================================================================================
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
CONDENSED STATEMENT OF FINANCIAL PERFORMANCE
SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
(A$ in thousands)
Consolidated
------------
Note 2002 2001
---- --------- ---------
Operating revenues:
Casino A$234,894 A$246,364
Hotel 68,544 63,665
Other gaming and wagering 75,733 69,740
Gaming equipment sales and
technology services 18,547 24,578
--------- ---------
397,718 404,347
Other revenue 6 2,838 2,795
--------- ---------
Total revenue from ordinary activities 400,556 407,142
Employee related expenses (116,300) (114,222)
Government gaming taxes and
fees/community benefit contribution (56,857) (59,561)
Marketing expenses (49,094) (47,599)
Cost of goods sold (11,489) (14,223)
Depreciation and amortization expense 6 (27,438) (26,626)
Borrowing costs 6 (18,715) (11,634)
Management fees (9,761) (10,309)
Property operations and energy costs (10,923) (10,749)
Keno commissions (12,872) (11,792)
Other expenses from ordinary activities (34,570) (31,539)
--------- ---------
Profit from ordinary activities
before income tax expense 52,537 68,888
Income tax expense (17,331) (31,939)
--------- ---------
Net profit before outside
equity interests 35,206 36,949
Net profit attributable to outside
equity interests (548) (763)
--------- ---------
Net profit attributable to members
of the chief entity 34,658 36,186
Increase in opening balance of retained
profits on adoption of new accounting
standard AASB 1044 "Provisions,
Contingent Liabilities and Contingent
Assets" 22,902 -
--------- ---------
Total changes in equity other than
those resulting from transactions with
owners as owners A$57,560 A$36,186
========= =========
Basic earnings per share
(Australian cents per share) 17.2 15.0
========= =========
Diluted earnings per share
(Australian cents per share) 17.2 15.0
========= =========
The accompanying notes form an integral part of this
condensed statement of financial performance
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
CONDENSED STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 2002 AND JUNE 30, 2002
(A$ in thousands)
Consolidated
------------
12/31/02 06/30/02
---------- ----------
CURRENT ASSETS:
Cash assets A$65,404 A$85,301
Receivables 25,226 18,420
Inventories 17,178 14,098
Other 9,654 10,568
---------- ----------
Total current assets 117,462 128,387
---------- ----------
NON-CURRENT ASSETS:
Property, plant and equipment 797,908 792,061
Intangibles 116,840 122,831
Deferred tax assets 1,039 -
Other 24,677 24,052
---------- ----------
Total non-current assets 940,464 938,944
---------- ----------
Total assets 1,057,926 1,067,331
---------- ----------
CURRENT LIABILITIES:
Payables 96,361 93,699
Interest bearing liabilities 1,276 1,827
Current tax liabilities 2,505 21,348
Other provisions 17,917 36,375
---------- ----------
Total current liabilities 118,059 153,249
---------- ----------
NON-CURRENT LIABILITIES:
Interest bearing liabilities 451,672 431,695
Deferred tax liabilities - 2,358
Other provisions 12,271 10,622
---------- ----------
Total non-current liabilities 463,943 444,675
---------- ----------
Total liabilities 582,002 597,924
---------- ----------
Net assets A$475,924 A$469,407
========== ==========
EQUITY:
Contributed equity A$311,410 A$310,457
Retained profits 164,514 127,592
---------- ----------
Chief entity interest 475,924 438,049
Outside equity interest - 31,358
---------- ----------
Total equity A$475,924 A$469,407
========== ==========
The accompanying notes form an integral part of this
condensed statement of financial position
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
CONDENSED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
Consolidated
------------
2002 2001
--------- ---------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Cash receipts in the course of operations A$392,598 A$393,185
Cash payments in the course of operations (292,960) (280,906)
Interest received 1,032 1,677
Borrowing costs (23,207) (11,003)
Income taxes paid (39,845) (32,492)
--------- ---------
Net cash provided by operating
activities 37,618 70,461
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property, plant and equipment (29,189) (17,404)
Proceeds from sale of property, plant
and equipment 120 39
Purchase of businesses - (2,000)
Increase in ownership interest in
controlled entity (24,285) -
--------- ---------
Net cash used in investing activities (53,354) (19,365)
--------- ---------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Repayment of borrowings (20,300) (90,400)
Proceeds from borrowings 40,000 40,000
Ordinary dividends paid (22,902) (25,672)
Repayment of finance lease (959) (937)
--------- ---------
Net cash used in financing activities (4,161) (77,009)
--------- ---------
Net decrease in cash held (19,897) (25,913)
Cash at the beginning of the period 85,301 116,742
--------- ---------
Cash at the end of the period A$65,404 A$90,829
========== ==========
The accompanying notes form an integral part of this
condensed statement of cash flows
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONDENSED FINANCIAL REPORT
1. BASIS OF PREPARATION OF THE FINANCIAL REPORT
Basis of Preparation
This general purpose consolidated financial report has been
prepared for the six months ended December 31, 2002 in accordance with
Australian Accounting Standard AASB 1029: Interim Financial Reporting and
other mandatory professional reporting requirements. It is recommended that
this report be read in conjunction with the June 30, 2002 annual financial
report and any public announcements made by Jupiters Limited and its
controlled entities during the half year in accordance with the continuous
disclosure obligations of the Corporations Act 2001 and Australian Stock
Exchange Listing Rules. This financial report does not include all notes of
the type normally included within the annual financial report. This
financial report has been prepared on the basis of historical costs and the
accounting policies adopted are consistent with those applied in the June
30, 2002 annual financial report.
