valtra provides its customers
the opportunity to order a tractor, which is produced according to the end
customer's specification at the factory, with a large number of options,
accessories and different colors. The tractors are sold in most of the markets
using dealer networks. However, in certain markets, Valtra has its own direct
sales force, which has the authority to accept trade-in tractors and sell them.
Spare parts sales are also part of Valtra's business. Service of tractors is
handled by the dealers and, in the case of direct sales, mainly by third party
service contractors. In most of the markets, sales financing is offered to the
end customers. In some markets, sales financing is also offered to dealers.
Independent third party finance companies provide these financing services to
customers.
KONE has signed an agreement to sell the Valtra Group to AGCO
Corporation. The transaction was closed on January 5, 2004.
BASIS OF PREPARATION
The combined financial statements of Valtra have been prepared in
conformity with accounting principles generally accepted in Finland ("Finnish
GAAP"). Finnish GAAP differs in certain significant respects from accounting
principles generally accepted in the United States of America ("US GAAP").
Information relating to the nature and effect of such differences is presented
in Note 18.
The preparation of the combined financial statements in conformity with Finnish
GAAP requires the Group's management to make a number of estimates and
assumptions relating to the reported amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the combined
financial statements and the reported amounts of revenues and expenses during
the period. Significant items subject to such estimates and assumptions include
the carrying amount of property, plant and equipment, valuation allowances for
receivables, inventories, deferred income tax assets, valuation of derivative
instruments and assets and obligations related to employee benefits. Actual
results could differ from those estimates.
PRINCIPLES OF COMBINATION
The legal structure for Valtra Group differs in certain respects from the
combined group shown in these financial statements. Finnish GAAP does not have
specific rules for combination. The combination is prepared to generally present
the historical financial statements of the combined businesses to be acquired,
and does not necessarily reflect the legal organization of Valtra Group. The
combined financial statements include the financial statements of Valtra Oy, a
company registered in Finland, and its greater than 50 % owned subsidiaries as
well as four companies which were under common control of KONE and managed and
operated by Valtra, collectively the "Group". These companies are Valtra USA,
Inc, Partek Holding, Inc, Tracfin Holding Oy and Valtra do Brasil Ltda. Valtra
do Brasil Ltda and Tracfin Holding Oy have during 2003 been sold from Valtra Oy
to another KONE company. The sales proceeds amounting to (Euro) 40,1 million
received has been shown as current
VALTRA GROUP 6
NOTES TO COMBINED FINANCIAL STATEMENTS
non-interest bearing liabilities. During 2002, KONE acquired Partek Corporation,
a publicly listed company in Finland ("Partek"), the owner of Valtra, in a
business combination accounted for as purchase. Accordingly, the financial
statements before and after the acquisition may not be comparable in all
material respects. A vertical black line has been inserted to distinguish
between the Predecessor (before KONE acquisition) and Successor Companies (after
KONE acquisition).
The Group's combined financial statements are prepared by combining the
assets, liabilities and results of operations of companies listed in note 9 as
these companies are managed and operated on a combined basis. All inter company
transactions have been eliminated in combination.
The difference between the acquisition cost of the shares of a
subsidiary and the equity at the time of acquisition is allocated to fixed
assets to the extent that their current value exceeds the book value. In this
calculation, appropriations, net of tax, are included in equity. The excess
value allocated to fixed assets is depreciated according to the depreciation
plan of the underlying fixed asset item. The remaining difference is carried as
goodwill, which is amortized over its expected useful life, 5-20 years.
Entities in which the Group owns less that 50 % (note 9) but have
significant influence are accounted for by the equity method in the combined
financial statements.
TRANSACTIONS DENOMINATED IN FOREIGN CURRENCIES
Foreign currency transactions are recorded at the exchange rates
prevailing at the time of transaction. At the end of the accounting period
receivables and liabilities are translated at the rates prevailing on the
balance sheet date. Exchange rate differences related to sales and purchases are
treated as adjustments to the underlying items. Exchange rate gains and losses
associated with financing are entered as net amount under financial income and
expenses.
The reporting currency of the Group is Euro, which is also the
functional currency of the parent company. The income statements of foreign
subsidiaries are translated at the average exchange rates for the accounting
period, and the balance sheets are translated at the closing rate on the balance
sheet date. All translation differences arising from the combination of foreign
subsidiaries and associated companies are credited or charged directly to
retained earnings in the combined financial statements.
DERIVATIVE FINANCIAL INSTRUMENTS
The business operations of the Group give rise to certain exposures
related to currency exchange rates. These risks are managed to minimize their
impact on the Group's profitability and financial position.
The Group considers its derivative financial instruments to be a hedge
when certain criteria are met.
For a non-Euro currency derivative instrument to qualify as a hedge,
the instrument must be related to a non-Euro currency asset, liability, or
commitment, or a portfolio of assets, liabilities and commitments, the
characteristics of which have been identified; involve the same currency as the
hedged item; and reduce the exposure to the risk of non-Euro currency exchange
movements on the Group's operations.
Gains and losses on forward exchange contracts and currency swaps that
are designated and effective as hedges are deferred and recognized in income or
as adjustments of carrying amounts
VALTRA GROUP 7
NOTES TO COMBINED FINANCIAL STATEMENTS
when the hedged transaction occurs. The interest component determined at the
inception of the contract is accrued as interest income and expense over the
contract term.
The Group does not use derivative financial instruments for speculative
purposes.
REVENUE RECOGNITION
Sales are recorded upon delivery of products or performance of
services. Net sales consist of gross sales revenues reduced by certain items
including indirect sales taxes and sales discounts. The Group estimates and
records provisions for cash discounts, quantity rebates, sales returns and
allowances and original warranties in the period the sale is reported based on
its historical experience. The Group has guaranteed certain financing
arrangements between end customer and financial institutions. The revenues have
been recognized and a provision for expected future guarantee losses has been
set up based on historical experience.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and balances with
banks and highly liquid short-term investments. For purposes of the combined
statement of cash flows, the Group considers all highly liquid investments to be
cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable are recorded at historical cost, less a provision
for doubtful accounts. Management considers current information and events
regarding the debtors' ability to repay their obligations, and makes a provision
against amounts due when it is probable that the full amount will not be
collected.
INVENTORIES
Inventories are stated at the lower of cost or net realizable value
using the first-in, first out method. The cost of inventories includes a
proportionate share of overhead arising from the purchase and production of the
goods. Cost includes direct manufacturing, labor and materials, variable
overhead and full absorption of manufacturing overhead.
IMPAIRMENT OF FIXED ASSETS
Impairment of property, plant and equipment and other tangible assets
is recognized if the estimated future cash flows generated by the fixed asset is
expected to be permanently lower than the historical cost, net of depreciation.
The amount of impairment is calculated as the difference between the estimated
future revenue generated and the historical cost, net of depreciation and
recorded as an expense. Fixed assets may be revalued upwards to recover amounts
previously recorded as impairment.
INTANGIBLE ASSETS
Other intangibles assets include capitalized expenditures related
primarily to software licensees and leasehold improvements and are amortized
over 3 to 10 years.
