-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MkE71QH9XL1/GT/LDL5iVEB+qTxL820y4v35nDWXzXdaeWYZAxlDBaTWrIWMM+0o 91KWFcNW1D4pqPhNdx3DDw== 0000950128-97-000604.txt : 19970303 0000950128-97-000604.hdr.sgml : 19970303 ACCESSION NUMBER: 0000950128-97-000604 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19970228 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLINGER INTERNATIONAL INC CENTRAL INDEX KEY: 0000868512 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 953518892 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-14164 FILM NUMBER: 97547052 BUSINESS ADDRESS: STREET 1: 401 NORTH WABASH AVE STREET 2: SUITE 740 CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3123212299 MAIL ADDRESS: STREET 1: 401 NORTH WABASH AVE STREET 2: SUITE 740 CITY: CHICAGO STATE: IL ZIP: 60611 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN PUBLISHING COMPANY DATE OF NAME CHANGE: 19940204 10-K/A 1 HOLLINGER INTERNATIONAL 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT NO. 1 [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended December 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---- ---- Commission File No. 0-24004 HOLLINGER INTERNATIONAL INC. ---------------------------- (Exact name of registrant as specified in its charter) DELAWARE 95-3518892 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 401 North Wabash Avenue, Suite, 740, Chicago, Illinois 60611 - ------------------------------------------------------ ----- (Address of Principal Executive Office) (Zip Code) Registrant's telephone number, including area code: (312) 321-2299 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON WHICH TITLE OF EACH CLASS REGISTERED ------------------- ------------------------------ Class A Common Stock par value $.01 per share New York Stock Exchange 9 1/4% Senior Subordinated Notes due 2006 New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of Class A Common Stock held by non-affiliates as of March 15, 1996, was approximately $96,082,500. As of such date, non-affiliates held no shares of Class B Common Stock. There is no active market for the Class B Common Stock. The number of outstanding shares of each class of the registrant's common stock as of March 15, 1996, was as follows: 58,065,754 shares of Class A Common Stock and 14,990,000 shares of Class B Common Stock. 2 The following Form 10-K/A amends Part IV Item 14 of the Form 10-K of Hollinger International Inc. for the year ended December 31, 1995. INDEX HOLLINGER INTERNATIONAL INC. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) Financial Statements filed pursuant to Rule 3-09 of Regulation S-X John Fairfax Holdings Limited Auditors Report Consolidated Balance Sheet Consolidated Profit and Loss Account Consolidated Statement of Cash Flows Notes to the Accounts as of June 30, 1996 (b) Exhibits 23.1 Consent of Ernst & Young 3 REPORT OF INDEPENDENT AUDITORS To the Board of Directors of JOHN FAIRFAX HOLDINGS LIMITED We have audited the accompanying consolidated balance sheets of John Fairfax Holdings Limited and its subsidiary companies ("the Group") as of June 30, 1995 and June 30, 1996, and the related consolidated statements of profit and loss and cash flows for the three years ended June 30, 1996. 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 audit in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above, present fairly, in all material respects, the financial position of John Fairfax Holdings Limited and its subsidiary companies at June 30, 1995 and 1996 and the results of their operations and their cash flows for the years ended June 30, 1994, 1995 and 1996 in conformity with Australian Accounting Standards. Accounting principles generally accepted in Australia vary in certain significant respects from accounting principles generally accepted in the United States. The application of the generally accepted accounting principles in the United States would have affected the determination of consolidated operating profit for the years ended June 30, 1994, 1995 and 1996 and the determination of the consolidated shareholders equity at June 30, 1994, 1995 and 1996 to the extent summarized in Note 31 to the financial statements. ERNST & YOUNG Chartered Accountants Sydney, Australia September 6, 1996 4 JOHN FAIRFAX HOLDINGS LIMITED - ------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEET - -------------------------------------------------------------------------------
June 30, - ------------------------------------------------------------------------------------------------------------- 1996 1995 Notes A $000 A $000 - ------------------------------------------------------------------------------------------------------------- CURRENT ASSETS Cash 5,341 310 Receivables 9 153,582 135,842 Inventories 10 36,095 26,308 ----------------------------- TOTAL CURRENT ASSETS 195,018 162,460 ----------------------------- NON-CURRENT ASSETS Receivables 9 2,224 3,310 Investments 11 44,831 25,964 Property, plant and equipment 12 607,942 507,432 Intangibles 13 1,258,167 1,256,949 Other 14 114,935 128,124 ----------------------------- TOTAL NON-CURRENT ASSETS 2,028,099 1,921,779 ----------------------------- TOTAL ASSETS 2,223,117 2,084,239 ----------------------------- CURRENT LIABILITIES Creditors and borrowings 15 255,455 100,010 Provisions 16 81,880 110,166 ----------------------------- TOTAL CURRENT LIABILITIES 337,335 210,176 ----------------------------- NON-CURRENT LIABILITIES Creditors and borrowings 15 & 23 728,971 750,000 Provisions 16 70,764 50,377 ----------------------------- TOTAL NON-CURRENT LIABILITIES 799,735 800,377 ----------------------------- TOTAL LIABILITIES 1,137,070 1,010,553 ----------------------------- NET ASSETS 1,086,047 1,073,686 ----------------------------- SHAREHOLDERS' EQUITY Issued capital 17 416,865 422,638 Reserves 18 423,358 416,099 Retained profits 245,751 234,078 ----------------------------- SHAREHOLDERS' EQUITY ATTRIBUTABLE TO MEMBERS OF THE CHIEF ENTITY 1,085,974 1,072,815 Outside equity interests in controlled entities 19 73 871 ----------------------------- TOTAL SHAREHOLDERS' EQUITY 1,086,047 1,073,686 =============================
The balance sheet should be read in conjunction with the accompanying notes. 5 JOHN FAIRFAX HOLDINGS LIMITED - ------------------------------------------------------------------------------- CONSOLIDATED PROFIT AND LOSS ACCOUNT - -------------------------------------------------------------------------------
Year ended June 30, - ----------------------------------------------------------------------------------------------------- 1996 1995 1994 Notes A $000 A $000 A $000 - ----------------------------------------------------------------------------------------------------- Operating revenue 2 1,006,148 948,433 846,592 Operating expenses 3 (854,537) (731,942) (678,019) --------------------------------------- OPERATING PROFIT BEFORE ABNORMAL ITEMS AND INCOME TAX 151,611 216,491 168,573 Abnormal items before income tax 4 (21,934) (10,867) (4,171) --------------------------------------- OPERATING PROFIT BEFORE INCOME TAX 129,677 205,624 164,402 Income tax attributable to operating profit 5 (42,201) (68,007) (53,660) --------------------------------------- OPERATING PROFIT BEFORE ABNORMAL TAX BENEFITS 87,476 137,617 110,742 Abnormal income tax benefits 5 - 9,707 75,168 --------------------------------------- OPERATING PROFIT AFTER INCOME TAX 87,476 147,324 185,910 Outside equity interests in operating profit after income tax (47) (246) (238) --------------------------------------- OPERATING PROFIT AFTER INCOME TAX ATTRIBUTABLE TO MEMBERS OF THE CHIEF ENTITY 6 87,429 147,078 185,672 Retained profits at the beginning of the financial year 234,078 173,493 47,980 Adjustment resulting from the adoption of a new accounting standard - (10,853) - --------------------------------------- TOTAL AVAILABLE FOR APPROPRIATION 321,507 309,718 233,652 Dividends provided for or paid 7 (75,756) (75,640) (60,159) --------------------------------------- RETAINED PROFITS AT THE END OF THE FINANCIAL YEAR 245,751 234,078 173,493 =======================================
The profit and loss account should be read in conjunction with the accompanying notes. 6 JOHN FAIRFAX HOLDINGS LIMITED - ------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS - -------------------------------------------------------------------------------