Changes in Accounting Policies
The consolidated entity has complied with the new Accounting Standard AASB
1044 "Provisions, Contingent Liabilities and Contingent Assets" which has
resulted in a change in the accounting for dividend provisions. Previously,
the consolidated entity recognised a provision for dividend based on the
amount that was proposed or declared after the reporting date. In
accordance with the requirements of the new standard, a provision for
dividend will only be recognised at the reporting date where the dividends
are declared, determined or publicly recommended prior to the reporting
date. The effect of the revised policy has been to increase consolidated
retained profits and decrease provisions at the beginning of the half year
by A$22,902,000. In accordance with the new Standard, no provision for
dividend has been recognised for the half year ended December 31, 2002. The
change in accounting policy has had no effect on basic or diluted EPS.
2. CHANGE IN COMPOSITION OF ENTITY
Throughout the six months ended December 31, 2002, Jupiters Limited held an
ownership interest of 47.5% in Breakwater Island Trust, a controlled
entity. On December 31, 2002, Jupiters Limited effectively increased its
ownership interest to 100% by declaring its takeover bid unconditional by
that date. Jupiters Limited has exercised its right to compulsorily acquire
the 5.8% ownership interest held by dissenting unitholders of Breakwater
Island Trust as at December 31, 2002. The total consideration offered for
the increase in ownership interest was A$27.9 million excluding transaction
costs, this was funded by the issue of A$0.9 million Jupiters Limited
ordinary shares at December 31, 2002 and the balance in cash.
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONDENSED FINANCIAL REPORT - (Continued)
3. CONTINGENT LIABILITIES
Since the last annual reporting date, there has been no change in
contingent liabilities.
4. DIVIDENDS
The Directors have declared an interim fully franked dividend of 11
Australian cents per share for the year ending June 30, 2003 (2001: 10
Australian cents per share fully franked). This declaration will result in
the payment of approximately A$22.2 million in March 2003, subject to any
allotment of Jupiters Limited's shares under the Breakwater Island Trust
compulsory acquisition process.
2002 2001
--------- ---------
5. RETAINED PROFITS (A$ IN THOUSANDS)
Retained profits at the beginning
of the half year A$127,592 A$123,881
Net profit attributable to members
of the chief entity 34,658 36,186
Adjustment arising from adoption
of new accounting standard
AASB 1044 "Provisions, Contingent
Liabilities and Contingent Assets" 22,902 -
Interim dividend of 10 Australian
cents per share, fully franked at
30% related to year ended
June 30, 2002 - (24,135)
Final dividend of 11 Australian cents
per share, fully franked at 30%
related to year ended
June 30, 2002 (22,148)
Final distribution of 1 Australian
cent per unit, fully franked at
30% payable by Breakwater Island
Trust to outside equity interests
related to year ended
June 30, 2002 (754)
--------
(22,902) -
Reclassification of retained earnings
on acquisition of controlled entity 2,264 -
Over provision of prior year final
distribution payable by Breakwater
Island Trust to outside equity
interest - 151
--------- ----------
Retained profits at the end of the
half year A$164,514 A$136,083
========= ==========
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONDENSED FINANCIAL REPORT - (Continued)
Consolidated
------------
2002 2001
--------- ---------
6. PROFIT FROM ORDINARY ACTIVITIES
(A$ IN THOUSANDS)
Profit from ordinary activities has
been arrived at after:
Crediting the following -
Operating revenues:
Casino A$234,894 A$246,364
Hotel 68,544 63,665
Other gaming and wagering 75,733 69,740
Gaming equipment sales and
technology services 18,547 24,578
--------- ---------
A$397,718 $A404,347
--------- ---------
Other revenues:
Interest from other persons A$1,125 A$1,435
Proceeds from sale of property,
plant and equipment 120 39
Other 1,593 1,321
--------- ---------
A$2,838 A$2,795
--------- ---------
Charging the following expenses -
Depreciation and amortization expense:
Depreciation of property, plant
and equipment A$20,664 A$20,179
Amortization of:
Leased assets 1,612 1,657
Goodwill 3,918 3,973
Management contract 264 264
Deferred borrowing costs 980 553
--------- ---------
A$27,438 A$26,626
--------- ---------
Borrowing costs:
Unsecured notes issued in USA A$9,749 A$9,751
Reset preference shares classified
as liabilities 7,813 -
Bank loans and overdraft 1,097 1,771
Finance charges relating to leases 56 112
--------- ---------
A$18,715 A$11,634
--------- ---------
Other expenses:
Property lease rentals 2,711 2,739
Government gaming taxes/community
benefit contribution 55,364 54,804
Bad debts written off and provision
for doubtful debts 2,261 863
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONDENSED FINANCIAL REPORT - (Continued)
7. SEGMENT INFORMATION (A$ IN THOUSANDS)
December 31, 2002 December 31, 2001
------------------- ---------------------
Segment Segment Segment Segment
Revenue Result Revenue Result
Business Segments:
- ------------------
Land based operations A$305,164 A$60,162 A$311,690 A$71,530
Wide-area operations 60,997 13,570 60,986 11,441
Technology operations 26,581 787 28,811 650
Sportsbetting operations 16,573 4,686 11,824 4,928
Net interest 1,125 (17,590) 1,435 (10,199)
Unallocated 1,537 (10,761) 3,100 (10,410)
Eliminations (11,421) 1,683 (10,704) 948
--------- -------- --------- ---------
Consolidated A$400,556 A$52,537 A$407,142 A$68,888
--------- -------- --------- ---------
LAND BASED OPERATIONS
Comprises hotel and casino operations at Hotel Conrad and Jupiters Casino (Gold
Coast), Hotel Conrad and Treasury Casino (Brisbane) and Jupiters Townsville
Hotel and Casino (Townsville) as well as other Breakwater Island Trust
activities in Townsville.
WIDE-AREA OPERATIONS
Comprises keno operations throughout Queensland and in clubs in New South Wales
and gaming machine monitoring and related activities in Queensland clubs and
hotels.
TECHNOLOGY OPERATIONS
Comprises national gaming and information technology service providers.
SPORTSBETTING OPERATIONS
Comprises Centrebet sportsbetting business.
Consolidated segment result equates to profit from ordinary activities before
income tax expense.
Goodwill attributable to the acquisition of the AWA group is included in
Unallocated.
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES
GAAP)
(A) RECONCILIATION OF AUSTRALIAN GAAP TO UNITED STATES GAAP
The following reconciliations have been provided to give additional
information as required under United States GAAP. A description of the
major differences between Australian GAAP and United States GAAP follows
the reconciliations.
CONSOLIDATED
------------
(A$ IN THOUSANDS) 6 MONTHS TO 6 MONTHS TO
NOTE DECEMBER 2002 DECEMBER 2001
---- ------------- -------------
Net profit reported under Australian GAAP A$34,658 A$36,186
Depreciation (i) (1,726) (1,726)
Conrad Treasury and Jupiters Keno
preopening expenses (ii) 329 329
Mark to fair value of cross currency
swap during the period (iii) (1,306) 2,887
Unrealised foreign exchange
gain/(loss) on Notes (iv) (625) 2,697
Software development costs (v) 130 (1,564)
Write back of Jupiters Machine
Gaming impairment charge (vi) (123) 1,500
Debt issuance costs (vii) 95 -
Debt costs - Reset
Preference Share discount (xiv) (1,245) -
Start-Up activity costs (xvii) (726) -
Amortization of goodwill (xviii) 3,918 -
Goodwill impairment charge (xviii) (2,500) -
Net deferred tax effect of
above adjustments 668 (1,755)
Tax effect of equity method investment (viii) - 1,005
Net profit under United States GAAP A$31,547 A$39,559
--------- ---------
Basic Earnings per share (cents) (ix) 15.7 16.4
Diluted Earnings per share (cents) (ix) 15.7 16.4
==== =====
Shareholders' equity as reported
under Australian GAAP. A$475,924 A$633,608
Accumulated depreciation (i) (32,510) (29,059)
Conrad Treasury and Jupiters
Keno preopening expenses (ii) (14,562) (15,249)
Dividends payable (x) - 24,136
Capitalized interest income (xi) 1,858 1,886
Breakwater Island Trust -
Outside Equity Interest (xii) - (31,400)
Breakwater Island Trust -
distribution paid to
Outside Equity Interest (xii) - 3,469
Cumulative effect of
exchange rates on Notes (iv) (24,677) (48,839)
Cumulative effect of
change in swap fair value (iii) 9,471 10,087
Software development costs. (v) (1,434) (1,564)
Write back of Jupiters
Machine Gaming impairment charge (vi) 1,008 1,500
Debt issuance costs (vii) (859) -
Tax effect of equity method investment (viii) - 1,005
Cumulative effect of debt costs -
Reset Preference Share discount (xiv) (1,485) -
Beneficial conversion factor (xiv) 10,009 -
Start-Up activity costs (xvii) (4,011) -
Amortization of goodwill (xviii) 3,918 -
Goodwill impairment charge (xviii) (2,500) -
Net deferred tax effect of
above adjustments 9,861 15,552