VALTRA GROUP 8
NOTES TO COMBINED FINANCIAL STATEMENTS
FIXED ASSETS AND DEPRECIATION
Property, plant and equipment are stated at the historical cost less
accumulated depreciation. Depreciation on plant and equipment is calculated
using the straight-line method over the estimated useful lives of the assets
according to plan as follows:
Buildings........................................ 15-40 years
Machinery and equipment.......................... 3-10 years
Other tangible assets............................ 5-30 years
Gains and losses on the disposal of fixed assets are included in
operating income and expenses.
LONG-TERM INVESTMENTS
Long-term investments include investments, which are recorded at their
historical cost less impairment of permanent decreases in value.
LEASING
Operating and financial lease payments are treated as rentals. Annual
leasing charges on the basis of existing leasing agreements are shown in the
notes.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed in the financial period
during which they have been incurred.
WARRANTY COSTS
The estimated warranty costs on goods delivered to customers are
charged to earnings and included in accrued expenses in the balance sheet.
PENSION ARRANGEMENTS
Statutory and supplementary pension obligations in Finland are covered
through a compulsory pension insurance policy. Payments to pension insurance
institutions are recorded in amounts determined by the insurance institutions
according to certain prescribed actuarial assumptions and other rulings pursuant
to the Finnish Employees' Act. Group companies outside of Finland have pension
obligations arranged and pension liabilities recorded in accordance with the
local regulations and practice. Costs of pensions are recorded as they are
earned. Changes in uncovered pension liabilities are entered in the income
statement. The pension liability is included in the balance sheet.
VALTRA GROUP 9
NOTES TO COMBINED FINANCIAL STATEMENTS
INCOME TAXES
Income taxes in the income statement include taxes of the Group
companies for the financial period, calculated in accordance with local
regulations, as well as adjustments to prior year taxes and deferred taxes.
Deferred tax assets and liabilities are determined for timing differences
arising when revenues and expenses are recorded in different accounting periods
for accounting and taxation purposes. Currently enacted tax rate is used in
determination of deferred tax income. The balance sheet includes all deferred
tax liabilities and the probable realizable amount of deferred tax assets. No
deferred tax liability is recognized for undistributed earnings of subsidiaries.
EXTRAORDINARY ITEMS
Extraordinary items include group contributions. For tax purposes in
Finland, profits and losses of companies within a group are combined through
group contributions. Group contributions are treated as an expense for the
contribution provider and as income for the beneficiary.
APPROPRIATIONS
Appropriations comprise voluntary provisions and the temporary
differences related to the depreciation of the tax basis as compared to the book
basis of fixed assets. Accumulated appropriations are divided into tax liability
and shareholders' equity. The change in appropriations, net of the tax
liability, is included in the earnings for the year.
VALTRA GROUP 10
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
2. GEOGRAPHICAL AREA DATA
SUCCESSOR PREDECESSOR
-------------------------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
-----------------------------------------|--------------------------------------
|
Net sales by geographical area |
Finland 225,2 89,7 | 105,4 180,0
Other EU 287,2 134,7 | 142,1 252,3
Other Europe 72,5 27,8 | 22,6 36,0
North America 31,0 15,8 | 12,8 22,9
South America 183,6 81,2 | 91,0 174,2
Other countries 52,9 30,2 | 8,4 20,1
-----------------------------------------|-----------------------------------
Total 852,4 379,4 | 382,3 685,5
=============================================================================
SUCCESSOR PREDECESSOR
-------------------------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
-----------------------------------------|-------------------------------------
|
Personnel expenses by geographical area |
Finland 64,8 31,0 | 30,6 57,0
Other EU 8,4 4,3 | 3,9 9,0
Other Europe 2,9 1,6 | 1,4 2,8
South America 10,8 4,6 | 6,4 12,6
Other countries 2,3 1,1 | 1,1 0,8
-----------------------------------------|----------------------------------
Total 89,2 42,6 | 43,4 82,2
============================================================================
SUCCESSOR PREDECESSOR
-------------------------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
-----------------------------------------|-------------------------------------
|
Personnel on average by geographical area |
Finland 1598 1528 | 1499 1467
Other EU 161 153 | 153 168
Other Europe 48 41 | 42 42
South America 766 739 | 737 739
Other countries 37 29 | 27 14
-----------------------------------------|-----------------------------------
Total 2610 2490 | 2458 2430
=============================================================================
VALTRA GROUP 11
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
3. PERSONNEL EXPENSES
SUCCESSOR PREDECESSOR
--------------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
------------------------------------|-------------------------------
|
Wages and salaries |
Salaries and payments to Board Members and |
Managing Directors 2,1 0,9 | 1,1 1,7
To others 69,4 32,5 | 32,8 60,7
Bonus to Board Members and Managing Directors 0,3 0,3 | - 0,1
------------------------------------|---------------------------
Wages and salaries, total 71,8 33,7 | 33,9 62,5
------------------------------------|---------------------------
Other personnel expenses |
Pension expenses 9,5 4,9 | 4,1 7,7
Other personnel expenses 7,9 4,0 | 5,4 12,0
------------------------------------|---------------------------
Total 17,4 8,9 | 9,5 19,7
------------------------------------|---------------------------
|
Personnel expenses, total 89,2 42,6 | 43,4 82,2
================================================================
SUCCESSOR PREDECESSOR
--------------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
------------------------------------|-------------------------------
|
Personnel |
On average 2 610 2 490 | 2 458 2 430
At year end 2 612 2 508 | 2 547 2 395
DISMISSAL
The dismissal time is both for the company and the CEO six months. If the
company dismisses the CEO, he will be paid in addition to the salary for
the dismissal period a compensation for dismissal, which will correspond to
six months fixed monetary salary.