Year ended June 30, - ---------------------------------------------------------------------------------------------------------- 1996 1995 1994 Notes A $000 A $000 A $000 - ---------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 972,621 938,077 829,214 Payments to suppliers and employees (764,194) (656,256) (607,173) Redundancy payments (46,298) (10,024) (17,488) Dividends and unit trust income received 854 662 555 Interest received 986 459 779 Interest paid (45,175) (35,263) (32,273) Income taxes paid (2,378) (244) (134) ------------------------------------------- Net cash flows from (used in) operating activities 26 116,416 237,411 173,480 ------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant & equipment (108,704) (228,231) (191,831) Proceeds from the sale of property, plant & equipment 9,245 19,879 3,200 Interest paid (22,455) (14,654) (3,273) Additional costs of acquiring the economic entity - (4,580) (2,337) Recovery of costs of acquiring the economic entity - 2,500 - Acquisition of investments (18,874) (9,575) (3,537) Proceeds from the sale of investments - 799 - Acquisition of a division - (1,064) - Acquisition of controlled entities/minority interests (2,012) (36,866) - Proceeds from the sale of controlled entities - 650 - Transfers from related bodies corporate - - - Settlement of commitments entered into during the acquisition of the economic entity - - (60,000) ------------------------------------------- Net cash used in investing activities (142,800) (271,142) (257,778) ------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of shares and debentures 1,757 5,390 118,200 Dividends paid (75,578) (67,345) (55,333) Proceeds from borrowings 223,971 130,000 665,000 Repayment of borrowings (120,000) (32,774) (644,736) Loans and deposits issued - - - Loans and deposits repaid 1,329 - 2,896 Borrowing costs (64) (1,646) (1,687) ------------------------------------------- Net cash provided by (used in) financing activities 31,415 33,625 84,340 ------------------------------------------- NET INCREASE (DECREASE) IN CASH HELD 5,031 (106) 42 Cash at beginning of financial year 310 416 374 ------------------------------------------- Cash at end of financial year 26 5,341 310 416 ===========================================
The statement of cash flows should be read in conjunction with the accompanying notes. 7 - -------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 1 STATEMENT OF ACCOUNTING POLICIES The financial report is a general purpose financial report which has been prepared in accordance with applicable Accounting Standards and other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) and the Corporations Law, including the disclosure requirements of Schedule 5 of the Corporations Regulations. The accounts have also been prepared on the basis of the historical cost accounting convention. The accounting policies are consistent with those of the previous year. Certain comparative figures have been re-classified to conform with changes in presentation for the current year. The changes are not material. (a) Principles of Consolidation The consolidated accounts are those of the economic entity comprising the chief entity, John Fairfax Holdings Limited, and all its controlled entities. The consolidated accounts include the information contained in the accounts of John Fairfax Holdings Limited and each of its controlled entities as from the date the chief entity obtains control until such time as control ceases. The accounts of controlled entities are prepared for the same reporting period as the chief entity, using consistent accounting policies. All inter-entity balances and transactions, and unrealised profits arising from intra economic entity transactions, have been eliminated in full. (b) Debentures Debentures have been included as equity as the rights attaching to them are in all material respects comparable to those attaching to the ordinary shares. Such debentures are unsecured non-voting securities that have interest entitlements equivalent to the dividend entitlements attaching to the ordinary voting shares and rank equally with such shares on any liquidation or winding up. These interest entitlements are treated as dividends. The debentures are convertible into shares on a one for one basis at the option of the holder provided that conversion will not result in a breach of any of the following: (i) any provision of the Foreign Acquisitions and Takeovers Act 1975; (ii) any undertaking given by the chief entity to the Foreign Investment Review Board or at the request of the Foreign Investment Review Board from time to time; or (iii) any other applicable law including, without limitation, the Broadcasting Act 1942. 8 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 1 STATEMENT OF ACCOUNTING POLICIES (continued) (c) Property, Plant and Equipment Land and buildings Freehold and leasehold properties are initially capitalised at cost and thereafter are periodically revalued to an amount not exceeding their recoverable amount estimated on the basis of undiscounted cash flows. Other Fixed Assets Other fixed assets are carried at the lower of cost or recoverable amount. The carrying amount is reviewed annually by directors to ensure it is not in excess of the recoverable amount estimated on the basis of undiscounted cash flows. Profits and losses on disposal of fixed assets in the ordinary course of business are taken into account in determining the operating profit for the period. Capitalisation Costs arising from the acquisition or construction of plant and equipment are capitalised. Such costs may include internal labour and interest. Interest relating to the financing of the Chullora printing plant was capitalised up to the date of commissioning and will be subsequently amortised over its useful life. Leasing Leases of fixed assets where substantially all the risks and benefits incidental to ownership of the asset are transferred to the economic entity are classified as finance leases. Finance leases are capitalised and recorded as an asset and liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest for the period. Operating leases, where the lessor effectively retains all the risk and benefits of ownership of the leased asset, are not capitalised. Rental payments are charged as an expense in the periods to which they relate. Depreciation and Amortisation Depreciation is determined using the straight-line method of calculation. It is calculated on the cost recorded for buildings, plant and equipment so as to write off the asset over its estimated useful life. In the case of land no provision for depreciation has been made. Leased assets are amortised over the life of the relevant lease, or where it is likely that the company will obtain ownership of the asset, over the useful life of the asset. 9 - -------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - -------------------------------------------------------------------------------- NOTE 1 STATEMENT OF ACCOUNTING POLICIES (continued) (d) Investments Investments are carried at the lower of cost or recoverable amount. The carrying amount is reviewed annually by directors to ensure it is not in excess of the recoverable amount. The recoverable amount is represented by a directors valuation based on undiscounted cashflows or the underlying net assets of the particular entities. Dividends are brought to account as they are received. (e) Mastheads and tradenames Mastheads and tradenames are carried at cost and are not amortised as they are considered to be assets which are unlikely to diminish in value over time. In accordance with AASB 1021, no amortisation is provided against the carrying value of these assets because the Directors believe that the life of these assets is of such duration and the residual value would be such that the amortisation charge, if any, would not be material. The carrying amount is reviewed annually by Directors to ensure it is not in excess of the recoverable amount. The recoverable amount is represented by a directors valuation based on undiscounted cashflows. (f) Inventories Inventories including work in progress are valued at the lower of cost and estimated net realisable value. The methods used to determine cost for the main items of inventory are: - Raw materials (comprising mainly newsprint and paper on hand) are assessed at average cost and newsprint and paper in transit by specific identification cost. - Work in progress and finished goods are valued at direct material and labour costs, together with a proportion of indirect labour costs and manufacturing overheads where appropriate. - In the case of other inventories, cost is assigned by the weighted average cost method. A provision for diminution in value of inventories exists to cover a decline in value which might arise from the effects of storage hazards. (g) Debtors Bad debts are written off by a charge against the provision for doubtful debts during the period in which they are identified as bad. Provision is made for doubtful debts and is based on an inspection and assessment of all debts outstanding. Adjustments are made for any outstanding returns, commissions and allowances in arriving at the trade debtors balance. 