========== ==========
Shareholders' equity under United States GAAP A$430,011 A$565,132
========== ==========
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES GAAP)
- (CONTINUED)
(A) RECONCILIATION OF AUSTRALIAN GAAP TO UNITED STATES GAAP
- (CONTINUED)
(i) DEPRECIATION
Both Australian GAAP and United States GAAP specify that
non-current Assets (including buildings) are to be depreciated
over the useful life of such assets to the business. The useful
life of the Conrad Jupiters' and Conrad Treasury buildings have
been adjusted to 40 years to attain consistency with general
practice in the application of United States GAAP. The
Consolidated Entity expects the useful life of those assets to
exceed that timeframe.
(ii) CONRAD TREASURY AND JUPITERS KENO PREOPENING EXPENSES
Under Australian GAAP, expenses may be deferred to future
accounting periods where the estimated future benefits to be
derived from such expenses are likely to be sufficient to recover
those expenses. The Consolidated Entity has deferred certain
costs incurred during the development and start up phase of both
the Conrad Treasury and the real-time, wide-area keno operations
and these costs are amortised over the period of estimated future
benefit. Under United States GAAP, such costs must be expensed
when incurred.
(iii) MARK TO FAIR VALUE OF CROSS CURRENCY SWAP DURING THE PERIOD
Under United States GAAP, in accordance with Statement of
Financial Accounting Standards (SFAS) No. 133 "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133),
derivatives are carried on the Statement of Financial Position at
fair value and except in certain circumstances where hedge
accounting is adopted, changes in the fair value of derivatives
are recorded through net profit. Hedge accounting has not been
adopted in accounting for the cross currency swap. For Australian
GAAP purposes, hedge accounting has been applied and no
mark-to-market adjustment has been recorded.
(iv) UNREALISED FOREIGN EXCHANGE LOSS ON NOTES
Under Australian GAAP, hedge accounting has been applied and the
United States denominated debt principal has been stated at the
spot foreign exchange rate in effect at the reporting date. An
amount has been recorded as a hedge receivable to reflect the
effect of exchange rate movements sheltered by the related swap
agreement. For United States GAAP purposes, the hedge accounting
has not been applied and the movements in the hedge receivable
amount have been recorded through net profit.
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES GAAP)
- (CONTINUED)
(A) RECONCILIATION OF AUSTRALIAN GAAP TO UNITED STATES GAAP -
(CONTINUED)
(v) SOFTWARE DEVELOPMENT COSTS
Under Australian GAAP, the Consolidated Entity has capitalized
certain costs associated with the internal development of
software to be used in its gaming operations, which can also
be marketed to third parties. These costs include internal costs
associated with completing a detailed program design, including
investigating the feasibility of various alternative designs.
Under United States GAAP, SFAS 86 "Accounting for the Costs of
Computer Software to Be Sold, Leased or Otherwise Marketed"
indicates that costs associated with computer software to be
sold, leased or otherwise marketed cannot be capitalized until
"technological feasibility" has been obtained. Based on the
provisions of this standard, the Consolidated Entity was required
to expense certain costs for United States GAAP reporting that
were capitalized for Australian GAAP reporting.
During the period to December 31, 2002 the Consolidated Entity
began amortizing the above software development costs. As these
software development costs were previously expensed under US GAAP,
the current period amortization has been reversed.
(vi) WRITE BACK OF JUPITERS MACHINE GAMING IMPAIRMENT CHARGE
Under Australian GAAP, specifically the provisions of AASB 1010,
"Recoverable Amount of Non-Current Assets," the Consolidated
Entity recognized an impairment charge of A$1,500,000 relating to
deferred costs that are not expected to be fully recoverable.
Under United States GAAP, the Consolidated Entity performed a
separate analysis of its long-lived assets, based on the
undiscounted cashflow methodology described in SFAS 121
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." On this basis, no
impairment charge was recognized for United States GAAP
reporting. During the current period this amount was amortized
for United States GAAP purposes.