4. DEPRECIATION AND AMORTIZATION
SUCCESSOR PREDECESSOR
--------------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
------------------------------------|-------------------------------
|
Depreciation and amortization by function |
Production 7,7 3,6 | 3,9 6,9
Selling and marketing 1,5 0,7 | 0,8 1,7
Research and development 0,4 0,2 | 0,2 0,4
Administration 1,9 0,6 | 0,9 2,1
------------------------------------|---------------------------
Total 11,5 5,1 | 5,8 11,1
================================================================
SUCCESSOR PREDECESSOR
--------------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
------------------------------------|-------------------------------
|
Depreciation and amortization by category |
Intangible rights 0,4 0,2 | 0,3 0,5
Other capitalised expenditure 0,3 0,3 | 0,2 0,4
Buildings and constructions 2,1 0,9 | 1,0 1,6
Machinery and equipment 8,6 3,7 | 4,2 8,4
Other tangible assets 0,1 - | 0,1 0,2
------------------------------------|---------------------------
Total 11,5 5,1 | 5,8 11,1
================================================================
VALTRA GROUP 12
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
5. OTHER OPERATING INCOME AND EXPENSES
SUCCESSOR PREDECESSOR
--------------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
------------------------------------|-------------------------------
|
Other operating income |
Rental income 0,3 0,1 | 0,1 0,2
Profit on sale of fixed assets 0,5 - | 0,1 0,1
Other income 3,2 1,1 | 1,9 1,3
------------------------------------|---------------------------
Total 4,0 1,2 | 2,1 1,6
================================================================
SUCCESSOR PREDECESSOR
--------------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
------------------------------------|-------------------------------
|
Other operating expenses |
Loss on sale of fixed assets - - | - 0,2
Wages for term of notice in connection |
with restructuring 0,1 0,1 | 0,1 -
Service fee expenses 2,0 0,4 | 0,5 0,7
Other expenses 1,4 0,8 | 0,9 1,4
------------------------------------|---------------------------
Total 3,5 1,3 | 1,5 2,3
================================================================
6. OTHER FINANCIAL ITEMS
SUCCESSOR PREDECESSOR
--------------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
------------------------------------|-------------------------------
|
Exchange rate differences (0,3) 0,2 | (0,8) (2,1)
Other financial income 0,1 0,4 | 0,6 1,5
Other financial expenses (1,5) (0,8) | (0,8) (0,4)
------------------------------------|---------------------------
Total (1,7) (0,2) | (1,0) (1,0)
================================================================
7. INCOME TAXES
SUCCESSOR PREDECESSOR
--------------------------------------------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
-------------------------------------|------------------------------
|
Income taxes |
Direct taxes for the year 16,5 2,1 | 4,2 4,9
Direct taxes from previous years 0,5 0,1 | - (0,1)
Change in deferred tax asset / liability - 1,4 | (0,2) (4,8)
-------------------------------------|--------------------------
Total 17,0 3,6 | 4,0 -
================================================================
SUCCESSOR PREDECESSOR
--------------------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
----------------------------------------|---------------------------
|
Deferred tax asset |
From consolidation entries 5,0 4,9 | 5,8
From valuation and matching differences 1,5 1,9 | 2,4
Offset against liabilities (0,3) (0,3) | (0,3)
----------------------------------------|-----------------------
Total 6,2 6,5 | 7,9
================================================================
SUCCESSOR PREDECESSOR
--------------------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
----------------------------------------|---------------------------
|
Deferred tax liability |
From appropriations 0,3 0,4 | 0,3
From consolidation entries - - | 0,1
Offset against receivables (0,3) (0,3) | (0,3)
----------------------------------------|-----------------------
Total - 0,1 | 0,1
================================================================
VALTRA GROUP 13
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
8. FIXED ASSETS
Advanced
Other Machinery Other payments and
capitalised Buildings and and tangible construction
expenditure Land constructions equipment assets in progress
--------------------------------------------------------------------
PREDECESSOR
Historical cost as at January 1, 2002 5,4 2,7 34,2 114,2 1,0 4,6
Translation differences (0,7) (0,5) (3,7) (13,3) - (0,1)
Capital expenditures 0,1 - 0,1 1,5 - 3,4
Disposals and other decreases - - - (0,1) - -
Transfers between line items - - 0,3 1,4 - (1,8)
----------------------------------------------------------------
Historical cost as at June 30, 2002 4,8 2,2 30,9 103,7 1,0 6,1
Accumulated depreciation and amortization as at
January 1, 2002 (3,2) - (11,0) (81,5) (0,8) -
Translation differences 0,5 - 1,1 9,9 - -
Depreciation and amortization during the year (0,5) - (0,9) (3,8) (0,1) -
----------------------------------------------------------------
Accumulated depreciation and amortization as at
December 31, 2002 (3,2) - (10,8) (75,4) (0,9) -
CARRYING VALUE AS AT JUNE 30, 2002 1,6 2,2 20,1 28,3 0,1 6,1
================================================================
SUCCESSOR
Historical cost as at July 1, 2002 4,8 2,2 30,9 103,7 1,0 6,1
Translation differences (0,4) (0,3) (2,4) (8,1) - -
Capital expenditures 0,2 - - 5,3 - 4,0
Disposals and other decreases - (0,5) - (0,2) - -
Transfers between line items - - 2,6 2,5 - (5,1)
----------------------------------------------------------------
Historical cost as at December 31, 2002 4,6 1,4 31,1 103,2 1,0 5,0
Accumulated depreciation and amortization as at
June 1, 2002 (3,2) - (10,8) (75,4) (0,9) -
Translation differences 0,3 - 0,8 6,5 - -
Depreciation and amortization during the year (0,5) - (1,0) (4,1) - -
Other changes - - - 0,1 - -
----------------------------------------------------------------
Accumulated depreciation and amortization as at
December 31, 2002 (3,4) - (11,0) (72,9) (0,9) -
CARRYING VALUE AS AT DECEMBER 31, 2002 1,2 1,4 20,1 30,3 0,1 5,0
================================================================
VALTRA GROUP 14
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
Advanced
Other Machinery Other payments and
capitalised Buildings and and tangible construction
expenditure Land constructions equipment assets in progress
--------------------------------------------------------------------
Historical cost as at January 1, 2003 4,6 1,4 31,1 103,2 1,0 5,0
Translation differences - - 0,1 - - 0,1
Capital expenditures 0,4 - - 6,6 - 17,3
Disposals and other decreases - - (0,1) (0,1) - -
Transfers between line items 0,2 - 5,5 9,3 - (17,2)
Other changes 0,6 - - - - -
----------------------------------------------------------------
Historical cost as at December 31, 2003 5,8 1,4 36,6 119,0 1,0 5,2
Accumulated depreciation and amortization as at
January 1, 2003 (3,4) - (11,0) (72,9) (0,9) -
Translation differences - - - (0,1) 0,1 -
Depreciation and amortization during the year (0,7) - (2,1) (8,6) (0,1) -
Other changes - - - - - -
----------------------------------------------------------------
Accumulated depreciation and amortization as at
December 31, 2003 (4,1) - (13,1) (81,6) (0,9) -
CARRYING VALUE AS AT DECEMBER 31, 2003 1,7 1,4 23,5 37,4 0,1 5,2
================================================================
Investments
in equity Investment
method in other
investees shares
PREDECESSOR
SHARES AND PARTICIPATIONS
Historical cost as at January 1, 2002 1,5 0,2
Capital expenditures - 0,1
----------------------
Historical cost as at June 30, 2002 1,5 0,3
CARRYING VALUE AS AT JUNE 30, 2002 1,5 0,3
======================
SUCCESSOR
Historical cost as at July 1, 2002 1,5 0,3
Increase 0,1 -
Disposals - (0,2)
----------------------
Historical cost as at December 31, 2002 1,6 0,1
CARRYING VALUE AS AT DECEMBER 31, 2002 1,6 0,1
======================
Historical cost as at January 1, 2003 1,6 0,1
----------------------
Historical cost as at December 31, 2003 1,6 0,1
CARRYING VALUE AS AT DECEMBER 31, 2003 1,6 0,1
======================
VALTRA GROUP 15
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
9. SHARES AND PARTICIPATIONS, COMPANIES AND OPERATIONS COMBINED IN COMBINED
FINANCIAL STATEMENTS DECEMBER 31, 2003
Group
Subsidiaries holding %
Sales and production companies:
Sisu Diesel Oy, Finland 100,0
Valtra Norge AS, Norge 100,0
Valtra Danmark A/S, Danmark 100,0
Valtra Vertriebs GmbH, Germany 100,0
Valtra Tractors (UK) Limited, Great Britain 100,0
Valtra Tracteurs France S.A.S., France 100,0
Valtra Tractores S.A., Spain 100,0
Valtractor-Comercia de Tractores, Portugal 100,0
Valtra GesmbH, Austria 100,0
Valtra Sp.z.o.o., Poland 100,0
Valtra Argentina Tractores SA, Argentina 99,9
Valtratractores Mexico S.A. de CV, Mexico 99,9
Valtra Canada Inc., Canada 100,0
Valtra Tractors (A&NZ), Pty. Ltd, Australia 100,0
Tecnoagro Maquinas Agricolas Ltda, Brasil 99,9
Dormant companies:
Valtra Eastern Ventures Oy Ab , Finland 100,0
VTP-Tractores SA, Portugal 100,0
Sisu Tractors Tanzania Ltd, Tansania 100,0
Avelux S/A , Uruguay 100,0
Associated companies:
Valtra Traktor Ab, Sweden 40,0
Valtra Traktoren Ag, Switzerland 35,0
Operations combined into Valtra Group:
Valtra USA, Inc, USA
Partek Holding Inc, USA
Valtra do Brasil Ltda, Brasil
Tracfin Holding Oy, Finland
Other companies (28), shareholding less than 20 % and Valtra does not have
significant influence or control.