10 - -------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - -------------------------------------------------------------------------------- NOTE 1 STATEMENT OF ACCOUNTING POLICIES (continued) (h) Employee Entitlements Provision has been made for salaries and wages, holiday pay, long service leave and other entitlements payable to employees under statutory and contractual requirements. The provision has been allocated into current and non-current proportions. The current proportion relates to the amount of the provision which is expected to be payable in the ensuing twelve months and is measured in nominal value. The non-current proportion relates to entitlements, other than annual leave and sick leave, which are expected to be payable after twelve months from balance date and are measured at the present value of the expected future cash outflows. In determining the present value of future cash outflows, the interest rates attaching to government guaranteed securities which have terms to maturity approximating the terms of the related liability are used. (i) Income Tax Income tax has been accounted for using the liability method of tax effect accounting whereby income tax expense is based upon the accounting profit adjusted for permanent differences. Future income tax benefits attributable to income tax losses, capital losses and timing differences are brought to account when realisation of the benefit is considered to be virtually certain and will only be obtained if: (i) the economic entity derives future assessable income of a nature and of an amount sufficient to enable the benefit to be realised; (ii) the economic entity has complied and continues to comply with the conditions for deductibility imposed by tax legislation; and (iii) no changes in tax legislation adversely affect the economic entity in realising the benefit from the deductions for the loss. (j) Foreign Currency Foreign currency transactions are initially converted to Australian currency at the rate of exchange ruling on the date of the transaction or, where appropriate, at rates specified under forward exchange contracts. Amounts payable and receivable at balance date are translated at rates applicable at that date. Except for certain specific hedges and hedges of foreign currency operations, all resulting exchange differences arising on settlement or re-statement are brought to account in determining the profit and loss for the financial year. Transaction costs, premiums and discounts on forward currency contracts are deferred and amortised over the life of the contract. 11 - -------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - -------------------------------------------------------------------------------- NOTE 1 STATEMENT OF ACCOUNTING POLICIES (continued) Where a purchase or sale is specifically hedged, exchange gains or losses on the hedging transaction arising up to the date of purchase or sale and costs, premiums and discounts relative to the hedging transaction are included with the purchase or sale. Exchange gains and losses arising on the hedge transaction after that date are taken to the profit and loss account. The accounts of overseas subsidiaries are translated using the current rate method and any exchange differences are taken directly to the foreign currency translation reserve. (k) Industry and Geographical Segments The economic entity operates predominantly within the media industry and predominantly within Australia. NOTE 2 OPERATING REVENUE
Year ended June 30, ------------------------------------------- 1996 1995 1994 A $000 A $000 A $000 ------------------------------------------- TRADING REVENUE Newspapers 809,519 798,041 716,265 Magazines 89,170 80,534 76,661 Other 96,367 65,939 48,857 ------------------------------------------- 995,056 944,514 841,783 ------------------------------------------- OTHER REVENUE Proceeds from sale of non-current assets 9,245 2,671 3,200 Dividends received or receivable from: Wholly owned controlled entities - - - Other corporations 662 372 435 Distributions from unit trusts 192 290 120 Interest received or receivable from: Wholly owned controlled entities - - - Other persons/corporations 986 459 780 Foreign currency exchange gains - 100 122 Other 7 27 152 ------------------------------------------- 11,092 3,919 4,809 ------------------------------------------- TOTAL OPERATING REVENUE 1,006,148 948,433 846,592 ===========================================
12 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 3 OPERATING EXPENSES
Year ended June 30, ----------------------------------------- 1996 1995 1994 A $000 A $000 A $000 ----------------------------------------- Salaries and wages 236,913 231,234 218,928 Newsprint 155,252 125,275 114,632 Provisions Doubtful debts 4,855 2,617 5,489 Depreciation - freehold property, plant and equipment 41,218 26,102 22,193 Amortisation - leased property, plant and equipment 320 51 140 Diminution in value of inventories 203 (9) (29) Employee benefits 12,336 11,440 8,535 Rentals - operating leases 14,259 9,264 6,900 Book value of non-current assets sold 8,614 1,840 1,787 Foreign currency exchange losses 166 - - Interest paid or payable to: Wholly owned controlled entities - - - Other persons/corporations 43,287 36,952 37,624 Finance charges on capitalised leases 1,694 96 188 Other costs 335,420 287,080 261,632 ----------------------------------------- TOTAL OPERATING EXPENSES 854,537 731,942 678,019 =========================================
Interest paid or payable excludes $22,455,292 (1995: $14,653,869 1994: 3,273,000), attributable to debt arising from capital works in progress, which has been capitalised. 13 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 4 ABNORMAL ITEMS
Year ended June 30, ---------------------------------------- 1996 1995 1994 A $000 A $000 A $000 ---------------------------------------- INCOME Capital profit on sale of freehold property (income tax expense not applicable) - - 3,007 EXPENSE Depreciation adjustment arising from a reassessment of the estimated useful life of office furnishings (income tax benefit not applicable - - (2,152) Employee redundancy and executive severance costs (21,934) (10,867) (5,026) ---------------------------------------- Net abnormal items before income tax (21,934) (10,867) (4,171) Income tax benefit applicable 7,238 3,586 1,622 ---------------------------------------- NET ABNORMAL ITEMS AFTER INCOME TAX (14,696) (7,281) (2,549) ----------------------------------------
NOTE 5 INCOME TAX EXPENSE The prima facie tax on operating profit is reconciled to the income tax provided in the accounts as follows:
Year ended June 30, ---------------------------------------- 1996 1995 1994 A $000 A $000 A $000 ---------------------------------------- PRIMA FACIE TAX ON OPERATING PROFIT 46,684 67,856 54,253 Tax effect of permanent differences: Fringe benefits tax - - 550 Depreciation of buildings (63) 204 412 Investment allowance (5,251) (1,302) (421) Rebatable dividends (238) (123) (144) Other 1,286 1,491 (616) (Over)/under provision in prior year (217) (119) (374) ---------------------------------------- Income tax attributable to operating profit 42,201 68,007 53,660 Adjustment to future income tax benefit arising from the change in the corporate tax rate - (9,707) - Recognition of prior year tax losses not previously brought to account - - (75,168) ---------------------------------------- Abnormal income tax benefits - (9,707) (75,168) ---------------------------------------- Net total income tax (benefit)/expense 42,201 58,300 (21,508) ---------------------------------------- INCOME TAX PROVIDED COMPRISES: Provision attributable to current year 262 573 144 (Increase)/decrease in future income tax benefits: Timing differences 3,964 (2,716) 3,600 Tax losses 20,778 58,837 49,916 Increase in deferred income tax liability 17,197 11,313 - Abnormal income tax benefits - (9,707) (75,168) ---------------------------------------- 42,201 58,300 (21,508) ----------------------------------------
14 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 6 CONTRIBUTIONS OF CONTROLLED ENTITIES
NOTES INTEREST PLACE OF AMOUNT OF CONTRIBUTION TO INCORP. INVESTMENT CONSOLIDATED PROFIT ---------------------------------------------------------------------------------------------- June 30, Year ended June 30, ------------------- ------------------------ 1996 1995 1996 1995 1994 $000 $000 $000 $000 $000 CHIEF ENTITY John Fairfax Holdings Limited (a) ACT 1,442 981 1,958 CONTROLLED ENTITIES Associated Newspapers Limited (a) 100% NSW 5,000 5,000 - - - AAV Australia Pty Limited (a) 100% Vic. 398 398 3,549 3,442 2,854 AAV New Zealand Limited (e) 95% NZ 10 10 271 220 170 Ausinet Pty Limited (a) 100% ACT - - (404) 9 - Australian Geographic Pty Limited (a) 100% NSW 37,834 37,834 4,170 566 - David Syme & Co Limited (a) 100% Vic. 365,577 365,577 39,534 62,239 47,696 Dysford Pty Limited (a) 100% ACT - - - - - Fairfax CD Rom Pty Limited (a) 100% ACT - - (74) (154) - Fairfax Community Newspapers Pty Limited (a) 100% NSW 27,655 27,655 3,198 3,708 3,284 Fairfax Corporation Pty Limited (a) 100% NSW 30,000 30,000 (7) (749) 16 Fairfax Ian Limited (e) 100% UK - - - - - Fairfax Multimedia Holdings Pty Limited (a),(f) 100% ACT - - (2,584) (182) - Fairfax Printers Pty Limited (a),(d),(f) 100% ACT - - (6,953) - - Fairfax Print Holdings Pty Limited (a),(f),(g) 100% ACT - - 7,400 (949) - Gold Coast Community Press Pty Limited (a) 100% ACT - - - (33) (1,041) Homes Pictorial Publications Pty Limited (b) 100% NSW - - - - - Homes Pictorial Unit Trust (a),(b) 100% 5,012 3,000 810 937 918 Illawarra Newspapers Holdings Pty Limited (a) 100% NSW 16,612 16,612 1,627 1,474 1,229 Intercity Hire Pty Limited (a) 100% Vic. - - - - - John Fairfax Publications Pty Limited (a),(f) 100% NSW 134,462 134,462 30,748 65,030 88,507 John Fairfax Group Finance Pty Limited (a) 100% ACT - - 614 8,435 36,822 John Fairfax Limited (a) 100% ACT 458,454 458,454 - - - John Fairfax & Sons Limited (a) 100% NSW 400,200 400,200 - - - John Fairfax (NZ) Limited (c) 100% NZ - 1,954 - 3 (3) John Fairfax (UK) Limited (e) 100% UK 1,175 1,175 78 (1) 138 John Fairfax (US) Limited (e) 100% USA 1,864 1,864 (10) (7) (6) Morisset Newspapers Pty Limited (a) 100% NSW - - - - - Morisset Courier Unit Trust 100% 15 15 - - (6) Newcastle Newspapers Pty Limited (a) 100% NSW 32,542 32,542 3,802 2,416 2,502 Rozelle Terminal Handling Company Pty Limited (c) - - - - - - 30 Rydge Publications Pty Limited (a) 100% NSW 1,967 1,967 - - - Rydge Publications (Australia) Pty Limited (a) 100% NSW 3,239 3,239 - - - South Australian Real Estate Press Pty Limited (a) 100% ACT - - (107) (87) - S. Richardson (Newspapers) Pty Limited (a) 100% NSW 62 62 - - - Suburban Investments Pty Limited (a) 100% ACT 175 175 - - - Syme New Century Media Pty Limited (a),(d) 100% Vic. - - (255) - - The Warrnambool Standard Pty Limited (a) 100% Vic. 162 162 643 193 472 The Rockwood Pastoral Company Pty Limited (a) 100% NSW 68,568 68,568 - - - Wattle Street Properties Pty Limited (a) 100% ACT - - (63) (413) 132 ---------------------------- 87,429 147,078 185,672 ============================
15 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 6 CONTRIBUTIONS OF CONTROLLED ENTITIES CONTINUED (a) The chief entity and the controlled entities incorporated within Australia are party to a class order and have entered into a group cross indemnity agreement. Under the class order exemption has been granted these controlled entities from the requirements of the Corporations Law with regard to the preparation, and publication of accounts. In relation to these entities the aggregate assets total $2,213 million, the aggregate liabilities total $1,088 million and the aggregate profit totals $86.3 million. (b) Controlled entities acquired. On October 19, 1995 the economic entity increased its interest in the issued capital of Homes Pictorial Publications Pty Limited and Homes Pictorial Unit Trust from 80% to 100%. The additional equity was acquired for $2,012,000 representing fair value of the net assets. (c) Controlled entity liquidated. On July 7, 1995 John Fairfax (NZ) Limited was liquidated. (d) Controlled entity incorporated during the year. (e) All controlled entities incorporated in a foreign country conduct business in the country of incorporation. These entities are audited by other members of Ernst & Young International. (f) Denotes entities controlled directly by the chief entity. Refer note 11. (g) On October 4, 1995 the name of the controlled entity Sydney Printers Pty Limited changed to Fairfax Holdings Pty Limited. 16 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 7 DIVIDENDS PAID AND PROPOSED
Year ended June 30, ---------------------------- 1996 1995 A $000 A $000 ---------------------------- Interim dividend of 3.5 cents (1995 3.5 cents) per ordinary share and debenture (unfranked) paid May 31, 1996 27,856 27,820 Proposed final dividend of 6.0 cents (1995 6.0 cents) per share and debenture (unfranked) 47,900 47,820 ---------------------------- 75,756 75,640 ----------------------------
The chief entity has no retained franking credits against which franked dividends could be paid. NOTE 8 EARNINGS PER SHARE
Year ended June 30, ------------------------------------------- 1996 1995 1994 ------------------------------------------- cents cents cents Basic earnings per share (cents per share) 10.99 18.59 24.29 ------------------------------------------- Diluted earnings per share (cents per share) 10.96 18.38 23.26 ------------------------------------------- Reconciliation of earnings used in the $000 $000 calculation of earnings per share Operating profit after income tax expense attributable to members of the chief entity 87,429 147,078 185,672 Add: Imputed earnings after income tax on funds receivable on exercise of options outstanding during the year 1,523 1,538 1,820 ------------------------------------------- Diluted earnings 88,952 148,616 187,492 -------------------------------------------
Reconciliation of weighted average numbers of Number of Number of Number of ordinary shares and debentures used in the shares shares shares calculation of earnings per share Weighted average number of ordinary shares and debentures used in the calculation of the basic earnings per share 795,453,633 791,317,014 764,482,599 Add: Weighted average number of potential ordinary shares relating to options outstanding during the year 15,893,014 17,392,975 38,173,745 ----------------------------------------------- Weighted average number of potential ordinary shares and debentures used in the calculation of the diluted earnings per share 811,346,647 808,709,989 802,656,344 ===============================================
17 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 9 RECEIVABLES
June 30, ----------------------------------- 1996 1995 Notes A $000 A $000 ----------------------------------- CURRENT Trade debtors 138,765 132,422 Provision for doubtful debts (9,515) (7,718) ----------------------------------- 129,250 124,704 ----------------------------------- Loans and deposits 689 940 Provision for doubtful receivables (23) (376) ----------------------------------- 666 564 ----------------------------------- Loans to directors 30 14 6 Other debtors and prepayments 23,652 10,568 ----------------------------------- 153,582 135,842 ----------------------------------- Australian dollar equivalents of current foreign currency receivables not effectively hedged. United States dollars 210 78 United Kingdom pounds 103 79 New Zealand dollars 714 204 ----------------------------------- 1,027 361 ----------------------------------- NON-CURRENT Amounts receivable from wholly owned controlled entities - - Loans and deposits 2,045 2,043 Loans to directors 30 179 1,267 ----------------------------------- 2,224 3,310 -----------------------------------
NOTE 10 INVENTORIES
June 30, ---------------------------------- 1996 1995 A $000 A $000 ---------------------------------- CURRENT Raw materials and stores, at cost 28,467 19,875 Provision for diminution in value (747) (544) ----------------------------------- 27,720 19,331 Work in progress, at cost 45 60 Finished goods, at cost 8,330 6,917 ----------------------------------- 36,095 26,308 -----------------------------------
18 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 11 INVESTMENTS
June 30, ------------------------------ 1996 1995 A $000 A $000 ------------------------------- Shares in corporations not listed on a prescribed stock exchange, at June 1996 directors' valuation (1995 at cost) 44,184 25,317 Shares in controlled entities not listed on a prescribed stock exchange, at cost - - Interests in unit trusts, at June 1996 directors' valuation (1995 at cost) 647 647 ----------------------------- 44,831 25,964 -----------------------------
NOTE 12 PROPERTY, PLANT AND EQUIPMENT
June 30, ----------------------------- 1996 1995 A $1000 A $000 ----------------------------- Freehold land and buildings At cost 59,246 61,199 Provision for depreciation (2,784) (2,071) ----------------------------- 56,462 59,128 ----------------------------- Leasehold buildings At cost 49,767 1,210 Provision for amortisation (495) (180) ----------------------------- 49,272 1,030 ----------------------------- Plant and equipment At cost 567,687 171,617 Provision for depreciation (97,782) (57,449) ----------------------------- 469,905 114,168 ----------------------------- Capital works in progress, at cost 32,303 333,106 ----------------------------- 607,942 507,432 -----------------------------
Land and buildings were independently valued as at March 1994 by M S Smallhorn FVLE of JLW Advisory. In aggregate the valuations exceeded the book value, but not materially. 19 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 13 INTANGIBLES
June 30, ----------------------------------- 1996 1995 Notes A $000 A $000 ------------------------------------ Mastheads and tradenames, at cost 1(e) 1,258,167 1,256,949 -----------------------------------
NOTE 14 OTHER ASSETS
June 30, ------------------------------------ 1996 1995 A $000 A $000 ------------------------------------ NON-CURRENT Future income tax benefits 114,935 128,124 ----------------------------------- The future income tax benefit comprises the estimated future benefit at current income tax rates of the following : Tax losses 89,171 98,396 Timing differences 25,764 29,728 ----------------------------------- 114,935 128,124 ----------------------------------- Future income tax benefits arising from capital losses of a controlled entity not brought to account at balance date as realisation of the benefits is not regarded as virtually certain : 25,000 25,000 ----------------------------------- The benefits will only be realised if the conditions for deductibility set out in Note 1 (i) occur.