(vii) DEBT ISSUANCE COSTS
At June 30, 2002 the Consolidated Entity capitalized the cost of
an interest rate swaption contract associated with a debt raising
as disclosed in "Financial Statements - Note 15 - "Interest
Bearing Liabilities". Under United States GAAP, the cost of this
swaption was expensed.
During the period to December 31, 2002 the Consolidated Entity
amortized the capitalized cost of the above interest rate swaption
As this expense was previously expensed under US GAAP, the current
period amortization has been reversed.
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES GAAP)
- (CONTINUED)
(A) RECONCILIATION OF AUSTRALIAN GAAP TO UNITED STATES GAAP
- (CONTINUED)
(viii) TAX EFFECT OF EQUITY METHOD INVESTMENT
Under Australian GAAP, the difference between the book basis and
tax basis of an equity method investment is not tax effected. US
GAAP requires that a temporary difference be recorded for the
difference between the book basis of an equity method investment
and its tax basis, except for certain situations in which the
investment is considered to be permanent in duration. Accordingly,
a deferred tax asset was recognized for US GAAP reporting.
(ix) EARNINGS PER SHARE ("EPS")
SIX MONTHS ENDED DECEMBER 31, 2002
PER SHARE A$
INCOME A$ SHARES CENTS
--------- ------ ------------
Net profit under
United States GAAP 31,547,000
BASIC EPS
Income available
to common stockholders 31,547,000 201,349,866 15.7
------------
EFFECT OF
DILUTIVE SECURITIES - -
DILUTED EPS
Income available to
common stockholders 31,547,000 201,349,866 15.7
------------
1,901,735 Jupiters Reset Preference Shares "RPS" were outstanding
during the six months ended 31 December 2002 but were not included
in the computation of diluted EPS they were not dilutive.
For the six months ended 31 December 2001 no adjustments were made
to the reported income and shares reported for the purposes of
basic and diluted earnings per share.
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES GAAP)
- (CONTINUED)
(A) RECONCILIATION OF AUSTRALIAN GAAP TO UNITED STATES GAAP
- (CONTINUED)
(x) DIVIDENDS PAYABLE
At 31 December 2001 a provision for dividend had been made for the
purposes of Australian GAAP. This dividend had not been declared,
determined or publically recommended prior to 31 December 2002.
This provision for dividend was reversed for the purposes of
United States GAAP.
Effective July 1, 2002, the Consolidated Entity adopted AASB 1044
for Australian reporting purposes. Under AASB 1044 a provision for
dividend is only recognized at the reporting date where the
dividends are declared, determined or publically recommended
prior to the reporting date. In accordance with this Standard,
no provision for dividend has been recognized for the half year
ended December 31, 2002. Similarly under United States GAAP,
dividends and distributions are recognized in the period in which
they are declared and become legally payable.
(xi) CAPITALIZED INTEREST INCOME
Interest income on unutilized funds was capitalized during the
construction of Conrad Treasury. Under Australian GAAP, this
interest income was capitalized and included in the development
costs and amortized over the useful life of the project. Under
United States GAAP, this interest income is accounted for as
income in the year earned.
(xii) BREAKWATER ISLAND TRUST - OUTSIDE EQUITY INTEREST
Outside equity interest has been included in shareholders'
equity reported for Australian GAAP. The amount reported does
not reflect distributions to outside equity interests. Under
United States GAAP, outside equity interest does not form part of
shareholders' equity. For United States GAAP purposes, outside
equity interest has been reduced by distributions to outside
equity interests and has been removed from Shareholders' Equity.
At 31 December 2002 the outside equity interest was converted to
Jupiters Limited ("Chief Entity") interest in accordance with
transactions as disclosed in Note 2 "Changes in Composition of
the Entity."
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES GAAP)
- (CONTINUED)
(A) RECONCILIATION OF AUSTRALIAN GAAP TO UNITED STATES GAAP
- (CONTINUED)
(xiii) INVESTMENT IN BREAKWATER (A$ IN THOUSANDS)
As at June 30, 2000, the Consolidated Entity began consolidating
Breakwater Island Trust for Australian GAAP purposes. For United
States GAAP purposes, the investment in Breakwater Island Trust
would be accounted for as an equity basis investment. However,
on December 31, 2002, Jupiters Limited effectively increased its
ownership interest to 100% by declaring its takeover bid
unconditional by that date. Jupiters Limited has exercised its
right to compulsorily acquire the 5.8% ownership interest held
by dissenting unitholders of Breakwater Island Trust at December
31, 2002. At 31 December 2001 assets and liabilities would not
appear on the United States GAAP balance sheet. The following are
the assets and liabilities of Breakwater Island Trust that are
included in the Australian GAAP Balance Sheet at 31 December 2001.