VALTRA GROUP 16
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
10. LONG-TERM AND SHORT-TERM RECEIVABLES
SUCCESSOR PREDECESSOR
----------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
-----------------------------------------|----------------
|
Long term receivables: |
Loan receivable 0,3 1,6 | 1,0
==========================================================
SUCCESSOR PREDECESSOR
----------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
-----------------------------------------|----------------
|
Short term receivables: |
Associated companies |
Accounts receivable 3,4 4,9 | 4,9
=========================================|============
|
Other companies |
Accounts receivable 84,8 71,4 | 84,5
Loan receivable 2,4 74,3 | -
Other receivables 110,7 4,0 | -
Deferred tax asset 6,2 6,5 | 7,9
Prepaid expenses and accrued income 21,5 18,1 | 21,9
-----------------------------------------|------------
225,6 174,3 | 114,3
|
Short term receivables, total 229,0 179,2 | 119,2
======================================================
Other receivables at December 31, 2003 includes a group contribution
receivable of (Euro) 110,5 million from KONE companies.
Short-term loan receivable at December 31, 2002 include (Euro) 74.3
million receivable from Valtra's parent company. Interest rate is
variable based on 3 months Libor +0,6%
VALTRA GROUP 17
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
11. SHAREHOLDERS' EQUITY
Share Share premium Retained
Total capital account earnings (deficit)
-----------------------------------------------------
PREDECESSOR
Balance at January 1, 2001 69,1 43,6 54,7 (29,2)
Currency translation adjustments (5,6) - - (5,6)
Net result for the period 4,7 - - 4,7
----------------------------------------------
Balance at December 31, 2001 68,2 43,6 54,7 (30,1)
==============================================
Balance at January 1, 2002 68,2 43,6 54,7 (30,1)
Currency translation adjustments (18,2) - - (18,2)
Net result for the period 13,3 - - 13,3
----------------------------------------------
Balance at June 30, 2002 63,3 43,6 54,7 (35,0)
==============================================
SUCCESSOR
Balance at July 1, 2002 63,3 43,6 54,7 (35,0)
Currency translation adjustments (9,7) - - (9,7)
Net result for the period (6,4) - - (6,4)
----------------------------------------------
Balance at December 31, 2002 47,2 43,6 54,7 (51,1)
==============================================
Balance at January 1, 2003 47,2 43,6 54,7 (51,1)
Currency translation adjustments (2,4) - - (2,4)
Transfer from share premium account to retained earnings - - (27,7) 27,7
Net result for the period 145,9 - - 145,9
----------------------------------------------
Balance at December 31, 2003 190,7 43,6 27,0 120,1
==============================================
In accordance with Finnish Companies Act, companies can cover its
accumulated deficit with share premium. Valtra Oy transferred (Euro)
27,7 million from share premium account to retained earnings.
12. LONG-TERM LIABILITIES
SUCCESSOR PREDECESSOR
-----------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
-----------------------------------------------------------
|
Subordinated loan 76,5 74,2 | -
Other interest-bearing liabilities 0,7 0,9 | 45,4
Other non interest-bearing liabilities - 1,5 | 0,9
-------------------------------------------------------
Total 77,2 76,6 | 46,3
=======================================================
Subordinated loans amounted (Euro) 76,5 million and (Euro) 74,2 million as of
December 31, 2003 and December 31, 2002, respectively.
Loans have no maturity date and not endorsed by any guarantee or other security.
Loans are subordinate to the Group's other obligations and repayment can be made
only if distributable and non-distributable equity are in compliance with
Finnish companies Act. Interest payments on the subordinated loan can be only
made from distributable equity as required by Finnish Companies Act before the
payment of dividend. The interest on the subordinated loan is variable based on
6 months Euribor plus 1 % Interest payables to subordinated loans are added to
loan principal at the end of June and December each year.
SUCCESSOR PREDECESSOR
-----------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
-----------------------------------------------------------
|
Repayments of long-term liabilities after 5 years |
Other interest-bearing liabilities - 0,9 | 8,0
=======================================================
VALTRA GROUP 18
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
13. SHORT-TERM INTEREST-BEARING LIABILITIES
SUCCESSOR PREDECESSOR
-----------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
-----------------------------------------------------------
|
Other short-term liabilities 88,6 91,3 | 57,9
=======================================================
Other short-term interest bearing liabilities include non-current loan
(Euro) 88,5 million from the parent company of Valtra.
14. SHORT-TERM NON INTEREST-BEARING LIABILITIES
SUCCESSOR PREDECESSOR
-----------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
-----------------------------------------------------------
|
Other companies |
Accounts payable 59,4 59,0 | 70,3
Advances received 5,5 3,9 | 0,3
Other non interest bearing liabilities 43,1 - | -
Other accrued expenses and deferred income 80,5 91,8 | 59,9
-------------------------------------------------------
Short-term non interest-bearing liabilities, total 188,5 154,7 | 130,5
=======================================================
15. ACCRUED EXPENSES AND DEFERRED INCOME
SUCCESSOR PREDECESSOR
-----------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
-----------------------------------------------------------
|
Related to |
Group contribution payable - 28,6 | -
Purchases 0,1 0,2 | 1,9
Sales related items 10,0 6,9 | 10,7
Personnel costs 11,9 11,1 | 12,5
Warranties 15,9 11,3 | 9,0
Financial items 0,1 0,2 | 1,2
Taxes 18,8 7,0 | 1,2
Other 23,7 26,5 | 23,4
-------------------------------------------------------
Total 80,5 91,8 | 59,9
=======================================================
VALTRA GROUP 19
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
16. PLEDGED ASSETS AND CONTINGENT LIABILITIES
SUCCESSOR PREDECESSOR
-----------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
-----------------------------------------------------------
|
Contingent liabilities |
Guarantees |
Subsidiaries - 0,4 | 0,4
Others for customer finance 7,7 10,3 | 13,8
Discounted bills 0,1 - | -
Other contingent liabilities |
for customer finance 7,3 7,6 | 5,8
contingent liabilities by Finnish VAT regulations 2,2 1,1 | 0,7
-------------------------------------------------------
Total contingent liabilities 17,3 19,4 | 20,7
=======================================================
LEASING CONTRACTS
SUCCESSOR PREDECESSOR
-----------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
-----------------------------------------------------------
|
Rental payments for leasing contract are as follows: |
Next year 1,3 1,2 | 1,6
Later on 1,7 1,6 | 0,8
-------------------------------------------------------
Total 3,0 2,8 | 2,4
=======================================================
PURCHASE COMMITMENT
The Company has entered into an agreement to purchase district heat from a
Supplier's heating plant on land leased from the Company and located at the
Company's premises. Another company has jointly agreed to purchase 37,5 % of the
supply. The monthly payments depend on a variety of factors including; consumer
price on firewood for heat production, cost index for road transportation of
goods and consumer price of fuel oil. The agreement is effective for 15 years
starting from the first supply date of June 2003, after original term 1 year
termination period.