20 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 15 CREDITORS AND BORROWINGS
June 30, ----------------------------------- 1996 1995 Notes A $000 A $000 ----------------------------------- CURRENT Unsecured Liabilities: Trade and other creditors 108,956 78,317 Bank borrowings 138,000 13,000 Accrued interest on bank borrowings 24 8,499 8,693 ----------------------------------- 255,455 100,010 Secured Liabilities: Lease liability 20(a) - - ----------------------------------- 255,455 100,010 ----------------------------------- Australian dollar equivalents of current foreign currency payables not effectively hedged. United States dollars 3,057 6,435 United Kingdom pounds 221 421 Japanese yen 405 610 ----------------------------------- 3,683 7,466 ----------------------------------- NON-CURRENT Unsecured Liabilities: Bank borrowings 24 600,000 750,000 Other borrowings 79,728 - Lease liability 49,243 - ----------------------------------- 728,971 750,000 -----------------------------------
NOTE 16 PROVISIONS
June 30, ------------------------------------ 1996 1995 Notes A $000 A $000 ------------------------------------ CURRENT Employee entitlements 22 27,117 53,640 Dividends 7 47,998 47,820 Income tax 1,331 3,397 Other 5,434 5,309 ----------------------------------- 81,880 110,166 ----------------------------------- NON-CURRENT Employee entitlements 22 32,680 34,359 Deferred income tax liability 28,595 11,398 Other 9,489 4,620 ----------------------------------- 70,764 50,377 -----------------------------------
21 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 17 ISSUED CAPITAL
June 30, ------------------------------------ 1996 1995 A $000 A $000 ------------------------------------ AUTHORISED CAPITAL 2,000,000,000 ordinary shares of 50 cents each 1,000,000 1,000,000 ----------------------------------- ISSUED CAPITAL SHARES 758,230,945 (1995 : 744,775,045) ordinary shares of 50 cents each, fully paid 379,115 372,388 ----------------------------------- DEBENTURES 37,750,281 (1995 : 50,250,281) debentures of $1 each, fully paid 37,750 50,250 ----------------------------------- TOTAL ISSUED CAPITAL 416,865 422,638 -----------------------------------
MOVEMENTS IN ISSUED CAPITAL SHARES During the year the holders of 12,500,000 (1995: 32,316,409) debentures and the holders of 955,900 (1995: 4,526,850) options exercised their right to convert those holdings into ordinary shares. The proceeds from the shares issued on the conversion of options amounted to $1,280,370 and was employed for working capital purposes. Number BALANCE ON ISSUE AT JUNE 30, 1994 707,931,786 Converted from debentures 32,316,409 Converted from options 4,526,850 ------------- BALANCE ON ISSUE AT JUNE 30, 1995 744,775,045 Converted from debentures 12,500,000 Converted from options 955,900 ------------- BALANCE ON ISSUE AT JUNE 30, 1996 758,230,945 ------------- DEBENTURES During the year the holders of 12,500,000 (1995: 32,316,409) debentures exercised their right to convert those debentures into ordinary shares. Number BALANCE ON ISSUE AT JUNE 30, 1994 82,566,690 Converted to shares (32,316,409) -------------- BALANCE ON ISSUE AT JUNE 30, 1995 50,250,281 Issued during the year - Converted to shares (12,500,000) -------------- BALANCE ON ISSUE AT JUNE 30, 1996 37,750,281 -------------- 22 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 17 ISSUED CAPITAL continued OPTIONS TO ACQUIRE SHARES During the year the chief entity granted 8,997,500 options to acquire shares on a one for one basis to employees and executives. The exercise price of the options is equivalent to the chief entity's share price, as quoted on the Australian Stock Exchange, at the date the options were issued. At balance date the chief entity's share price was $2.62. The number, exercise date and exercise price of the options issued during the year, together with options issued in previous years, are shown below. On and after two years from the date of issue 40% of the options will become conditionally exercisable. On and after the passing of each subsequent year a further 20% of the options will become conditionally exercisable. Options not exercised within five years of issue will lapse.
Number BALANCE ON ISSUE AT JUNE 30, 1995 13,668,750 Granted during the year 8,997,500 Forfeited during the year (135,000) Exercised and converted to shares (955,900) -------------- BALANCE ON ISSUE AT JUNE 30, 1996 21,575,350 -------------- BALANCE COMPRISED OF: Date of grant Exercise price Number March 15, 1993 $1.84 11,127,850 May 15, 1993 $2.07 100,000 March 1, 1994 $2.99 350,000 April 5, 1994 $2.76 50,000 June 24, 1994 $2.52 500,000 September 12, 1994 $2.69 75,000 November 23, 1994 $2.60 100,000 April 5, 1995 $2.78 275,000 July 14, 1995 $2.62 200,000 August 22, 1995 $2.64 100,000 November 24, 1995 $2.69 110,000 December 5, 1995 $2.82 3,500,000 January 24, 1996 $2.88 500,000 March 26, 1996 $2.82 50,000 June 6, 1996 $2.67 300,000 June 28, 1996 $2.67 4,237,500 -------------- 21,575,350 --------------
The maximum number of options which may be issued under the Employee Option Incentive Scheme at any one time is 4% of the number of ordinary shares of the chief entity on issue at that date. The number of options outstanding, which were issued under the Employee Option Incentive Scheme, is equivalent to 2.8% of the ordinary shares on issue at June 30, 1996. 23 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 18 RESERVES
June 30, -------------------------------- 1996 1995 A $000 A $000 -------------------------------- Share premium 423,583 416,053 Foreign currency translation (225) 46 ------------------------------- 423,358 416,099 ------------------------------- MOVEMENTS IN RESERVES SHARE PREMIUM RESERVE Balance at the beginning of the financial year 416,053 396,768 Premium of 50 cents on 35,816,409 ordinary shares - 17,908 Premium of 134 cents on 1,026,850 ordinary shares - 1,377 Premium of 50 cents on 12,500,000 ordinary shares 6,250 - Premium of 134 cents on 955,900 ordinary shares 1,280 - ------------------------------- Balance at the end of the financial year 423,583 416,053 ------------------------------- FOREIGN CURRENCY TRANSLATION RESERVE Balance at the beginning of the financial year 46 (183) Net currency adjustment arising from the conversion of controlled entities accounts (271) 229 ------------------------------- Balance at the end of the financial year (225) 46 -------------------------------
24 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 19 OUTSIDE EQUITY INTEREST
June 30, ------------------------------ 1996 1995 A $000 A $000 ------------------------------ Outside equity interest comprises: Issued capital and unitholders funds 1 601 Reserves 3 214 Retained earnings 69 56 ------------------------------ 73 871 ------------------------------ Outside equity interests in the issued capital and unitholders funds of controlled entities: Homes Pictorial Unit Trust - 600 AAV New Zealand Limited 1 1 ------------------------------ Interest in issued capital and unitholders funds 1 601 ------------------------------ Outside equity interests in retained earnings of controlled entities at the beginning of the year: 56 44 Interest in economic entity profits for the year 47 246 Unit trust distributions - (234) Retained earnings of minority interests acquired (34) - ------------------------------ Interest in retained earnings 69 56 ------------------------------
NOTE 20 LEASING AND CAPITAL EXPENDITURE COMMITMENTS
June 30, ------------------------------ 1996 1995 Notes A $000 A $000 ------------------------------ a) FINANCE LEASE LIABILITIES Payable - not later than one year 5,670 - later than one year but not later than two years 5,917 - later than two years but not later than five years 19,345 - later than five years 137,273 - ------------------------------ Minimum lease payments 168,205 - Less future finance charges 118,962 - ------------------------------ Total lease liability 49,243 - ------------------------------ Classified as: Current 15 - - Non-current 15 49,243 - ------------------------------ 49,243 0 ------------------------------