ASSET/LIABILITY DECEMBER 31, 2001
Cash Assets - Current A$ 3,233
Receivables - Current 497
Inventories - Current 256
Prepayments - Current 737
Property, Plant and Equipment - Non Current 56,512
Deferred Tax Assets - Non Current 568
Payables - Current 3,573
Tax Liabilities 785
Other Provisions 1,315
Interest Bearing Liabilities - Non Current 2,100
Other Provisions - Non Current 1,038
================================================================================
JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES GAAP)
- (CONTINUED)
(A) RECONCILIATION OF AUSTRALIAN GAAP TO UNITED STATES GAAP
- (CONTINUED)
(xiii) INVESTMENT IN BREAKWATER (A$ IN THOUSANDS) - (CONTINUED)
Instead, for United States GAAP purposes, the balance sheet would
include a non-current asset, Investment in Associates, of
A$22,966,490 at December 31, 2001. In addition, for Australian
GAAP purposes, the Statement of Financial Performance included
operating revenues of 2001: A$21,644,000 and operating expenses
of 2001: A$19,993,000 attributable to Breakwater Island Trust.
The following are the cash flows of Breakwater Island Trust that
are included in the Australian GAAP Statement of Cash Flows:
2001
Cash flows from operating activities A$3,746
Cash flows from investing activities (780)
Cash flows from financing activities (6,708)
These cash flows would not appear in the United States GAAP
Statement of Cash Flows for December 31, 2001.
(xiv) BENEFICIAL CONVERSION FACTOR (A$ IN THOUSANDS)
1,901,735 reset preference shares ("RPS") were issued on April
11, 2002 at a face value of A$100 each with a coupon of 8.15% per
annum. The coupon is payable semi-annually, is cumulative and
ranks senior to the payment of ordinary dividends. The RPS have
a ten year term with specified terms able to be reset by the
Company at the end of year five. Holders of RPS have the ability
to request conversion of their securities to ordinary shares in
Jupiters Limited and the Company may convert, repurchase such
securities or sell them to a third party. Furthermore, the
Company may repurchase the securities at the time of reset,
maturity or if the coupon ceases to be tax deductible. Holders
of RPS generally have no voting rights except in limited
circumstances. The rights of holders of RPS are subordinated to
all claims except ordinary shareholders. The RPS are quoted for
trading on the Australian Stock Exchange. For the purposes of
United States GAAP these instruments may be classified as either
mezzanine or debt, but not as permanent equity. Because the
company presents the RPS as debt, dividends and amortization of
the beneficial conversion feature are classified as interest
expense.
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JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES GAAP)
- (CONTINUED)
(A) RECONCILIATION OF AUSTRALIAN GAAP TO UNITED STATES GAAP
- (CONTINUED)
(xiv) BENEFICIAL CONVERSION FACTOR (A$ IN THOUSANDS) - (CONTINUED)
For the purposes of Australian GAAP, the RPS have been recorded
as Non-Current Interest Bearing Liabilities. In accordance with
United States GAAP, specifically EITF 98-5 "Accounting for
Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios", the value of the
embedded conversion feature has been determined to be
approximately A$10 million and has been recorded as paid in
capital. This beneficial conversion factor is being amortised in
accordance with an effective annual interest rate method over the
five-year period to the first reset date.
(xv) PLAYER INCENTIVES - CASH REWARDS (A$ IN THOUSANDS)
The Consolidated Entity, through the operation of a "cash back
rewards scheme" in place at its casino operations in Brisbane
and on the Gold Coast, refunds to certain customers a cash reward
based on the volume of play by those customers. For Australian
GAAP, these refunds are recorded as marketing expenditure. In
accordance with United States GAAP, specifically EITF 01-9,
"Accounting for Consideration Given by a Vendor to a Customer
(Including a Reseller of the Vendor's Products)", customer cash
rewards should be recorded as a deduction to revenue and not as
an expense. Accordingly, revenues reported under Australia GAAP
should have the following amounts deducted for the purposes of
determining revenue in accordance with United States GAAP:
DECEMBER 31, 2002 DECEMBER 31, 2001
Cash Rewards A$5,732 A$6,170
(xvi) FINANCIAL STATEMENTS OF GUARANTORS
A number of controlled entities of the Consolidated Entity are
guarantors to the United States dollar denominated debt. The
consolidated position, performance and cash flows of the
consolidated guarantors are not materially different to the
position, performance and cash flow of the Consolidated Entity
after the exclusion of amounts related to Breakwater Island
Limited.