The Company and a third party that is also party to the district heat purchase
agreement are jointly obliged to purchase the heating plant from the Supplier if
the heat supply agreement is terminated or at the conclusion of the agreement.
The Company's liability relating to the purchase obligation is dependent on the
usage ratio between users of the heating plant, which is currently 62,5% for the
Company. The purchase price is dependent upon time of purchase and depreciation
but has a minimum purchase price of (Euro) 183.750. Current value of the heating
plant is estimated at (Euro) 735.000 as at December 31, 2003 and represents the
estimated value that would be paid if termination were to occur as of December
31, 2003.
17. DERIVATIVE INSTRUMENTS
SUCCESSOR PREDECESSOR
-----------------------------------------------------------
AT AT | AT
DECEMBER 31, 2003 DECEMBER 31, 2002 | JUNE 30, 2002
-----------------------------------------------------------
|
NOMINAL VALUES |
Foreign exchange forward contracts 62,0 66,7 | 66,3
|
MARKET VALUES |
Foreign exchange forward contracts 0,7 0,3 | 0,3
VALTRA GROUP 20
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
18. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES IN FINLAND AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED
STATES
The combined financial statements of the Group have been prepared in
conformity with Finnish GAAP, which differs in certain significant respects from
US GAAP. The Group's combined financial statements are prepared by combining the
assets, liabilities and results of operations of the companies listed in Note 9
to the combined financial statements as these companies are managed and operated
on a combined basis. Combined financial statements do not reflect the legal
organization of the Group. The nature and effect of the application of US GAAP
to the net income, balance sheet and shareholders' equity are set out in the
tables below:
SUCCESSOR PREDECESSOR
----------------------------------------------------------------
PERIOD FROM |
JULY 1 TO | PERIOD FROM
DECEMBER 31, | JANUARY 1 TO
2002 | JUNE 30, 2002
(for Finnish GAAP) | (for Finnish GAAP)
PERIOD FROM PERIOD FROM AUGUST 1 | PERIOD FROM JANUARY 1
JANUARY 1 TO TO DECEMBER 31, 2002 | TO JULY 31, 2002
NOTES DECEMBER 31, 2003 (for US GAAP) | (for US GAAP)
-----------------------------------------------------------------------
|
Net income (loss) in accordance with |
Finnish GAAP 145,9 (6,4) | 13,3
US GAAP adjustments: |
Revenue recognition a) (0,4) (0,1) | (0,1)
Derivatives and hedging activities b) (0,3) (0,4) | 1,4
Employee benefit plans c) (1,8) (0,8) | (1,1)
Deferred taxes d) (31,9) 43,6 | (0,5)
Provisions e) (3,8) 4,5 | 1,1
Push down basis of accounting f) (15,7) (9,4) | (1,7)
Group contribution g) (110,5) 24,7 | -
Acquisition date h) - (3,1) | 3,1
Tax effect of US GAAP adjustments 1,8 1,2 | (1,9)
-------------------------------------------------------
Net (loss) income in accordance with US GAAP (16,7) 53,8 | 13,6
=======================================================
VALTRA GROUP 21
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
PREDECESSOR
FINNISH GAAP IMPACT OF JULY US GAAP
BALANCE SHEET 2002 US GAAP BALANCE SHEET
NOTES JUNE 30, 2002 h) ADJUSTMENTS JULY 31, 2002
---------------------------------------------------------------------
Balance sheet as of June 30, 2002 / July 31, 2002
Intangible assets 1,6 (0,1) - 1,5
Land f) 2,2 (0,1) 1,1 3,2
Building and constructions f) 20,1 (1,0) 13,6 32,7
Machinery and equipment f)i) 28,3 (1,9) 5,1 31,5
Other tangible assets 0,1 - - 0,1
Advance payments and construction in progress 6,1 1,0 - 7,1
Other non-current assets 2,8 - - 2,8
Inventories 99,4 (10,4) - 89,0
Other current assets a)b)j) 111,3 (11,0) 4,5 104,8
Cash and bank balances 18,2 0,5 - 18,7
Non-current liabilities c) (46,2) - (12,5) (58,7)
Current liabilities e)i)j) (188,4) 19,4 1,1 (167,9)
Deferred tax assets and liabilities, net d) 7,8 (0,2) 1,7 9,3
--------------------------------------------------------
Shareholders' equity 63,3 (3,8) 14,6 74,1
========================================================
SUCCESSOR
FINNISH GAAP US GAAP US GAAP
NOTES BALANCE SHEET ADJUSTMENTS BALANCE SHEET
-----------------------------------------------------
Balance sheet as of December 31, 2002
Goodwill f) - 39,7 39,7
Intangible assets 1,2 - 1,2
Customer relationships f) - 20,6 20,6
Technologies f) - 36,8 36,8
Dealership networks f) - 41,0 41,0
Tradenames and trademarks f) - 32,7 32,7
Land f) 1,4 2,1 3,5
Building and constructions f) 20,1 36,2 56,3
Machinery and equipment f)i) 30,3 38,2 68,5
Other tangible assets f) 0,1 - 0,1
Advance payments and construction in progress 5,0 - 5,0
Other non-current assets 3,3 - 3,3
Inventories 98,9 - 98,9
Other current assets a)b)j)k) 172,7 (73,8) 98,9
Cash and bank balances 30,3 - 30,3
Non-current liabilities c)k) (76,5) 60,9 (15,6)
Current liabilities e)i)j) (246,0) 7,6 (238,4)
Deferred tax assets and liabilities, net d) 6,4 (16,1) (9,7)
---------------------------------------
Shareholders' equity 47,2 225,9 273,1
=======================================
VALTRA GROUP 22
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
FINNISH GAAP US GAAP US GAAP
SUCCESSOR NOTES BALANCE SHEET ADJUSTMENTS BALANCE SHEET
--------- ---------------------------------------------------------------
Balance sheet as of December 31, 2003
Goodwill f) - 39,9 39,9
Intangible assets 1,7 - 1,7
Customer relationships f) - 18,7 18,7
Technologies f) - 31,7 31,7
Dealership networks f) - 36,7 36,7
Tradenames and trademarks f) - 32,5 32,5
Land f) 1,4 2,1 3,5
Building and constructions f) 23,5 36,2 59,7
Machinery and equipment f) i) 37,4 34,1 71,5
Other tangible assets f) 0,1 - 0,1
Advance payments and construction in progress 5,2 - 5,2
Other non-current assets 2,0 - 2,0
Inventories 118,3 - 118,3
Other current assets a) j) 222,8 16,4 239,2
Cash and bank balances 126,4 - 126,4
Non-current liabilities c) k) (77,2) 61,4 (15,8)
Current liabilities e) i) j) k) (277,1) (47,1) (324,2)
Deferred tax assets and liabilities, net d) 6,2 (52,2) (46,0)
------ ----- ------
Shareholders' equity 190,7 210,4 401,1
------ ----- ------
a) REVENUE RECOGNITION
Under Finnish GAAP revenue is recognized when the product has been
delivered or the service rendered. Valtra has recognized revenues upon delivery
of products or performance of services, net of sales taxes and discounts. For
the period from January 1, 2002 to June 30, 2002, the period from July 1, 2002
to December 31, 2002, and for the year ended December 31, 2003 Valtra billed
(Euro) 60 million, (Euro) 68 million, and (Euro) 130 million, respectively, of
VAT which was remitted to the applicable government authorities.