25 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 20 LEASING AND CAPITAL EXPENDITURE COMMITMENTS (continued)
June 30, ------------------------------- 1996 1995 A $000 A $000 ------------------------------- b) OPERATING LEASE COMMITMENTS Payable - not later than one year 7,449 8,166 later than one year but not later than two years 5,173 5,116 later than two years but not later than five years 23,236 15,578 later than five years 52,695 45,615 ------------------------------- Total operating lease commitments 88,553 74,475 ------------------------------- c) CAPITAL EXPENDITURE COMMITMENTS Payable - not later than one year 21,237 84,750 later than one year but not later than two years - 11,633 ------------------------------- Total capital expenditure commitments 21,237 96,383 -------------------------------
26 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 21 SUPERANNUATION COMMITMENTS The economic entity participates in employer sponsored superannuation plans which provide benefits for employees and their dependents on retirement, disability or death. The plans operate on an accumulation basis with the exception of the John Fairfax Retirement Fund which provides benefits on both an accumulation and defined benefit basis. The defined benefits are based on years of service and final average salary and are being funded on the basis of biannual actuarial assessments such that the funds will be adequate to provide the benefits payable to members on their retirement. Employees contribute various percentages of their gross income and the economic entity also contributes at generally twice the employees contributions. At balance date the assets of each of the plans are sufficient to satisfy all benefits that would have vested under the plans in the event of termination of the plans and voluntary or compulsory termination of employment of each employee. The economic entity maintains a provision for any deficiency that may arise in the plans. An actuarial assessment of the John Fairfax Retirement Fund as at July 1, 1994 was carried out by Mr D McNeil BEc BSc FIAA, Consultant & Actuary, AMP Consulting & Superannuation Services, on December 23, 1994. The financial position of the fund as at June 30, 1996 was:
1996 1995 A $000 A $000 The estimated accrued benefits of the plan were 119,900 179,997 Net market value of the plans' assets were 118,800 181,637 ------------------------------------ Surplus/(Deficiency) (1,100) 1,640 ------------------------------------ Vested benefits (estimate) 117,700 173,350 ------------------------------------ Economic entity contributions were 12,851 11,307 ------------------------------------
NOTE 22 EMPLOYEE ENTITLEMENTS
June 30, ----------------------------- 1996 1995 Notes A $000 A $000 ----------------------------- The aggregate employee entitlement liability is comprised of: Accrued wages, salaries and oncosts 11,440 11,035 Provisions (current) 16 27,117 53,640 Provisions (non-current) 16 32,680 34,359 ----------------------------- 71,237 99,034 -----------------------------
27 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 23 CONTINGENT LIABILITIES RELATED BODIES CORPORATE Under the terms of an ASC Class Order the chief entity and certain controlled entities, identified in Note 6, have guaranteed any deficiency of funds if any party to the class order is wound up. No such deficiency exists.> OTHER PERSONS From time to time entities in the economic entity are sued for defamation and similar matters in the ordinary course of business. The amount of contingency for such actions cannot be determined with any accuracy.> However, on the basis of professional advice, the accounts incorporate adequate provision to cover material contingencies. NOTE 24 FINANCING The economic entity has two facilities agreements with a syndicate of banks comprised of the National Australia Bank Limited, Toronto Dominion Australia Limited and Societe Generale Australia Limited. The facilities are comprised of $750 million amortising term facility and a $50 million working capital facility. The facilities are unsecured and terminate on October 29, 1998. The maximum amount to which the amortising term facility can be drawn : To November 30, 1996 $750 million To May 30, 1997 $700 million To November 30, 1997 $650 million To May 30, 1998 $600 million To October 29, 1998 $550 million The interest rate on these facilities is the aggregate of the bank bill rate prevailing at the respective rollover date plus a margin. NOTE 25 FINANCIAL INSTRUMENTS In the ordinary course of business the economic entity is exposed to financial risk in respect of interest rates and foreign exchange. The economic entity has entered equipment contracts denominated in Swiss francs, Deutschmarks and Pounds sterling and newsprint supply contracts denominated in US dollars. The foreign exchange risks arising from these contracts is managed through the use of currency swaps, options and forward exchange contracts taken out against these specific risks. Net receipts or payments, which may arise in the future, will be recognised as an adjustment to the cost of the equipment or newsprint acquired. The bank facilities agreements, refer Note 24, expose the economic entity to financial risk from adverse movements in bank bill rates. Interest rate risk is managed through the use of interest rate swaps, options and forward rate agreements. At balance date approximately 70% of the interest expense on forecast fiscal 1997 debt and 50% of the interest expense on forecast fiscal 1998 debt has been hedged. These financial instruments are not recognised in the accounts. Net receipts or payments, which may arise in the future, will be recognised as an adjustment to interest expense. The economic entity employs treasury policies approved by the Board. These policies minimise counterparty credit risk and do not permit the use of financial instruments for speculative trading. 28 - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS AS AT JUNE 30, 1996 - ------------------------------------------------------------------------------- NOTE 26 STATEMENT OF CASH FLOWS
Year ended June 30, ----------------------------------------------- 1996 1995 1994 A $000 A $000 A $000 ----------------------------------------------- (a) Reconciliation of cash For the purposes of the statement of cash flows, cash includes cash on hand and in banks, which includes money market investments readily convertible to cash. The economic entity has a working capital facility available, the outstanding balance of which has been excluded from the definition of cash (see Note 24). Cash balance comprises: Cash on hand 5,341 310 416 ----------------------------------------------- (b) Reconciliation of the operating profit after tax to the net cash flows from operations. Operating profit after tax 87,476 147,324 185,910 Costs attributable to financing activities - - 1,650 Depreciation 41,218 26,102 24,345 Amortisation 320 51 140 Provision for doubtful debts 1,802 (1,260) 1,227 Provision for diminution in value of inventories 203 (9) (29) Provision for employee benefits (33,918) 4,225 (12,140) Other provisions (677) (497) (866) Proceeds from the sale of non-current assets (9,245) (2,671) (6,207) Book value of non-current assets sold 8,614 1,840 1,787 Changes in assets and liabilities: Trade debtors (6,343) (6,421) (12,197) Other debtors and prepayments (13,044) 147 (526) Future income tax benefits 39,823 58,056 (21,652) Inventories (9,990) 374 1,599 Trade creditors 14,758 4,834 7,534 Sundry creditors (4,581) 5,316 2,905 ----------------------------------------------- Net cash flows from operating activities 116,416 237,411 173,480 ----------------------------------------------- (c) Non cash financing and investing activities. The economic entity did not transact any material non cash financing or investing activities during the year.