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JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES GAAP)
- (CONTINUED)
(A) RECONCILIATION OF AUSTRALIAN GAAP TO UNITED STATES GAAP
- (CONTINUED)
(xvii) START-UP ACTIVITY COSTS
Under Australian GAAP, expenses may be deferred to future
accounting periods where the estimated future benefits to be
derived from such expenses are likely to be sufficient to recover
those expenses. The Consolidated Entity has deferred certain costs
incurred relating to the development of future business
operations. Under United States GAAP, in accordance with Statement
of Position 98-5, "Accounting for the Costs of Start-Up
Activities" costs incurred in future business operations prior to
the securing of a contract for that business operation must be
expensed.
(xviii) GOODWILL
In July 2001, the Financial Accounting Standards Board issued SFAS
No. 141,"Accounting for Business Combinations", and SFAS No. 142,
"Goodwill and Other Intangible Assets". The Consolidated Entity
adopted these standards on July 1, 2002. These standards affect
accounting for business combinations consummated after June 30,
2001 and existing goodwill and other intangible assets of the
Consolidated Entity.
The standards require, among other provisions, companies to
review for possible impairment of goodwill existing at the date
of adoption and perform subsequent impairment tests on an annual
basis. The standards no longer require the amortization of
goodwill while other intangible assets will continue to be
amortized over their estimated useful lives, which, if
supportable, may be a period that exceeds the current maximum
period of 40 years. Intangible assets with indeterminable useful
lives will not be amortized but assessed for impairment in
accordance with SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets".
During the six months to December 31, 2002 the Consolidated
entity wrote back the amortisation of goodwill recorded under
Australian GAAP and recognised an impairment charge related to
goodwill in accordance with United States GAAP.
During the six months to December 31, 2001 the Consolidated
Entity recorded goodwill amortisation of A$3,973,000 which
decreased basic and diluted earnings per share by A1.6 cents per
share.
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JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES GAAP)
- (CONTINUED)
(B) ADDITIONAL DISCLOSURES FOR UNITED STATES INVESTORS
Defined Contribution Superannuation Funds
The Consolidated Entity makes payments in respect of employees
into defined contribution superannuation funds. The total amount
paid during the year was A$8.1 million (2001: A$7.4 million).
Employee Share Plan
The Consolidated Entity has established an employee share plan
whereby shares may be purchased on behalf of employees on market
through payroll deductions.
Commitments (A$ in thousands)
The aggregate amounts of principal maturities (excluding finance
leases) outstanding at December 31, 2002 comprise unsecured Notes
of United States $135 million repayable in March 2006, A$20
million drawn under a multi-option syndicated facility agreement
dated April 26, 2001 and A$2.4 million drawn by Breakwater Island
Trust under a secured commercial bill facility which was
refinanced in August 2001.
Also outstanding at December 31, 2002 were A$190 million Reset
Preference Shares ("RPS").
Land, Buildings and Casino Licenses (A$ in thousands)
Land, buildings and casino licenses at cost as shown in the
financial statements, includes costs of A$102 million associated
with the acquisition of the casino license for Conrad Treasury
(including a security deposit of A$50 million in respect of
future lease payments for the leasehold premises that is
presently being refunded to the Consolidated Entity over a ten
year period).
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JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES GAAP)
- (CONTINUED)
(B) ADDITIONAL DISCLOSURES FOR UNITED STATES INVESTORS - (CONTINUED)
Executive Option Plan
The Chief Entity has established an executive share option plan
whereby certain employees have been granted options to purchase
the Chief Entity's shares at a price equal to the market value of
the shares on the date the options were granted. These options
vest three years after the grant date. The number of options that
will ultimately vest is dependent upon the overall return to
ordinary shareholders during the three-year vesting period
compared to a benchmark group of similar sized companies listed on
the Australian Stock Exchange.
Under Australian GAAP, no compensation expense will be recognized
relating to these share options. Under United States GAAP, the
Chief Entity has elected to calculate compensation expense for
these share options based on Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees." This standard
requires the Chief Entity to record compensation expense when it
becomes probable that the conditions for vesting will be achieved.
Upon management's assessment that probability of vesting has been
reached, compensation expense will be recorded based on the
intrinsic value of the options, measured as the difference between
the share price and the exercise price at the measurement date.
No compensation cost has been recognized to date as it is not yet
probable that the conditions for vesting will be achieved.