Under US GAAP revenue is recognized when persuasive evidence of an
arrangement exists, delivery has occurred or services have been rendered, the
seller's price to buyer is fixed or determinable, and collectibility is
reasonably assured. Under US GAAP, sales of equipment and replacement parts are
recorded by the Group when title and risks of ownership have been transferred to
independent dealer, distributor or other customer.
In addition, any costs or losses expected in connection with estimated returns
are accrued in the financial statements as required in Statement of Financial
Accounting Standards ("SFAS") No. 48 Revenue Recognition When Right of Return
Exists. Provisions for returns are made at the time of sales based on historical
returns experience. The net change in this reserve between periods impacted net
income by (Euro) (0,1) million, (Euro) (0,1) million, and (Euro) (0,4) million,
respectively, for the period from January 1, 2002 to July
VALTRA GROUP 23
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
31, 2002, the period from August 1, 2002 to December 31, 2002, and for the year
ended December 31, 2003, respectively.
b) DERIVATIVES AND HEDGING ACTIVITIES
Under Finnish GAAP, for a foreign currency derivative instrument (i.e.
foreign currency exchange contracts and foreign currency option contracts) to
qualify as a hedge, the instrument must: (a) be related to a foreign currency
asset, liability or firm commitment, or a portfolio of assets, liabilities and
firm commitments, the characteristics of which have been identified; (b) involve
the same currency as the hedged item; and (c) reduce the risk of foreign
currency exchange movements on a company's operations. Gains and losses on
forward foreign exchange contracts and currency swaps and foreign currency
option contracts that are designated as hedges of firm commitments are deferred
and recognized in income as the hedged transaction occurs. Gains and losses on
foreign currency options that are designated as effective hedges of firm
commitments are deferred and recognized in income as the hedged transaction
occurs.
Where derivatives are held for speculative purposes, common practice is
to record only unrealized losses in the income statement and leave the
unrealized gains unrecognized. No derivative instruments are held for
speculative or trading purposes by the Group.
The accounting principles with respect to accounting for foreign
currency derivatives as described above under Finnish GAAP are consistent with
US GAAP prior to January 1, 2001.
Effective on January 1, 2001, for US GAAP purposes, the Group adopted
the principles of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, which requires that an
entity recognize all derivatives as either assets or liabilities on the balance
sheet measured at fair value. The accounting for changes in the fair value of a
derivative depends on the use of the derivative. Derivatives that are not
designated as part of a hedging relationship must be adjusted to fair value
through income. Certain conditions must be met in order to designate a
derivative as a hedge including assessment and documentation of the following:
- - Objective of the derivative;
- - Nature of the risk being hedged;
- - Derivative hedging instrument;
- - Hedged item;
- - For the hedge of a firm commitment, a reasonable method for recognizing in
earnings the hedged firm commitment; and
- - How the entity will assess hedge effectiveness and measure hedge
ineffectiveness.
If the derivative is a designated hedge, depending on the nature of the
hedge, the effective portion of the hedge's change in fair value is either (1)
offset against the change in fair value of the hedged asset, liability or firm
commitment through income or (2) held in equity until the hedged item is
VALTRA GROUP 24
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
recognized in income. The ineffective portion of a hedge's change in fair value
is immediately recognized in income.
The documentation for the Group's derivative instruments does not meet
all of the requirements of SFAS 133. Therefore, the Group has recorded all
changes in the fair value of all derivative instruments directly to earnings.
During the period from January 1, 2002 to July 31, 2002, the period from August
1, 2002 to December 31, 2002, and for the year ended December 31, 2003, the
Group recorded the change in the fair value of these agreements, (Euro) 1,4
million, (Euro) (0,4) million, and (Euro) (0,3) million, respectively, through
earnings as these hedging relationships did not qualify for hedge accounting in
accordance with SFAS No. 133.
c) EMPLOYEE BENEFIT PLANS
Pensions and other postretirement benefits
In Finland statutory and supplementary pension obligations (The Finnish
statutory employment scheme, "TEL") are covered through a compulsory pension
insurance policy. The TEL consists of pension obligations and future disability
pensions. The TEL is a national pension system in which all Finnish private
sector employers participate. The TEL pension is partly funded, but at present
it is fundamentally funded as pay-as-you-go. The pay-as-you-go costs of an
employer do not depend on the pensions paid to the former employees of Valtra
Finland. Instead, the yearly premium depends on the wages of current workforce
and is a certain percentage of these wages. Payments to pension insurance
institutions are recorded at amounts determined by insurance institutions
according to prescribed actuarial assumptions and other rulings pursuant to the
Finnish Employment Pension Act. The disability pension part of the "TEL" is
funded at the time when the event resulting in a disability pension takes place.
Under the TEL, an employer does not have a direct responsibility for the
unfunded part of the TEL pension. The unfunded part of the TEL pension is
comparable to the U.S. concept of a multiemployer plan and is treated as such by
the Group.
Group companies outside of Finland have pension obligations arranged
and pension liabilities recorded in accordance with local regulations and
practice. Changes in uncovered pension obligations are recorded as an expense
and the related pension liability is included as a provision.
Under US GAAP, pension expense is recorded on an accrual basis and
reflected in the income statement over the working lives of the employees
provided with such benefits. Under US GAAP defined benefit pension plan
accounting, plan assets are valued on a market related basis and liabilities are
valued under a specified actuarial methodology, including market related
valuation assumptions. Changes in the funding status not reflected in the
balance sheet that fall outside a 10% corridor are recognized systematically and
gradually over subsequent periods. The valuation must be as of the balance sheet
date or at a date not more than three months prior to the balance sheet date.
The companies within the Group have various pension schemes in
accordance with local conditions and practices of the countries in which they
operate. The Group operates defined-benefit schemes with retirement, disability,
death and termination income benefits in Finland, Norway and France. The total
active membership of these defined benefit schemes was approximately 1,500 as at
December 31, 2001, July 31, December 31, 2002, and December 31, 2003,
respectively.