29 NOTE 26 STATEMENT OF CASH FLOWS (continued)
1995 A $000 ---------- (d) Acquisition of controlled entity. There were no controlled entities acquired during the year. Last year 100% of the issued capital of Australian Geographic Pty Limited was acquired. Cash Consideration 37,834 ---------- Cash 968 Property, plant and equipment 1,912 Mastheads and tradenames 35,089 Trade debtors 1,205 Sundry debtors 206 Inventories 6,264 ---------- 45,644 Trade creditors (5,734) Taxation (1,792) Provision for employee entitlements (284) ---------- Fair value of net assets 37,834 ---------- Net cash effect - Cash consideration 37,834 Cash included in net assets acquired (968) Cash paid for the purchase of the controlled entity as reflected in the accounts 36,866 ----------
1995 A $100 ---------- (e) Disposal of controlled entity. There were no controlled entities disposed of during the year. Last year 100% of the issued capital of Rozelle Terminal Handling Company Pty Limited was sold. Cash consideration 650 ---------- Property, plant and equipment 664 Trade debtors 18 ---------- 682 Trade creditors (6) Taxation (65) ---------- Fair value of net assets 611 ----------
30 NOTE 27 REMUNERATION OF DIRECTORS The directors of John Fairfac Holdings Limited during the financial year were: Sir Laurence Street D. J. Halley (resigned December 18, 1995) C. M. Black M. J. Hoy (resigned February 29, 1996) M. Burrows (appointed January 22, 1996) J. M. King (appointed July 17, 1995) Sir Roderick Carnegie R. C. Mansfield (appointed November 27, 1995, resigned June 25, 1996) W. Colson S. Mulholland Sir Zelman Cowan A. Turnbull D. M. Gonski D. Wills
ECONOMIC ENTITY CHIEF ENTITY 1996 1995 1994 1996 1995 1994 A $000 A $000 A $000 A $000 A $000 A $000 ---------------------------------------------------------- (a) DIRECTORS' REMUNERATION Income received or due and receivable by the directors of the economic entity from corporations of which they are directors or related bodies corporate or entities controlled by the chief entity. 14,142 8,730 8,147 --------------------------- Income received or due and receivable by the directors of John Fairfax Holdings Limited from that entity and related bodies corporate 8,447 3,194 3,771 --------------------------
The number of directors of John Fairfax Holdings Limited whose remuneration falls within the following bands:
(in Australian dollars) 1996 1995 1994 No. of No. of No. of directors directors directors $0 - $9,999 - - 1 $10,000 - $19,999 - - 1 $20,000 - $29,999 1 - - $30,000 - $39,999 - 1 1 $40,000 - $49,999 - 5 4 $50,000 - $59,999 5 1 - $60,000 - $69,999 2 1 - $70,000 - $79,999 - - 1 $80,000 - $89,999 - 1 - $90,000 - $99,999 1 - - $100,000 - $109,999 - - 1 $120,000 - $129,999 1 - - $490,000 - $499,999 - 1 - $980,000 - $989,999 1 1 - $1,130,000 - $1,139,999 1 - - $1,260,000 - $1,269,999 - 1 - $1,520,000 - $1,529,999 - - 1 $1,850,000 - $1,859,999 - - 1 $2,740,000 - $2,749,999 1 - - $2,930,000 - $2,939,999 1 - -
The directors have availed themselves of ASC class order 95/741 in the disclosure of directors' remuneration and benefits. 31 NOTE 28 REMUNERATION OF EXECUTIVES
Year ended June 30, --------------------------------------- 1996 1995 1994 A $000 A $000 A $000 --------------------------------------- Amounts received or due and receivable by executive officers of the economic entity and the chief entity whose remuneration is $100,000 or more, from entities in the economic entity and related entities: Remuneration 10,667 11,160 10,682 Termination Pay 6,753 1,332 2,901 --------------------------------------- 17,420 12,492 13,583 ---------------------------------------
The number of executives of the economic entity and the chief entity whose remuneration falls within the following bands:
June 30, --------------------------------------- 1996 1995 1994 --------------------------------------- (in Australian dollars) No. of No. of No. of executives executives executives $110,000 - $119,999 1 1 4 $120,000 - $129,999 - 4 2 $130,000 - $139,999 1 - 5 $140,000 - $149,999 - 3 1 $150,000 - $159,999 3 1 2 $160,000 - $169,999 1 2 2 $170,000 - $179,999 3 2 2 $180,000 - $189,999 3 1 2 $190,000 - $199,999 5 4 2 $200,000 - $209,999 2 3 1 $210,000 - $219,999 3 4 1 $220,000 - $229,999 2 - 2 $230,000 - $239,999 1 - - $240,000 - $249,999 1 3 - $250,000 - $259,999 4 - 3 $270,000 - $279,999 - 2 1 $290,000 - $299,999 1 - - $320,000 - $329,999 1 3 2 $330,000 - $339,999 - 1 1 $360,000 - $369,999 - - 2 $380,000 - $389,999 1 - - $410,000 - $419,999 1 - 1 $420,000 - $429,999 1 - - $430,000 - $439,999 - 1 - $450,000 - $459,999 - 1 1 $490,000 - $499,999 - 2 - $580,000 - $589,999 1 - - $640,000 - $649,999 - - 1 $870,000 - $879,999 - - 1 $910,000 - $919,999 - - 1 $980,000 - $989,999 1 1 - $1,130,000 - $1,139,999 1 - - $1,260,000 - $1,269,999 1 1 - $1,490,000 - $1,499,999 - 1 - $1,520,000 - $1,529,999 - - 1 $1,850,000 - $1,859,999 - - 1 $2,740,000 - $2,749,999 1 - - $2,930,000 - $2,929,999 1 - -
32 NOTE 29 AUDITORS' REMUNERATION
Year ended June 30, ----------------------------------------- 1996 1995 1994 A $000 A $000 A $000 ------------------------------------------ Amounts receivable or due and receivable by the auditors, from entities in the economic entity or related entities for: Auditing accounts 730 705 569 Other services 213 1,253 975 ----------------------------------------- 943 1,958 1,544 -----------------------------------------
Auditors' Other services include share registry and advice in relation to litigation, taxation, refinancing and other services. NOTE 30 RELATED PARTY TRANSACTIONS The following related party transactions occurred during the financial year TRANSACTIONS WITH THE DIRECTORS OF THE ECONOMIC ENTITY. During the year, M. J. Hoy, an executive director of the chief entity, repsid an outstanding loan of $1,000,000. The debt was interest-free and was secured by a mortgage over a residential property. The loan was approved at the 1992 Annual General Meeting. As at June 30, 1996, two (1995: four) executives who are directors of controlled entities, but who are not directors of the chief entity, had no outstanding loans totalling $89,623 (1995: $273,044). Interest rates of 5% or 6% apply to the loans which are secured by mortgages over residential properties. The interest benefit is included in the executives' remuneration disclosed in Note 28. During the year, interest payments totalling $8,007 were received, principal repayments totalling $92,794 were received and no new loans were issued. Repayments were received from E. Gregory, F. McMahon and S. Simson. Two executives resigned as directors during the year. TRANSACTIONS WITH ASSOCIATED ENTITIES. Controlled entities have received commissions of $183,431 (1995: $211,697), in respect of sales of The Weekly Telegraph from The Telegraph plc and have paid $13,900 (1995: $17,336) to The Telegraph plc for the supply of news services. The transactions are on commercial terms. TRANSACTIONS WITH CONTROLLED ENTITIES. John Fairfax Holdings Limited has undertaken transactions with its controlled entities including the issue and receipt of loans (both at commercial interest rates and interest free) and management fees. On consolidation, all such transactions have been eliminated in full. 33 NOTE 30 RELATED PARTY TRANSACTIONS CONTINUED DIRECTORS' SHAREHOLDINGS The interest of each Director in the issued capital of the chief entity as at June 30, 1996 are:
Fully Paid 50 cent Fully paid $1 Ordinary Shares Convertible Notes C. M. Black - 500,000 Sir Roderick Carnegie 5,000 - D. W. Colson - 750,000 Sir Zelman Cowen 10,000 - D. M. Gonski 10,000 - J. M. King 3,400 - Sir Laurence Street 50,000 - A. Turnbull 15,000 - D. R. Wills 25,000 -
In addition C. M. Black and D. W. Colson may be deemed to be interested in the share and debenture holdings of The Telegraph plc by virtue of their directorships in that entity. During the year J. M. King acquired 3,400 shares and D. R. Wills acquired 25,000 share in the ordinary course of trading on the stock exchange. There have been no other movements in directors' shareholdings or option holdings since the end of the last financial year. NOTE 31 RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) GENERAL The following represents additional information to the 1994, 1995 and 1996 Audited Consolidated Financial Statements of the Company that were prepared in accordance with Australian G.A.A.P.. Set out below are the material adjustments (net of income taxes and minority interest adjustments where applicable) to operating profit for the years ended June 30, 1994, 1995 and 1996, and shareholders' equity at June 30, 1994, 1995 and 1996 in order to conform to accounting principles generally accepted in the United States.