Allowances (A$ in thousands)
The Consolidated Entity has made the following allowances at June
30 and 31 December 2002:
BALANCE AT
BEGINNING ADDITIONS DEDUCTIONS BALANCE AT
DESCRIPTION OF PERIOD IN PERIOD IN PERIOD PERIOD END
-------------------------------------------------------------------
Allowance
for Doubtful
Debts 7,275 2,590 - 9,865
-------------------------------------------------------------------
Allowance for
Diminution in
Inventory Value 5,055 - (685) 4,370
-------------------------------------------------------------------
Allowance for
Valuation of
Deferred Tax
Assets 9,236 518 - 9,754
-------------------------------------------------------------------
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JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
8. UNITED STATES GENERALLY ACCEPTED ACOUNTING PRINCIPLES (UNITED STATES GAAP)
- (CONTINUED)
(B) ADDITIONAL DISCLOSURES FOR UNITED STATES INVESTORS - (CONTINUED)
Revenue Recognition - Sale of Goods
Revenue from the sale of goods is recognised in accordance with
Australian Accounting Standard 1004 "Revenue". In accordance with
this standard revenue from the sale of goods is recorded when all
of the following conditions have been satisfied; (1) control in the
goods being sold passes to the buyer; (2) it is probable
consideration will pass from the buyer in accordance with an
established arrangement; and (3) the amount of consideration to
pass can be reliably measured. No adjustments have been recorded
relating to revenue from the sale of goods, as the principles of
revenue recognition do not differ from those that would be applied
under United States GAAP.
Contingent Liabilities
(a) Australian Taxation Office (ATO) Audit - AWA Limited
AWA Limited is currently the subject of an audit by the ATO. The
ATO is reviewing the availability of tax losses incurred in 1998,
1990 and 1991 which have been utilised by AWA and its wholly owned
controlled entities. The matter continues to progress with the ATO,
however at December 31, 2002 it is too early to determine what, if
any, liability might ultimately arise. Should the ATO's current
position prevail, the effect would be to increase purchased
goodwill by approximately $19 million, excluding any penalties.
(b) Other Regulatory Matters
From time to time the Consolidated Entity is the subject of
inquiries by various regulatory bodies. Management does not believe
that there are any such enquiries that would currently have a
material effect on the Company's results of operations and
financial position.
9. SUBSEQUENT EVENTS FOR THE PERIOD FEBRUARY 11, 2002 TO MARCH 27, 2003
On March 4, 2002 Jupiters Limited ("Jupiters") and TABCORP Holdings
Limited ("TABCORP") announced a proposal to merge and have agreed an
exclusivity period to negotiate a Merger Implementation Agreement and to
undertake reciprocal due diligence.
The merger will be subject to the approval of the Treasurer of Queensland.
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JUPITERS LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
9. SUBSEQUENT EVENTS FOR THE PERIOD FEBRUARY 11, 2002 TO MARCH 27, 2003 -
(CONTINUED)
MERGER TERMS
Jupiters' ordinary shareholders will receive on average from TABCORP:
- 24 TABCORP shares; and
- A$285.00 cash
for every 100 Jupiters' ordinary shares they own.
Jupiters' ordinary shareholders will receive from Jupiters:
- A proportion of Centrebet sale proceeds; and
- A fully franked special dividend of A$0.75 cash per Jupiters' ordinary
share.
The special dividend will have attached franking credits of approximately
A$0.32 per Jupiters' ordinary share but will be subject to receiving a
satisfactory tax ruling.
The merger proposal for ordinary shareholders implies a value of A$6.06
(based on the volume weighted average price of TABCORP shares traded on
the Australian Stock Exchange in the three months to the date of this
announcement (A$10.26)). In addition, Jupiters' ordinary shareholders will
receive the value of the franking credits and the value of their proportion
of the Centrebet sale proceeds.
Holders of Jupiters' reset preference shares will be offered A$105.26 cash
for each preference share, plus accrued dividends.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Jupiters Limited
We have audited the accompanying consolidated statements of the financial
position of Jupiters Limited as of 31 December 2002 and 30 June 2002, and the
related consolidated statements of financial performance, and cash flows for the
six months ended 31 December 2002 and 31 December 2001. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Australia. 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
preparation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jupiters Limited at 31 December
2002 and 30 June 2002, and the consolidated results of its operations and its
cash flows for the six months ended 31 December 2002 and 31 December 2001, 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. The application of the latter would have effected the
determination of consolidated net profit for the six months ended 31 December
2002 and 31 December 2001, and the determination of consolidated equity as of 31
December 2002 and 30 June 2002, to the extent summarised in Note 8 to the
financial statements.
As discussed more fully in Note 1 to the consolidated financial statements, the
Company adopted Australian Accounting Standard AASB 1044 "Provisions, Contingent
Liabilities and Contingent Assets" effective July 1, 2002.
ERNST & YOUNG
Brisbane, Australia
11 February 2003 (except with respect to matters discussed in Notes 8 and 9, as
to which the date is 27 March 2003).
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