VALTRA GROUP 25
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
Under US GAAP, SFAS No. 87, Employers' Accounting for Pensions, certain
elements of the Finnish TEL, primarily related to the disability plan as well as
pension plans in other countries, result in accounting for the plans as defined
benefit plans. An actuarial valuation of the defined benefit plans has been
carried out by an independent, professionally qualified actuary using the
Projected Unit method. The principal actuarial assumptions adopted for the
valuation for Finnish TEL and foreign pension plans at the valuation date were
as follows:
Finnish
December 31, July 31, December 31,
2003 2002 2002 2001
Discount rate........................ 5,5% 5,8% 5,8% 5,8%
Rate of compensation increase........ 3,5% 4,0% 4,0% 4,0%
Expected return on plan assets....... NA NA NA NA
Foreign
December 31, July 31, December 31,
2003 2002 2002 2001
Discount rate........................ 5,25% 6,0% 5,7% 5,7%
Rate of compensation increase........ 3,0% 3,0% 3,0% 3,0%
Expected return on plan assets....... NA NA NA NA
It was not feasible to apply SFAS No. 87 on the effective date
specified in the standard for the pension schemes. SFAS No. 87 calculations were
made for the first time for these schemes as of December 31, 2000. The amount of
the liabilities that were recorded directly to equity in the opening balance
sheet January 1, 2001 under US GAAP for these schemes was (Euro) 8,2 million and
the amortization period used for the transitional liability was 15 years
beginning January 1, 1987, the effective date of SFAS No. 87.
Based on actuarial calculations the SFAS 87 liability as of 31 July
2002, 31 December 2002 and 31 December 2003 amounted to (Euro) 12,5 million,
(Euro) 13,2 million and (Euro) 15,1 million. Total adjustment of (Euro) (1,1)
million, (Euro) (0,8) million and (Euro) (1,8) million have been made to net
income for the period from January 1, 2002 to July 31, 2002, for the period
August 1, 2002 to December 31, 2002 and for the period ended December 31, 2003
respectively.
VALTRA GROUP 26
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
d) DEFERRED INCOME TAXES
Under Finnish GAAP the company has adopted the income statement
approach under which deferred taxes are based on timing differences. Timing
differences arise when revenues and expenses are recorded in different
accounting periods for accounting and taxation purposes.
For US GAAP purposes, deferred taxes are based on temporary
differences. Temporary differences arise when the amount of the tax bases of
assets or liabilities and their reported amounts in financial statements differ.
Deferred tax liabilities on purchase accounting adjustments described
in note f) as of August 1, 2002, amounted to (Euro) 66 million, as of December
31, 2002 to (Euro) 62 million, and as of December 31, 2003 to (Euro) 57 million.
Under US GAAP, deferred taxes are provided on all temporary differences
between the financial statement basis and tax basis of investments in
subsidiaries, unless an exception applies. Under Finnish GAAP, no deferred taxes
have been provided on such differences.
Total adjustments of (Euro) (0,5) million, (Euro) 43,5 million, and
(Euro) (31,9) million have been made to net income for the period from January
1, 2002 to July 31, 2002, for the period August 1, 2002 to December 31, 2002,
and for the year ended December 31, 2003, respectively. Adjustments of
(Euro) 1,7 million, (Euro) (16,1) million, and (Euro) (52,2) million have been
to the balance sheet as of July 31, 2002, December 31, 2002, and December 31,
2003, respectively.
e) RESTRUCTURING COSTS AND OTHER PROVISIONS
For disposals initiated prior to December 31, 2002, the recognition of
restructuring costs under US GAAP was as specified under EITF 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring), which required
that a liability be recognized at the date of an entity's commitment to an exit
plan. This is usually the date on which management, having appropriate level of
authority, committed to the restructuring plan, identified all significant
actions, including the method of disposition and the expected date of
completion, and, in the case of employee terminations, specified the severance
arrangements and communicated them to employees. For disposals initiated after
December 31, 2002, companies are required to apply the provisions of SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities, which
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. In certain respects under
Finnish GAAP, the Group has recognized certain provisions that would not qualify
under US GAAP. Accordingly, under US GAAP, non-qualifying provisions related
primarily to future costs without any present or constructive obligation as a
result of past events have been reversed. The Group accounted for all
restructuring initiatives prior to December 31, 2002 under EITF 94-3. The
adjustment for provisions not meeting the US GAAP criteria amounted to
(Euro) 3,6 million, (Euro) 6,6 million and (Euro) 3,0 million as of 31 July
2002, 31 December 2002 and 31 December 2003. The impact on the net income for
the period January 1, 2002 to July 31, 2002,
VALTRA GROUP 27
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
the period from August 1, 2002 to December 31, 2002 and for the year ended
December 31, 2003 amounted to (Euro) 1,1 million, (Euro) 4,5 million and
(Euro) (3,8) million respectively.
f) PUSH DOWN BASIS OF ACCOUNTING
Under Finnish GAAP, the cost of a company acquired in a purchase
business combination includes direct costs of acquisition. The excess of the
cost of the acquired company over the amounts assigned to identifiable assets,
based upon the value of the assets less the liabilities assumed, is recorded as
goodwill. However, the concept of allocating the purchase consideration based on
the estimated fair values of acquired tangible and intangible assets and
liabilities assumed is less specific in Finnish GAAP than in US GAAP. Generally,
tangible assets are recorded at fair value, while other assets acquired and
liabilities assumed are recorded at net book rather than fair value, as required
under US GAAP. In addition, under Finnish GAAP, goodwill from acquisitions is
not required to be "pushed down" to the underlying businesses as required under
SEC Staff Accounting Bulletin No. 73, Push Down Basis of Accounting Required in
Certain Limited Circumstances.
Under US GAAP, business combinations prior to June 30, 2001 were
accounted for in accordance with Accounting Principles Bulletin ("APB") No. 16,
Business Combinations. In June 2001, the Financial Accounting Standards Board
("FASB") issued SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill
and Other Intangible Assets. SFAS No. 141 requires that acquired intangible
assets are required to be recognized and reported separately from goodwill. SFAS
No. 142 requires that goodwill no longer be amortized, but instead tested for
impairment at least annually. In addition, SFAS No. 142 requires recognized
intangible assets with a definite useful life to be amortized over their
respective estimated useful lives and reviewed for impairment in accordance with
SFAS No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets.
Any recognized intangible assets determined to have indefinite useful lives will
not be amortized, but instead tested for impairment in accordance with SFAS No.
142 until its life is determined to no longer be indefinite. SFAS No. 142 was
applied starting with fiscal years beginning after December 15, 2001.
Under Finnish GAAP, goodwill arising from acquisitions is generally
capitalized and amortized over the estimated useful life, not to exceed 20
years. Under US GAAP, prior to January 1, 2002, goodwill and all identifiable
intangible assets arising from acquisitions were capitalized and amortized over
their estimated useful lives. A useful life of 20 years was also utilized by the
Group for goodwill amortization purposes under US GAAP prior to January 1, 2002,
when amortization ceased.
ACQUISITION OF VALTRA BUSINESS BY PARTEK
In April 1997, Partek Corporation acquired Sisu Corporation, the parent
company of Valtra. The acquisition was paid through a combination of cash and
the issuance of new shares.
The purchase consideration allocated to the Valtra Group was
approximately (Euro) 90 million as determined by the fair value of the Group as
a percentage of the fair value for the entire Sisu Corporation. For US GAAP
purposes, Partek's acquisition of Sisu was accounted for under APB No. 16 as a
purchase. Under Finnish GAAP, all assets acquired and liabilities were
recognized at cost. In accordance with US GAAP, the purchase price was allocated
to the fair value of assets acquired and liabilities assumed. The acquisition of
Sisu resulted in negative goodwill for the Valtra Group of
VALTRA GROUP 28
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
approximately (Euro) 1 million which was allocated proportionately to reduce the
values initially assigned to long-lived assets.