OPERATING PROFIT Year ended 30 June ----------------------------------------------- 1994 1995 1996 $'000 $'000 $'000 ----------------------------------------------- Operating profit per Australian G.A.A.P. after income tax and abnormal items 185,910 147,324 87,476 less: Minority Interests (238) (246) (47) ----------- ----------- ---------- Operating Profit per Australian G.A.A.P. 185,672 147,078 87,429 Adjustments to reflect U.S. G.A.A.P. (refer table below) (109,412) (33,077) (41,620) ----------- ----------- ---------- Operating Profit per U.S. G.A.A.P. 76,260 114,001 45,809 =========== =========== ========== Earnings per share - Primary and fully diluted per U.S. G.A.A.P. 10.31 cents 14.74 cents 6.32 cents =========== =========== ========== Weighted average number of shares for Primary and fully diluted EPS calculation (000) 802,656 808,710 811,347 =========== =========== ========== ADJUSTMENTS TO OPERATING PROFIT TO REFLECT U.S. G.A.A.P. (Less) Dividends paid on debentures reclassified as interest paid (Note a) (6,489) (5,180) (3,919) (Less) Amortisation of mastheads (Note d) (27,755) (27,897) (28,592) (Less) Future Income Tax benefit attributable to tax losses (Note e) (75,168) - - (Less) Devaluation of investments (Note f) - - (9,109) ----------- ----------- ---------- (109,412) (33,077) (41,620) =========== =========== ========== SHAREHOLDERS EQUITY Total Shareholders equity per Australian G.A.A.P. 1,007,458 1,073,686 1,086,047 (Less) debentures (Note a) (82,567) (50,250) (37,750) Add dividends proposed (Note b) 39,525 47,820 47,900 (Less) dividends paid (Note b) (34,700) (39,525) (47,820) (Less) Minority Interest (Note c) (847) (871) (73) (Less) Accumulated amortisation of mastheads (Note d) (68,175) (96,072) (124,664) (Less) Future Income Tax Benefit (Note e) (114,107) (114,107) (114,107) (Less) Devaluation of investments (Note f) - - (9,109) ----------- ----------- ---------- Shareholders equity per U.S. G.A.A.P. 746,587 820,681 800,424 =========== =========== ==========
34 JOHN FAIRFAX HOLDINGS LIMITED NOTES TO THE ACCOUNTS NOTES (a) Classification of Debentures John Fairfax Holdings Limited issued a number of convertible debentures during 1992. The terms of these debentures are identical to issued stock, except that the debentures are not listed and do not have voting rights attached. Under Australian G.A.A.P. the debentures are treated as a form of equity. For U.S. G.A.A.P. purposes the debentures are defined as convertible debt. The adjustment reflected in the reconciliation of Shareholders' equity is made to exclude the debentures from Shareholders' equity, consistent with U.S. G.A.A.P. treatment. The adjustment reflected in the Profit and Loss Statement reflects the payment of amounts, which under Australian G.A.A.P. were treated as dividends on the debentures, as if those payments were interest paid. (b) Proposed Dividends In the June 30, 1994, 1995 and 1996 financial statements of John Fairfax Holdings Limited, prepared under Australian G.A.A.P., provisions for dividends were reflected. Although the dividends were to be paid out of the profits earned in those fiscal years, the dividends were declared after the balance date but before finalization of the financial statements. Under U.S. G.A.A.P. such provisions for dividends should be provided in the year in which the declaration was made. The adjustment reflects the postponement of the provisions until the fiscal year in which the dividends were actually declared. (c) Minority Interests Minority interests are frequently included as part of Total Shareholders' equity under Australian G.A.A.P. The financial statement adjustments have excluded these from Shareholders' equity consistent with the U.S. G.A.A.P. treatment. (d) Mastheads Mastheads acquired since December 31, 1991 are recorded in the accounts at cost. No amortisation has been charged on these assets under Australian G.A.A.P. as no event has occurred to cause a reduction in the values or limit their useful lives. For U.S. G.A.A.P. purposes Mastheads are amortised over 40 years on a straight line basis. (e) Income Taxes Australian G.A.A.P. requires that future income tax benefits arising from tax losses can only be recognized if they are regarded as virtually certain of realization. For U.S. G.A.A.P. the requirement is that the benefit be more likely than not to be realized. As such, certain tax losses which did not meet the Australian G.A.A.P. guideline of being realized within the following three years had not been accounted for under Australian G.A.A.P. as a benefit on acquisition. However, under U.S. G.A.A.P. the benefit would have been recognized on acquisition as the benefit was more likely than not to be realized. Had the future income tax benefit been recognized on acquisition, the value attributed to mastheads would have been less. The adjustment in the Profit and Loss Statement reflects the reversal of the income tax credits recorded under Australian G.A.A.P. for utilization of tax losses previously not booked. 35 JOHN FAIRFAX HOLDINGS LIMITED NOTES TO THE ACCOUNTS (cont'd) (f) Devaluation of Investments John Fairfax Holdings Limited and its subsidiaries hold a number of non-listed, non-current investments. Under Australian G.A.A.P. these investments can be revalued as a class. In the June 30, 1996 financial statements, prepared under Australian G.A.A.P., certain individual investments were revalued to amounts not in excess of their recoverable amount. The decrements of individual carrying values were offset by revaluation increases to other individual investments. Under U.S. G.A.A.P. revaluation increases are not permitted. If the value of a non-current investment has been permanently diminished a valuation allowance should be created which reduces the investment to its present value. The adjustment in the profit and loss statement reflects the recording of the write down under U.S. G.A.A.P. 36 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized. HOLLINGER INTERNATIONAL INC. Registrant Date: February 27, 1997 By: /s/ J. A. BOULTBEE ------------------ J. A. Boultbee Vice President and Chief Financial Officer EX-23.1 2 HOLLINGER INTERNATIONAL 1 Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the registration statements (No. 333-04697 and No. 333-1711) on Form S-3 and (No. 33-88810) on Form S-8 of Hollinger International Inc. and the registration statement (No. 333-17113) of Form S-3 of Hollinger International Publishing Inc. of our report dated September 6, 1996 with respect to the consolidated financial statements of John Fairfax Holdings Limited included in the Form 10K/A dated December 31, 1995 of Hollinger International Inc. filed with the Securities and Exchange Commission. ERNST & YOUNG February 25, 1997 Sydney Australia -----END PRIVACY-ENHANCED MESSAGE-----