PARTEK ACQUISITION BY KONE
In 2002, KONE acquired Partek, which included the Group, with a public
tender offer. Under Finnish GAAP KONE consolidated Partek as of July 1, 2002.
For purposes of Finnish GAAP, the acquisition date for accounting purposes can
be pushed back to the most recent interim period. Under US GAAP, the acquisition
date is considered to be August 23, 2002 as this is the date that KONE gained
effective control as determined under US GAAP. However, an acquisition date of
August 1, 2002 has been used for US GAAP accounting purposes because this
followed the end of the most recent accounting period that fell between the
initiation and consummation of the transaction.
A purchase price of approximate (Euro) 255 million was allocated to the
Group based upon the appraised enterprise value of the Group in relation to the
enterprise fair value of Partek. Under US GAAP, the combined financial
statements of the Group as of the acquisition date reflect the new basis for
accounting established for the Group's acquired assets and liabilities assumed
based upon the fair values at August 1, 2002. Identified intangibles acquired in
the acquisition, along with their estimated useful lives, include the following
(in (Euro) millions):
Customer relationships 21,4 11 years
Acquired Technology 36,6 8 years
Dealer Network 42,7 10 years
Sisu Tradenames and Trademarks 1,8 10 years
Valtra Tradenames and Trademarks 30,9 indefinite
Diesel Technology 2,2 4,5 years
-----
135,6
In addition, the Company recorded goodwill of approximately
(Euro) 42 million that is not amortized under US GAAP but tested for impairment
at least annually.
g) GROUP CONTRIBUTION
Finland does not apply any tax consolidation. In Finland, profits and
losses of companies within a group are combined through group contributions.
Group contributions require recording into the accounts. Under Finnish GAAP,
group contributions are treated as an expense for the contribution provider and
as income for the beneficiary. The parent company in the combined Valtra Group,
Valtra Oy paid a group contribution of (Euro) 24,7 million in the period from
August 1 to December 31, 2002 to a company within Partek Group, and received a
group contribution of (Euro) 110,5 million in the year ended
VALTRA GROUP 29
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF Euro EXCEPT FOR PERSONNEL DATA)
December 31, 2003 from a company within KONE, which were recorded as
extraordinary items under Finnish GAAP
Under US GAAP, contributions paid are presented as dividends and a
reduction of shareholders' equity and contributions received are presented as a
capital contributions and an increase of shareholders' equity.
h) ACQUISITION DATE
As discussed above, there are different acquisition dates for
accounting purposes under Finnish GAAP and US GAAP. As a result of the
difference in acquisition dates for the acquisition of Partek by KONE, an
adjustment of (Euro) 3,1 million has been made to the income statement for the
period from January 1, 2002 to June 30, 2002 to properly state the results of
the predecessor company under US GAAP for the period from January 1, 2002 to
July 31, 2002. This amount has been reduced from the successor company income
statement under Finnish GAAP for the period from July 1, 2002 to December 31,
2002 to properly state the results of the successor company under US GAAP for
the period from August 1, 2002 to December 31, 2002.
i) LEASING
Under Finnish GAAP classification of leases into finance or operating
leases is optional. The Group has historically treated all lease agreements as
operating leases.
Under US GAAP, SFAS No. 13, Accounting For Leases, classifies leases as
either operating or capital leases. Under US GAAP, a lease meeting detailed
criteria must be treated as a capital lease. The lessee records a capital lease
as an asset and an obligation at an amount equal to the lesser of the present
value of the minimum lease payments at the beginning of the lease term or the
fair value of the leased property. Under US GAAP those leasing agreements which
qualify as a capital lease have been adjusted in the US GAAP reconciliation.
j) SALE OF RECEIVABLES
Under Finnish GAAP, receivables sold to independent finance companies
have been derecognized; however under US GAAP, sales of certain receivables in
the United States, Canada and Germany do not meet the criteria of SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, for derecognition. Therefore, (Euro) 1,8 million,
(Euro) 0,7 million, and (Euro) 13,2 million was reflected as a financial asset
and obligation at July 31, 2002, December 31, 2002, and December 31, 2003,
respectively, in the balance sheet but did not materially affect net income.
k) RECLASSIFICATIONS
Subordinated loan from Valtra's parent company (Euro) 74,2 million,
presented under Finnish GAAP as a non-current liability, and corresponding loan
receivable (Euro) 74,2 million, presented under Finnish GAAP as current
receivable, has been removed from the December 31, 2002 US GAAP balance sheet as
no cash transaction had occurred before December 31, 2002.
VALTRA GROUP 30
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF EURO EXCEPT FOR PERSONNEL DATA)
As at December 31, 2003 subordinated loan from Valtra's parent company
(Euro) 76,5 million, presented under Finnish GAAP as a non-current liability,
has been reclassified in US GAAP balance sheet from non-current to current
liabilities.
The combined financial statements include the financial statements of
Valtra Oy and its wholly and over 50% owned subsidiaries as well as four
companies which were under common control of KONE and managed and operated by
Valtra. Those companies are Valtra USA, Inc, Partek Holding, Inc, Tracfin
Holding Oy and Valtra do Brasil Ltda. During 2003, Valtra do Brasil Ltda and
Tracfin Holding Oy were sold from Valtra Oy to another KONE company. For the
entities sold from Valtra Oy to KONE, but included in the combined financial
statements, the sales have been eliminated and the proceeds of (Euro)
40,1 million received have been presented as current other non-interest bearing
liabilities in Finnish GAAP balance sheet. Under US GAAP, this amount has been
reclassified to retained earnings.
l) CASH FLOW STATEMENTS
Combined statements of cash flows are prepared in accordance with
Finnish GAAP using International Accounting Standards ("IAS") No. 7, Cash Flow
Statements, as amended, which is not materially different from US GAAP.
Cash and cash equivalents consist of cash on hand and balances with
banks and other liquid short-term investments with original maturity of less
than three months.
m) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
According to SFAS No. 130, Reporting Comprehensive Income,
comprehensive income generally encompasses all changes in shareholders' equity,
except those arising from transactions with owners. Under Finnish GAAP, the
Group's comprehensive income differs from the net income only by the amount of
the foreign currency translation differences credited or charged to
shareholders' equity for the period.
Comprehensive income under Finnish GAAP is as follows (in (Euro)
millions):
SUCCESSOR | PREDECESSOR
--------------------------------------|-------------------------------
YEAR ENDED PERIOD FROM JULY 1 | PERIOD FROM YEAR ENDED
DECEMBER 31, TO DECEMBER 31 | JANUARY 1 TO DECEMBER 31,
2003 2002 | JUNE 30, 2002 2001
--------------------------------------|-------------------------------
|
Net income under Finnish GAAP 145,9 (6,4) | 13,3 4,7
Other comprehensive income |
Foreign currency translation adjustment (2,4) (9,7) | (18,2) (5,6)
----- ----- | ----- ----
Comprehensive income 143,5 (16,1) | (4,9) (0,9)
===== ===== | ===== ====